MODEM MEDIA POPPE TYSON INC, S-3/A, 2000-03-23

MODEM MEDIA POPPE TYSON INC
S-3/A, 2000-03-23
BUSINESS SERVICES, NEC

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<PAGE>

As filed with the Securities and Exchange Commission on March 23, 2000

Registration No. 333-32542
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1

TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MODEM MEDIA . POPPE TYSON, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 06-1464807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
230 East Avenue
Norwalk, CT 06855
(203) 299-7000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
-----------
Sloane Levy
Vice President, General Counsel
Modem Media . Poppe Tyson, Inc.
230 East Avenue
Norwalk, CT 06855
(203) 299-7000
Fax: (203) 299-7461
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
<TABLE>
<S> <C>
Alan Dean William J. Whelan, III
Davis Polk & Wardwell Cravath, Swaine & Moore
450 Lexington Avenue 825 Eighth Avenue
New York, New York 10017 New York, New York 10019
(212) 450-4000 (212) 474-1000
Fax: (212) 450-4800 Fax: (212) 474-3700
</TABLE>

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
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, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
-----------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

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

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED MARCH 23, 2000

4,500,000 Shares

[LOGO OF MODEM MEDIA . POPPE TYSON, INC.]

Class A Common Stock

--------

We are selling 1,567,803 shares of Class A common stock and the selling
stockholders are selling 2,932,197 shares of Class A common stock. We will not
receive any of the proceeds from the sale of shares by the selling
stockholders.

Our Class A common stock is traded on The Nasdaq Stock Market's National
Market under the symbol "MMPT." On March 22, 2000, the last reported sale price
of our Class A common stock was $45 1/4 per share.

The underwriters have an option to purchase a maximum of 675,000 additional
shares to cover over-allotments of shares.

Investing in our Class A common stock involves risks. See "Risk Factors" on
page 4.

<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions Company Stockholders
-------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share.................................. $ $ $ $
Total...................................... $ $ $ $
</TABLE>

Delivery of the shares of Class A common stock will be made on or about
, 2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

Credit Suisse First Boston
Robertson Stephens
Thomas Weisel Partners LLC
First Union Securities, Inc.

The date of this prospectus is , 2000.
<PAGE>

INSIDE FRONT COVER PAGE OF PROSPECTUS

[The page has a photograph of a woman drinking from a coffee mug. Next to
her face is the caption, "Before you spend millions to build the most powerful
e-business in the world, take a moment to remember that true power on the Web
resides with me."

Towards the bottom of the page is the following text: "Understanding
individual customer needs. Conceiving e-services to meet those needs.
Distributing those services to the exact place and time they're needed most.
That's what we call Me-business/SM/. We're Modem Media. For over 12 years, we've
been providing strategy and technology-based solutions for industry-leading
companies and their customers." To the right of this text is Modem Media's
logo.

Under the logo is the following list of cities, separated by short vertical
lines: San Francisco, New York, London, Tokyo, Sao Paulo, Hong Kong, Munich,
Toronto, Paris, Norwalk.

This page opens to reveal a two-page fold-out graphic inside. The graphic
has the caption "Focus: Modem Media conceives, develops and distributes
customer-focused Internet solutions by:" across the top of the page.

The graphic is then broken up into five separate segments, each numbered,
with "1" on the top left, "2" on the top right, "3" to the left of center, "4"
on the bottom left and "5" on the bottom right. Each number is accompanied by a
bolded caption, one or more screenshots, and accompanying text. The
screenshots and text are set off with thin lines and box-like highlighting.

Next to "1" is the bolded caption: "Understanding customers and their
online needs." The screenshot depicts Citibank's website. The text next to the
screenshot reads, "Over the past 12 years, we have managed customer interactions
over the Internet and other interactive channels. We know what makes customers
click, and we put that knowledge to work for our clients."

Next to "2" is the bolded caption: "Using conceptual and technology skills
to create services that meet customers needs." The screenshot depicts the
website of the Opel division of General Motors. The text next to the screenshot
reads, "People read newspapers and watch TVs, but they use the Web. Our sites
provide services that help people get things done."

Next to "3" is the bolded caption: "Distributing services to customers
across Internet-enabled channels." The screenshot depicts a Mentadent/R/ e-mail
to a customer to the left of the text and a mobile phone, a PDA and two banner
advertisements to the right of the text. The text next to the screenshot reads,
"The services we create can be detached and distributed seamlessly across many
channels and devices, via our Me-business/sm/ Network. That means customers can
access those services whenever and wherever they're needed most."

Next to "4" is the bolded caption: "Creating new transaction opportunities
for our clients." The screenshot depicts John Hancock's website and a John
Hancock banner advertisement. The text next to the screenshot reads, "If
customers can access our services anywhere and anytime, they can also transact
with our clients anywhere and anytime. That means more opportunities to meet
customer needs, and more potential revenue for our clients."

Next to "5" is the bolded caption: "Measuring effectiveness and improving
constantly." The screenshot depicts the website of Delta Air Lines. The text
next to the screenshot reads, "Our CentrPort/sm/ technology enables us to gather
data about the effectiveness of many transactions we generate. That data is used
to help us understand customer needs better, so that we can customize our
services for them, and produce better results for our clients."

Across the bottom of the page is the caption "Results: Successful
e-business relationships for our industry-leading clients and their customers."]

<PAGE>

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 4
Special Note on Forward-Looking
Statements........................ 14
Use of Proceeds.................... 15
Dividend Policy.................... 15
Price Range of Our Class A Common
Stock............................. 15
Capitalization..................... 16
Selected Financial Data............ 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations......... 18
Business........................... 25
Management......................... 34
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Certain Relationships and Related
Transactions...................... 39
Principal and Selling
Stockholders...................... 40
Shares Eligible for Future Sale.... 42
Description of Capital Stock....... 45
U.S. Federal Tax Considerations for
Non-U.S. Holders of our Class A
Common Stock...................... 48
Underwriting....................... 50
Notice to Canadian Residents....... 52
Legal Matters...................... 53
Experts............................ 53
Where You Can Find More
Information....................... 53
Index to Financial Statements...... F-1
</TABLE>

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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.

"Modem Media" and "Me-business" are service marks of Modem Media.
"CentrPort" is a service mark of CentrPort, LLC.
<PAGE>

[This Page Intentionally Left Blank]
<PAGE>

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all of the information that you should consider
before deciding to invest in shares of our Class A common stock. We urge you to
read this entire prospectus carefully, including the "Risk Factors" section,
the consolidated financial statements and the notes to those statements, the
unaudited pro forma combined financial statements and the notes to those
statements, as well as the documents incorporated by reference in this
prospectus.

In this prospectus, the terms "Modem Media," "we," "us" and "our" refer to
Modem Media . Poppe Tyson, Inc. Unless otherwise indicated, all share amounts
and financial information presented in this prospectus:

. assume that the underwriters' over-allotment option is not exercised;

. give effect to a 2-for-1 split of both our Class A and Class B common
stock, which occurred on March 1, 2000; and

. give effect to the conversion of all outstanding shares of our Class B
common stock into shares of our Class A common stock upon consummation
of this offering.

Overview

We are a leading Internet professional services firm focused on conceiving,
developing and distributing customer-focused Internet solutions for Global 500
and select online businesses. Our customer-focused approach combines
technology-driven solutions with a deep understanding of the customer's unique
needs to create e-business solutions that are more rewarding for both our
clients and their customers. We combine our experience in business strategy,
creative design, technology and marketing to deliver to our clients, on a
global basis, an integrated service offering that includes:

. strategic consulting and customer research;
. design, development and implementation of e-business websites;
. distribution and marketing of customized services across multiple
Internet-enabled communication channels; and
. collection and analysis of customer data and measurement of the
effectiveness of our e-business solutions.

We call this comprehensive approach, focused on building enduring, mutually
beneficial client-customer relationships, Me-business SM, since in the eyes of
the customer, the company that best answers "my" needs will get "my" business.

We established the Me-business Network to enhance the distribution of our
Me-business solutions to our clients' customers. The network is designed to
seamlessly deliver services across multiple Internet-enabled communication
channels including websites, e-mail, wireless devices and call centers by
deploying the functionality of best-of-breed vendors on each channel. Through
CentrPort SM, our proprietary data and distribution management platform, we
provide clients an outsourced service to identify, accumulate and analyze
customer data generated through the Me-business Network's various communication
channels. By enabling a cross-channel understanding of individual customer
needs, we can continuously tailor new services for our clients' customers and
deliver them appropriately.

Since our inception in 1987, we have established and maintained
relationships with Global 500 and select online businesses. Our clients include
Citibank, Coca-Cola, Delta Air Lines, E*TRADE, General Electric, General
Motors, IBM, Intel and Women.com. We service our clients through a global
network of eleven offices in North America, Latin America, Europe and Asia with
our staff of over 750 employees.

1
<PAGE>

The Offering

<TABLE>
<S> <C>
Class A common stock offered in this
offering:
By Modem Media...................... 1,567,803
By the selling stockholders......... 2,932,197
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Total.............................. 4,500,000 shares
Class A common stock to be outstanding
after this offering.................. 25,614,133 shares
Over-allotment option:
By Modem Media...................... 175,000
By True North Communications Inc.... 500,000
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Total.............................. 675,000 shares
Use of proceeds....................... For general corporate purposes including working
capital and capital expenditures. We will not
receive any proceeds from the sale of the shares by
the selling stockholders.
Dividend policy....................... We do not intend to pay dividends on our common
stock. We plan to retain any earnings for use in the
operation of our business and to fund future growth.
Nasdaq National Market symbol......... MMPT
</TABLE>

The foregoing information is based on the number of shares outstanding as of
March 1, 2000. The number of shares of Class A common stock outstanding
excludes, in each case as of March 1, 2000:

. an aggregate of approximately 130,647 shares issued upon the exercise of
options during the period March 1, 2000 through March 10, 2000;

. an aggregate of 5,775,100 shares issuable upon the exercise of
outstanding options and warrants at a weighted average exercise price of
$13.06 per share;

. 4,461,086 additional shares that could be issued under our stock-based
compensation plans; and

. an aggregate of 1,046,656 shares issuable upon the exercise of
outstanding options under the Vivid Holdings, Inc. 1999 stock option
plan, at a weighted average exercise price of $2.41 per share.

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

Our principal executive offices are located at 230 East Avenue, Norwalk,
Connecticut 06855 and our telephone number is (203) 299-7000. We maintain a
website at www.modemmedia.com. Information contained on our website should not
be considered to be a part of this prospectus.

2
<PAGE>

SUMMARY FINANCIAL DATA

The following summary and pro forma financial data should be read in
conjunction with the consolidated financial statements and notes thereto, the
unaudited pro forma combined financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Selected Financial Data" included elsewhere in this
prospectus. The pro forma statements of operations data give effect to the
acquisition of Vivid Holdings, Inc. and Vivid Publishing, Inc. (collectively
"Vivid"), as if the acquisition had closed on January 1, 1999.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
Pro Forma
1995 1996 1997 1998 1999 1999
------- ------- ------- ------- ------- -----------
(in thousands, except per share data) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenues................ $ 438 $ 2,093 $25,497 $42,544 $74,036 $ 81,067
Cost of revenues........ 308 1,322 12,045 23,249 32,991 38,602
------- ------- ------- ------- ------- --------
Gross margin............ 130 771 13,452 19,295 41,045 42,465
Sales and marketing..... -- -- 769 1,098 1,658 1,969
General and
administrative......... 215 712 12,118 19,750 29,683 33,004
Amortization of
goodwill............... -- -- 1,666 1,768 2,959 15,615
Operating losses of True
North Units Held for
Transfer............... 1,766 1,309 2,180 13 -- --
------- ------- ------- ------- ------- --------
Operating (loss)
income................. (1,851) (1,250) (3,281) (3,334) 6,745 (8,123)
Interest (expense)
income, net............ -- -- (76) 29 1,975 1,630
------- ------- ------- ------- ------- --------
(Loss) income before
income taxes........... (1,851) (1,250) (3,357) (3,305) 8,720 (6,493)
(Benefit) provision for
income taxes........... (873) (548) (248) (102) 5,703 4,603
------- ------- ------- ------- ------- --------
Net (loss) income....... $ (978) $ (702) $(3,109) $(3,203) $ 3,017 $(11,096)
======= ======= ======= ======= ======= ========
Net (loss) income per
share:
Basic................. $ -- $(17.55) $ (0.21) $ (0.21) $ 0.14 $ (0.50)
======= ======= ======= ======= ======= ========
Diluted............... $ -- $(17.55) $ (0.21) $ (0.21) $ 0.13 $ (0.50)
======= ======= ======= ======= ======= ========
</TABLE>

<TABLE>
<CAPTION>
December 31, 1999
---------------------------------
Pro Forma As
Actual Pro Forma Adjusted
-------- ----------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................... $ 30,265 $ 20,092 $ 86,488
Short-term investments...................... 16,859 16,859 16,859
Working capital............................. 37,687 27,266 93,662
Total assets................................ 145,732 200,876 267,272
Capital lease obligations, less current
portion.................................... 471 471 471
Other long-term obligations................. 221 221 221
Total stockholders' equity.................. 111,476 164,876 231,272
</TABLE>

The balance sheet data are set forth on an actual basis, on a pro forma
basis giving effect to our acquisition of Vivid as if the acquisition had
closed on December 31, 1999, and on a pro forma as adjusted basis after giving
effect to our offering of shares of Class A common stock at an assumed public
offering price of $45 1/4 per share.

3
<PAGE>

RISK FACTORS

You should carefully consider each of the following risks and all of the
other information set forth and incorporated by reference in this prospectus
before deciding to invest in shares of our Class A common stock. Some of the
following risks relate principally to our business in general and the industry
in which we operate. Other risks relate principally to the securities market
and ownership of our stock.

Our business, financial condition or results of operations could be
materially adversely affected and the trading price of our Class A common stock
could decline due to any of these risks. As a result, you may lose all or part
of your investment.

Risks Relating to Our Business

We have a history of operating losses, and we expect to incur net losses for
the foreseeable future

We have experienced operating or net losses in nine of the twelve quarters
in the period from January 1, 1997 to December 31, 1999. Although we have
experienced revenue growth and profitability in recent periods, our recent
growth may not be sustainable or indicative of future operating results. We
have incurred substantial costs to expand and integrate our operations, and we
intend to continue to invest heavily in global expansion efforts, sales and
marketing, technology platforms, infrastructure development and the hiring of
additional personnel. We have current plans to significantly increase our
hiring efforts and costs associated with these new hires will begin to accrue
before we are realizing corresponding revenues generated by them. As a result
of the amortization of goodwill related to the acquisition of Vivid, and these
increased costs, we expect to incur net losses for the foreseeable future.

Our operating results depend on our relationship with a limited number of
clients

Our results of operations and our business depend on our relationships with
a limited number of large clients. Set forth below are the percentages of
revenues during 1998 and 1999 for each of our clients that accounted for more
that 10% of our revenues and for our five largest clients combined:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
Client 1998 1999
------ -------- ---------------
<S> <C> <C>
AT&T............................................. 20.7% less than 10%
Citibank......................................... 12.8 13.8
Five largest clients combined.................... 53.4 45.1
</TABLE>

We cannot assure you that we will be able to maintain our historical rate of
growth or our current level of revenues derived from these clients or any other
client in the future. We resigned from our relationship with AT&T in June 1999
and at this time do not expect AT&T to be a significant client of ours in the
future.

We generally do not have long-term contracts with our clients. Our clients
typically hire us one project at a time. Moreover, our clients generally have
the right to terminate their relationships with us without penalty and with
relatively short or no notice. Once a project is completed we cannot assure you
that a client will engage us for further services. As a result, a client that
generates substantial revenue for us in one period may not be a substantial
source of revenue in a subsequent period. We expect a relatively high level of
client concentration to continue but not necessarily involve the same clients
from period to period. The termination of our business relationships with any
of our significant clients, or a material reduction in the use of our services
by any of our significant clients, could adversely affect our future financial
performance.

4
<PAGE>

Variability of our quarter-to-quarter operating results may impact our stock
price

Our quarterly operating results have fluctuated in the past, and may
continue to fluctuate in the future as a result of a variety of factors, many
of which are outside of our control, including:

. the loss of or resignation from a significant client;

. the timing of new hires in anticipation of growth in our business and
employee attrition;

. the timing and scope of new projects;

. the devotion of resources to new business development;

. reduction, cancellation or completion of major projects;

. the opening or closing of an office;

. costs related to the expansion of our business;

. our relative mix of domestic versus international business;

. changes in pricing by us or our competitors;

. employee utilization rates;

. integration of acquisitions; and

. use of more expensive temporary employees to provide our professional
services.

As a result of these fluctuations, we believe that period-to-period
comparisons of our operating results cannot be relied upon as indicators of our
future performance. In some periods our operating results may fall below the
expectations of securities analysts and investors due to any of the factors
described above. If this occurs, the trading price of our Class A common stock
would likely decline.

We also experience some variation in operating results throughout the year
that results in part from the Internet professional services spending patterns
and business cycles of our clients, and from Internet professional services
spending patterns in general. Our revenues have historically been higher during
the second half of our fiscal year. We expect this variation in operating
results to continue in the future.

If we fail to accurately estimate costs in fixed-fee projects, our operating
results may be adversely affected

In 1999, approximately 76% of our revenues were derived from fixed-fee
projects. Because of the complexity of many of our client engagements,
accurately estimating the cost, scope and duration of a particular project can
be a difficult task. With respect to any single fixed-fee project, if we fail
to estimate costs accurately, control costs or anticipate technical problems,
our future financial performance could be adversely affected. We may also be
forced to devote additional resources to these projects for which we will not
receive additional compensation. We recognize revenues from fixed-fee projects
as services are rendered. To the extent our estimates are inaccurate, the
revenues and operating profits, if any, we report for periods during which we
are working on a project may not accurately reflect the final results of the
project and we would be required to record an expense for such period equal to
the amount by which our revenues were previously overstated.

To succeed in our labor intensive business, we must recruit and retain
qualified professionals, who are currently in high demand

The labor-intensive Internet professional services industry currently faces
a shortage of qualified personnel, at all levels of experience, which we expect
to continue. We compete intensely with other companies to recruit and hire from
this limited pool. Our inability to hire and retain personnel would cause our
business results to

5
<PAGE>

suffer. In addition, our ability to generate revenues directly relates to our
personnel, both in terms of the number and expertise of the personnel we have
available to work on our projects and the mix of full time employees and
temporary employees that we utilize. As a result, if we fail to retain existing
employees or hire new employees, we may not be able to complete or retain
existing engagements or bid for new engagements of similar scope or revenues
and our business, financial condition and operating results could be materially
and adversely affected. We are particularly dependent on a limited number of
technical personnel to develop our CentrPort technology. Losing any of these
individuals could delay the development of services related to the CentrPort
technology.

The integration of Vivid and other companies that we may acquire may
materially and adversely affect our operating results

We recently acquired Vivid and may acquire other companies. We expect that
the integration of acquired operations will place a significant burden on our
management. Such integration is subject to risks and uncertainties, including:

. the inability to effectively assimilate the operations, services,
technologies, personnel and cultures of entities that we acquire;

. the diversion of management's attention;

. undisclosed or potential legal liabilities of Vivid or other acquired
businesses;

. the potential disruption of our business; and

. the impairment or loss of relationships with employees and clients.

We expect that our margins will decline until we successfully complete the
integration of the operations of Vivid with our own. As a result of the
amortization of goodwill related to the acquisition of Vivid and increased
costs that we expect to incur in connection with our expansion and development
efforts, we expect to incur net losses for the foreseeable future. If in
connection with acquiring new businesses we fail to integrate our operations
successfully or on a timely basis, or if we incur any unforeseen expenses, our
financial performance could be materially and adversely affected.

Difficulties presented by international factors could negatively affect our
operating results

One component of our strategy is to expand into international markets, as
evidenced by the opening of offices in Europe and Asia, as well as by recent
acquisitions in those regions. Once we select a new location, we typically
devote substantial financial and management resources to launch and grow that
office. We cannot assure you that we will select appropriate markets to enter,
open new offices efficiently or manage new offices profitably. Any new office
could underperform relative to our expectations and we may not be able to
achieve the same levels of business growth and profitability as in our domestic
offices. We believe that we will face risks in doing business abroad that we do
not face domestically. Among the international factors we believe are most
likely to affect us are:

. difficulties and costs of staffing and managing international
operations;

. different rate structures based on local economies;

. longer payment cycles;

. problems in collecting accounts receivable;

. international currency issues, including fluctuations in currency
exchange rates and the conversion to the Euro by all countries of the
European Union by year end 2003;

. restrictions on the import and export of sensitive U.S. technologies,
such as data security and encryption technologies that we may wish to
use in solutions we develop for customers;

. more restrictive privacy regulations in different countries,
particularly in the European Union; and

. legal and regulatory requirements of different countries, such as
differing tax or labor laws.

6
<PAGE>

Any of these factors or other factors not enumerated here could adversely
affect the results of our international operations.

Continued growth of our business will place increased demands on our systems
and resources and may adversely affect our operating results and our ability
to retain talented personnel

The expansion of our business and client base has placed increased demands
on our management, operating systems, internal controls and financial and
physical resources. Our continued growth, if any, may strain existing
management and human resources in particular, affecting our ability to attract
and retain talented personnel. Consequently, we may be required to increase
expenditures to hire new employees, open new offices and invest in new
equipment or make other capital expenditures. Any failure to expand any of the
foregoing areas in an efficient manner could adversely affect our operating
results. We also cannot assure you that we will be able to sustain the rates of
growth that we have experienced in the past or manage our growth effectively in
the future.

We depend on our key management personnel for our future success

We rely on our key management personnel, including G. M. O'Connell, our
Chairman and Chief Executive Officer, and Robert C. Allen, II, our President
and Chief Operating Officer, because personal relationships are critical to
obtaining and retaining client engagements. We believe that our future success
will depend upon our ability to attract and retain additional key management
personnel. If any of our officers or key employees leaves our company, the
relationships that they have with our clients could be lost.

Our future success depends in part on our ability to provide our clients with
measurement and distribution services using our new CentrPort technology

We recently introduced new services based on our CentrPort technology for
measuring the effectiveness of distributing Me-business solutions over multiple
Internet-enabled communication channels. If these new services are not
successful, we will not be able to add a new source of revenue to supplement
our fees from our Internet professional services. There are significant risks
associated with our ability to deliver these services and to make them
commercially successful, including potential damage to our reputation if we do
not succeed.

These services are based on new technology and, to date, we have offered
these services to a limited number of clients. Moreover, we are still in the
process of developing additional capabilities. We will need to invest in
technology development, hardware and hosting services to provide these services
and to broaden their scope and volume. We will be making these investments in
advance of client commitments to use our services. To the extent that demand
develops for these services, we do not have the experience to know whether we
will be able to expand our technology platform to meet this demand.

In addition, our CentrPort technology and the Me-business Network depend on
our ability to develop relationships with service providers for each Internet-
enabled communication channel covered by our services. We have established
these relationships with an e-mail provider and an ad serving firm for
distribution to third- party websites and are in the process of developing
additional relationships and related technology. If we are unsuccessful in
these efforts, we may not realize the full potential of our CentrPort
technology and the Me-business Network, limiting the usefulness of these
services to our clients.

We have established a new pricing model for CentrPort and the related Me-
business Network services including measurement fees, distribution fees based
on volume and database maintenance fees based on records under management. We
have limited experience with this transactional pricing model and we cannot be
certain our clients will find this pricing acceptable.

As a result of all these considerations, we cannot be certain that our new
services will achieve commercial acceptance.

7
<PAGE>

Disruption of our services due to unanticipated problems or failures could
harm our business

Our CentrPort technology is hosted by a third-party service provider. This
third-party service provider's continuing and uninterrupted performance is
critical to CentrPort's success. Our clients may become dissatisfied by any
system failure that interrupts our ability to provide CentrPort's services to
them, including failures affecting our ability to deliver information without
significant delay. Sustained or repeated system failures would reduce the
attractiveness of our Me-business solutions, supported by CentrPort, to our
clients. Slower response time or system failures may also result from straining
the capacity of our deployed software or hardware due to an increase in the
volume of information delivered through CentrPort's servers. To the extent that
we do not effectively address any capacity constraints or system failures, our
business, results of operations and financial condition could be materially and
adversely affected.

Our operations are dependent on our ability to protect our computer systems
against damage from fire, power loss, water damage, telecommunications
failures, vandalism and other malicious acts, and similar unexpected adverse
events. In addition, interruptions in the delivery of our services could result
from the failure of our telecommunications providers to provide the necessary
data communications capacity in the time frame we require. Despite precautions
that we have taken, unanticipated problems affecting our systems have from
time-to-time in the past caused, and in the future could cause, interruptions
in the delivery of our services. Our business, results of operations and
financial condition could be materially and adversely affected by any damage or
failure that interrupts or delays our operations.

Concentration of ownership may limit your ability to influence corporate
matters and True North's interests may conflict with our interests

Immediately following this offering, the officers, directors and significant
stockholders set forth below collectively will own approximately 51.3% of the
outstanding shares of our common stock, including options that are currently
exercisable or will become exercisable within 60 days of March 1, 2000, and
will own individually the percentage set forth opposite their respective names:

<TABLE>
<CAPTION>
Officers, Directors
and/or Significant
Stockholders Ownership Percentage
------------------- --------------------
<S> <C>
True North
Communications Inc. and
Subsidiaries........... 33.6%
Douglas C. Ahlers....... 8.2
G. M. O'Connell......... 7.4
Robert C. Allen, II..... 2.1
</TABLE>

If the stockholders listed above choose to act or vote together, they will
have the power to influence the election of our directors, and the approval of
any other action requiring the approval of our stockholders, including any
amendments to our certificate of incorporation and mergers or sales of all or
substantially all of our assets. In addition, without the consent of these
stockholders, we could be prevented from entering into transactions that could
be beneficial to us. Also, third parties could be discouraged from making a
tender offer or bid to acquire our company at a price per share that is above
the then-current market price.

Currently, two of our eight directors are also employees of True North and
are compensated by True North in connection with their employment by True
North. In addition one of these directors and one of our other directors are
also directors of True North and were elected to serve on our board of
directors by True North. These three directors may have conflicts of interest
in addressing business opportunities and strategies in circumstances where our
interests differ from those of True North. For example, if a dispute were to
arise between True North and us, our directors who are also officers or
directors of True North may have a conflict of interest in resolving the
dispute. In such a case these directors would not be able to participate in
resolving such dispute and our remaining officers and directors would be
required to act independently. We have not adopted any formal plan or
arrangement to address these potential conflicts of interest. So long as True
North owns at least 10% of our outstanding capital stock, we and the other
parties to a stockholders agreement have agreed to take all action necessary to
cause the election of at least one director designated by True North to our
board of directors.

8
<PAGE>

Risks Relating to Our Industry

Exclusivity arrangements with our clients may limit our ability to provide
services to others

It is customary in the Internet professional services industry to enter into
exclusivity arrangements with clients. We have entered into these arrangements
with a number of our largest clients that restrict our ability to provide
services to their competitors. We have in the past been, and may in the future
be, unable to take on new clients because such opportunities would require us
to provide services to direct competitors of our existing clients. In addition,
we risk harming relationships with existing clients if we agree to provide
services to their indirect competitors. Prospective clients may also choose not
to retain us for reasons of actual or perceived conflicts of interest.

The Internet professional services market is highly competitive and has low
barriers to entry, which could affect our ability to compete and may cause
our revenues to decline

The Internet professional services market is relatively new and intensely
competitive. We expect competition to intensify even further as this market
evolves. Some of our competitors and potential competitors have longer
operating histories, longer client relationships, and greater financial,
management, technology, development, sales, marketing and other resources than
we do. Competition depends to a large extent on clients' perception of the
quality and creativity as well as the technical proficiency of our services and
those of our competitors. We also compete on the basis of price and the ability
to serve clients on a broad geographic basis. To the extent we lose clients to
our competitors because of dissatisfaction with our services, or if our
reputation is adversely impacted for any other reason, our future operating
performance could be materially and adversely affected.

There are relatively low barriers to entry in the Internet professional
services industry, primarily because it is an industry that requires minimal
capital expenditures from new entrants. We expect that we will face additional
competition from new market entrants. There can be no assurance that existing
or future competitors will not develop or offer Internet professional services
and products that provide significant performance, price, creative,
technological or other advantages over our services, any of which could have a
material adverse effect on our future operating performance.

The developing market for our Internet professional services is subject to
uncertainties

The market for Internet professional services has only recently begun to
develop, is evolving rapidly and is characterized by an increasing number of
market entrants. Demand for, and market acceptance of, recently introduced
services are subject to a high level of uncertainty and are dependent on a
number of factors, including:

. the growth in consumer access to and acceptance of new interactive
technologies, such as the Internet and online services;

. the development of technologies that facilitate the delivery and use of
interactive communications between organizations and targeted audiences;
and

. our ability to anticipate such technologies and incorporate them into
our services in a timely fashion.

We cannot assure you that the market for Internet professional services will
continue to grow, that demand for our services will continue or that Internet-
enabled communication channels or other interactive media will continue to be
used for commerce and communication. If the market for Internet professional
services develops more slowly than we expect, or if our services do not
continue to achieve market acceptance, our future operating performance could
be materially adversely affected.

9
<PAGE>

Our business will be negatively affected if we do not keep up with the
Internet's rapid technological change, evolving industry standards and
changing client requirements

The Internet professional services market is characterized by rapidly
changing technology, evolving industry standards and changing client needs.
Accordingly, our future success will depend, in part, on our ability to meet
these challenges. Among the most important challenges facing us are the need
to:

. effectively use and build leading technologies;

. continue to develop our strategic and technical expertise;

. influence and respond to emerging industry standards and other
technological changes;

. enhance our current services;

. develop new services that meet changing customer needs; and

. advertise and market our services.

All of these challenges must be met in a timely and cost-effective manner.
We cannot assure you that we will succeed in effectively meeting these
challenges and our failure to do so could have an adverse effect on our
operating results.

Our revenues may decrease if growth in the use of the Internet does not
increase

Our business is dependent upon continued growth in the use of the Internet
by our clients, prospective clients and their customers and suppliers.
Published reports indicate that capacity constraints caused by growth in
Internet usage may, unless resolved, impede further growth in Internet use. If
the number of users on the Internet does not increase and commerce over the
Internet does not become more accepted and widespread, demand for our services
may decrease and, as a result, our revenues would decline causing the value of
your investment also to decline. Factors that may affect Internet usage or the
adoption of electronic commerce include:

. actual or perceived lack of security of information;

. lack of access and ease of use;

. congestion of Internet traffic;

. inconsistent quality of service;

. increases in access costs to the Internet;

. excessive governmental regulation;

. uncertainty regarding intellectual property ownership;

. reluctance to adopt new business methods; and

. costs associated with the obsolescence of existing infrastructure.

Changes in government regulation could adversely affect our business

A number of the services that we provide are subject to extensive government
regulation, both domestic and foreign, with respect to the truth in and
fairness of advertising and other marketing-related regulations. To ensure that
our clients' communications with their customers do not violate these
regulations, we must comply with Federal Trade Commission regulations governing
the marketing of products and services and similar state regulations. In
addition, there has been an increasing tendency in the United States on the
part of businesses to resort to the judicial system to challenge comparative
advertising of their competitors on the grounds that the

10
<PAGE>

advertising is false and deceptive. We cannot assure you that we will not be
subject to claims against us or our clients by other companies or governmental
agencies or that any such claims, regardless of merit, would not have a
material adverse effect on our future operating performance.

Although there are currently few laws or regulations directly governing
access to or commerce on the Internet, due to the increasing popularity and use
of the Internet, any number of state, federal, foreign laws and regulations may
be adopted regarding pricing, acceptable content, taxation and quality of
products and services. Any new legislation could inhibit the growth in use of
the Internet and decrease the acceptance of the Internet as a communications
and commercial medium, which could in turn decrease the demand for our services
or otherwise have a material adverse effect on our future operating
performance.

Customers' concerns about, or government regulation of, privacy on the
Internet may adversely affect our business

An important feature of the services we provide to our clients is the
ability to develop and maintain non-personally identifiable information to
measure the effectiveness of the services our clients provide to their
customers. Through our Me-business Network and CentrPort technology we enable
our clients to capture non-personally identifiable information to measure the
effectiveness of their services and manage the distribution of services to
their customers. Additionally, we enable many of our clients to gather
personally identifiable information when their customers visit their websites
so that our clients may offer customized services to their customers.

However, privacy concerns may cause customers to resist providing the data
necessary to support these capabilities. Moreover, even the perception of
privacy concerns, whether or not valid, may indirectly inhibit market
acceptance of the Internet as a means of commerce and marketing. Lastly,
standard Internet browsers allow users to modify their browser settings to
remove "cookies" at any time or prevent cookies from being stored on their hard
drives. These cookies, information keyed to a specific server, file pathway or
directory location that is stored on a computer user's hard drive, possibly
without the user's knowledge or consent, are used by our CentrPort technology.
If the privacy concerns of customers are not adequately addressed, we may not
be able to collect data from the customers of our clients and, our future
operating performance could be materially and adversely affected.

Privacy concerns would be heightened by proposed legislative or regulatory
initiatives that mandate notification to Internet users that the data captured
on Internet sites will be used for marketing or other purposes. The Federal
Trade Commission is in the process of working with various industry groups to
determine if industry self-regulation will provide sufficient protection of
consumer information. If the Federal Trade Commission believes industry efforts
are inadequate, the Federal Trade Commission will likely recommend legislation
regarding the handling of information on the Internet. In addition, the
European Union has promulgated regulations regarding the handling of data.
Governments of various countries have adopted or are considering other
regulations regarding privacy. Regulations regarding the use and collection of
customer information or limitations on or elimination of the use of cookies
could reduce the effectiveness of our services, which would make them less
attractive to our clients and could have an adverse effect on our business
results.

We may face intellectual property claims that may be costly to resolve or
limit our ability to use intellectual property in the future

We are obligated under some agreements to indemnify other parties as a
result of claims that we infringe on the proprietary rights of third parties.
Although we do not believe that the Me-business solutions that we develop for
clients, or our CentrPort technology, infringe on any third-party proprietary
rights, we cannot assure you that third parties will not assert infringement
claims against us in the future or that these claims will not be successful. We
could incur substantial costs and management resources may be diverted to
defend any claims

11
<PAGE>

relating to proprietary rights. These costs and diversions could cause our
business results to suffer. If any party asserts a claim against us relating to
proprietary technology or information, we may need to obtain licenses to the
disputed intellectual property. We cannot assure you, however, that we will be
able to obtain these licenses on commercially reasonable terms or that we will
be able to obtain any licenses at all. The failure to obtain necessary licenses
or other rights may have an adverse affect on our business results.

We may not be able to protect our intellectual property

As we develop technology platforms, including CentrPort, we will need to
protect our intellectual property interests in that technology. Our success
will depend, in part, on whether we can:

. obtain patents to protect our own products;

. obtain licenses to use certain technologies of third parties, which may
be protected by patents;

. protect our trade secrets and know-how; and

. operate without infringing the intellectual property and proprietary
right of others.

Despite our efforts to protect our intellectual property, unauthorized
parties may attempt to copy or otherwise obtain and use our proprietary
technology. Monitoring unauthorized use of our technology is difficult and
unauthorized use of our technology may occur. We cannot be certain that patents
will be issued nor can we be certain that any issued patents would protect or
benefit us or give us adequate protection from competing products. For example,
issued patents may be circumvented or challenged and declared invalid or
unenforceable. In addition, others may develop competing technologies on their
own. Any inability to adequately protect our intellectual property interests
could have an adverse effect on our business results.

We may be liable to our clients for damages

Many of our engagements involve the development, implementation and
maintenance of Me-business solutions that are critical to our clients'
businesses. Our failure or inability to meet a client's expectations in the
performance or completion of services could injure our business reputation or
result in a claim for substantial damages against us regardless of our
responsibility for such failure. In addition, in the course of providing
Internet professional services to our clients we may be given access to
confidential or proprietary client information. Although we have implemented
policies to prevent such client information from being disclosed to
unauthorized parties or used inappropriately, any such unauthorized disclosure
or use could result in a claim against us for substantial damages. Our
contractual provisions attempting to limit such damages may not be enforceable
in all instances or may otherwise fail to protect us from liability for
damages, which could adversely affect our future operating performance.

Risks Relating to This Offering

We may need additional capital in the future, which may not be available to
us and the raising of which may dilute your ownership in us

We may need to raise additional funds through public or private debt or
equity financing in order to:

. take advantage of business opportunities, including more rapid expansion
or acquisitions of, or investments in, businesses or technologies;

. develop new services; or

. respond to competitive pressures.

Any additional capital raised through the sale of equity may dilute your
ownership percentage in our Class A common stock. Furthermore, we cannot assure
you that any additional financing we may need will be available on terms
favorable to us, or at all. Our failure to obtain additional capital may have
an adverse effect on our business results.

12
<PAGE>

There may be sales of a substantial amount of our Class A common stock after
this offering that could cause our stock price to fall

Sales of a substantial number of shares of our Class A common stock by our
stockholders after this offering or the public perception that these sales
could occur, could cause the market price of our Class A common stock price to
fall and could impair our ability to raise capital through the sale of
additional Class A common stock. After giving effect to stockholder lock-ups
and holding periods under Rule 144, we estimate that additional shares of
outstanding Class A common stock will be available for sale in the public
market, as follows: approximately 2,050,000 shares will be available
immediately, approximately 10,800,000 additional shares will be available 91
days after the date of this prospectus, approximately 128,400 additional shares
will be available in October 2000 and approximately 446,000 additional shares
will be available in February 2001. In addition to these shares, additional
shares issuable upon the exercise of outstanding options and warrants may be
sold in the public market under the registration statements described in
"Shares Eligible For Future Sale."

Anti-takeover provisions could make a third-party acquisition of our company
difficult

Provisions of our certificate of incorporation and bylaws and provisions of
Delaware law could delay, defer or prevent an acquisition or change of control
of us or otherwise adversely affect the price of our Class A common stock.
These provisions may deprive you of the opportunity to sell your shares at a
premium over prevailing prices. This potential inability to obtain a control
premium could reduce the market price of our Class A common stock. Please refer
to "Description of Capital Stock" for a more detailed discussion of these and
other provisions.

Market volatility may impact our share price

The stock market in general, and the market for Internet-related stocks in
particular, have experienced extreme volatility that often has been unrelated
to the operating performance of particular companies. These broad market and
industry fluctuations may adversely affect the trading price of our Class A
common stock, regardless of our actual operating performance.

13
<PAGE>

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements within the meaning of
Section 27A(i)(1) of the Securities Act of 1933, as amended and Section
21E(i)(1) of the Securities and Exchange Act of 1934, as amended. Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results to be materially different from any
future results expressed or implied by these statements. Such factors include,
among other things, the following:

. history of operating losses; . the ability to manage future
. dependence on a limited number of growth, if any;
clients; . dependence on key management
. variability of operating results; personnel;
. the ability to accurately . exclusivity arrangements with
estimate costs in fixed-fee clients that may limit the
engagements; ability to provide services to
. the ability to attract and retain others;
qualified professionals; . dependence on technology;
. the ability to successfully . dependence on the continued
introduce and expand the Me- growth of the Internet; and
business Network and CentrPort . changes in government regulation
technology; including regulation of privacy
. the ability to integrate acquired issues.
companies;
. the cost and timing of
international expansion;

In light of these and other uncertainties, the forward-looking statements
included in this prospectus should not be regarded as a representation by us
that our plans and objectives will be achieved.

14
<PAGE>

USE OF PROCEEDS

We estimate our net proceeds from the sale of shares of Class A common stock
offered by us in this offering, after deducting estimated expenses of $1.0
million, all of which are payable by us, and underwriting discounts and
commissions, to be approximately $66.4 million (approximately $73.9 million if
the underwriters exercise their over-allotment option in full), at an assumed
offering price of $45 1/4 per share.

We currently expect to use the net proceeds from this offering for general
corporate purposes, including working capital and capital expenditures.
Although we have no immediate plans to do so, we may elect to use a portion of
the net proceeds from this offering to acquire or invest in complementary
businesses or to invest in geographic expansion. Pending use of the net
proceeds for the above purposes, we intend to invest such funds in short-term,
interest-bearing, investment grade obligations.

We will not receive any of the proceeds from the sale of shares of Class A
common stock offered by the selling stockholders.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We
anticipate that we will retain any future earnings for use in the expansion and
operation of our business and do not anticipate paying any cash dividends in
the foreseeable future. Any determination to pay dividends in the future will
be at the discretion of our board of directors and will depend upon our
financial condition, results of operations and capital requirements.

PRICE RANGE OF OUR CLASS A COMMON STOCK

Our Class A common stock has been quoted on the Nasdaq National Market under
the symbol "MMPT" since our initial public offering on February 5, 1999. Prior
to that time, there was no public market for our Class A common stock. The
following table sets forth, for the periods indicated, the high and low sales
prices per share of our Class A common stock as reported on the Nasdaq National
Market:

<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1999
----
First Quarter (from February 5, 1999).................... $27.56 $11.97
Second Quarter........................................... 26.00 10.63
Third Quarter............................................ 20.86 8.88
Fourth Quarter........................................... 39.50 17.78
2000
----
First Quarter (through March 22, 2000)................... 56.94 31.22
</TABLE>

On March 22, 2000, the last reported sale price for our Class A common stock
on the Nasdaq National Market was $45 1/4 per share.

15
<PAGE>

CAPITALIZATION

The following table sets forth our total capitalization as of December 31,
1999 on an actual basis, on a pro forma basis after giving effect to our
acquisition of Vivid as if it had occurred on December 31, 1999 and on a pro
forma as adjusted basis after giving further effect to this offering and the
application of our net proceeds from this offering. This table should be read
in conjunction with our consolidated financial statements and notes thereto and
our unaudited pro forma combined financial statements and notes thereto
appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
December 31, 1999
---------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- ----------- -----------
(unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C>
Cash and cash equivalents and short-term
investments................................. $ 47,124 $ 36,951 $103,347
======== ======== ========
Capital lease obligations, less current
portion..................................... $ 471 $ 471 $ 471
Stockholders' equity:
Preferred stock, $0.001 par value;
5,000,000 shares authorized, none issued
and outstanding, actual, pro forma and pro
forma as adjusted......................... -- -- --
Common stock, $0.001 par value; 44,909,539
shares of Class A common stock and
11,116,326 shares of Class B common stock
authorized, 11,931,136 shares of Class A
common stock and 11,116,326 shares of
Class B common stock issued and
outstanding, actual; 44,909,539 shares of
Class A common stock and 11,116,326 shares
of Class B common stock authorized,
12,377,146 shares of Class A common stock
and 11,116,326 shares of Class B common
stock issued and outstanding, pro forma;
44,909,539 shares of Class A common stock
and 11,116,326 shares of Class B common
stock authorized, 25,061,275 shares of
Class A common stock and no shares of
Class B common stock issued and
outstanding, pro forma as adjusted........ 23 23 25
Paid-in capital............................ 121,151 174,551 240,945
Accumulated deficit........................ (8,604) (8,604) (8,604)
Treasury stock, 184,834 shares of Class A
common stock, at cost..................... (1,118) (1,118) (1,118)
Accumulated other comprehensive income..... 24 24 24
-------- -------- --------
Total stockholders' equity............... 111,476 164,876 231,272
-------- -------- --------
Total capitalization................... $111,947 $165,347 $231,743
======== ======== ========
</TABLE>

The foregoing information is based on the number of shares outstanding as of
December 31, 1999. The number of shares of Class A common stock outstanding
excludes, in each case as of December 31, 1999:

. an aggregate of approximately 526,063 shares issued upon the exercise of
options during the period January 1, 2000 through March 10, 2000;

. 5,614,044 shares issuable upon the exercise of outstanding options and
warrants, at a weighted average exercise price of $10.86 per share;

. 4,995,266 additional shares that could be issued under our stock-based
compensation plans; and

. an aggregate of 1,210,826 shares issuable upon the exercise of
outstanding options under the Vivid Holdings, Inc. 1999 stock option
plan, at a weighted average exercise price of $2.32 per share, after
giving effect to the acquisition of Vivid.

16
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
consolidated financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein. The statements of operations data for the fiscal
years ended December 31, 1995 and 1996 and the balance sheet data as of
December 31, 1995, 1996 and 1997 are derived from our consolidated financial
statements that have been audited by Arthur Andersen LLP, independent public
accountants, which are not included in this prospectus. The statements of
operations data for the fiscal years ended December 31, 1997, 1998 and 1999 and
the balance sheet data as of December 31, 1998 and 1999 are derived from our
consolidated financial statements that have been audited by Arthur Andersen
LLP, independent public accountants, and are included elsewhere in this
prospectus. Data for 1998 and later periods reflect our combination with the
strategic interactive marketing operations of Poppe Tyson, Inc.

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenues........................ $ 438 $ 2,093 $25,497 $42,544 $ 74,036
Cost of revenues................ 308 1,322 12,045 23,249 32,991
------- ------- ------- ------- --------
Gross margin.................... 130 771 13,452 19,295 41,045
Sales and marketing............. -- -- 769 1,098 1,658
General and administrative...... 215 712 12,118 19,750 29,683
Amortization of goodwill........ -- -- 1,666 1,768 2,959
Operating losses of True North
Units Held
for Transfer................... 1,766 1,309 2,180 13 --
------- ------- ------- ------- --------
Operating (loss) income......... (1,851) (1,250) (3,281) (3,334) 6,745
Interest (expense) income, net.. -- -- (76) 29 1,975
------- ------- ------- ------- --------
(Loss) income before income
taxes.......................... (1,851) (1,250) (3,357) (3,305) 8,720
(Benefit) provision for income
taxes.......................... (873) (548) (248) (102) 5,703
------- ------- ------- ------- --------
Net (loss) income............... $ (978) $ (702) $(3,109) $(3,203) $ 3,017
======= ======= ======= ======= ========
Net (loss) income per share:
Basic......................... $ -- $(17.55) $ (0.21) $ (0.21) $ 0.14
======= ======= ======= ======= ========
Diluted....................... $ -- $(17.55) $ (0.21) $ (0.21) $ 0.13
======= ======= ======= ======= ========
<CAPTION>
December 31,
--------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........ $ -- $ 2,726 $ 7,056 $ 7,824 $ 30,265
Short-term investments........... -- -- -- -- 16,859
Working capital (deficit)........ 548 3,428 3,269 (5,917) 37,687
Total assets..................... 753 54,022 59,024 71,286 145,732
Capital lease obligations, less
current portion................. -- 193 472 323 471
Related party obligations, less
current portion................. 620 6,000 9,346 -- --
Other long-term obligations...... -- 55 41 19 221
Total stockholders' (deficit)
equity.......................... (846) 40,493 35,618 35,560 111,476
</TABLE>

17
<PAGE>

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

Overview

. strategic consulting and customer research;

. design, development and implementation of e-business websites;

. distribution and marketing of customized services across multiple
Internet-enabled communication channels; and

. collection and analysis of customer data and measurement of the
effectiveness of our e-business solutions.

We were formed by True North in October 1996 to acquire Modem Media
Advertising Limited Partnership (the "Modem Partnership") and to combine it
with True North's digital interactive marketing operations, including Northern
Lights Interactive. Effective October 1, 1998, we acquired the strategic
interactive marketing operations of Poppe Tyson from True North in exchange for
(1) our non-strategic digital interactive marketing operations and (2) an
aggregate of 1,619,028 shares of our Class B common stock. In conjunction with
this transaction, True North forgave $5,763,000 of intercompany borrowings and
transferred $1,624,000 of fixed assets to us. This transaction occurred among
companies under common control, and, accordingly, was recorded as of December
31, 1997, the date of True North's acquisition of the strategic interactive
marketing operations of Poppe Tyson, at historical cost. Poppe Tyson was formed
in December 1985 as a subsidiary of Bozell, Jacobs, Kenyon & Eckhardt, Inc.,
which was acquired by True North in December 1997 in a business combination
accounted for under the pooling-of-interests method (see Note 2 of the notes to
our consolidated financial statements).

During the fourth quarter of 1998, we integrated the domestic offices of the
strategic interactive marketing operations of Poppe Tyson with our own
operations. In 1999, we successfully deployed this additional capacity to
service additional business with existing clients. Internationally, we resigned
from low-margin engagements and utilized this capacity to service global
clients. As a result of these measures, we became profitable for the three
quarters ending December 31, 1999, after suffering a loss in 1998.

Our results of operations include the results of:

. the Modem Partnership;

. the digital interactive marketing operations contributed by True North
to us in 1996, including both Northern Lights Interactive and the non-
strategic digital interactive marketing operations that we sold back to
True North effective October 1, 1998; and

. the strategic interactive marketing operations of Poppe Tyson,

from their respective dates of acquisition by True North. The results of
operations of the businesses that we sold back to True North effective October
1, 1998 are included in our results through September 30, 1998 and are
presented as "Operating Losses of True North Units Held for Transfer" in our
consolidated financial statements.

The financial statements of the strategic interactive marketing operations
of Poppe Tyson as of and for the year ended December 31, 1997 are incorporated
by reference herein as the financial statements of a predecessor to us.

18
<PAGE>

Clients generally hire us on a fixed-fee, retainer or time-and-material
basis. A majority of our revenues are derived from fixed-fee engagements. We
recognize revenues as services are rendered. We reassess our estimated costs on
fixed-fee engagements periodically and losses are accrued, on a project-by-
project basis, to the extent that costs incurred and anticipated costs to
complete projects exceed anticipated billings. Provisions for losses on
uncompleted fixed-fee contracts are recognized in the period in which such
losses are determined. We anticipate that CentrPort and the Me-business Network
will generate transactional fees for distribution and data management.

Our five largest clients accounted for 45.1%, 53.4% and 65.5% of
consolidated revenues for the years ended December 31, 1999, 1998 and 1997,
respectively. Citibank accounted for 13.8% and 12.8% of our consolidated
revenues for the years ended December 31, 1999 and 1998, respectively. AT&T
accounted for 20.7% and 36.2% of our consolidated revenues for the years ended
December 31, 1998 and 1997, respectively.

Once a project is completed, there can be no assurance that a client will
engage us for future services. As a result, a client that generates substantial
revenue for us in one period may not be a substantial source of revenue in a
subsequent period. In addition, our clients generally have the right to
terminate their relationships with us without penalty and with relatively short
or no notice. The termination of our business relationships with any of our
significant clients, or a material reduction in the use of our services by any
such clients, could adversely affect our business, financial condition or
results of operations.

Cost of revenues consists of salaries, employee benefits and incentive
compensation for our professional services staff and costs for temporary
employees we use to provide professional services, as well as certain other
direct costs. As we generate revenue from our CentrPort technology, cost of
revenues will include our direct costs associated with the CentrPort
technology.

Sales and marketing consists of salaries, employee benefits and incentive
compensation of new business and other sales and marketing personnel, as well
as certain other marketing costs. During 2000, we will substantially increase
our spending on marketing and advertising on a global basis to promote the
Modem Media brand. In addition, we will increase our sales personnel to expand
new business efforts.

General and administrative includes salaries, employee benefits and
incentive compensation of administrative and other nonbillable employees, as
well as office rent, utilities, depreciation, amortization of software,
professional and consulting fees, travel, telephone and other related expenses.
During 2000, our general and administrative costs will increase in connection
with our expanded hiring efforts and costs associated with these new hires. In
February 2000, we completed our acquisition of Vivid, resulting in
approximately $63.3 million of goodwill, which will increase our goodwill
amortization by $3.2 million per quarter over five years.

We have experienced operating or net losses in nine of the twelve quarters
in the period January 1, 1997 through December 31, 1999. Although we have
experienced revenue growth in recent periods, these growth rates may not be
sustainable or indicative of future operating results. We have incurred
substantial costs to expand and integrate our operations and intend to continue
to invest heavily in global expansion and integration efforts, as well as
infrastructure development. As a result of the amortization of goodwill related
to the acquisition of Vivid and these increased costs, we expect to incur net
losses for the forseeable future.

During 1999, 83.2% of our revenues was domestic, 16.8% was international. We
anticipate that our domestic operations will experience declines in margins as
we hire strategy and technology personnel in anticipation of new engagements
and the further development of the CentrPort technology platform. We intend to
increase hiring internationally to meet demand and provide full-service
capabilities in each office. International revenues are expected to grow at a
faster rate than domestic operations. International margins will continue to be
lower than domestic margins due to competitive pricing, lower utilization
rates, higher benefit costs and higher occupancy and infrastructure costs.

19
<PAGE>

In November 1999, we entered into an agreement with five employees to form
CentrPort, LLC, a limited liability company focused on the development of
intelligent marketing platforms to build and enhance customer relationships
across multiple communication channels. We own 50.5%, and the employees own
49.5%, of the common interests in CentrPort. In addition, we have contributed
$1,500,000 under the agreement, in exchange for 100% of the preferred interests
of CentrPort. We may contribute additional funds to CentrPort pursuant to the
agreement. We have the option to purchase the common interests of the employees
for a purchase price indexed to the value of our Class A common stock. We are
managing the business and affairs of CentrPort and the operating results of
CentrPort have been included in our consolidated financial statements from the
date of its formation.

In February 2000 we acquired Vivid, a privately held Internet engineering
and information architecture specialist, for approximately $64 million in cash,
Class A common stock and Vivid stock options converted to Modem Media stock
options. We will account for the Vivid acquisition as a purchase and include
its results with ours from the date of acquisition. We believe that Vivid
strengthens us by:

. meeting strong client demand for a greater depth of expertise and
service offerings in systems architecture and web engineering,
information architecture and design, and strategic consulting; and

. combining our strength in guiding worldwide Me-business solutions for
the Global 500 with Vivid's capabilities for assisting in the
development of online ventures.

Vivid's engineering and information architecture capabilities, coupled with our
customer-focused Me-business approach should enhance our ability to provide
complete end-to-end solutions for our clients.

Results of Operations

The following table sets forth certain items from our statements of
operations as a percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues......................................... 100.0% 100.0% 100.0%
Cost of revenues................................. 47.2 54.6 44.6
------- ------- -------
Gross margin..................................... 52.8 45.4 55.4
------- ------- -------
Sales and marketing.............................. 3.0 2.6 2.2
General and administrative....................... 47.6 46.4 40.1
Amortization of goodwill......................... 6.5 4.2 4.0
Operating losses of True North Units Held for
Transfer........................................ 8.6 -- --
------- ------- -------
Operating (loss) income.......................... (12.9) (7.8) 9.1
Interest (expense) income, net................... (0.3) 0.1 2.7
(Benefit) provision for income taxes............. (1.0) (0.2) 7.7
------- ------- -------
Net (loss) income................................ (12.2)% (7.5)% 4.1%
======= ======= =======
</TABLE>

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Revenues. Revenues increased by $31.5 million, or 74.0%, to $74.0 million
for 1999 from $42.5 million for 1998. Revenues increased primarily as a result
of increased services provided to existing clients, as well as the addition of
new clients.

Cost of Revenues and Gross Margin. Cost of revenues increased by $9.8
million, or 41.9%, to $33.0 million for 1999 from $23.2 million for 1998. Gross
margin improved to 55.4% of consolidated revenues for 1999 from 45.4% for 1998.
The increase in cost of revenues was primarily due to a company-wide increase
in headcount due to the growth of our existing client relationships, as well as
the addition of new client relationships. The improvement in gross margin in
1999 compared to 1998 was primarily due to improved utilization and deployment
of personnel to higher margin work.

20
<PAGE>

Sales and Marketing. Sales and marketing increased by $0.6 million, or
51.0%, to $1.7 million for 1999 from $1.1 million for 1998. Sales and marketing
represented 2.2% of revenues for 1999 and 2.6% for 1998. The dollar increase in
sales and marketing was primarily attributable to increased salaries, benefits
and incentive compensation associated with an increase in headcount. The
decrease in sales and marketing as a percentage of revenues was due primarily
to a higher percentage growth rate in revenues.

General and Administrative. General and administrative increased by $9.9
million, or 50.3%, to $29.7 million for 1999 from $19.8 million for 1998.
General and administrative represented 40.1% of revenues for 1999 and 46.4% for
1998. The dollar increase in general and administrative was due primarily to
increased occupancy and office support expenses, as well as increased salary,
benefits and incentive compensation of administrative and other nonbillable
employees, incurred in connection with increases in headcount. The decrease in
office and general as a percentage of revenues was due primarily to a higher
percentage growth rate in revenues.

Amortization of Goodwill. Amortization of goodwill increased by $1.2
million, or 67.4%, to $3.0 million for 1999 from $1.8 million for 1998. The
increase is primarily a result of payments of additional purchase price for the
Modem Partnership by True North to the former owners of the Modem Partnership
of $18.5 million in February 1999 and $3.3 million in May 1998, as well as our
acquisitions in Japan and Germany during 1999 (see Note 2 of the notes to our
consolidated financial statements).

Operating Losses of True North Units Held for Transfer. We sold the non-
strategic digital interactive marketing operations to True North effective
October 1, 1998. Accordingly, the operating results of such entities are not a
part of our operating results for 1999.

Interest Income (Expense), Net. The increase in interest income, net to $2.0
million for 1999 is principally attributable to interest income earned on
investments purchased with the proceeds from our initial public offering.

Income Taxes. We had a provision for income taxes of $5.7 million on pre-tax
income of $8.7 million for 1999 compared to a benefit of $0.1 million on a pre-
tax loss of $3.3 million for 1998. The effective income tax rate was 65.4% in
1999 compared to an effective income tax benefit rate of 3.1% in 1998. These
rates differ from the federal statutory rate primarily due to the effect of
non-deductible goodwill amortization and losses of certain foreign subsidiaries
on which we do not currently recognize tax benefits.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Revenues. Revenues increased $17.0 million, or 66.9%, to $42.5 million for
1998 from $25.5 million for 1997. Revenues increased $6.8 million, or 26.7%,
due to the addition of the revenues of the strategic interactive marketing
operations of Poppe Tyson as a result of the combination of those operations
with ours (see Note 2 of the notes to our consolidated financial statements),
and also as a result of increased services provided to existing clients and the
addition of new clients.

Cost of Revenues and Gross Margin. Cost of revenues increased by $11.2
million, or 93.0%, to $23.2 million for 1998 from $12.0 million for 1997. Gross
margin was reduced to 45.4% of consolidated revenues for 1998 from 52.8% for
1997. The increase in cost of revenues was due to a company-wide increase in
headcount from our combination with the strategic interactive marketing
operations of Poppe Tyson, as well as recruiting efforts to manage our growth.
The reduction in gross margin in 1998 compared to 1997 was primarily due to the
integration of the strategic interactive marketing operations of Poppe Tyson
into ours.

Sales and Marketing. Sales and marketing increased $0.3 million, or 42.8%,
to $1.1 million for 1998 from $0.8 million for 1997. Sales and marketing
represented 2.6% of revenues for 1998 and 3.0% for 1997. The dollar increase in
sales and marketing was primarily attributable to increased salaries, benefits
and incentive compensation associated with an increase in headcount. The
decrease in sales and marketing as a percentage of revenues is due primarily to
a higher percentage growth rate in revenues.

21
<PAGE>

General and Administrative. General and administrative increased $7.7
million, or 63.0%, to $19.8 million for 1998 from $12.1 million for 1997.
General and administrative represented 46.4% of revenues for 1998 and 47.6% for
1997. The dollar increase in general and administrative was primarily due to
the addition of the office and general expenses of the strategic interactive
marketing operations of Poppe Tyson, as well as increased occupancy, office
support and personnel costs of administrative and other nonbillable employees
incurred in connection with increases in headcount. The decrease in office and
general as a percentage of revenues is due primarily to a higher percentage
growth rate in revenues.

Amortization of Goodwill. Amortization of goodwill increased by $0.1
million, or 6.1%, to $1.8 million for 1998 from $1.7 million for 1997, as a
result of the payment of $3.3 million of additional purchase price for the
Modem Partnership by True North in May 1998 (see Note 2 of the notes to our
consolidated financial statements).

Operating Losses of True North Units Held for Transfer. The operating losses
of our non-strategic digital interactive marketing operations that we sold back
to True North effective October 1, 1998 decreased to breakeven during the nine
months ended September 30, 1998 (the period prior to their sale to True North)
from operating losses of $2.2 million during 1997, principally due to the
closure of one office and overhead reductions at other locations.

Income Taxes. We had a benefit for income taxes of $0.1 million on a pre-tax
loss of $3.3 million for 1998 as compared to a benefit for income taxes of $0.2
million on a pre-tax loss of $3.4 million for 1997. The effective income tax
benefit rates were 3.1% for 1998 and 7.4% for 1997. These rates differ from the
federal statutory rate primarily due to the effect of non-deductible goodwill
amortization, the tax effects of the non-strategic digital interactive
marketing operations that we sold back to True North effective October 1, 1998,
and, in 1998, losses of certain foreign subsidiaries on which we do not
currently recognize tax benefits.

Quarterly Financial Information

The following table sets forth certain unaudited consolidated statements of
operations data for the eight quarters ending December 31, 1999. These data
have been derived from unaudited condensed consolidated financial statements
that have been prepared on the same basis as the annual audited consolidated
financial statements and, in our opinion, include all normal recurring
adjustments necessary for a fair presentation of such information. These
unaudited quarterly results should be read in conjunction with our consolidated
financial statements and notes thereto. The consolidated results of operations
for any quarter are not necessarily indicative of the results for any future
period.

<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------
June Sept. Dec. June Sept. Dec.
March 31, 30, 30, 31, March 31, 30, 30, 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- ------- ------- ------- --------- ------- ------- -------
(unaudited, in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenues................ $9,016 $10,451 $10,930 $12,147 $12,383 $16,042 $21,121 $24,490
Operating income
(loss)................. 124 (817) (1,333) (1,308) (614) 1,309 2,889 3,161
Income (loss) before
income taxes........... 123 (820) (1,334) (1,274) (277) 1,813 3,454 3,730
Net (loss) income ...... (194) (768) (1,126) (1,115) (473) 581 1,308 1,601
</TABLE>

Effective October 1, 1998, we acquired the strategic interactive marketing
operations of Poppe Tyson from True North. However, since this transaction
occurred among companies under common control, it was recorded as of December
31, 1997, the date of True North's acquisition of the strategic interactive
marketing operations of Poppe Tyson, at historical cost. During the fourth
quarter of 1998, we integrated the domestic offices of the strategic
interactive marketing operations of Poppe Tyson with our own operations. In
1999, we successfully

22
<PAGE>

deployed this additional capacity to service additional business with existing
clients. Internationally, we resigned from low-margin engagements and utilized
this capacity to service global clients. As a result of these measures, we
became profitable for the three quarters ending December 31, 1999, after
suffering a loss in 1998.

Our operating results have fluctuated in the past, and may continue to
fluctuate in the future, as a result of a variety of factors, including the
timing of new projects, material reductions, cancellations or completions of
major projects, the loss of significant clients, the opening or closing of
offices, our relative mix of business, changes in our pricing strategies or
those of our competitors, employee utilization rates, changes in personnel and
other factors that are outside of our control. In addition, we have experienced
some variation in operating results throughout the year resulting in part from
the Internet professional services spending patterns and business cycles of our
clients. As a result, period-to-period comparisons of our operating results
cannot be relied upon as indicators of future performance.

Our revenues have historically been higher during the second half of each
year. During the first quarter of each year, we have historically experienced
revenue declines from the fourth quarter of the preceding year as clients
reestablish their annual budgets allocated to their Internet initiatives.
Although we did not experience this variation in the first quarter of 1999,
there can be no assurance that the variation will not return in future fiscal
years.

Liquidity and Capital Resources

We historically have financed our operations primarily from funds generated
from operations, and proceeds from our initial public offering. Net cash
provided by operating activities was $11.2 million, $6.3 million and $6.4
million for 1999, 1998 and 1997, respectively, including depreciation and
goodwill amortization totaling $6.4 million, $3.6 million and $2.9 million
during such years, respectively.

Net cash used in investing activities was $31.8 million, $4.1 million and
$1.2 million for 1999, 1998 and 1997, respectively. In 1999, using the proceeds
of our initial public offering and cash generated from our operations, we
invested $10.4 million in capital expenditures, $4.6 million to acquire our
Japanese and German offices and $16.9 million in short-term investments. In
1998 and 1997, our cash used in investing activities were related to capital
expenditures.

Net cash provided by (used in) financing activities was $43.0 million,
$(1.4) million and $(0.9) million, for 1999, 1998 and 1997, respectively. Our
primary sources of cash flows from financing activities during 1999 were
proceeds from the our initial public offering of $43.5 million and the exercise
of employee stock options of $4.7 million.

We used $10.2 million in cash in February 2000 in connection with the Vivid
acquisition. Our short-term capital commitments include lease payments over the
next twelve months aggregating approximately $4.8 million and the funding of
certain international operations which are not expected to be self-sufficient
in the near-term. Our long-term capital needs will depend on numerous factors,
including the rate at which we are able to obtain new business from clients and
expand our personnel and infrastructure to accommodate growth, as well as the
rate at which we choose to invest in new technologies. We have ongoing needs
for capital, including working capital for operations, project development
costs and capital expenditures to maintain and expand our operations. In
conjunction with our acquisition in Japan during 1999, we are obligated to make
payments to the former owners of the acquired entity of up to approximately
$3.2 million if the entity's operating results exceed certain targeted levels
annually through 2002. As a result of the entity meeting its 1999 targets, we
will make a payment of approximately $0.3 million to its former owners during
2000.

23
<PAGE>

We believe that the net proceeds from this offering, together with cash and
short-term investments on hand and funds generated from operations, will be
sufficient to meet our capital needs for at least the next twelve months. A
portion of the net proceeds from this offering may also be used to acquire or
invest in complementary businesses, services, products or technologies, or to
invest in geographic expansion. We have no agreements or commitments with
respect to any such transactions, other than those disclosed in the notes to
our consolidated financial statements.

If our current operating plans change, we may need to raise additional
capital in order to take advantage of business opportunities, including more
rapid expansion or acquisitions of, or investments in, businesses or
technologies or to develop new services. We cannot assure you that any
additional financing we may need will be available on terms favorable to us, or
at all. Any additional capital raised through the sale of equity may be
dilutive to our current stockholders.

Quantitative and Qualitative Disclosures About Market Risk

Our consolidated financial statements are denominated in U.S. dollars. In
1999, we derived approximately 16.8% of our revenues from operations outside of
the United States. Currency fluctuations may give rise to translation gains and
losses when financial statements of foreign operating units are translated into
U.S. dollars. Significant strengthening or weakening of the U.S. dollar against
major foreign currencies could have an adverse impact on our results of
operations. In general, we incur most of our costs to support the related
revenues in the same currency in which these revenues are billed, thereby
reducing exposure to currency fluctuations. Currently, we do not hedge foreign
currency transactions into U.S. dollars because management believes that, over
time, the cost of a hedging program will outweigh any benefit of greater
predictability in our U.S.-dollar denominated results. However, as we continue
to extend the depth and breadth of our foreign operations, management will,
from time-to-time, reconsider the issue of whether a foreign currency hedging
program would be beneficial to our operations.

Recently Issued Accounting Pronouncements

Derivative Instruments. In June 1999, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
137, Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of FASB Statement No. 133. The Statement defers for one year
the effective date of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which was issued in June 1998 and establishes accounting
and reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 also requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 will now apply to all fiscal quarters of all fiscal years beginning
after June 15, 2000. We do not believe that the implementation of SFAS No. 133
will have a material impact on our results of operations.

24
<PAGE>

BUSINESS

Overview

. strategic consulting and customer research;

. design, development and implementation of e-business websites;

. distribution and marketing of customized services across multiple
Internet-enabled communication channels; and

. collection and analysis of customer data and measurement of the
effectiveness of our e-business solutions.

Industry Background

The Internet has fundamentally changed the way businesses and customers
interact, introducing new ways of communicating, obtaining information,
purchasing goods and services, providing customer service and soliciting
customer feedback. The Internet and electronic commerce have increased the
frequency and speed of interaction between a business and its trading partners
and customers by providing immediate access to and facilitating the interactive
exchange of information. Traditionally limited to in-person, print and analog
channels, customers today can interact with businesses through a variety of
digital communication channels. While websites have been the primary Internet
communication channel, businesses increasingly interact with their customers
through such additional Internet-enabled channels as e-mail, cellular phones or
PDAs. According to International Data Corporation, or IDC, an independent
research company, the number of Internet users will grow from 144 million at
the end of 1998 to 602 million at the end of 2003 and revenues generated from
Internet commerce in 2003 will exceed $1.6 trillion.

The profound impact of the Internet has led to a shift in the balance of
power from the business to the customer. However, many companies today continue
to approach e-business through the context of the traditional business-customer
relationship. These companies view the Internet as a vehicle that allows easy
access to a larger customer base to whom they can market and sell, or push,
their products and services. Using the Internet simply as another medium which
connects customers to businesses fails to realize the full

25
<PAGE>

potential of the Internet to transform the customer experience to one that is
more relevant, efficient, meaningful and mutually rewarding for both the
business and the customer.

Given these market dynamics and the expansion of new Internet-enabled
communication channels, successful businesses must be able to identify what
personalized services the customer wants and have the ability to deliver those
services across multiple communication channels to begin and ultimately extend
a relationship between the business and the customer. As opposed to the push
approach, this pull approach utilizes knowledge gained about the customer
through multiple interactions to make available relevant personalized services
to drive customer satisfaction, retention and loyalty. For example, through
analyzing customer behavior patterns of a frequent flyer through existing
channels, such as the airline's call center and website, an airline could
introduce a value-added service to provide updated flight status information,
potential new bookings and special fare promotions via a PDA. As a result, the
airline creates greater customer satisfaction and generates potential future
revenues through customer retention and loyalty.

Customer personalization requires the ability to capture and analyze
customer activity across multiple communication channels in an efficient and
effective manner. Currently, companies have significant investments in channel-
specific infrastructure including ad networks, web servers, e-mail and customer
call centers. Unfortunately, these systems may not communicate with one
another, track multiple communication channels, systematically store data or
incorporate prior learning from past results, and may be slow to implement,
requiring extensive internal resources that may not be coordinated across the
divisions within a company. Inefficiencies arise because as the customer
interacts with the company on each communication channel the information that
the customer gives the company, or that the company observes, is generally
stored in separate databases. A solution that can aggregate data on a
particular customer across multiple channels can dramatically increase e-
business results and activity. Once a company has a centralized cross-channel
understanding of the customer, it can intelligently deliver services across
channels to better service customers, thus optimizing the business relationship
with and profitability of each individual customer.

Given the complexity and scale of these new Internet-related initiatives,
few businesses have in-house employees with the advanced skills necessary to
effectively conceive and implement customer-focused strategies and solutions.
Nor do they have the technology and systems required to aggregate data
resulting from cross-channel customer contact that will enable them to develop
key insights that can drive a higher return on their customer relationships.
Given the pressures to get to market quickly, training in-house employees may
not be a practical alternative. Hiring trained professionals may be difficult
because they are in great demand. Outsourcing this function to providers of
Internet professional services is often the most efficient and cost-effective
solution for many companies. IDC estimates that Internet-related services will
rise from approximately $16.5 billion in 1999 to $102.7 billion in 2004.

Currently there are a large number of Internet professional services firms
that compete in the marketplace that focus on technology infrastructure for
advanced electronic commerce platforms. Advantages achieved by e-businesses
with advanced electronic commerce platforms, however, will be limited if these
businesses do not implement solutions that are driven by the fundamental
understanding that customers control the e-business relationship. We believe a
greater portion of future Internet-related services spending will be dedicated
to the development, implementation and ongoing management of customer-focused
solutions that enable the delivery of services to individual customers across
multiple Internet-enabled communication channels and devices. We believe that
Internet professional services firms that have a customer-focused approach,
expertise across multiple Internet-enabled communication channels, advanced
data analytics and a global delivery capability will capture an increased share
of Internet expenditures from Global 500 and leading online businesses.

Our Me-Business Solution

Me-business Vision: A Customer Driven Approach. We have developed a business
approach that recognizes the power of the customer in a business relationship
and seeks to direct that power to the benefit of our clients. In following our
Me-business approach, we create customer-focused solutions by understanding

26
<PAGE>

customer needs, conceiving services that fulfill those needs, building and
scaling those services, enabling our clients to distribute them on multiple
communication channels and measuring their effectiveness for both our clients
and their customers on a global basis. Our approach helps our clients increase
the lifetime revenue potential of their customers and transforms the customer
experience to one that is more relevant, efficient, meaningful and mutually
rewarding for both the client and the customer.

Building and Delivering Services Across Multiple Internet Channels and
Devices. We build a client's website not only as an e-commerce platform, but
also as the foundation of a comprehensive online marketing strategy. We work
with our clients to build Me-business solutions that fulfill customer needs by
providing them with personalized services for each customer. We have
established the Me-business Network, an outsourced solution, to enable our
clients to reach beyond their own websites and provide personalized content and
services to customers through their customers' preferred communication
channels. This network consists of strategic relationships with select ad-
serving and affiliate marketing companies, wireless providers, e-mail delivery
systems, personalization and content management engines. Because of our pre-
established relationships with network partners, we can offer clients quick and
cost-effective access to these services. For example, in the case of an
airline, these services may include online, PDA, or pager reservation and
flight-delay notification capabilities.

Analyze and Customize Customer Information to Enhance Client-Customer
Relationships. We continuously analyze and measure our customer-focused Me-
business solutions to determine their effectiveness against client goals and
customer needs. In order to make this analysis and measurement more effective,
we have built, and are continuing to develop, a leading-edge technology
platform called CentrPort. CentrPort provides clients an outsourced service to
identify, accumulate and analyze customer data generated through the Me-
business Network's various channels. By accumulating information on the
customer's interactions through these different channels and devices in a
single database, our clients can better understand their customers' needs and
customize new Internet services and features for them. For example, our Me-
business Network may recognize our airline client's customer on another travel-
related website and proactively offer the customer the option of booking a
reservation without leaving the site. Through the constant accumulation of
customer behavioral data in a centralized technology platform, we are able to
continuously increase our client's knowledge of their customers, develop better
services for each individual customer, identify and understand the customer's
preferred delivery channel and ultimately help our client measure and improve
its return on Internet-related initiatives.

Global Delivery Capabilities. We believe that multinational companies prefer
a single service provider to help them build and manage their Internet
activities around the world. Our knowledge of the international marketplace,
combined with our knowledge of our clients' businesses, enables us to help
design and create effective global e-business strategies. Through our global
network of eleven offices in North America, Latin America, Europe and Asia, we
deliver successful customer-focused Me-business solutions tailored to the
specific needs and preferences of the local markets in which our multinational
clients operate. Our single consistent global methodology makes it easier and
more efficient for our clients to do business with us worldwide. This
differentiating factor strengthens our position with our Global 500 clients and
makes it more difficult for our competitors to develop relationships with them.

Strategy

Our goal is to be the leading provider of customer-focused e-business
solutions. Our strategy to achieve this goal is to:

Broaden and Deepen Our Client Relationships with the Global 500 and Select
Online Businesses. We will continue to build customer-focused Me-business
solutions that enable Global 500 and select online businesses to seize market
opportunities and competitive advantages in their industries. We believe that
Global 500 companies have just begun to take advantage of the Internet and will
launch many large cross-channel initiatives in the coming years, driving the
majority of the spending on Internet professional services,

27
<PAGE>

as they seek to bring additional business units and geographies online. We also
anticipate that select online businesses will heavily invest in Internet
professional services as they advance their businesses to become a more
prominent part of the economy. We believe that our twelve years of experience
with Global 500 clients and select online businesses will lead to additional
large, long-term client relationships. Additionally, by expanding our
engagements with our clients to different business units as their global
Internet initiatives and needs grow, we broaden and deepen our relationships
with existing clients, thereby enhancing client loyalty and generating greater
demand for our services.

Enhance Our Distribution and Analytical Technologies. We intend to enhance
our distribution capabilities by expanding our Me-business Network and by
further developing our CentrPort technology. We plan to expand our proprietary
Me-business Network to increase the number of ways in which our clients can
reach their customers and enhance the quality of their customer interactions
across multiple Internet-enabled communication channels. We believe it is
imperative that we stay at the forefront of developing technologies, expand the
number of partners per communication channel and increase our penetration with
existing clients. We also intend to continue to enhance CentrPort's analytical
and reporting tools and improve our clients' ability to deliver customized
content and services to their customers, on a real-time basis across multiple
communication channels, using a complex rules-driven process. We believe that
this improved offering will enable us to sustain our long-term client
relationships and to achieve higher-margin recurring transactional revenue.

Pursue Client-Driven International Expansion. To better serve our Global 500
clients, we plan to continue to expand our international presence. We believe
that Global 500 companies require a uniform delivery of customer-focused
solutions that are highly tailored to individual cultures and locales. In most
cases, we open new offices when our Global 500 clients expand their initiatives
to new markets. Because these clients typically have significant budgets for
new Internet initiatives, our new offices typically open with engagements from
existing clients. We currently have a network of three offices in the United
States and eight offices internationally. By establishing an early presence in
select international markets, we believe we can better serve our Global 500
clients and gain a competitive advantage in those local markets.

Continue to Attract and Retain Talented Professionals. We intend to continue
to allocate significant resources to recruit and retain highly skilled and
experienced professionals in order to grow our business. In particular, we
intend, in the near term, to focus our recruiting efforts on strategy and
technology professionals. We attract and retain our employees by offering them
the following benefits, among others:

. the opportunity to work on challenging, high-profile projects for Global
500 and select online businesses;

. continuing education and development in the areas of research, business
strategy, marketing, project management and technology;

. an entrepreneurial corporate culture supplemented by competitive
compensation packages and rapid career advancement; and

. the opportunity to work at multiple locations within our global network
of offices.

Our Services Approach

We deploy integrated, multi-disciplinary client service teams with strong
backgrounds in business strategy, creative design, technology and marketing to
conceive, develop and distribute Me-business solutions for our clients.

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<PAGE>

The following diagram illustrates our approach to developing Me-business
solutions:

[Graphic Depicting Customer-focused Me-business(SM) Solutions]

Over the course of our client relationships, we focus on different
competencies at various phases. With our customer-focused Me-business approach
as their foundation, client initiatives are driven by our proprietary Modem
Media process, which has been refined over the past five years and includes:

Understanding Customer Needs. Using our consulting and research resources,
we conduct diagnostic analyses of our clients' businesses to gain a deep
understanding of the unique needs and expectations of the customer. During this
phase we conduct primary and secondary customer research, perform a competitive
review to identify opportunities and threats, analyze online customer behavior,
inventory the existing customer relationship databases, review existing
distribution channels and identify potential conflicts with online channels.

Conceiving Services That Fulfill Customer Needs. Based on our understanding
of the customer's needs, we identify and prioritize Internet-related
opportunities to strengthen client-customer relationships. We conceive
strategies to position and brand personalized Me-business solutions to create a
competitive advantage for our clients. We analyze technology requirements to
understand the viability, risks and timeframes associated with the delivery of
these solutions.

Building and Scaling Me-Business Services. We build Me-business services
that are deployed through websites and other communication channels. We create
customized software and applications and identify best-of-breed hardware,
software and third-party applications to develop overall Me-business solutions.
In conjunction with the client's existing staff or vendors, we define and
coordinate the integration of these services with legacy systems. Finally, we
detach services from client websites and distribute the functionality of these
services to customers on their preferred communication channels.

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<PAGE>

Distributing Services on Internet-Enabled Channels. We implement
distribution strategies for our clients either through the existing Me-
business Network of ad-serving and affiliate marketing companies, wireless
providers, e-mail delivery systems, personalization and content management
engines or through the client's preferred vendor. When a client has a
preferred vendor outside of the Me-business Network, we will negotiate
agreements with that vendor. We manage the relationships between our client
and the vendors that are used in implementing our recommended distribution
strategy both within and outside of the Me-business Network.

Measuring Effectiveness for Both the Client and the Customer. We
continuously monitor and measure our Me-business solutions to determine their
effectiveness in meeting client goals and customer needs. Based on our
analysis, we enhance these solutions to increase their relevance, utility and
value. We use the information we collect in performing program measurement and
data analysis to help our clients improve their Me-business solutions and
distribution strategies. We believe that our continuous program improvement
builds the foundation for recurring client business. Our CentrPort technology
will increase our ability to monitor, measure and enhance our solutions
efficiently across multiple communication channels.

Client Case Studies

Delta Air Lines

Challenge: Utilize the Internet to do more business with and provide better
services for Delta's high-value frequent flyers while reducing
distribution costs.

Solution: Using our Me-business approach, we are developing an Internet
presence on multiple communication channels for Delta that can be
personalized to the individual needs of its customers. Based on an
in-depth customer needs analysis, we identified the priority of
services, utilities and content required by Delta customers. Using
this information, we developed Delta-Air.com featuring flight
reservations, frequent flyer account information and management,
real-time flight departure/arrival information and personal
message box capabilities. Flight reservations and flight
information are presented in a unique detachable application
format that allows the customer to place that functionality
directly on his desktop. Additionally, we made frequent flyer
information, flight information and current customer itineraries
available through wireless PDAs. For ongoing customer management
purposes, we are currently rolling out distributed marketing
programs, through both e-mail and paid advertising, that will be
customized based upon the Delta customer status and previous
Internet activity. Through these efforts, Delta now has a cross-
channel interface that enables the customer to access critical
information and services on his preferred communication channel,
and to be recognized for his status during ongoing marketing
efforts. A substantial number of Delta's high-value frequent
flyers have utilized our Me-business solution, resulting in
significant e-commerce revenue and reduced distribution costs per
ticket sold for Delta.

Intel Corporation

Challenge: Develop a high-end multi-media loyalty program designed to
increase customer demand for faster processors using innovative
web content, applications and utilities.

Solution: Collaborating with Intel, we developed a Me-business solution
called the Web Outfitter Service for owners of Pentium(R) III
processors dedicated to providing registered customers with a
cutting-edge Internet experience each time they are online. These
registered customers receive monthly promotional information on
topics that include a tour of the best digital photography and
online music, leading Internet technologies, downloads for the
latest Internet software tools for video streaming, animation,
music technologies and other multimedia experiences on the
Internet that are best enjoyed using a high-end processor.

We used a combination of technologies that identified end-users'
processor speeds and a dynamic ad-serving platform to optimize and
distribute highly targeted services and utilities that drove
awareness, registration and usage of the Web Outfitter Service. In
addition, we

30
<PAGE>

developed and customized direct e-mail campaigns about the Web
Outfitter Service to a database of customers who requested
information about this service. Finally, we developed a customer
profile database architecture allowing for analysis and
optimization of the program. As a result of our Me-business
solution, Intel achieved conversion rates that exceeded
expectations.

General Motors

Challenge: Create a coordinated Internet solution for the Opel division of
General Motors to enable one-to-one relationships between Opel and
its customers and prospects across Europe.

Solution: At the time of our initial engagement, Opel's Internet presence
was dispersed over 20 individual and independently run National
Sales Companies (NSCs), each having its own website that varied in
functionality, organization, navigation and look and feel, none of
which fostered ongoing customer relationships. After extensive
interviews with key stakeholders throughout the GM Europe
organization, we identified and prioritized the common
requirements of the major NSCs. Based on this information and an
examination of the existing customer research, we recommended a
set of functional requirements for their Internet solution. We
built consensus around this set of requirements, and delivered a
plan that would phase in the functionality over an 18 month
period.

We created a single platform driven by a common customer database
and information architecture that enabled Opel to distribute a
consistent creative look and feel across all of the European NSCs.
The system supports the dynamic generation of web pages in
multiple languages, and has built-in customer management and
measurement tools. It also supports personalized services and
content for individual customers through an ownership center.

ChipCenter

Challenge: Rapidly launch a new business-to-business vertical portal for
the electronics design industry, including both editorial
content and e-commerce capabilities.

Solution: We applied our full service architecture to develop ChipCenter's e-
business platform. ChipCenter's website allows its users to search
a comprehensive product database that aggregates real time
inventory and pricing from leading components distributors.
Additionally, it enables users to secure product specifications
and place orders via the Internet. The website's infrastructure
allows for the targeting of specific audiences or individual users
using a personalized user profile database. We provided access to
databases of multiple vendors. We managed the project over an
accelerated time frame dictated by the aggressive time-to-market
constraints of an Internet start-up. Our work resulted in a
successful launch that has already gained industry acceptance,
with the addition of several new leading electronics distributors,
making ChipCenter a leading source for online electronics
component e-commerce.

Clients

We have a diverse roster of clients. Our five largest clients in 1999
accounted for 45.1% of our revenues, of which Citibank accounted for 13.8%.

Our clients include:

Citibank Infinite Supply
Coca-Cola Intel
DaimlerChrysler JCPenney
Delta Air Lines John Hancock
E*TRADE Starwood Hotels and Resorts
General Electric Toyota
General Motors Women.com
IBM

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<PAGE>

Sales and Marketing

We target a select group of clients, primarily Global 500 companies and
select online businesses. Many of the Global 500 companies that we target have
an existing presence on the web, but have yet to develop and deploy a
comprehensive strategy for how it will attract, sell and service customers
online. Fewer yet have integrated these efforts across multiple communication
channels, effectively leveraged their domestic business strategies in markets
around the world or integrated these efforts with offline customer service
efforts.

Recognition of the importance of building online customer relationships
through effective Internet solutions on a global basis has fueled a significant
demand for our expertise and services worldwide, particularly among the largest
multinational companies in the world including Citibank, General Motors,
General Electric, IBM and Intel.

Our online business clients range from the leading Internet businesses
looking to upgrade their online sales and marketing efforts, such as E*TRADE or
The Industry Standard, to start-ups requiring comprehensive support from
business strategy development through technical development, creative
production and launch and marketing support.

We market our Internet professional services through a combination of
business development teams, targeting new prospects, and our existing
relationship managers, who are responsible for deepening our business
relationships with existing clients.

Technology

Our background in developing e-commerce solutions for Global 500 businesses,
and the skills of our technology professionals have helped us to utilize
technology to further the business and marketing objectives of our client base.
We utilize technology to implement customer-focused Me-business solutions for
our clients and to help them manage their customer relationships.

We make extensive use of third-party technologies and applications as part
of the solutions we engineer for our clients. We have utilized third-party
technology in order to perform several essential business and marketing
functions for our clients, including systems integration, credit card
processing, ad-serving, e-mail management, data warehousing, order fulfillment
and data processing. Utilizing third-party technology greatly reduces the cost
of the solutions we provide for our clients, while increasing their scalability
as well as the speed with which we can bring them to market. We intend to
continue incorporating advanced third-party technologies into our service
offerings as the Internet professional services needs of our clients evolve.

In addition, we are continuing to develop the CentrPort technology platform,
which is intended to provide: the ability to "make decisions" as to what
information or service to send to a specific customer; campaign management
across multiple communication channels; closed loop media tracking; and
analysis of clickstream and log file data. The CentrPort platform is designed
to evaluate customer responses to prior contacts across multiple communication
channels, and return the appropriate strategic response. CentrPort can track
customers on off-site distribution channels related to the client, as well as
beyond a company's website. CentrPort can aggregate customer information across
multiple communication channels.

The CentrPort technology platform has the following features: (1) a service
bureau built on a Sun/Oracle/Netscape platform; (2) a Java(R)-based
administration interface provided by IBM's WebSphere(TM); (3) a robust,
scalable core engine written in C/C++, with flexible extensible web-based user
interfaces written in Java/HTML; (4) a multi-processor and multi-server
architecture, which provides scalability; and (5) multiple data centers and
redundant, distributed hardware which provides reliability and performance.

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<PAGE>

Employees and Culture

In order to maintain high levels of creativity and quality, we place great
importance on recruiting and retaining talented employees. As of March 1, 2000,
we had more than 750 full-time employees, of which 627 were billable
professionals. We also hire temporary employees and contract service providers
as needed. Our employees are not represented by any union and, except for
senior management are retained on an at-will basis. We consider our employee
relations to be good. We believe our firm fosters an entrepreneurial, creative,
and professional culture, and as a result, attracts talented individuals. In
addition to recruiting talented professionals, we are committed to employee
training and orientation. We have various programs dedicated to the training
and development of our personnel.

Competition

The Internet professional services market has grown dramatically in recent
years due to the increasing need for outsourced expertise in developing end-to-
end Internet solutions to create and maintain an e-business. Businesses have
realized the opportunity to increase revenue, reduce customer turnover, deepen
relationships and increase market share by allowing their customers to access
the client's products and services over the Internet through various
communication channels. As a result, the market for our services is highly
competitive. The market is subject to rapid technological change and increased
competition from large existing players, new market entrants and internal
Internet services divisions. Our competitors include:

. Internet professional services firms, such as AGENCY.COM, Digitas, iXL,
Organic, Proxicom, Razorfish, Sapient, Scient, and Viant;

. traditional technology services firms, such as Andersen Consulting,
Computer Sciences Corporation, EDS, and IBM Global Services;

. strategic consulting firms, such as Bain, Booz-Allen & Hamilton, Boston
Consulting Group and McKinsey & Co.; and

. internal Internet services, technology, marketing and design
departments.

We believe the main competitive factors in the Internet professional
services market include Internet expertise and talent, reliability of a high
quality solution, pricing and speed of service, ability to provide an
integrated solution, technological knowledge, creative design skills, brand
name and recognition and client references. We believe that we compete
favorably on these criteria and distinguish ourselves from our competitors
based on our Me-business approach, which focuses on satisfying the needs of our
clients' customers.

Facilities

Our headquarters are located in Norwalk, Connecticut where we lease
approximately 54,300 square feet of space. Under our lease agreement, we will
increase the space that we lease in Norwalk to 79,300 square feet in May 2000
and 114,300 square feet in September 2000. This lease expires in January 2009.
We maintain additional offices in New York City, San Francisco, Toronto,
London, Paris, Munich, Tokyo, Hong Kong, Singapore and Sao Paolo.

Legal Proceedings

We are not a party to any material legal proceedings.

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<PAGE>

MANAGEMENT

Executive Officers and Directors

The following table sets forth certain information with respect to our
executive officers and directors as of March 1, 2000.

<TABLE>
<CAPTION>
Name Age Position(s)
---- --- ----------
<S> <C> <C>
G. M. O'Connell......... 38 Chief Executive Officer and Chairman of the Board
Robert C. Allen, II..... 32 President, Chief Operating Officer and Director
Steven C. Roberts....... 38 Chief Financial Officer
John Nardone............ 35 President, International and Worldwide Director of Media
Sloane Levy............. 35 Vice President, General Counsel and Corporate Secretary
William Zierolf......... 41 Senior Vice President, Corporate Development
Amy Nenner.............. 45 Vice President, Human Resources
Robert H. Beeby......... 68 Director
Donald M. Elliman, Jr... 55 Director
Terry D. Peigh.......... 46 Director
Don Peppers............. 49 Director
Donald L. Seeley........ 56 Director
Joseph R. Zimmel........ 46 Director
</TABLE>

G. M. O'Connell has served as our Chief Executive Officer and Chairman of
our Board since November 1998. From October 1996 to November 1998, Mr.
O'Connell was our President and Chief Operating Officer. From 1987 to October
1996, Mr. O'Connell was a Managing Partner of the Modem Partnership, which he
co-founded in 1987. Mr. O'Connell is a director of the Direct Marketing
Association. Mr. O'Connell has been a director of ours since 1996.

Robert C. Allen, II has served as our President and Chief Operating Officer
since November 1998. From October 1996 to November 1998, Mr. Allen was
President of one of our divisions. From 1993 to October 1996, Mr. Allen served
as a Managing Partner of the Modem Partnership. From 1989 to 1992, Mr. Allen
was the Director of Business Development of the Modem Partnership. Mr. Allen
has been a director of ours since 1996.

Steven C. Roberts has served as our Chief Financial Officer since August
1998. From January 1997 to August 1998, Mr. Roberts served us in various
capacities, most recently as our Vice President, Finance and International
Operations. From 1990 to January 1997, Mr. Roberts held various management
positions at a number of subsidiaries of United Technologies.

John Nardone is currently our President, International and Worldwide
Director of Media, a position that he has held since December 1998. From
October 1995 to December 1998, he was our Vice President, Director of Media and
Research. From September 1994 to October 1995 he held the title of Account
Director with us.

Sloane Levy is currently our Vice President, General Counsel and Corporate
Secretary, a position she has held since May 1999. From April 1998 to May 1999,
Ms. Levy was Director, Investor Relations of Witco Corporation, a specialty
chemical corporation. From January 1996 through March 1998, she was Senior
Attorney at Witco Corporation and from May 1994 through December 1995, she was
Corporate Counsel for OSi Specialties, Inc., which was subsequently acquired by
Witco Corporation. Prior to May 1994, Ms. Levy was associated with the law
firms Arent Fox Kitner Plotkin & Kahn and Weil, Gotshal & Manges.

William Zierolf was named as our Senior Vice President, Corporate
Development in October 1999. From 1997 until his appointment with us, Mr.
Zierolf was Vice President and General Manager of Aspect Development, Inc., a
leading provider of enterprise wide component and supplier management systems,
and President of ChipCenter.com, a company co-founded and partially owned by
Aspect Development, Inc. From 1994 to 1997, Mr. Zierolf was Chief Executive
Officer, President and Director of Teltech Resource Network, Inc.

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<PAGE>

Amy Nenner was named as our Vice President, Human Resources in February
2000. From February 1994 until February 2000, Ms. Nenner was Vice President,
Human Resources and Administration of Labatt USA. Prior to joining Labatt USA,
Ms. Nenner held various positions in the human resources field including Vice
President, Human Resources of Reed Exhibition Companies and Director, Human
Resources of Book of the Month Club, Inc., a subsidiary of Time Warner, Inc.

Robert H. Beeby is the retired President and Chief Executive Officer of
Frito-Lay, Inc., a position he held from 1989 until his retirement in 1991.
Between 1984 and 1988, Mr. Beeby was the President and Chief Executive Officer
of Pepsi-Cola International. Prior to 1984, Mr. Beeby held a number of senior
management positions with Wilson Sporting Goods Company, Pepsi-Cola
International and Frito-Lay, Inc. He is a member of the board of directors of
A.C. Nielsen Co., Columbia Energy Group and Church & Dwight Co. Mr. Beeby has
been a director of ours since May 1999.

Donald M. Elliman, Jr. has served as President of Ascent Sports Holdings, a
sports and arena management firm, since January 2000. From 1995 to 1999, Mr.
Elliman served as a director and an Executive Vice President of Time Inc. Mr.
Elliman was the President of Sports Illustrated from September 1992 through
January 1998 and held various senior sales and marketing and publishing
positions with Time Inc. since 1967. Mr. Elliman has been a director of ours
since November 1998.

Terry D. Peigh is currently Executive Vice President, TN Services of True
North, a position that he has held since April 1998. Prior to April 1998, Mr.
Peigh held various positions with Foote, Cone and Belding, including acting as
its Senior Vice President, Worldwide Account Director commencing in 1993. Mr.
Peigh has been a director of ours since February 2000.

Don Peppers is a founder and partner of the Peppers and Rogers Group, a
customer relationship management and consulting company. Prior to establishing
the Peppers and Rogers Group in 1993, he was the Chief Executive Officer of
Perkins/Butler Direct Marketing, a direct-market advertising agency. Mr.
Peppers is a member of the board of directors of DoubleClick Inc. and Electric
SchoolHouse and is a member of the Advisory Board of Internet Capital Group,
Netcentives Inc., E.piphany, Chordiant Software Inc. and BroadVision, Inc. Mr.
Peppers has been a director of ours since May 1999.

Donald L. Seeley retired as Executive Vice President, Chief Financial
Officer of True North in March 2000, a position he had held since June 1997.
Currently, Mr. Seeley is a part-time employee and director of True North. Mr.
Seeley was the Vice Chairman of True North from May 1999 to March 15, 2000.
From 1993 through June 1997, Mr. Seeley was Chief Executive Officer of The
Alexander Consulting Group. Mr. Seeley has been a director of ours since
November 1998.

Joseph R. Zimmel has served as a managing director and head of the
Communications, Media & Entertainment Group for the Americas in the Investment
Banking Division at Goldman, Sachs & Co. since 1992. From 1988 to 1992, Mr.
Zimmel served as a managing director in the firm's Mergers and Acquisitions
Department. He is a member of the board of directors of the Student/Sponsor
Partnership in New York. Mr. Zimmel has been a director of ours since May 1999.

Messrs. O'Connell and Allen were elected to our board of directors pursuant
to an agreement with True North entered into in connection with our formation
in December 1996. In 1996, True North agreed to cause each of Messrs. O'Connell
and Allen to be elected to our board of directors as long as each serves us as
an executive officer and until their collective ownership of our Class A common
stock falls below 45% of the aggregate number of shares held by them on
December 31, 1996. Each of our officers serves at the discretion of our board
of directors.

Messrs. Beeby, Peppers and Zimmel were elected to our board of directors
under an agreement dated as of May 4, 1999, by and among us, True North, G.M.
O'Connell and Robert C. Allen, II.

There are no family relationships among any of our directors or officers.

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<PAGE>

Director Compensation

Our directors who are not also our employees, or employees or directors of
True North, receive options to acquire 17,500 shares of Class A common stock
when they join the board of directors. In addition, such outside directors
receive options to acquire 5,000 shares of Class A common stock for each year
of service at the time of his or her re-election. Also, each such outside
director is paid $1,000 for each board or committee meeting.

Committees of the Board of Directors

We have established an Audit Committee composed of two directors, currently
Messrs. Zimmel and Beeby. No member of our Audit Committee is an employee of
ours or of True North or a director of True North. The Audit Committee reports
to our board of directors regarding the appointment of our independent public
accountants, the scope and fees of prospective annual audits and the results
thereof, compliance with our accounting and financial policies and management's
procedures and policies relative to the adequacy of our internal accounting
controls.

Compensation Committee Interlocks and Insider Participation

Our board of directors has established a Compensation Committee comprised of
independent directors that makes determinations regarding the compensation of
our executive officers. The current members of the Compensation Committee are
Messrs. Peppers and Beeby. Before the board of directors established the
Compensation Committee, the compensation of our executive officers was
determined by our directors who were not also our officers. No interlocking
relationship exists between our board of directors and the board of directors
or Compensation Committee of any other company, nor has any such interlocking
relationship existed in the past.

Limitation of Liability and Indemnification Matters

Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. The Delaware General Corporation Law
provides that a corporation's certificate of incorporation may contain a
provision eliminating or limiting the personal liability of a director for
monetary damages for breach of his or her fiduciary duties as a director,
except for liability for:

. any breach of the duty of loyalty to us or our stockholders;

. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or

. any transaction from which the director derives an improper personal
benefit.

Our bylaws provide that we shall indemnify our directors and officers and
may indemnify our employees and agents to the fullest extent permitted by
Delaware law.

We have entered into agreements to indemnify certain of our directors and
officers in addition to the indemnification provided for in our certificate of
incorporation and bylaws. Under these agreements, we are obligated to indemnify
our directors and officers for expenses, attorneys' fees, judgments, fines and
settlement amounts incurred by any such person in any action or proceeding
arising out of such person's services as a director or officer of ours, any
subsidiary of ours or any other company or enterprise to which the person
provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified individuals to serve
as our directors and officers.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of ours where indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.

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<PAGE>

Executive Compensation

The following table sets forth information concerning the compensation
received, for each of the last two years, for services rendered to us by our
current Chief Executive Officer and each of our other four most highly-
compensated executive officers during the year ended December 31, 1999 whose
total compensation in 1999 equaled or exceeded $100,000.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
----------------- ------------
Securities
Underlying
Name and Principal Positions Year Salary Bonus Options
---------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
G. M. O'Connell......................... 1999 $300,000 $150,000 --
Chief Executive Officer 1998 300,000 90,000 285,000
Robert C. Allen, II..................... 1999 300,000 150,000 --
President and Chief Operating Officer 1998 300,000 90,000 285,000
Steven C. Roberts....................... 1999 184,000 120,000 200,000
Chief Financial Officer 1998 175,000 85,000 120,908
Sloane Levy(1).......................... 1999 106,000 40,000 60,000
VP, General Counsel and Corporate
Secretary 1998 -- -- --
William Zierolf(2)...................... 1999 41,000 66,000(3) 500,000
Senior Vice President, Corporate
Development 1998 -- -- --
</TABLE>
- ---------------------
(1) Ms. Levy commenced employment with us as Vice President and General Counsel
in May 1999.
(2) Mr. Zierolf commenced employment with us as Senior Vice President,
Corporate Development in October 1999.
(3) The amount shown includes a signing bonus of $50,000 paid to Mr. Zierolf
upon his employment with us.

Employment Agreements

In December 1996, we entered into a five-year employment agreement with each
of Messrs. O'Connell and Allen providing for an initial annual base salary of
$300,000, subject to increases at the discretion of our board of directors.
Each of Messrs. O'Connell and Allen currently receive base salaries of
$300,000. Pursuant to the employment agreements, if we terminate such
executive's employment without cause, the executive is entitled to receive
severance benefits equal to salary plus profit sharing for a period equal to
the lesser of three years after such termination or the time remaining in the
initial term of employment. Pursuant to letter agreements between us and each
of Mr. O'Connell and Mr. Allen, the vesting of each of their stock options
granted prior to January 2000 will be accelerated by one year upon (1)
termination of each person's employment by him for good reason within 18 months
after a change of control or (2) upon termination of his employment by us
without cause within 18 months after a change of control. In addition, if the
effective date of such termination is six months or less from the next vesting
date, an additional prorated number of options will vest. Each of Messrs.
O'Connell and Allen has also agreed to certain confidentiality, noncompetition
and nonsolicitation provisions.

In December 1996, we entered into an employment agreement with Mr. Roberts
providing for an annual base salary of $150,000. Mr. Roberts currently receives
a base salary of $200,000. Pursuant to a letter agreement, if we, or a
successor, terminate Mr. Roberts' employment without cause or if Mr. Roberts
terminates his employment with good reason, he is entitled to receive severance
benefits equal to one year's salary plus any applicable bonuses. Upon a change
of control, the vesting of Mr. Roberts' stock options granted prior to January
2000 will be accelerated by one year. If Mr. Roberts' employment is terminated
by us without cause or by him for good reason within 18 months following a
change of control, the vesting of these options will be accelerated by an
additional one year period. If the effective date of such termination is six
months or

37
<PAGE>

less from the next vesting date, an additional prorated number of options will
vest. In addition, Mr. Roberts has agreed to certain confidentiality,
noncompetition and nonsolicitation provisions.

In April 1999, we entered into an employment agreement with Ms. Levy for an
initial base salary of $170,000. Pursuant to the employment agreement, if we
terminate Ms. Levy's employment without cause, she is entitled to receive
severance benefits equal to one year of base salary plus any other payments to
which she may be entitled to at that time. Pursuant to a letter agreement
between us and Ms. Levy, the vesting of Ms. Levy's stock options granted on May
17, 1999 shall be accelerated by one year and the vesting of the options
granted to Ms. Levy on December 6, 1999 shall be fully accelerated upon (1)
termination of her employment by her for good reason within 18 months after a
change of control or (2) upon termination of her employment by us without cause
within 18 months after a change of control. In addition, if the effective date
of such termination is six months or less from the next vesting date, an
additional prorated number of options will vest. Ms. Levy has also agreed to
certain confidentiality, noncompetition and nonsolicitation provisions.

In October 1999, we entered into an employment agreement with Mr. Zierolf
providing for an initial base salary of $200,000 and a one-time signing bonus
of $50,000. Pursuant to the employment agreement, if Mr. Zierolf is terminated
without cause within 18 months following a change of control, the vesting of
options granted to him will be accelerated by one year. Mr. Zierolf has also
agreed to certain confidentiality and nonsolicitation provisions.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Zimmel is a managing director of Goldman, Sachs & Co. This firm provided
us with investment banking services during 1999 and is expected to provide us
with similar services during 2000.

Currently, two of our eight directors are also employees of True North, and
are compensated by True North in connection with their employment by True
North. In addition, one of these directors and one of our other directors are
also directors of True North and were elected to our board of directors by True
North. These directors may have conflicts of interest in addressing business
opportunities and strategies in circumstances where our and True North's
interests differ.

In the normal course of business, we and True North have, from time to time,
entered into various business transactions and agreements, and we may enter
into additional transactions in the future. These transactions include (1) an
administrative services agreement whereby True North provides us with
administrative functions and other services including tax preparation,
insurance and treasury consulting; (2) a sublease with Bozell, for office space
in New York City; and (3) a tax matters agreement whereby we and True North
have entered into an agreement to provide for certain unitary state tax-sharing
arrangements.

We believe that each of these transactions was made on terms no less
favorable than those that we could have obtained from unaffiliated third
parties. All future transactions, including loans, between us and our officers,
directors, principal stockholders or our affiliates will be approved by a
majority of our board of directors, including a majority of our independent and
disinterested directors, and will be on terms equivalent to those that we could
obtain from unaffiliated third parties.

Stockholders Agreement with True North, Mr. O'Connell and Mr. Allen

In May 1999, we, True North, G. M. O'Connell and Robert C. Allen, II entered
into a stockholders agreement. Under this agreement True North agreed to
convert all of its shares of our Class B common stock into shares of our Class
A common stock when it no longer owns 35% of the total outstanding shares of
our capital stock, which will occur upon consummation of this offering.

In connection with expanding our board of directors from five to eight
directors, we and the other parties to the stockholders agreement agreed that
until True North no longer owns at least 10% of our outstanding capital stock,
such parties would take all actions necessary in order to cause the election of
at least one director designated by True North to our board of directors.

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<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of our Class A common stock as of March 1, 2000, for:

. each person or entity who is known by us to beneficially own five
percent or more of the outstanding shares of our common stock;

. each of our directors;

. each of our executive officers; and

. all of our directors and executive officers as a group

and as adjusted to reflect the sale of the shares offered by this prospectus.

<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Before the Offering After the Offering
---------------------------- Number of ----------------------------
Percent of Shares Being Percent of
Name Number(1) Ownership Offered Number(1) Ownership
- ---- --------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
True North
Communications Inc. ... 11,109,696 46.2% 2,500,000 8,609,696 33.6%
101 East Erie Street
Chicago, Illinois 60611(2)
Provident Investment
Counsel, Inc........... 795,700 3.3 -- 795,700 3.1
300 North Lake Avenue
Pasadena, California
91101(3)
GEOCapital LLC.......... 1,461,800 6.1 -- 1,461,800 5.7
767 Fifth Avenue, 45th
Floor
New York, NY 10153-4590(4)
Douglas C. Ahlers (5)... 2,110,748 8.8 -- 2,110,748 8.2
G.M. O'Connell (6)...... 2,254,346 9.3 338,151 1,916,195 7.4
Robert C. Allen, II
(7).................... 626,978 2.6 94,046 532,932 2.1
Robert H. Beeby (8)(9).. 37,000 * -- 37,000 *
Donald M. Elliman, Jr.
(10)................... 11,109,696 46.2 2,500,000 8,609,696 33.6
Sloane Levy............. 644 * -- 644 *
Terry D. Peigh (11)..... 11,109,696 46.2 2,500,000 8,609,696 33.6
Don Peppers (9)......... 47,000 * -- 47,000 *
Steven C. Roberts (12).. 37,152 * -- 37,152 *
Donald L. Seeley (13)... 11,110,696 46.2 2,500,000 8,610,696 33.6
William Zierolf......... -- * -- -- *
Joseph R. Zimmel (9).... 35,000 * -- 35,000 *
All directors and
executive officers as a
group (thirteen
persons) (14)(15)...... 14,323,658 58.2 2,932,197 11,391,461 43.5
</TABLE>
- --------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Class A common stock subject to options held by that
person that are currently exercisable or exercisable within 60 days of
March 1, 2000 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing and presenting the percentage
ownership of any other person named in the table. Except as indicated in
the footnotes to this table and pursuant to applicable community property
laws, each stockholder named in the table has sole voting and investment
power with respect to the shares set forth opposite such stockholder's
name.
(2) Includes shares of our Class B common stock held by various wholly-owned
subsidiaries of True North prior to this offering. All of the Class B
shares held by True North and its subsidiaries will be converted into
shares of our Class A common stock upon consummation of this offering.

40
<PAGE>

(3) Provident Investment Counsel, Inc. and Robert M. Kommerstad, a shareholder
of a predecessor business of Provident, filed a statement with the
Commission on Schedule 13G/A under the Exchange Act, disclosing beneficial
ownership of greater than 5% of our Class A common stock (795,700 shares).
According to the statement, Provident's beneficial ownership of our Class
A common stock is directly as a result of Provident's discretionary
authority to buy, sell and vote shares of such common stock for its
investment advisory clients. Mr. Kommerstad no longer has beneficial
ownership of any of our Class A common stock and is no longer a reporting
person. Since this table reflects the conversion of True North's Class B
common stock into Class A common stock upon consummation of this offering,
Provident's percentage of ownership of our Class A common stock is shown
as less than 5%.
(4) GEOCapital LLC filed a statement with the Commission on Schedule 13G under
the Exchange Act, disclosing beneficial ownership of greater than 5% of
our Class A common stock (1,461,800 shares). According to the statement,
GEOCapital has sole dispositive power for 1,461,800 shares.
(5) Includes 60,800 shares of our Class A common stock subject to options that
are exercisable within 60 days of March 1, 2000.
(6) Includes 174,800 shares of our Class A common stock subject to options
that are exercisable within 60 days of March 1, 2000.
(7) Includes 74,800 shares of our Class A common stock subject to options that
are exercisable within 60 days of March 1, 2000.
(8) Includes 2,000 shares of our Class A common stock beneficially owned by
Mr. Beeby's wife.
(9) Includes 35,000 shares of our Class A common stock subject to options that
are exercisable within 60 days of March 1, 2000.
(10) Includes 11,109,696 shares of our Class B common stock beneficially owned
by True North and its wholly owned subsidiaries. Mr. Elliman, who is a
director of True North, disclaims beneficial ownership of such shares.
(11) Includes 11,109,696 shares of our Class B common stock beneficially owned
by True North and its wholly-owned subsidiaries. Mr. Peigh, who is an
Executive Vice President of True North, disclaims beneficial ownership of
such shares.
(12) Includes 34,028 shares of our Class A common stock subject to options that
are exercisable within 60 days of March 1, 2000.
(13) Includes 11,109,696 shares of our Class B common stock beneficially owned
by True North and its wholly owned subsidiaries. Mr. Seeley, who is a
part-time employee and director of True North, disclaims beneficial
ownership of such shares.
(14) Includes an aggregate of 560,346 shares of our Class A common stock
subject to options held by our directors and executive officers that are
exercisable within 60 days of March 1, 2000.
(15) The address of each of the individuals listed, with the exception of Mr.
Ahlers, is c/o Modem Media. Poppe Tyson, Inc., 230 East Avenue, Norwalk,
Connecticut 06855. Mr. Ahlers' address is 1942 Pacific Avenue, San
Francisco, CA 94109.

41
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Future public market sales of substantial amounts of Class A common stock
that have not previously been sold in the public market, including shares
issuable upon exercise of outstanding options and warrants after this offering,
could adversely affect market prices prevailing from time-to-time and could
impair our ability to raise capital through the sale of our equity securities.

Upon consummation of this offering, we will have 25,744,780 shares of Class
A common stock outstanding (25,919,780 shares if the underwriters' over-
allotment is exercised in full) and no shares of Class B common stock
outstanding. Of the shares outstanding after the offering, approximately 11.9
million shares of Class A common stock, will be freely tradeable without
restriction under the Securities Act, except for any such shares which may be
acquired by an "affiliate" of us, which shares will be subject to the volume
limitations of Rule 144 under the Securities Act. The freely tradable shares
include the 4.5 million shares of Class A common stock to be sold in this
offering, the 5,980,000 shares sold in our initial public offering and
approximately 1.4 million shares sold under other registration statements or
Rule 144 under the Securities Act. As defined in Rule 144, an "affiliate" of an
issuer is a person who, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
such issuer.

Substantially all of the remaining 13,895,172 shares of Class A common stock
outstanding will be "restricted securities" as that phrase is defined in Rule
144 and may not be resold in the absence of registration under the Securities
Act or pursuant to an exemption from such registration, including the exemption
provided by Rule 144 under the Securities Act. Approximately 2,050,000 shares
of Class A common stock which are restricted securities may be sold freely
under Rule 144(k). Holders of the balance of the restricted securities will be
entitled to sell a number of shares of Class A common stock within any three-
month period equal to the greater of 1% of the then outstanding shares of the
Class A common stock (approximately 257,450 shares immediately after the
offering) or the average weekly reported volume of trading of the Class A
common stock on the Nasdaq National Market during the four calendar weeks
preceding such sale, provided that certain manner of sale and notice
requirements and requirements as to the availability of current public
information concerning us satisfied.

Immediately after the offering, there will be options and warrants to
purchase approximately 6.7 million shares of Class A common stock outstanding
granted by us through March 10, 2000. We have filed registration statements on
Form S-8 covering all options granted under our 1999 Stock Incentive Plan, 1997
Stock Option Plan, 1996 Option Plan, Purchase Plan and the Vivid Holdings, Inc.
1999 Stock Option Plan. Shares of Class A common stock registered under such
registration statements will, subject to Rule 144 volume limitations applicable
to affiliates, be available for sale in the open market, unless such shares are
subject to vesting restrictions with us or the lock-up agreements described
below. See "Management--Stock Plans."

Notwithstanding the foregoing, in connection with this offering, we have
agreed that we will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Commission a registration
statement under the Securities Act relating to, any shares of our common stock
or securities convertible into or exchangeable or exercisable for any shares of
our common stock, or publicly disclose the intention to make any such offer,
sale, pledge, disposition or filing, without the prior written consent of
Credit Suisse First Boston Corporation for a period of 90 days after the date
of this prospectus, except issuances pursuant to the conversion or exchange of
convertible or exchangeable securities or the exercise of options or warrants
outstanding on the date hereof and grants and issuances pursuant to our stock-
based compensation plans and except as necessary to permit us to fulfill our
contractual obligations, including our obligation to file a registration
statement relating to the shares of Class A common stock issuable upon the
exercise of General Electric Capital Corporation's warrants and, if it arises
during the lock-up period, our obligation to file a registration statement
relating to the shares of Class A common stock issuable in connection with the
CLLC Investments II merger described below.

42
<PAGE>

which would have the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of our common stock, whether any such aforementioned
transaction is to be settled by delivery of our common stock or such other
securities, in cash or otherwise, or publicly disclose the intention to make
any such offer, sale, pledge or disposition, without the prior written consent
of Credit Suisse First Boston Corporation for a period of 90 days after the
date of this prospectus, except True North will be permitted to sell to us up
to approximately 222,660 shares pursuant to the exercise of certain outstanding
employee stock options.

After giving effect to these contractual restrictions and holding periods
under Rule 144, we estimate that additional shares of outstanding common stock
will be available for sale in the public market as follows:

<TABLE>
<CAPTION>
Number of shares Date of availability for resale
---------------- -------------------------------
<C> <S>
2,050,000 Immediately
10,800,000 91 days after the date of this prospectus
128,400 October 2000; shares issued in conection with our
acquisition of MEX Multimedia Experts GmbH
446,000 February 2001; shares issued in connection with the Vivid
transaction
</TABLE>

In addition to these shares, additional shares issuable upon the exercise of
outstanding options and warrants may be sold in the public market under the
registration statements described below and our registration statements
relating to our stock-based incentive plans.

Registration Rights

True North and Messrs. O'Connell, Allen and Ahlers

True North, G. M. O'Connell, Robert C. Allen, II and Douglas C. Ahlers are
entitled to require us to register their shares of our Class A common stock
under the Securities Act. After this offering, approximately 12,859,171 shares
of common stock may be registered under these rights. Under the agreement
between us and these stockholders, True North will be entitled to demand that
we file a total of four registration statements, two of which are specified as
Form S-3 registration statements. If we file any registration statement for our
equity securities, either for our own account or for the account of other
security holders, we must give notice of the filing to True North and Messrs.
O'Connell, Allen and Ahlers and offer to include their shares of Class A common
stock in the registration statement. In an underwritten offering, the
underwriters will have the right to limit the aggregate number of shares
included by these parties to no less than 20% of the total offering. All of
these registration rights are transferable subject to specified conditions and
expire in August 2002. We will bear the expenses of each such registration.

Relating to the Vivid Acquisition

In connection with the Vivid acquisition, we have granted certain parties
piggyback registration rights in connection with shares of our Class A common
stock that they received in that transaction. Approximately 446,000 shares of
Class A common stock may be registered under these rights, of which 139,706
shares only become subject to these rights when released from an escrow
arrangement that is scheduled to terminate on February 11, 2001 or earlier
under certain circumstances. The registration rights of the stockholders who
received shares in the Vivid acquisition are subordinate to the rights of our
stockholders who held registration rights prior to February 10, 2000.

GE Capital Warrant Shares

We have issued a warrant to purchase 190,000 shares of our Class A common
stock at an exercise price of $12.16 per share to General Electric Capital
Corporation. The terms of our warrant agreement with General Electric Capital
Corporation require us, with certain exceptions, to prepare and file a resale
registration statement on or before June 9, 2000 in respect of all shares of
our Class A common stock issuable upon

43
<PAGE>

exercise of the warrants. We have agreed, with certain exceptions, to use our
best efforts to cause this registration statement to become effective on or
before August 9, 2000 and to keep it continuously effective until August 9,
2004 or until all of the shares registered thereunder have been sold.

CentrPort Merger Shares

If CentrPort LLC, a limited liability company formed pursuant to the
Delaware Limited Liability Company Act, meets certain defined milestones prior
to April 26, 2001, we have agreed to merge with an entity called CLLC
Investments I, Inc., pursuant to which transaction the shareholders of CLLC
Investments I will receive $3 million worth of our Class A common stock based
on the market price of our Class A common stock at the time of the merger. The
stockholders of CLLC Investments I will have piggyback registration rights in
connection with those shares. Under certain circumstances, following the merger
with CLLC Investments I, we may merge with CLLC Investments II. If that merger
occurs, stockholders of CLLC Investments II will receive shares of our Class A
common stock with a value equal to a dollar amount which will be determined on
a sliding scale based on the then-market price of our Class A common stock. In
addition, the stockholders of CLLC Investments II will be entitled to demand
that we file a resale registration statement in connection with those shares.
The registration rights of the CLLC Investments I and CLLC Investments II
stockholders will be subordinate to the rights of our stockholders who held
registration rights prior to November 22, 1999. As of the time of this
offering, mergers with neither CLLC Investments I nor CLLC Investments II have
occurred.

44
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following descriptions are summaries of the material terms of our
certificate of incorporation and bylaws. Reference is made to the more detailed
provisions of, and such descriptions are qualified in their entirety by
reference to, our certificate of incorporation and bylaws, copies of which are
filed with the Securities and Exchange Commission as exhibits to the
registration statement of which this prospectus is a part, and applicable law.

General

Under our certificate of incorporation, we have authority to issue an
aggregate of 61,025,865 shares of capital stock, consisting of 44,909,539
shares of Class A common stock, par value $0.001 per share, 11,116,326 shares
of Class B common stock, par value $0.001 per share, and 5,000,000 shares of
preferred stock, par value $0.001 per share.

Set forth below is a description of our common stock and our preferred stock
that may be issued under our certificate of incorporation.

Common Stock

Shares of our Class A common stock and Class B common stock are identical in
all respects, except for voting rights and certain conversion rights, as
described below.

Voting Rights. Each outstanding share of our Class A common stock is
entitled to one vote on all matters submitted to a vote of our stockholders,
including the election of directors, and each share of our Class B common stock
is entitled to five votes on each such matter. Except as required by applicable
law, holders of our Class A common stock and Class B common stock vote together
as a single class on all matters. There is no cumulative voting in the election
of directors.

For so long as there are any shares of our Class B common stock outstanding,
any action that may be taken at a meeting of the stockholders may be taken by
written consent in lieu of a meeting if we receive consents signed by
stockholders having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present and voted. This could permit the holders of our Class B
common stock to take action regarding certain matters without providing other
stockholders the opportunity to voice dissenting views or raise other matters.
The right to take such action by written consent of stockholders will expire
when there are no longer any shares of our Class B common stock outstanding,
which will occur upon consummation of this offering.

Dividends, Distributions and Stock Splits. Holders of our Class A common
stock and Class B common stock are entitled to receive dividends at the same
rate if, and when such dividends are declared by our board of directors out of
assets legally available therefor after payment of dividends required to be
paid on shares of preferred stock, if any.

In the case of dividends or distributions payable in Class A common stock or
Class B common stock, only shares of our Class A common stock will be
distributed with respect to the Class A common stock and only shares of our
Class B common stock will be distributed with respect to our Class B common
stock. In the case of dividends or other distributions consisting of other of
our voting shares, we will declare and pay such dividends in two separate
classes, identical in all respects except that the voting rights of each such
security paid to the holders of our Class A common stock shall be one-fifth of
the voting rights of each such security paid to the holders of our Class B
common stock. In the case of dividends or other distributions consisting of
non-voting securities convertible into, or exchangeable for, our voting
securities we will provide that such convertible or exchangeable securities and
the underlying securities be identical in all respects, except that the voting
rights of each security underlying the convertible or exchangeable security
paid to the holders of our Class A common stock shall be one-fifth of the
voting rights of each security underlying the convertible or exchangeable
security paid to the holders of our Class B common stock, and such underlying
securities paid to the holders of our Class B common stock shall convert into
the security paid to the holders of the Class A common stock upon the same
terms and conditions applicable to the conversion of Class B common stock into
Class A common stock.

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<PAGE>

Neither our Class A common stock nor our Class B common stock may be
subdivided or combined in any manner unless the other class is subdivided or
combined in the same proportion.

Conversion. The shares of our Class A common stock are not convertible. Each
share of our Class B common stock is convertible into one share of our Class A
common stock at any time at the option of the holder. Each share of Class B
common stock will automatically convert into one share of Class A common stock
upon consummation of this offering, when True North's holdings will be reduced
below 35% of our outstanding shares. The holders of Class B common stock shall
have, upon conversion of their shares of Class B common stock into shares of
Class A common stock, one vote per share of Class A common stock held.

Liquidation. In the event of any dissolution, liquidation, or winding up of
our affairs, whether voluntary or involuntary, after payment of our debts and
other liabilities and making provision for the holders of preferred stock, if
any, remaining assets will be distributed ratably among the holders of our
Class A common stock and Class B common stock, treated as a single class.

Mergers and Other Business Combinations. Upon a merger, combination, or
other similar transaction in which shares of our common stock are exchanged for
or changed into other stock or securities, cash and/or any other property,
holders of our Class A common stock and Class B common stock will be entitled
to receive an equal amount per share of stock, securities, cash, and/or any
other property, as the case may be, into which or for which each share of any
other class of common stock is exchanged or changed; provided that in any
transaction in which shares of capital stock are distributed, such shares so
exchanged for or changed into may differ as to voting rights and conversion
rights to the extent and only to the extent that the voting rights and
conversion rights of Class A common stock and Class B common stock differ at
that time.

All shares of Class A common stock outstanding are fully paid and
nonassessable, and all the shares of Class A common stock to be outstanding
upon completion of this offering will be fully paid and nonassessable.

Preferred Stock

We have authority to issue 5,000,000 shares of undesignated preferred stock,
of which none are currently outstanding. Our board of directors has the
authority to issue preferred stock in one or more series and to establish the
rights and restrictions granted to or imposed on any unissued shares of
preferred stock and to fix the number of shares constituting any series without
any further vote or action by the stockholders. Our board of directors has the
authority, without approval of the stockholders, to issue preferred stock that
has voting and conversion rights superior to the Class A and Class B common
stock, which could have the effect of delaying or preventing a change in
control of us. We currently have no plans to issue any shares of preferred
stock.

Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute 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 a merger, asset sale or other transaction resulting in a
financial benefit to the stockholder. For purposes of Section 203, an
"interested stockholder" is defined to include any person that is:

. the owner of 15% or more of the outstanding voting stock of the
corporation;

. an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation, at any time
within three years immediately prior to the relevant date; and

. an affiliate or associate of the persons described in the foregoing
bullet points.

Stockholders may, by adopting an amendment to the corporation's certificate
of incorporation or bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither our

46
<PAGE>

certificate of incorporation nor our bylaws exempts us from the restrictions
imposed under Section 203 of the Delaware General Corporation Law. It is
anticipated that the provisions of Section 203 of the Delaware General
Corporation Law may encourage companies interested in acquiring us to negotiate
in advance with our board of directors because the stockholder approval
requirement would be avoided if a majority of the directors then in office
approve either the business combination or the transaction that results in the
stockholder becoming an interested stockholder.

Annual meetings of stockholders shall be held to elect our board of
directors and transact such other business as may be properly brought before
the meeting. Special meetings of stockholders may be called by the Chairman or
the Chief Executive Officer or by a majority of the board of directors. Our
certificate of incorporation and bylaws provide that any action required or
permitted to be taken by our stockholders may be effected at a duly called
annual or special meeting of the stockholders or may be taken by a consent in
writing by stockholders.

Our certificate of incorporation may be amended with the approval of a
majority of the board of directors and the holders of a majority of our
outstanding voting securities.

The number of directors shall be fixed by resolution of the board of
directors. The size of our board of directors is currently fixed at eight
members. Our directors shall be elected at the annual meeting of the
stockholders, except for filling vacancies. Our directors may be removed with
the approval of the holders of a majority of our voting power present and
entitled to vote at a meeting of stockholders. Vacancies and newly created
directorships resulting from any increase in the number of directors may be
filled by a majority of our directors then in office, a sole remaining
director, or the holders of a majority of the voting power present and entitled
to vote at a meeting of stockholders. Under the terms of our May 1999
stockholders' agreement with True North, G. M. O'Connell and Robert C. Allen,
II, in connection with expanding our board of directors from five to eight
directors, we and the other parties to that agreement agreed, until True North
no longer owns at least 10% of our outstanding capital stock, to take all
actions necessary in order to cause the election of at least one director
designated by True North to our board of directors.

The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote generally shall
constitute a quorum for stockholder action at any meeting.

Limitation of Liability; Indemnification

Our certificate of incorporation contains certain provisions permitted under
the Delaware General Corporation Law relating to the liability of our
directors. These provisions eliminate a director's personal liability for
monetary damages resulting from a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, including:

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

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

. any unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or

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

These provisions do not limit or eliminate our rights or those of any
stockholder to seek non-monetary relief, such as an injunction or rescission,
in the event of a breach of a director's fiduciary duty. These provisions will
not alter a director's liability under federal securities laws. Our bylaws also
contain provisions indemnifying our directors and officers to the fullest
extent permitted by the Delaware General Corporation Law. We believe that these
provisions are necessary to attract and retain qualified individuals to serve
as directors and officers. See "Management--Limitation of Liability and
Indemnification Matters."

Transfer Agent and Registrar

The Transfer Agent and Registrar for our Class A common stock is First
Chicago Trust Company.

47
<PAGE>

U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
OF OUR CLASS A COMMON STOCK

The following is a general discussion of the material U.S. federal income
and estate tax consequences of the ownership and disposition of Class A common
stock by a beneficial owner that is a "Non-U.S. Holder." A "Non-U.S. Holder" is
a person or entity that, for U.S. federal income tax purposes, is a non-
resident alien individual, a foreign corporation, or a foreign estate or trust.
If a partnership is a beneficial owner of our Class A common stock, the tax
treatment of a partner will generally depend upon the status of the partner and
upon the activities of the partnership. If you are a partner of a partnership
holding our Class A common stock, you should consult your tax advisor about the
U.S. tax consequences of holding and disposing of shares of our Class A common
stock.

This discussion is based on the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury regulations thereunder,
and administrative and judicial interpretations thereof as of the date of this
prospectus, all of which are subject to change, including changes with
retroactive effect. This discussion does not address all aspects of U.S.
federal income and estate taxation that may be relevant to Non-U.S. Holders of
Class A common stock in light of their particular circumstances such as their
status as an insurance company, tax-exempt organization, financial institution,
broker-dealer, U.S. expatriate, or holder of our securities as part of a
"straddle," "hedge" or "conversion transaction." This discussion does not
address any tax consequences arising under the laws of any state, local or
foreign jurisdiction. Prospective holders should consult their tax advisors
with respect to the particular tax consequences to them of owning and disposing
of Class A common stock, including the consequences under the laws of any
state, local or foreign jurisdiction.

Dividends

Dividends paid to a Non-U.S. Holder of Class A common stock generally will
be subject to withholding tax at a 30% rate or a reduced rate specified by an
applicable income tax treaty. For purposes of withholding and determining
whether tax is to be withheld at a reduced rate under an income tax treaty, we
will presume that dividends paid on or before December 31, 2000 to an address
in a foreign country are paid to a resident of that country unless we have
knowledge that the presumption is not warranted.

In order to obtain a reduced rate of withholding for dividends paid after
December 31, 2000, a Non-U.S. Holder of Class A common stock will be required
to provide an Internal Revenue Service Form W-8BEN certifying its entitlement
to benefits under a treaty. In addition, in certain cases where dividends are
paid to a Non-U.S. Holder of Class A common stock that is a partnership or
other pass-through entity, persons holding an interest in the entity and the
entity itself may need to provide the required certification. Non-U.S. Holders
should consult their tax advisors regarding their entitlement to benefits under
a relevant income tax treaty.

The withholding tax does not apply to dividends paid to a Non-U.S. Holder of
Class A common stock that provides an Internal Revenue Service Form W-8ECI,
certifying that the dividends are effectively connected with the Non-U.S.
Holder's conduct of a trade or business within the United States (or if an
income tax treaty applies, the withholding tax does not apply to dividends that
are attributable to a permanent establishment maintained by such Non-U.S.
Holder in the United States, provided that the Non-U.S. Holder complies with
other applicable certification and disclosure requirements). Instead, the
effectively connected dividends will be subject to regular U.S. federal income
tax on net income as if the Non-U.S. Holder were a U.S. resident, U.S. citizen
or domestic corporation. A non-U.S. corporation receiving effectively connected
dividends may also be subject to an additional "branch profits tax" imposed at
a rate of 30% (or a lower treaty rate) on an earnings amount that is net of the
regular tax.

A Non-U.S. Holder may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund, along with the required information,
with the Internal Revenue Service.

48
<PAGE>

Gain on Disposition of Class A Common Stock

A Non-U.S. Holder generally will not be subject to U.S. federal income tax
on gain realized on a sale or other disposition of Class A common stock unless:

. the gain is effectively connected with a trade or business of the Non-
U.S. Holder in the United States (and, if an income tax treaty applies,
is attributable to a permanent establishment maintained in the United
States by such Non-U.S. Holder);

. in the case of certain Non-U.S. Holders who are non-resident alien
individuals and hold the Class A common stock as a capital asset, the
individuals are present in the United States for 183 or more days in the
taxable year of the disposition and certain other conditions exist;

. the Non-U.S. Holder is subject to tax under the provisions of the Code
regarding the taxation of certain U.S. expatriates; or

. we are or have been a "U.S. real property holding corporation" within
the meaning of the Code at any time within the five-year period
preceding the disposition or the Non-U.S. Holder's holding period,
whichever period is shorter.

We believe that we are not, and do not anticipate becoming, a U.S. real
property holding corporation for U.S. federal income tax purposes.

Information Reporting Requirements and Backup Withholding

We must report to the Internal Revenue Service the amount of dividends paid,
the name and address of the recipient, and the amount of any tax withheld. A
similar report is sent to each Non-U.S. Holder of Class A common stock. Under
tax treaties or other agreements, the Internal Revenue Service may make its
reports available to tax authorities in the recipient's country of residence.
United States backup withholding generally is a withholding tax imposed at the
rate of 31% on certain payments to holders of common stock that are not "exempt
recipients" and that fail to furnish certain required information. Dividends
paid on or before December 31, 2000 at an address outside the United States are
generally not subject to backup withholding, unless we have knowledge that the
payee is a U.S. person. However, a Non-U.S. Holder may need to certify its non-
U.S. status in order to avoid backup withholding at a 31% rate on dividends
paid after December 31, 2000 or on dividends paid on or before that date at an
address inside the United States.

U.S. information reporting and backup withholding generally will not apply
to a payment of proceeds of a disposition of Class A common stock where the
transaction is effected outside the United States through a non-U.S. office of
a non-U.S. broker. However, a Non-U.S. Holder of Class A common stock may need
to certify its non-U.S. status in order to avoid information reporting and
backup withholding at a 31% rate on disposition proceeds where the transaction
is effected by or through a U.S. office of a broker. In addition, U.S.
information reporting requirements may apply to the proceeds of a disposition
effected by or through a non-U.S. office of a U.S. broker, or by a non-U.S.
broker with specified connections to the United States.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. When withholding results in an overpayment of taxes, a refund may be
obtained if the required information is furnished to the IRS.

Federal Estate Tax

An individual Non-U.S. Holder of Class A common stock who is treated as the
owner of, or has made certain lifetime transfers of, an interest in Class A
common stock will be required to include the value of the Class A common stock
in his gross estate for U.S. federal estate tax purposes, and may be subject to
U.S. federal estate tax unless an applicable estate tax treaty provides
otherwise.

49
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we and the selling stockholders have agreed to sell
to the underwriters named below, for whom Credit Suisse First Boston
Corporation, FleetBoston Robertson Stephens Inc., Thomas Weisel Partners LLC
and First Union Securities, Inc. are acting as representatives, the following
respective numbers of shares of Class A common stock:

<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
FleetBoston Robertson Stephens Inc.................................
Thomas Weisel Partners LLC.........................................
First Union Securities, Inc........................................

---------
Total............................................................ 4,500,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of our Class A common stock in this offering if any are
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults the purchase commitments of non-defaulting underwriters
may be increased or the offering of common stock may be terminated.

We and True North have granted to the underwriters a 30-day option to
purchase on a pro rata basis up to 175,000 additional shares from us and
500,000 additional shares from True North at the public offering price less the
underwriting discounts and commissions. This option may be exercised only to
cover any over-allotments of Class A common stock.

The underwriters propose to offer the shares of Class A common stock
initially at the public offering price on the cover page of this prospectus and
to selling group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share on
sales to other broker/dealers. After the public offering, the public offering
price and concession and discount to broker/dealers may be changed by the
representatives.

The following table summarizes the compensation and estimated expenses we
and the selling stockholders will pay.

<TABLE>
<CAPTION>
Per Share Total
------------------- ------------------------
Without With Without
Over- Over- Over- With
allotment allotment allotment Over-allotment
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions
paid by us.............
Expenses payable by us..
Underwriting Discounts
and Commissions
paid by selling
stockholders...........
</TABLE>

50
<PAGE>

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Commission a
registration statement under the Securities Act relating to, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing, without the prior written
consent of Credit Suisse First Boston Corporation for a period of 90 days after
the date of this prospectus, except issuances pursuant to the conversion or
exchange of convertible or exchangeable securities or the exercise of options
or warrants outstanding on the date hereof and grants and issuances pursuant to
our stock-based compensastion plans and except as necessary to permit us to
fulfill our contractual obligations, including our obligation to file a
registration statement relating to the warrant shares issuable upon the
exercise of General Electric Corporation's warrants and, if it arises during
the lock-up period, our obligation to file a registration statement relating to
the shares of Class A common stock issuable in connection with the CLLC
Investments II merger described under "Shares Eligible for Future Sale."

Our officers, other senior managers, directors and True North have agreed
that they will not offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, enter into a transaction which would have the same effect, or enter into
any swap, hedge or other arrangement that transfers, in whole or in part, any
of the economic consequences of ownership of our common stock, whether any such
aforementioned transaction is to be settled by delivery of our common stock or
such other securities, in cash or otherwise, or publicly disclose the intention
to make any such offer, sale, pledge or disposition, without the prior written
consent of Credit Suisse First Boston Corporation for a period of 90 days after
the date of this prospectus, except True North will be permitted to sell to us
up to approximately 222,660 shares pursuant to the exercise of certain
outstanding employee stock options.

We and the selling stockholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments which
the underwriters may be required to make in that respect.

The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Exchange Act.

. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

. In passive market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations,
make bids for or purchases of the common stock until the time, if any,
at which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has acted as a lead or co-manager on
numerous public offerings of equity securities. Thomas Weisel Partners does not
have any material relationship with us or any of our officers, directors or
other controlling persons, except with respect to its contractual relationship
with us pursuant to the underwriting agreement entered into in connection with
this offering.

51
<PAGE>

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of our Class A common stock in Canada is being made only on
a private placement basis exempt from the requirement that we and the selling
shareholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are effected.
Accordingly, any resale of our Class A common stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of our Class A common
stock.

Representations of Purchasers

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling shareholders and
the dealer from whom such purchase confirmation is received that: (i) such
purchaser is entitled under applicable provincial securities laws to purchase
such common stock without the benefit of a prospectus qualified under such
securities laws; (ii) where required by law, that such purchaser is purchasing
as principal and not as agent; and (iii) such purchaser has reviewed the text
above under "Resale Restrictions."

Rights of Action (Ontario Purchasers)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of Legal Rights

All of the issuer's directors and officers as well as the experts named
herein and the selling shareholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.

Notice to British Columbia Residents

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.

Taxation and Eligibility for Investment

Canadian purchasers of our common stock should consult their own legal and
tax advisors with respect to the tax consequences of an investment in our
common stock in their particular circumstances and with respect to the
eligibility of our common stock for investment by the purchaser under relevant
Canadian legislation.

52
<PAGE>

LEGAL MATTERS

The validity of the Class A common stock offered by us will be passed on for
us by Davis Polk & Wardwell, New York, New York and the validity of the Class A
common stock offered by the selling stockholders will be passed on for us by
Sloane Levy, our Vice President, General Counsel. Ms. Levy owns 644 shares of
Class A common stock and options to purchase 56,000 shares of Class A common
stock. Cravath, Swaine & Moore, New York, New York has represented the
underwriters in this offering.

EXPERTS

Our audited financial statements included and incorporated by reference in
this prospectus and the audited financial statements of Poppe Tyson Strategic
Interactive Marketing Operations incorporated by reference in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included or
incorporated by reference, as the case may be, herein in reliance upon the
authority of said firm as experts in giving said reports.

The consolidated financial statements of Vivid Holdings, Inc., and
subsidiary, as of December 31, 1999 and for the six-month period then ended,
and the consolidated financial statements of Vivid Publishing, Inc.
(predecessor) as of and for the year-ended December 31, 1998 and for the six-
month period ended June 30, 1999 have been incorporated by reference herein and
in the registration statement in reliance upon the report of KPMG LLP,
independent public accountants, also incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document that we file at the Public Reference Room of the Securities and
Exchange Commission at 450 Fifth Street, NW, Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. You may also inspect our
filings over the Internet at the Securities and Exchange Commission's website
at http://www.sec.gov.

The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus,
and information that we file later with the Securities and Exchange Commission
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the
Securities and Exchange Commission under Sections 13(a), 13(c), 14, or 15(d) of
the Exchange Act until we sell or deregister all of the shares of Class A
common stock offered by this prospectus:

(a) our Annual Report on Form 10-K for the year ended December 31, 1999;

(b) our Current Report on Form 8-K filed February 25, 2000, as amended
by our Form 8-K/A filed on March 15, 2000; and

You may request a copy of these filings at no cost, by visiting our website
at www.modemmedia.com.

53
<PAGE>

[This Page Intentionally Left Blank]
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Modem Media . Poppe Tyson, Inc. and Subsidiaries
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-3
Consolidated Statements of Operations for the years ended December 31,
1997, 1998 and 1999..................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1997, 1998 and 1999.................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7

Modem Media . Poppe Tyson, Inc., Vivid Holdings, Inc. and Vivid
Publishing, Inc.
Introduction............................................................. F-24
Unaudited Pro Forma Combined Balance Sheet as of December 31, 1999....... F-25
Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1999....................................................... F-26
Notes to Unaudited Pro Forma Combined Financial Statements............... F-27
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
Modem Media . Poppe Tyson, Inc.:

We have audited the accompanying consolidated balance sheets of Modem
Media . Poppe Tyson, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1998 and 1999, and the related consolidated statements of
operations, changes in stockholders' equity 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 auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Modem Media . Poppe Tyson,
Inc. and subsidiaries as of December 31, 1998 and 1999, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.

Arthur Andersen LLP

Stamford, Connecticut
February 4, 2000

F-2
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 7,824,000 $ 30,265,000
Short-term investments............................ -- 16,859,000
Accounts receivable, net of bad debt reserve of
$968,000 and $1,151,000, respectively............ 13,619,000 18,090,000
Unbilled revenues................................. 1,261,000 2,066,000
Unbilled charges.................................. 640,000 642,000
Deferred income taxes............................. 484,000 1,004,000
Prepaid expenses and other current assets......... 1,139,000 2,325,000
True North note receivable........................ 4,500,000 --
------------ ------------
Total current assets............................ 29,467,000 71,251,000

Property and equipment:
Leasehold improvements............................ 1,074,000 3,769,000
Computers and software............................ 6,731,000 11,158,000
Furniture and other............................... 2,156,000 4,969,000
------------ ------------
Total property and equipment.................... 9,961,000 19,896,000
Less: accumulated depreciation and amortization.... (3,135,000) (5,704,000)
------------ ------------
Total property and equipment, net............... 6,826,000 14,192,000

Other assets:
Goodwill, net of accumulated amortization of
$3,433,000 and $6,391,000, respectively.......... 33,139,000 55,742,000
Deferred income taxes............................. 229,000 602,000
Other assets...................................... 1,625,000 3,945,000
------------ ------------
Total other assets.............................. 34,993,000 60,289,000
------------ ------------
Total assets.................................... $ 71,286,000 $145,732,000
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 4,522,000 $ 5,346,000
Pre-billed media.................................. 6,914,000 6,639,000
Advance billings.................................. 2,164,000 2,736,000
Deferred revenues................................. 5,484,000 4,125,000
Due to True North................................. 1,797,000 --
Note payable to True North........................ 6,000,000 --
Accrued expenses and other current liabilities.... 8,503,000 14,718,000
------------ ------------
Total current liabilities....................... 35,384,000 33,564,000

Noncurrent liabilities:
Capital lease obligations, less current portion... 323,000 471,000
Other liabilities................................. 19,000 221,000

Commitments and contingencies (see Note 9).........
Stockholders' equity:
Common stock, Class A, $.001 par value--
44,909,539 shares authorized, 4,848,270 and
12,115,970 issued................................ 5,000 12,000
Common stock, Class B, $.001 par value--
11,297,248 and 11,116,326 shares authorized,
issued and outstanding, respectively............. 11,000 11,000
Preferred stock, $.001 par value--5,000,000
shares authorized, none issued and outstanding... -- --
Paid-in capital................................... 47,211,000 121,151,000
Accumulated deficit............................... (11,621,000) (8,604,000)
Treasury stock, 184,834 shares of Class A common
stock, at cost................................... -- (1,118,000)
Accumulated other comprehensive income............ (46,000) 24,000
------------ ------------
Total stockholders' equity...................... 35,560,000 111,476,000
------------ ------------
Total liabilities and stockholders' equity...... $ 71,286,000 $145,732,000
============ ============
</TABLE>

The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.

F-3
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................. $25,497,000 $42,544,000 $74,036,000
Cost of revenues......................... 12,045,000 23,249,000 32,991,000
----------- ----------- -----------
Gross margin............................. 13,452,000 19,295,000 41,045,000
----------- ----------- -----------
Operating expenses:
Sales and marketing.................... 769,000 1,098,000 1,658,000
General and administrative............. 12,118,000 19,750,000 29,683,000
Amortization of goodwill............... 1,666,000 1,768,000 2,959,000
Operating losses of True North Units
Held for Transfer..................... 2,180,000 13,000 --
----------- ----------- -----------
Total operating expenses............. 16,733,000 22,629,000 34,300,000
----------- ----------- -----------
Operating (loss) income.................. (3,281,000) (3,334,000) 6,745,000
Interest (expense) income, net........... (76,000) 29,000 1,975,000
----------- ----------- -----------
(Loss) income before income taxes........ (3,357,000) (3,305,000) 8,720,000
(Benefit) provision for income taxes..... (248,000) (102,000) 5,703,000
----------- ----------- -----------
Net (loss) income........................ $(3,109,000) $(3,203,000) $ 3,017,000
=========== =========== ===========

Net (loss) income per share:
Basic.................................. $ (0.21) $ (0.21) $ 0.14
=========== =========== ===========
Diluted................................ $ (0.21) $ (0.21) $ 0.13
=========== =========== ===========

Weighted-average number of common shares
outstanding:
Basic.................................. 14,520,000 14,930,000 21,563,000
=========== =========== ===========
Diluted................................ 14,520,000 14,930,000 22,958,000
=========== =========== ===========
</TABLE>

The accompanying notes to consolidated financial statements are an integral
part of these statements.

F-4
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
--------------- Paid-in Accumulated Treasury Comprehensive Stockholders'
Class A Class B Capital Deficit Stock Income Equity
------- ------- ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1996, as
previously reported.................. $ 3,000 $ 5,000 $ 43,588,000 $(3,103,000) $ -- $ -- $ 40,493,000
Effect of two-for-one stock split
effective March 1, 2000.............. 2,000 6,000 -- (8,000) -- -- --
------- ------- ------------ ----------- ----------- ------- ------------
Balance as of December 31, 1996....... 5,000 11,000 43,588,000 (3,111,000) -- -- 40,493,000
Comprehensive income:
Net loss............................. -- -- -- (3,109,000) -- -- (3,109,000)
Foreign currency translation
adjustment.......................... -- -- -- -- -- 8,000 8,000
------------
Total comprehensive income (loss).. (3,101,000)
------------
Acquisition of Poppe Tyson Strategic
Interactive Marketing Operations..... -- -- -- (2,980,000) -- (34,000) (3,014,000)
Payment by True North to former Modem
Partnership partners................. -- -- 1,150,000 -- -- -- 1,150,000
Other, net............................ -- -- 90,000 -- -- -- 90,000
------- ------- ------------ ----------- ----------- ------- ------------
Balance as of December 31, 1997....... 5,000 11,000 44,828,000 (9,200,000) -- (26,000) 35,618,000
Comprehensive income:
Net loss............................. -- -- -- (3,203,000) -- -- (3,203,000)
Foreign currency translation
adjustment.......................... -- -- -- -- -- (20,000) (20,000)
------------
Total comprehensive income (loss).. (3,223,000)
------------
Forgiveness of intercompany
borrowings........................... -- -- 5,763,000 -- -- -- 5,763,000
Sale to True North of True North Units
Held for Transfer.................... -- -- (7,444,000) -- -- -- (7,444,000)
Acquisition of fixed assets from True
North in connection with the
Combination.......................... -- -- 1,624,000 -- -- -- 1,624,000
Payment by True North to former Modem
Partnership partners................. -- -- 3,263,000 -- -- -- 3,263,000
Other, net............................ -- -- (823,000) 782,000 -- -- (41,000)
------- ------- ------------ ----------- ----------- ------- ------------
Balance as of December 31, 1998....... 5,000 11,000 47,211,000 (11,621,000) -- (46,000) 35,560,000
Comprehensive income:
Net income........................... -- -- -- 3,017,000 -- -- 3,017,000
Foreign currency translation
adjustment.......................... -- -- -- -- -- 70,000 70,000
------------
Total comprehensive income......... 3,087,000
------------
Initial public offering, net of
offering costs....................... 6,000 -- 42,045,000 -- -- -- 42,051,000
Exercise of stock options............. 1,000 -- 3,704,000 -- -- -- 3,705,000
Tax benefit from the exercise of stock
options.............................. -- -- 5,728,000 -- -- -- 5,728,000
Shares issued under employee stock
purchase plan........................ -- -- 956,000 -- -- -- 956,000
Purchases of treasury stock........... -- -- -- -- (1,118,000) -- (1,118,000)
Acquisition of MEX Multimedia Experts
GmbH................................. -- -- 2,400,000 -- -- -- 2,400,000
Payment by True North to former Modem
Partnership partners................. -- -- 18,518,000 -- -- -- 18,518,000
Other, net............................ -- -- 589,000 -- -- -- 589,000
------- ------- ------------ ----------- ----------- ------- ------------
Balance as of December 31, 1999....... $12,000 $11,000 $121,151,000 $(8,604,000) $(1,118,000) $24,000 $111,476,000
======= ======= ============ =========== =========== ======= ============
</TABLE>

The accompanying notes to consolidated financial statements are an integral
part of these statements.

F-5
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income.................... $(3,109,000) $(3,203,000) $ 3,017,000
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation....................... 1,189,000 1,846,000 3,463,000
Amortization of goodwill........... 1,666,000 1,768,000 2,959,000
Tax benefit from the exercise of
stock options..................... -- -- 5,703,000
Provision for doubtful accounts.... 517,000 660,000 316,000
Loss on disposal of equipment...... 98,000 155,000 268,000
Changes in assets and liabilities:
Accounts receivable.............. (568,000) (6,865,000) (4,432,000)
Unbilled revenues................ (454,000) (217,000) (179,000)
Unbilled charges................. 38,000 18,000 53,000
Prepaid expenses and other
current assets.................. (125,000) (798,000) (1,157,000)
Accounts payable, accrued
expenses and other current
liabilities..................... 1,106,000 7,839,000 6,405,000
Pre-billed media................. 2,543,000 3,028,000 (260,000)
Advance billings................. 770,000 1,000 565,000
Deferred revenues................ 1,442,000 3,868,000 (1,364,000)
Deferred income taxes............ (413,000) (326,000) (902,000)
Other, net....................... (22,000) (1,586,000) (3,276,000)
Net assets of True North Units
Held for Transfer............... 1,718,000 129,000 --
----------- ----------- ------------
Net cash provided by operating
activities.................... 6,396,000 6,317,000 11,179,000

Cash flows from investing activities:
Purchase of property and equipment... (1,324,000) (4,133,000) (10,403,000)
Purchase of short-term investments... -- -- (16,859,000)
Acquisitions, net of cash acquired... -- -- (4,624,000)
Other, net........................... 147,000 -- 115,000
----------- ----------- ------------
Net cash used in investing
activities.................... (1,177,000) (4,133,000) (31,771,000)

Cash flows from financing activities:
Proceeds from initial public
offering............................ -- -- 43,459,000
Funding from (to) True North......... 729,000 (1,015,000) (3,302,000)
Purchases of treasury stock.......... -- -- (1,118,000)
Principal payments made under capital
lease obligations................... (143,000) (361,000) (392,000)
Exercises of stock options........... -- -- 4,661,000
Other, net........................... (1,475,000) (40,000) (339,000)
----------- ----------- ------------
Net cash (used in) provided by
financing activities.......... (889,000) (1,416,000) 42,969,000
----------- ----------- ------------
Effect of exchange rates on cash and
cash equivalents...................... -- -- 64,000
----------- ----------- ------------
Net increase in cash and cash
equivalents........................... 4,330,000 768,000 22,441,000
Cash and cash equivalents, beginning of
the year.............................. 2,726,000 7,056,000 7,824,000
----------- ----------- ------------
Cash and cash equivalents, end of the
year.................................. $ 7,056,000 $ 7,824,000 $ 30,265,000
=========== =========== ============
</TABLE>

The accompanying notes to consolidated financial statements are an integral
part of these statements.

F-6
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Summary of Significant Accounting Policies

Nature of Operations--Modem Media . Poppe Tyson, Inc. ("Modem Media" or the
"Company") is a subsidiary of True North Communications Inc. ("True North")
and a leading Internet professional services firm focused on conceiving,
developing and distributing customer-focused Internet solutions for Global 500
and select online businesses. Headquartered in Norwalk, CT, the Company has
offices in New York City, San Francisco, Toronto, London, Paris, Munich,
Tokyo, Hong Kong, Singapore and Sao Paolo.

Principles of Consolidation--The accompanying consolidated financial
statements include all of the accounts of the Company and its subsidiaries.
All significant intercompany transactions have been eliminated in
consolidation.

Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the dates of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from those estimates.

Reclassifications--Certain reclassifications have been made in the prior
period consolidated financial statements to conform to the current period
presentation.

Revenue Recognition and Billing--A majority of the Company's revenues is
derived from fixed-fee assignments. Revenues are recognized as services are
rendered. Unbilled revenues represent labor costs incurred and estimated
earnings in excess of billings. Unbilled charges represent production and
other client reimbursable out-of-pocket costs in excess of billings. Revenue
is reported net of such reimbursable costs. Pre-billed media represents
amounts billed to customers for media placement in advance of the
advertisements being placed. Advance billings represent billings of production
and other client reimbursable out-of-pocket costs in excess of those incurred.
Amounts billed to clients in excess of revenues recognized to date are
classified as deferred revenues. The Company reassesses its estimated costs on
each project periodically and losses are accrued, on a project-by-project
basis, to the extent that costs incurred and anticipated costs to complete
projects exceed anticipated billings. Provisions for estimated losses on
uncompleted projects are made in the period in which such losses are
determinable.

Business Combinations--Business combinations that have been accounted for
under the purchase method of accounting include the results of operations of
the acquired businesses from the dates of their respective acquisition. Net
assets of acquired companies are recorded at their fair value to the Company
at the date of acquisition.

Business Concentrations and Credit Risk--The Company's services have been
provided to a limited number of clients located worldwide in a variety of
industries. The Company had revenues from one client representing 36.2% of
total revenues during the year ended December 31, 1997, two clients
representing 20.7% and 12.8% of total revenues during the year ended December
31, 1998, and one client representing 13.8% of total revenues during the year
ended December 31, 1999. The Company generally does not require its clients to
provide collateral.

The Company is subject to a concentration of credit risk with respect to
its accounts receivable. The Company had four clients accounting for 19.3%,
11.8%, 11.4% and 10.4% of total gross accounts receivable as of December 31,
1998 and one client accounting for 18.7% of total gross accounts receivable as
of December 31, 1999.

F-7
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income Taxes--The Company accounts for income taxes under the liability
method in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 109, Accounting for Income Taxes. In accordance with such standard, the
provision for income taxes includes deferred income taxes resulting from items
reported in different periods for income tax and financial statement purposes.
Deferred income tax assets and liabilities represent the expected future tax
consequences of the differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. The
effects of changes in tax rates on deferred income tax assets and liabilities
are recognized in the period that includes the enactment date.

Cash, Cash Equivalents and Short-Term Investments--The Company considers
all highly liquid investments with a maturity of three months or less at the
time of purchase to be cash equivalents. All investments with maturities
greater than three months at the time of purchase are accounted for under SFAS
No. 115, Accounting for Certain Investments in Debt and Equity Securities. As
of December 31, 1999, all of the Company's short-term investments have been
classified as held-to-maturity securities and are carried at amortized cost,
which approximates market, since management has the positive intent and
ability to hold such investments to maturity. Short-term investments
principally consist of commercial paper maturing less than six months from the
date of purchase.

Property and Equipment--Property and equipment are stated at cost and are
depreciated, principally using the straight-line method, over their estimated
useful lives of three to five years for computers and software, and five to
seven years for furniture and other. Purchased software and third-party costs
incurred to develop software for internal use are capitalized and amortized
principally over three years. Leasehold improvements are amortized over the
lesser of their estimated useful lives or the remaining lease term.

Goodwill--Goodwill represents acquisition costs in excess of the fair value
of tangible net assets acquired and is amortized using the straight-line
method over periods of five to twenty years. Carrying values are periodically
reviewed for impairment and adjusted, if necessary, based upon current facts
and circumstances and management's estimates of the undiscounted future cash
flows from the related businesses.

Long-Lived Assets--In accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of, the
Company reviews its recorded long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable and provides currently for any identified impairments.

Fair Value of Financial Instruments--The carrying values of the Company's
assets and liabilities approximate fair value because of the short maturities
of these financial instruments.

Net (Loss) Income Per Share--In accordance with SFAS No. 128, Earnings Per
Share, basic net (loss) income per share is computed using the weighted-
average number of common shares outstanding during each period. Diluted net
(loss) income per share gives effect to all potentially dilutive securities
that were outstanding during each period. The Company had net losses for the
years ended December 31, 1997 and 1998; as a result, none of the options
outstanding during those periods was included in the computations of diluted
net loss per share since they were antidilutive.

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Basic weighted-average number of common
shares outstanding....................... 14,520,000 14,930,000 21,563,000
Potentially dilutive effect of stock
options and warrants..................... -- -- 1,395,000
---------- ---------- ----------
Diluted weighted-average number of common
shares outstanding....................... 14,520,000 14,930,000 22,958,000
========== ========== ==========
</TABLE>

F-8
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

All historical weighted-average share and per-share amounts have been
restated to reflect the stock splits effected by the Company (see Note 4).

Initial Public Offering--In conjunction with the Company's initial public
offering of securities in February 1999 (see Note 4), the Company incurred
approximately $1,408,000 in offering-related costs through December 31, 1998
that were deferred until the consummation of such offering at which time they
were charged against paid-in capital.

Foreign Currency Translation--The Company's financial statements were
prepared in accordance with the requirements of SFAS No. 52, Foreign Currency
Translation. Under this method, net foreign currency transaction gains and
losses are included in the accompanying consolidated statements of operations.
Such gains and losses were immaterial for each of the years ended December 31,
1997, 1998 and 1999.

Comprehensive Income--The Company reflects its comprehensive income, such
as unrealized gains and losses on the Company's foreign currency translation
adjustments, as a separate component of stockholders' equity as required by
SFAS No. 130, Reporting Comprehensive Income. The currency translation
adjustments are not adjusted for income taxes as they relate to indefinite
investments in international subsidiaries. There were no other items of
comprehensive income during the years ended December 31, 1997, 1998 or 1999.

Recently Issued Accounting Pronouncements--In June 1999, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB Statement No. 133. The Statement defers for one year the effective
date of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, which was issued in June 1998 and establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. SFAS No. 133 will now apply to all fiscal quarters of all fiscal years
beginning after June 15, 2000. Management believes that the implementation of
SFAS No. 133 will not have a material impact on Modem Media's results of
operations.

2. Acquisitions

In June 1999, the Company acquired 100% of the outstanding capital stock of
a builder and marketer of e-businesses in Tokyo, Japan ("Modem Media Japan")
for approximately $1,400,000 in cash. Pursuant to the acquisition agreement,
the Company is obligated to make additional payments of up to approximately
$3,150,000 if the acquired entity's operating results exceed certain targeted
levels annually through 2002. Additional payments will be allocated to the
cost in excess of the fair value of tangible net assets acquired and amortized
by the Company over the remainder of the original amortization period. At the
Company's discretion, such payments may be comprised of cash and/or common
stock of the Company. The acquisition has been accounted for under the
purchase method of accounting and, accordingly, the operating results of Modem
Media Japan have been included in the Company's consolidated financial
statements from the date of its acquisition. The excess of purchase price over
the net assets acquired of approximately $1,950,000 is reflected in the
accompanying consolidated balance sheet as of December 31, 1999 and is being
amortized over a ten-year period. As a result of Modem Media Japan's operating
results meeting the aforementioned targeted levels during 1999, the Company
will make an additional payment of $274,000 to the former owners of Modem
Media Japan. Such amount was accrued as of December 31, 1999 and will be
amortized over the remainder of the original amortization period.

In October 1999, the Company acquired 100% of the outstanding capital stock
of MEX Multimedia Experts GmbH ("MEX"), a developer of interactive business
solutions in Munich, Germany, for approximately

F-9
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

$5,400,000, which was comprised of $3,000,000 in cash and approximately
$2,400,000 in Class A common stock of the Company. The acquisition was
accounted for under the purchase method of accounting and, accordingly, the
operating results of MEX have been included in the Company's consolidated
financial statements from the date of its acquisition. The excess of purchase
price over the net assets acquired of approximately $5,600,000 is being
amortized over a ten-year period.

In November 1999, the Company entered into an agreement with certain
employees ("Members") to form CentrPort, LLC ("CentrPort"), a limited
liability company focused on the development of intelligent marketing
platforms to build and enhance customer relationships across multiple
communication channels. The Company and the Members own 50.5% and 49.5% of the
common interests of CentrPort, respectively. In addition, the Company has
contributed $1,500,000 in exchange for 100% of the preferred interests of
CentrPort. The Company may contribute additional funds to CentrPort pursuant
to the agreement. Upon the occurrence of certain events, the Company may have
the option to purchase the Members' interest for a purchase price indexed to
the value of the Company's Class A common stock. The Company is managing the
business and affairs of CentrPort and the operating results of CentrPort have
been included in the Company's consolidated financial statements from the date
of its formation.

Effective October 1, 1998, the Company acquired the strategic interactive
marketing operations of Poppe Tyson, Inc. (the "Poppe Tyson Strategic
Interactive Marketing Operations") from True North in exchange for (i) the
Company's non-strategic digital interactive marketing operations and (ii) an
aggregate of 1,619,028 shares of Class B common stock (the "Combination"). In
conjunction with the Combination, True North forgave $5,763,000 of
intercompany borrowings and transferred $1,624,000 of fixed assets to the
Company. The historical financial results of the Poppe Tyson Strategic
Interactive Marketing Operations have been prepared on a carved-out basis, and
are included in the consolidated financial statements of the Company from
December 31, 1997, the date of the merger of Bozell, Jacobs, Kenyon &
Eckhardt, Inc. ("Bozell"), the former parent of Poppe Tyson, Inc., with True
North, and therefore the date on which the Company and the Poppe Tyson
Strategic Interactive Marketing Operations came under common control. Because
the Combination occurred among True North and majority-owned, controlled
subsidiaries, the transaction has been recorded at historical cost. The
accumulated deficit arising from the carved-out operating results of the Poppe
Tyson Strategic Interactive Marketing Operations for the period from December
31, 1997 to the date of its acquisition by the Company is reflected as a
reduction in paid-in capital. The pre-tax losses of the non-strategic digital
interactive marketing operations through the date of sale to True North have
been presented as one line, "Operating losses of True North Units Held for
Transfer," in the accompanying consolidated statements of operations in a
manner similar to that of entities held for sale. All adjustments necessary
for the fair presentation of the consolidated financial statements related to
the Poppe Tyson Strategic Interactive Marketing Operations are reflected
herein. The Poppe Tyson Strategic Interactive Marketing Operations is a
predecessor entity of the Company, and its financial statements as of and for
the year ended December 31, 1997 are incorporated by reference herein.

The following information reflects pro forma statement of operations data
for the year ended December 31, 1997 assuming that the acquisition of the
Poppe Tyson Strategic Interactive Marketing Operations was consummated on
January 1, 1997.

<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
<S> <C>
Revenues.................................................... $29,422,000
Loss before income taxes.................................... (6,005,000)
Net loss.................................................... (5,609,000)
Basic and diluted net loss per common share................. (0.35)
</TABLE>

F-10
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The pro forma statement of operations data above give effect to the
issuance of shares of Class B common stock of the Company issued in
conjunction with the Combination. These pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of the
results of operations that would have actually resulted had the acquisition of
the Poppe Tyson Strategic Interactive Marketing Operations occurred on January
1, 1997, or which may result in the future.

On December 31, 1996, True North, through the Company, acquired a 64%
interest in Modem Media Advertising Limited Partnership (the "Modem
Partnership"). In addition to the consideration initially paid, True North was
obligated to make cash payments of up to $19,000,000 (reduced by the payments
discussed below) and issue $4,000,000 in shares of True North common stock to
the former owners of the Modem Partnership upon completion of an initial
public offering of the Company's common stock and/or certain other events. The
acquisition agreement also required additional payments contingent on future
earnings to be made in the event that an initial public offering had not
occurred, which payments would thereby reduce the aforementioned $19,000,000
obligation. Pursuant to the agreement, payments aggregating $1,150,000 and
$3,263,000 were made to the former owners in February 1997 and May 1998,
respectively, resulting in corresponding increases in goodwill on the books of
the Company. On February 10, 1999, the Company completed an initial public
offering of its common stock. As a result, True North paid $14,587,000 in cash
and issued $3,931,000 in True North common stock to the former owners of the
Modem Partnership, thereby resulting in corresponding increases in goodwill on
the books of the Company. Such amounts are being amortized over the remainder
of the original amortization period.

3. Debt

Restrictions on Indebtedness--Pursuant to certain agreements between True
North and its lenders, the Company is subject to certain limitations on
indebtedness. Such limitations could adversely affect the Company's ability to
secure debt financing in the future. Based on its internal projections and
business plans, management believes that cash flows from operations, together
with cash on-hand and short-term investments, will provide adequate funds to
support ongoing operations.

Interest Expense--The Company incurred interest expense on all borrowings,
including those from related parties, of $119,000, $185,000 and $134,000 for
the years ended December 31, 1997, 1998 and 1999, respectively. Related party
interest expense in the respective totals above are $46,000, $42,000 and
$63,000.

4. Equity

Change in Authorized Shares/Stock Splits--On January 11, 1999, the
Company's Board of Directors approved an amendment to the Company's
Certificate of Incorporation to provide for the authorization of an aggregate
of 39,351,376 shares of Class A common stock and 5,648,624 shares of Class B
common stock. On that date, the Board of Directors also approved a 0.95-for-1
reverse split of both classes of the Company's outstanding common stock
effective upon completion of the acquisition of the Poppe Tyson Strategic
Interactive Marketing Operations, which occurred on February 3, 1999 (see Note
2).

On December 17, 1999, the Company's Board of Directors approved another
amendment to the Company's Certificate of Incorporation to provide for the
authorization of an aggregate of 44,909,539 shares of Class A common stock and
11,116,326 shares of Class B common stock. On that date, the Board of
Directors also approved a 2-for-1 stock split of both classes of the Company's
outstanding common stock to be paid in the form of a stock dividend to
shareholders of record at the close of trading on February 16, 2000.

All historical share and per-share amounts have been restated to reflect
the changes in authorized shares and stock splits.

Initial Public Offering--On February 10, 1999, the Company completed an
initial public offering of 5,980,000 shares of its Class A common stock at an
initial public offering price of $8.00 per share. Total net

F-11
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

proceeds from the offering were approximately $42,051,000. The Company used
$6,000,000 of these proceeds to settle an intercompany note payable to True
North, and approximately $21,200,000 to acquire and fund the operations of
complementary businesses in Tokyo, Munich, Paris and San Francisco (see Notes
2 and 16). The Company expects to use the remaining net proceeds for general
corporate purposes, strategic initiatives, additional geographic expansion and
the funding of certain international operations that are not expected to be
self-sufficient in the near-term. Pending the use of the net proceeds for the
above purposes, the Company has invested such funds in short-term, interest-
bearing, investment grade obligations that are reflected as cash equivalents
and short-term investments in the accompanying consolidated balance sheet as
of December 31, 1999.

Stockholders and Registration Rights Agreements--In May 1999, the Company
and True North entered into a stockholders' agreement ("Stockholders'
Agreement") which stipulates, among other things, that upon the earlier of (i)
the date True North and its affiliates no longer own at least 35% of the
outstanding capital stock of the Company or (ii) June 30, 2000, True North and
its affiliates will convert all of their shares of Class B common stock of the
Company into shares of Class A common stock of the Company. On August 1, 1999,
as part of the Stockholders' Agreement, the Company and True North entered
into a registration rights agreement that contains provisions granting the
holders of Class B common stock, and certain holders of Class A common stock,
the right to participate in certain registrations of the Company's common
stock, subject to limitations outlined therein. In addition, the agreement
also provides the holders of Class B common stock of the Company the right to
initiate the registration of their securities, subject to certain timing and
other limitations.

Warrants--On August 9, 1999, the Company entered into an agreement to
provide $12,000,000 of services to General Electric Company ("GE") through
September 30, 2000. If GE fails to meet its obligation to purchase such
services prior to September 30, 2000, GE will make a cash payment to the
Company equal to the difference between the $12,000,000 commitment and the
actual amount of services purchased during such period. In conjunction with
GE's commitment to purchase the aforementioned services, the Company granted
General Electric Capital Corporation a warrant to purchase 190,000 shares of
the Company's Class A common stock at $12.16 per share, the average of the
high and low trading prices during the five trading days prior to the grant
date. The warrants vested immediately and expire on August 8, 2004. The fair
value of these warrants, as determined by independent appraisal, will result
in a non-cash charge of approximately $587,000, which is being reflected as a
reduction of revenues ratably as services are provided over the length of the
agreement. Revenues from GE for the year ended December 31, 1999 have been
reduced by a non-cash charge of approximately $234,000 in the accompanying
consolidated statement of operations.

Common Stock--The shares of Class A common stock and Class B common stock
are identical in all respects, except for voting rights and certain conversion
rights as described below.

Each outstanding share of Class A common stock is entitled to one vote on
all matters submitted to a vote of the Company's stockholders, including the
election of directors, and each share of Class B common stock is entitled to
five votes on each such matter. True North owns, directly or indirectly, all
of the outstanding shares of Class B common stock. Except as required by
applicable law, holders of Class A common stock and Class B common stock vote
together as a single class on all matters. There is no cumulative voting in
the election of directors.

For so long as there are any shares of Class B common stock outstanding,
any action that may be taken at a meeting of the stockholders may be taken by
written consent in lieu of a meeting if the Company receives consents signed
by stockholders having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present and voted. This could permit the holders of Class B common
stock to take action regarding certain matters without providing other
stockholders the opportunity to voice dissenting views or raise other matters.
The right to take such action by written consent of stockholders will expire
when there are no longer any shares of Class B common stock outstanding.

F-12
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Holders of Class A common stock and Class B common stock are entitled to
receive dividends at the same rate if and when such dividends are declared by
the Company's Board of Directors out of assets legally available therefor
after payment of dividends required to be paid on shares of preferred stock,
if any.

In the case of dividends or distributions payable in Class A common stock
or Class B common stock, only shares of Class A common stock will be
distributed with respect to the Class A common stock and only shares of Class
B common stock will be distributed with respect to the Class B common stock.
In the case of dividends or other distributions consisting of other of the
Company's voting shares, the Company will declare and pay such dividends in
two separate classes, identical in all respects except that the voting rights
of each such security paid to the holders of the Class A common stock shall be
one-fifth of the voting rights of each such security paid to the holders of
Class B common stock. In the case of dividends or other distributions
consisting of non-voting securities convertible into, or exchangeable for, the
Company's voting securities, the Company will provide that such convertible or
exchangeable securities and the underlying securities be identical in all
respects, except that the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of the Class A common
stock shall be one-fifth of the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of Class B common
stock, and such underlying securities paid to the holders of Class B common
stock shall convert into the security paid to the holders of the Class A
common stock upon the same terms and conditions applicable to the conversion
of Class B common stock into Class A common stock.

Neither the Class A common stock nor the Class B common stock may be
subdivided or combined in any manner unless the other class is subdivided or
combined in the same proportion.

The shares of Class A common stock are not convertible. Each share of Class
B common stock is convertible into one share of Class A common stock at any
time at the option of the holder. Each share of Class B common stock will also
automatically convert into one share of Class A common stock upon the sale or
transfer of such share of Class B common stock to any person other than a
parent corporation, subsidiary or other related party of such holder or other
qualified recipient, or upon the occurrence of certain other events. The
holders of Class B common stock shall have, upon conversion of their shares of
Class B common stock into shares of Class A common stock, one vote per share
of Class A common stock held.

In the event of any dissolution, liquidation, or winding up of the affairs
of the Company, whether voluntary or involuntary, after payment of the debts
and other liabilities of the Company and making provision for the holders of
preferred stock, if any, the remaining assets of the Company will be
distributed ratably among the holders of the Class A common stock and the
Class B common stock, treated as a single class.

Upon a merger, combination, or other similar transaction in which shares of
common stock are exchanged for or changed into other stock or securities, cash
and/or any other property, holders of the Class A common stock and Class B
common stock will be entitled to receive an equal per share amount of stock,
securities, cash, and/or any other property, as the case may be, into which or
for which each share of any other class of common stock is exchanged or
changed; provided that in any transaction in which shares of capital stock are
distributed, such shares so exchanged for or changed into may differ as to
voting rights and certain conversion rights to the extent, and only to the
extent, that the voting rights and certain conversion rights of Class A common
stock and Class B common stock differ at that time.

The holders of the Class A common stock and Class B common stock are not
entitled to preemptive rights. There are no redemption provisions or sinking
fund provisions applicable to the Class A common stock or the Class B common
stock. All shares of Class A common stock and Class B common stock outstanding
are fully paid and nonassessable.

Preferred Stock--Preferred stock may be issued, from time-to-time, pursuant
to a resolution by the Company's Board of Directors that will set forth the
voting powers and other pertinent rights of each series.

F-13
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. Stock Purchase Plan

In February 1999, the Company's Board of Directors adopted the 1999
Employee Stock Purchase Plan (the "Purchase Plan") under which a total of
1,900,000 shares of Class A common stock have been reserved for issuance. The
Purchase Plan, which is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code, provides for
consecutive, overlapping 24-month offering periods. Each offering period
contains four six-month purchase periods. Offering periods begin on the first
trading day on or after February 15 and August 15 of every year and terminate
twenty-four months later. Employees are eligible to participate if they are
employed by the Company or a subsidiary of the Company designated by the Board
for at least 20 hours per week and for more than five months in any calendar
year. The Purchase Plan permits eligible employees to purchase Class A common
stock through payroll deductions, which may not exceed 15% of an employee's
compensation, subject to certain limitations.

Each participant will be granted an option to purchase stock on the first
day of each of the six-month purchase periods and such option will be
automatically exercised on the last day of each such purchase period. The
purchase price of each share of Class A common stock under the Purchase Plan
will be equal to 85% of the lesser of the fair market value per share of Class
A common stock on the starting date of that offering period or on the date of
the purchase. Employees may modify or end their participation in the offering
at any time during the offering period or on the date of purchase, subject to
certain limitations. Participation ends automatically on termination of
employment with Modem Media. The purchase plan will terminate in 2009 unless
sooner terminated by Modem Media's Board of Directors.

6. Stock-Based Compensation

The Company has established various stock option plans for its officers,
directors, key employees and consultants as described below.

1999 Stock Incentive Plan--During 1999, the Company adopted a stock
incentive plan pursuant to which a total of 3,000,000 shares of Class A common
stock have been reserved for issuance. Pursuant to the stock incentive plan,
the Company may grant stock options, stock appreciation rights, restricted
stock, merit awards, performance awards and other stock-based awards to the
Company's employees, directors and consultants. The plan is administered by
the Board of Directors or a committee of two or more outside directors. The
committee interprets and construes the provisions of the plan, adopts rules
for administering the plan and determines grants of equity awards under the
plan. As of December 31, 1999, no stock options were granted under this plan.

1997 Stock Option Plan--During 1997, the Company established a stock option
plan pursuant to which a total of 6,080,000 shares of Class A common stock
have been reserved for issuance. Pursuant to the stock option plan, the
Company may grant stock options and stock purchase rights to the Company's
employees, officers, directors and consultants. The Board of Directors, or a
committee to whom the Board of Directors has delegated authority, selects the
individuals to whom options and stock purchase rights are granted, interprets
and adopts rules for the operation of the stock option plan and specifies the
vesting, exercise price and other terms of options and stock purchase rights.
The maximum term of an incentive stock option granted under the Plan is
generally limited to ten years. The exercise price of incentive stock options
granted under the stock option plan must be at least equal to the fair market
value of the Class A common stock of the Company on the date of grant.

In connection with the transfer to True North of the non-strategic digital
interactive marketing operations by the Company, True North agreed to satisfy
options to purchase up to an aggregate of 281,010 shares of the Company's
Class A common stock held by employees of such operations, as well as options
to purchase an aggregate of 298,022 shares of the Company's Class A common
stock held by former employees of the Poppe Tyson Strategic Interactive
Marketing Operations. As of December 31, 1999, options to purchase up to
229,690 shares of Class A common stock to be satisfied by True North remained
outstanding. Upon the exercise of such options, the exercise price will be
paid to True North and True North will surrender an equivalent number of
shares of common stock to the Company.

F-14
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Modem Media Advertising Limited Partnership 1996 Option Plan--The Modem
Partnership established an option plan pursuant to which units ("Units")
representing assignments of beneficial ownership of the Modem Partnership were
reserved for issuance. The Modem Partnership ceased to have its own separate
existence prior to the Company's initial public offering in February 1999 and
the terms and the conditions of the option plan were assumed by the Company.
Pursuant to the terms of the option plan, Units acquired under the option plan
were converted into shares of Class A common stock and options to acquire
Units were converted into options to acquire shares of Class A common stock.
Options to purchase 690,492 shares of Class A common stock, which vested
immediately and expire on September 30, 2006, were issued under this plan at
an exercise price of $0.32 per share. As of December 31, 1999, all available
options had been granted under the option plan and no further grants will be
made. The plan is administered by the Board of Directors and the Compensation
Committee of the Board.

The Company follows the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, and applies Accounting Principles
Board Opinion ("APB") No. 25 and related interpretations in accounting for its
stock option plans. Under APB No. 25, because the exercise prices of the
Company's employee stock options are equal to the market prices of the
underlying common stock on the date of grant, no compensation expense is
recognized. If compensation expense for stock options awarded under the
Company's plans had been determined in accordance with SFAS No. 123, the
Company's pro forma net (loss) income and pro forma net (loss) income per
share would have been as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net (loss) income:
As reported..................... $(3,109,000) $(3,203,000) $ 3,017,000
Pro forma....................... (4,077,000) (5,324,000) (3,176,000)
Basic net (loss) income per share:
As reported..................... $ (0.21) $ (0.21) $ 0.14
Pro forma....................... (0.28) (0.36) (0.15)
Diluted net (loss) income per
share:
As reported..................... $ (0.21) $ (0.21) $ 0.13
Pro forma....................... (0.28) (0.36) (0.15)
</TABLE>

The effect of applying SFAS No. 123 on the pro forma net (loss) income per
share disclosures is not indicative of future amounts because it does not take
option grants to be made in future years into consideration.

The following is a summary of the activity under the Company's stock option
plans for each annual period presented:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1997 1998 1999
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the
beginning of the year.. 711,216 $0.48 1,936,440 $3.85 4,080,348 $ 4.74
Granted................. 1,388,374 5.79 2,327,856 5.55 3,118,042 15.67
Exercised............... 15,428 5.79 1,550 2.47 978,374 4.76
Forfeited............... 147,722 5.69 182,398 5.57 433,788 6.15
--------- --------- ---------
Outstanding at the end
of the year............ 1,936,440 4,080,348 5,786,228
========= ========= =========
Exercisable at the end
of the year............ 945,848 1,632,184 1,643,748
========= ========= =========
Weighted average fair
value of options
granted................ $4.19 $5.20 $11.02
</TABLE>

F-15
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions:

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- -------- ---------
<S> <C> <C> <C>
Risk-free interest rate......................... 6.75% 4.67% 5.89%
Expected life................................... 9 years 10 years 4.3 years
Expected volatility............................. 52.77% 111.47% 88.49%
Expected dividend yield......................... -- -- --
</TABLE>

The following table summarizes information regarding the Company's stock
options outstanding and exercisable as of December 31, 1999:

<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
----------------------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Remaining Exercise Exercise
Exercise Price Shares Contractual Life Price Shares Price
-------------- --------- ---------------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.32.................... 438,400 6.8 years $0.32 438,400 $0.32
$5.53-$6.80.............. 2,548,624 8.1 years 5.66 966,348 5.62
$9.78-$13.38............. 1,516,204 9.4 years 10.68 112,000 11.44
$15.25-$18.88............ 343,000 9.6 years 17.97 127,000 17.91
$21.41................... 500,000 9.8 years 21.41 -- --
$29.82-$34.38............ 440,000 9.9 years 30.13 -- --
--------- ---------
5,786,228 1,643,748
========= =========
</TABLE>

7. Related Party Transactions

In the normal course of business, the Company and True North have from
time-to-time entered into various business transactions and agreements, and
may enter into additional transactions in the future. The following is a
summary of each of the material agreements between the Company and True North.

Administrative Services Agreement--Under an Administrative Services
Agreement, True North provides administrative functions and other services to
the Company, including tax preparation, insurance and treasury consulting.
During the period in which True North performs administrative functions for
the Company, expenses associated with such functions will be allocated to the
Company based on agreed upon rates. The Company may terminate this agreement
at any time upon 90 days' prior written notice and True North may terminate
the agreement at any time, but must give 180 days' written notice of such
intent to terminate.

Intercompany Credit Arrangements--The Company and True North are parties to
intercompany credit agreements. In August 1998, True North extended a credit
facility to the Company allowing for revolving borrowings in the amount of up
to $3,000,000 to be outstanding at any given time at an interest rate equal to
True North's cost of borrowing plus two percent. In addition, True North has
agreed at its discretion to provide guarantees for Modem Media's borrowings in
exchange for a fee of 0.5% per annum on the amount guaranteed. The credit
facility with True North expires in February 2001 or upon 60 days advance
notice if True North's voting control in the Company falls below 50% of total
voting power. In May 1998, the Company agreed to provide advances to True
North from time-to-time upon True North's request and subject to the Company's
discretion.

F-16
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Sublease with Bozell--The Company entered into a sublease with Bozell
pursuant to which the Company leases office space in New York City. The rent
per square foot under the sublease agreement is based on the average monthly
rent per square foot and other related costs under Bozell's underlying lease.

Tax Matters Agreement--In connection with the Combination, the Company and
True North entered into an agreement providing for certain unitary state tax-
sharing arrangements.

Parent Company Allocations--True North charges each of its operating units
for general corporate expenses incurred at the parent company level, including
costs to administer employee benefit plans; legal, accounting and treasury
services; use of office facilities; and other services for certain operations.
The amount of the charge is primarily based on budgeted revenue. The Company
believes that the method used to allocate these expenses is reasonable. These
charges amounted to approximately $291,000 and $308,000 for the years ended
December 31, 1997 and 1998, respectively, and are included in office and
general expenses in the consolidated statements of operations. True North
ceased charging allocations to the Company as of June 30, 1998, because the
Company has taken on responsibility for the majority of the functions that
generate the aforementioned corporate expenses.

As a result of the above agreements and other related transactions, the
accompanying consolidated financial statements reflect the following balances:

True North Note Receivable--On May 26, 1998, the Company entered into an
agreement to loan up to $3,000,000 to True North under a demand note facility.
Such agreement was amended on November 24, 1998 to increase the availability
under such facility to $10,000,000. The Company received repayments from True
North under such facility from time-to-time, on demand. The loan bore interest
at 5.75% per annum, payable quarterly, unless the parties agreed upon other
arrangements. The outstanding balance under this facility was $4,500,000 as of
December 31, 1998 and is reflected as "True North note receivable" in the
accompanying consolidated balance sheet. In February 1999, True North repaid
all amounts outstanding under this note.

Due to True North--On December 31, 1996, the Company entered into a one-
year agreement with True North, whereby True North provided the Company with a
credit facility. The agreement has been extended indefinitely beyond the
initial one-year term by mutual consent and under the terms outlined
hereafter. The Company receives advances from True North under the facility
from time-to-time, as requested. Prior to 1998, outstanding borrowings bore
interest at LIBOR plus .75%, which was due monthly. In 1998, True North ceased
charging interest to the Company under this facility. The outstanding balance
as of December 31, 1998 was $1,797,000 and is reflected as "Due to True North"
in the accompanying consolidated balance sheet. In April 1999, the Company
repaid all amounts outstanding under this facility.

Note Payable to True North--The Company had a $6,000,000 intercompany note
payable to True North due upon completion of an initial public offering of the
Company's common stock. This $6,000,000 note payable was repaid to True North
in February 1999, upon completion of the Company's initial public offering
(see Note 4). Accordingly, such amount is reflected as a current liability in
the accompanying consolidated balance sheet as of December 31, 1998.

The Company believes that all of the transactions set forth above were made
on terms equivalent to those that the Company could have obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including
a majority of the independent and disinterested directors of the Board, and
will be on terms equivalent to those that the Company could obtain from
unaffiliated third parties.

F-17
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. Employee Benefit Plans

The Company maintains a profit-sharing plan with a 401(k) feature for the
benefit of its eligible employees. There is no minimum length of service
required to participate in the plan and employees of the Company are eligible
to begin participation on designated quarterly enrollment dates provided that
they have reached 21 years of age. The Company makes annual matching and/or
profit-sharing contributions to the plan at its discretion. In addition,
certain employees of the Company have participated in other similar defined
contribution plans. Such employees subsequently became participants of the
aforementioned profit-sharing plan. The aggregate cost of contributions made
by the Company to all employee benefit plans was $40,000, $217,000 and
$389,000 during the years ended December 31, 1997, 1998 and 1999,
respectively.

In February 1999, the Company adopted the Purchase Plan (see Note 5).

9. Commitments and Contingencies

Lease Obligations--The Company leases its office facilities and certain
equipment under both operating and capital leases, the expirations of which
extend through 2009. Future minimum lease payments under noncancellable leases
with lease terms in excess of one year as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
Capital Operating
--------- -----------
<S> <C> <C>
2000.............................................. $ 291,000 $ 4,517,000
2001.............................................. 232,000 4,034,000
2002.............................................. 203,000 3,582,000
2003.............................................. 92,000 3,397,000
2004.............................................. 2,000 3,061,000
Thereafter........................................ -- 14,751,000
--------- -----------
820,000 $33,342,000
===========
Less: amount representing interest................ (62,000)
---------
$ 758,000
=========
</TABLE>

In connection with certain leases of office space, the Company has invested
$2,495,000 in highly liquid, short-term investments against which the
landlords of such space would be able to make claims in the event of default
by the Company of its lease obligations. Such amount is reflected as other
assets in the accompanying consolidated balance sheet as of December 31, 1999.
The Company is not aware of any defaults of its obligations under these
leases.

Rent expense, including rent expense resulting from leases with related
parties (see Note 7), was $1,131,000, $2,329,000 and $3,716,000 for the years
ended December 31, 1997, 1998 and 1999, respectively. The Company incurred a
non-cash charge of $570,000 during the year ended December 31, 1997 in
connection with the termination of a lease for office space that is included
in office and general expenses in the accompanying consolidated statement of
operations.

Employment Agreements--The Company has entered into five-year employment
agreements with two senior executives providing for initial annual base
salaries of approximately $300,000 each, subject to increases at the
discretion of the Company's Board of Directors. Pursuant to the agreements, if
the Company terminates either executive's employment without cause, the
executive is entitled to receive severance benefits equal to salary plus
profit sharing for a period equal to the lesser of three years after such
termination or the time remaining in the initial term of employment.

Accrued Bonuses--Accrued expenses and other current liabilities include
accrued bonuses of $2,307,000 and $4,513,000 as of December 31, 1998 and 1999,
respectively.

F-18
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Litigation--From time-to-time, the Company becomes involved in various
routine legal proceedings in the ordinary course of its business. The Company
believes that the outcome of all pending legal proceedings and unasserted
claims in the aggregate will not have a material adverse effect on its
consolidated results of operations, consolidated financial position or
liquidity.

10. Income Taxes

The Company and its predecessor entities operated under tax-sharing
arrangements with their former parents. Until October 1, 1998, the effective
date of the Combination, the Poppe Tyson Strategic Interactive Marketing
Operations are included in the consolidated group of which True North is the
common parent for federal income tax purposes. The Poppe Tyson Strategic
Interactive Marketing Operations' federal taxable income and losses through
October 1, 1998 were included in such group's consolidated tax return filed by
True North. Prospectively from the date of the Combination, the federal income
and losses of the Poppe Tyson Strategic Interactive Marketing Operations were
included in the consolidated tax return filed by the Company.

Prior to 1997, the Company was included in the consolidated federal and
state tax returns of True North. The settlement of tax provisions or benefits
with True North occurred in the subsequent year after True North filed its
related consolidated tax returns. In 1997, the Company filed a stand-alone
consolidated federal tax return. After the Company's initial public offering
(see Note 4), the Company and True North entered into a tax-sharing
arrangement whereby the Company provides for and pays or receives certain
state taxes.

The components of (loss) income before income taxes are as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Domestic............................... $(1,258,000) $(2,489,000) $10,449,000
International.......................... 81,000 (803,000) (1,729,000)
True North Units Held for Transfer..... (2,180,000) (13,000) --
----------- ----------- -----------
Total (loss) income before income
taxes................................. $(3,357,000) $(3,305,000) $ 8,720,000
=========== =========== ===========
</TABLE>

The (benefit) provision for income taxes consists of the following:

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
--------- --------- ----------
<S> <C> <C> <C>
Current provision (benefit):
Federal..................................... $ 250,000 $ 175,000 $4,735,000
Foreign..................................... 40,000 (17,000) 16,000
State....................................... 68,000 71,000 1,845,000
--------- --------- ----------
358,000 229,000 6,596,000
--------- --------- ----------

Deferred benefit:
Federal..................................... (458,000) (227,000) (639,000)
Foreign..................................... (2,000) (25,000) (5,000)
State....................................... (146,000) (79,000) (249,000)
--------- --------- ----------
(606,000) (331,000) (893,000)
--------- --------- ----------
Total (benefit) provision..................... $(248,000) $(102,000) $5,703,000
========= ========= ==========
</TABLE>

F-19
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Differences between the Company's effective income tax rate and the U.S.
statutory rate were as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Statutory federal tax rate..................... 35.0% 35.0% 35.0%
State taxes, net of federal benefit............ 1.5 0.1 11.9
Goodwill amortization.......................... (20.7) (20.9) 11.9
Impact of foreign operations................... (2.8) (2.1) (0.5)
Other.......................................... (5.6) (4.4) 0.4
------- ------- -------
7.4 7.7 58.7
Valuation allowance............................ -- (4.6) 6.7
------- ------- -------
Effective rate................................. 7.4% 3.1% 65.4%
======= ======= =======
</TABLE>

The deferred income tax assets and liabilities included in the consolidated
financial statements as of the balance sheet dates consist of the following:

<TABLE>
<CAPTION>
December 31,
---------------------
1998 1999
--------- ----------
<S> <C> <C>
Current assets:
Accrued compensation............................. $ 122,000 $ 371,000
Bad debt reserve................................. 234,000 468,000
Other............................................ 133,000 255,000
--------- ----------
489,000 1,094,000
Valuation allowance.............................. (5,000) (90,000)
--------- ----------
484,000 1,004,000
--------- ----------
Noncurrent assets (liabilities):
Net operating loss carryforwards................. 148,000 1,516,000
Accelerated amortization......................... 109,000 (136,000)
Other............................................ 120,000 (35,000)
--------- ----------
377,000 1,345,000
Valuation allowance.............................. (148,000) (743,000)
--------- ----------
229,000 602,000
--------- ----------
Net deferred income tax assets................... $ 713,000 $1,606,000
========= ==========
</TABLE>

At December 31, 1999, the Company had net operating loss carryforwards of
$4,289,000 available to offset future taxable income. These carryforwards
resulted from unused tax benefits from the exercise of stock options and
losses of certain foreign subsidiaries. Certain of the Company's net operating
losses may be carried forward for periods ranging from five to seven years and
others may be carried forward indefinitely.

F-20
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11. Geographic Information

Information about the Company's operations in different geographic regions
as of and for the years ended December 31, 1997, 1998 and 1999, is as follows:

<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1998 1999
------------ ----------- ------------
<S> <C> <C> <C>
Revenues:
Domestic........................ $ 25,008,000 $37,348,000 $ 61,603,000
International................... 489,000 5,196,000 12,433,000
------------ ----------- ------------
$ 25,497,000 $42,544,000 $ 74,036,000
============ =========== ============
(Loss) income before income taxes:
Domestic........................ $ (1,258,000) $(2,489,000) $ 10,449,000
International................... 81,000 (803,000) (1,729,000)
True North Units Held for
Transfer....................... (2,180,000) (13,000) --
------------ ----------- ------------
$(3,357,000) $(3,305,000) $ 8,720,000
============ =========== ============
Net (loss) income:
Domestic........................ $ (1,434,000) $(2,312,000) $ 4,757,000
International................... 43,000 (762,000) (1,740,000)
True North Units Held for
Transfer....................... (1,718,000) (129,000) --
------------ ----------- ------------
$ (3,109,000) $(3,203,000) $ 3,017,000
============ =========== ============
Identifiable assets:
Domestic........................ $66,620,000 $126,521,000
International................... 4,666,000 19,211,000
----------- ------------
$71,286,000 $145,732,000
=========== ============
</TABLE>

12. Assets Under Capital Leases

Assets under capital leases are included in the accompanying consolidated
balance sheets as follows:

<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Computers and software............................ $ 387,000 $ 135,000
Furniture and other............................... 862,000 977,000
---------- ----------
1,249,000 1,112,000
Less: accumulated depreciation and amortization... (593,000) (386,000)
---------- ----------
Total assets under capital leases, net.......... $ 656,000 $ 726,000
========== ==========
</TABLE>

Depreciation on assets under capital leases is included in depreciation
expense for all periods presented.

13. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash paid during the year for:
Interest....................................... $119,000 $185,000 $134,000
Income taxes, net of refunds received.......... 256,000 861,000 875,000
</TABLE>

F-21
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

14. Bad Debt Reserve

The bad debt reserve and related activity is as follows:

<TABLE>
<CAPTION>
Balance
at Write-
Beginning Provision for offs, Balance at
of Doubtful Net of End of
Year Accounts Recoveries Other Year
--------- ------------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1997................... $408,000 $517,000 $(489,000) $16,000 $ 452,000
Year ended December 31,
1998................... 452,000 660,000 (144,000) -- 968,000
Year ended December 31,
1999................... 968,000 316,000 (147,000) 14,000 1,151,000
</TABLE>

"Other" represents bad debt reserve balances of acquired entities (see Note
2).

15. Quarterly Results of Operations (Unaudited)

<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------
September
March 31 June 30 30 December 31
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998
Revenues.................. $ 9,016,000 $10,451,000 $10,930,000 $12,147,000
Operating income (loss)... 124,000 (817,000) (1,333,000) (1,308,000)
Income (loss) before
income taxes............. 123,000 (820,000) (1,334,000) (1,274,000)
Net loss.................. (194,000) (768,000) (1,126,000) (1,115,000)
Basic and diluted net loss
per share................ (0.01) (0.05) (0.08) (0.07)
1999
Revenues.................. $12,383,000 $16,042,000 $21,121,000 $24,490,000
Operating (loss) income... (614,000) 1,309,000 2,889,000 3,161,000
(Loss) income before
income taxes............. (277,000) 1,813,000 3,454,000 3,730,000
Net (loss) income......... (473,000) 581,000 1,308,000 1,601,000
Basic net (loss) income
per share................ (0.02) 0.03 0.06 0.07
Diluted net (loss) income
per share................ (0.02) 0.03 0.06 0.06
</TABLE>

16. Subsequent Events

In February of 2000, Modem Media acquired 100% of the outstanding capital
stock of Vivid Holdings, Inc. and its majority-owned subsidiary, Vivid
Publishing, Inc. (collectively hereinafter referred to as "Vivid") for
approximately $63,600,000. Vivid is a professional services company, with
approximately 100 employees, that provides strategic interactive marketing
services for Fortune 500 companies and Internet start-ups. The consideration
was comprised of approximately $10,200,000 in cash, approximately $14,400,000
in Modem Media Class A common stock (446,010 shares), of which approximately
$4,500,000 will remain in escrow as security for the indemnification
obligations of the sellers, and approximately $39,000,000 in value related to
employee stock options that were converted to Modem Media stock options. The
acquisition has been accounted for under the purchase method of accounting
and, accordingly, the operating results of Vivid will be included in the
Company's consolidated financial statements from the date of its acquisition.
The excess of purchase price over the fair value of net assets acquired of
approximately $63,280,000 will be amortized over a period of five years.

F-22
<PAGE>

MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following information reflects pro forma statement of operations data
for the year ended December 31, 1999 assuming that the acquisition of Vivid
was consummated on January 1, 1999.

<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Revenues.................................................... $ 81,067,000
Loss before income taxes.................................... (6,493,000)
Net loss.................................................... (11,096,000)
Basic and diluted net loss per common share................. (0.50)
</TABLE>

The pro forma statement of operations data above give effect to goodwill
amortization, the elimination of interest expense related to the indebtedness
of Vivid settled upon closing of the acquisition, the reduction of the
Company's interest income attributable to the cash used to settle such
indebtedness, and income tax benefits related to the losses of Vivid which
would have been used to offset the Company's taxable income. Such amounts are
reflected net of the related tax effects, where applicable. These pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of the results of operations that would have actually resulted
had the acqusition of Vivid occurred on January 1, 1999, or which may result
in the future.

In February of 2000, the Company acquired substantially all of the assets
of Eurokapi Multimedia S.A. ("Eurokapi"), a builder and marketer of e-
businesses in Paris, France, for approximately $450,000 in cash. The
acquisition was accounted for under the purchase method of accounting and,
accordingly, the operating results of Eurokapi will be included in the
Company's consolidated financial statements from the date of its acquisition.

F-23
<PAGE>

MODEM MEDIA . POPPE TYSON, INC., VIVID HOLDINGS, INC. AND VIVID PUBLISHING,
INC.

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Introduction

The following unaudited pro forma combined financial statements give effect
to the acquisition by Modem Media . Poppe Tyson, Inc. ("Modem Media") of 100%
of the outstanding capital stock of Vivid Holdings, Inc. and its majority-
owned subsidiary, Vivid Publishing, Inc. (collectively hereinafter referred to
as "Vivid") in a transaction accounted for under the purchase method of
accounting (the "Acquisition"). The consideration was comprised of
approximately $10,200,000 in cash, approximately $14,400,000 in Modem Media
Class A common stock (446,010 shares) and approximately $39,000,000 in value
related to employee stock options that were converted to Modem Media stock
options.

The unaudited pro forma combined balance sheet of Modem Media and Vivid as
of December 31, 1999 presents the combined financial position of such entities
assuming that the Acquisition occurred on December 31, 1999. The unaudited pro
forma combined statement of operations of Modem Media and Vivid for the year
ended December 31, 1999 presents the combined results of operations of such
entities assuming that the Acquisition occurred on January 1, 1999. The pro
forma combined financial information does not purport to be indicative of the
results which would have actually occurred had the Acquisition been completed
as of the dates assumed or which may be obtained in the future. The pro forma
adjustments described in the notes to the unaudited pro forma combined
financial statements reflect the preliminary allocation of the purchase price
to the net assets acquired and is subject to final determination.

F-24
<PAGE>

MODEM MEDIA . POPPE TYSON, INC., VIVID HOLDINGS, INC. AND VIVID PUBLISHING,
INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

December 31, 1999

<TABLE>
<CAPTION>
Modem Pro Forma
Media Vivid Adjustments Combined
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 30,265,000 $ 27,000 $(10,200,000)(a) $ 20,092,000
Short-term
investments........... 16,859,000 -- 16,859,000
Accounts receivable,
net................... 18,090,000 1,279,000 19,369,000
Unbilled revenues...... 2,066,000 43,000 2,109,000
Unbilled charges....... 642,000 -- 642,000
Deferred income
taxes................. 1,004,000 -- 1,004,000
Prepaid expenses and
other current
assets................ 2,325,000 174,000 2,499,000
------------ ----------- ------------
Total current
assets.............. 71,251,000 1,523,000 62,574,000

Total property and
equipment, net......... 14,192,000 325,000 14,517,000

Other assets:
Goodwill, net.......... 55,742,000 9,961,000 53,319,000 (b) 119,022,000
Deferred income
taxes................. 602,000 -- 602,000
Other assets........... 3,945,000 716,000 (350,000)(c) 4,161,000
(150,000)(d)
------------ ----------- ------------
Total other assets... 60,289,000 10,677,000 123,785,000
------------ ----------- ------------
Total assets......... $145,732,000 $12,525,000 $200,876,000
============ =========== ============

LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable....... $ 5,346,000 $ 821,000 $ 6,167,000
Notes payable.......... -- 14,008,000 (13,658,000)(e) --
(350,000)(c)
Pre-billed media....... 6,639,000 -- 6,639,000
Advance billings....... 2,736,000 -- 2,736,000
Deferred revenues...... 4,125,000 175,000 4,300,000
Accrued expenses and
other current
liabilities........... 14,718,000 350,000 398,000 (f) 15,466,000
------------ ----------- ------------
Total current
liabilities......... 33,564,000 15,354,000 35,308,000

Noncurrent liabilities:
Capital lease
obligations, less
current portion....... 471,000 -- 471,000
Other liabilities...... 221,000 -- 221,000
Stockholders' equity:
Class A common stock... 12,000 -- 12,000
Class B common stock... 11,000 -- 11,000
Preferred stock........ -- -- --
Paid-in capital........ 121,151,000 694,000 53,400,000 (g) 174,551,000
(694,000)(h)
Accumulated deficit.... (8,604,000) (3,523,000) 3,523,000 (h) (8,604,000)
Treasury stock, at
cost.................. (1,118,000) -- (1,118,000)
Accumulated other
comprehensive
income................ 24,000 -- 24,000
------------ ----------- ------------
Total stockholders'
equity (deficit).... 111,476,000 (2,829,000) 164,876,000
------------ ----------- ------------
Total liabilities and
stockholders' equity
(deficit)........... $145,732,000 $12,525,000 $200,876,000
============ =========== ============
</TABLE>

See notes to unaudited pro forma combined financial statements.

F-25
<PAGE>

MODEM MEDIA . POPPE TYSON, INC., VIVID HOLDINGS, INC. AND VIVID PUBLISHING,
INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 1999

<TABLE>
<CAPTION>
Modem Pro Forma
Media Vivid Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues................ $74,036,000 $ 7,031,000 $ 81,067,000
Cost of revenues........ 32,991,000 5,611,000 38,602,000
----------- ----------- ------------
Gross margin............ 41,045,000 1,420,000 42,465,000
Operating expenses:
Sales and marketing... 1,658,000 311,000 1,969,000
General and
administrative....... 29,683,000 3,321,000 33,004,000
Amortization of
goodwill............. 2,959,000 1,108,000 $12,656,000 (i) 15,615,000
(1,108,000)(j)
----------- ----------- ------------
Total operating
expenses........... 34,300,000 4,740,000 50,588,000
----------- ----------- ------------
Operating income
(loss)................. 6,745,000 (3,320,000) (8,123,000)
Interest income
(expense), net......... 1,975,000 (610,000) 610,000 (k) 1,630,000
(345,000)(l)
----------- ----------- ------------
Income (loss) before
taxes.................. 8,720,000 (3,930,000) (6,493,000)
Provision (benefit) for
income taxes........... 5,703,000 -- (1,100,000)(m) 4,603,000
----------- ----------- ------------
Net income (loss)....... $ 3,017,000 $(3,930,000) $(11,096,000)
=========== =========== ============
Net income (loss) per
share:
Basic................. $ 0.14 $ (0.50)
=========== ============
Diluted............... $ 0.13 $ (0.50)
=========== ============
Weighted-average number
of common shares
outstanding:
Basic................. 21,563,000 22,009,000(n)
=========== ============
Diluted............... 22,958,000 22,009,000(n)
=========== ============
</TABLE>

See notes to unaudited pro forma combined financial statements.

F-26
<PAGE>

MODEM MEDIA . POPPE TYSON, INC., VIVID HOLDINGS, INC. AND VIVID PUBLISHING,
INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Basis of Presentation

The unaudited pro forma combined balance sheet combines the balance sheets
of Modem Media and Vivid as of December 31, 1999, and is presented as if the
Acquisition occurred on December 31, 1999. The unaudited pro forma combined
statement of operations combines the statements of operations of Modem Media
and Vivid for the year ended December 31, 1999, and is presented as if the
Acquisition occurred on January 1, 1999.

The historical balance sheets and statements of operations as of and for
the year ended December 31, 1999, used in the preparation of the unaudited pro
forma combined financial statements, have been derived from the respective
audited financial statements of Modem Media and Vivid.

Unaudited Pro Forma Adjustments

Descriptions of the adjustments included in the unaudited pro forma
combined financial statements are as follows:

Balance Sheet Adjustments

(a)Represents cash paid in connection with the Acquisition.

(b) Represents the net excess of acquisition cost over the fair value of net
assets acquired in connection with the Acquisition, calculated as follows:

<TABLE>
<S> <C>
Purchase price............................................... $63,600,000
Acquisition costs............................................ 398,000
-----------
Total purchase price....................................... 63,998,000
Less: Fair value of net assets acquired...................... 718,000
-----------
Excess of total purchase price over the fair value of
net assets acquired......................................... 63,280,000
Less: Existing net goodwill of Vivid......................... 9,961,000
-----------
Incremental goodwill......................................... $53,319,000
===========
</TABLE>

(d) Represents the elimination of Modem Media's investment in Vivid as of
December 31, 1999.

(e) Represents the settlement of certain indebtedness of Vivid upon the
closing of the Acquisition, settled with cash of $10,200,000 and the
remainder with Modem Media's Class A common stock.

(f) Represents estimated liabilities associated with the Acquisition.

(g) Represents equity issued in the Acquisition.

(h) Represents the elimination of the equity accounts of Vivid.

Statement of Operations Adjustments

(i) Represents the amortization of $63,280,000 of goodwill, resulting from the
Acquisition, on a straight-line basis over five years.

(j) Represents the elimination of goodwill amortization on the books of Vivid
for the year ended December 31, 1999.

F-27
<PAGE>

MODEM MEDIA . POPPE TYSON, INC., VIVID HOLDINGS, INC. AND VIVID PUBLISHING,
INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(continued)

(k) Represents the elimination of interest expense related to certain
indebtedness of Vivid settled upon the closing of the Acquisition.

(l) Represents the reduction of Modem Media's interest income that was earned
on cash used to settle certain indebtedness of Vivid upon the closing of
the Acquisition.

(m) Represents tax benefits related to the losses of Vivid that would have
been used to offset Modem Media's taxable income, as well as the income
tax effects of the foregoing adjustments. The pro forma combined effective
tax rate differs from the statutory rate primarily due to the effect of
non-deductible goodwill amortization and the losses of certain foreign
subsidiaries on which Modem Media currently does not recognize tax
benefits.

(n) Represents the weighted-average number of common shares outstanding for
the period presented, after giving effect to the Acquisition, calculated
as Modem Media's historical basic weighted-average number of common shares
outstanding during such period, plus the Class A common shares issued in
connection with the Acquisition.

F-28
<PAGE>

INSIDE BACK COVER PAGE OF PROSPECTUS

[The page is divided into a top half and a bottom half. In the top center
of the page is the heading, "Our Global Reach." Beneath this heading is a world
map with the names of the following cities appearing in their appropriate
geographic locations, each preceded by the Modem Media logo: San Francisco,
Toronto, Norwalk CT, New York, Sao Paulo, London, Munich, Paris, Tokyo, Hong
Kong, and Singapore.

Beneath the map is the centered heading, "Our Client List." The following
names of Modem Media's clients appear next to bullets in three columns:
"Citibank," "Coca-Cola," "DaimlerChrysler," "Delta Air Lines," "E*Trade,"
"General Electric," "General Motors," "IBM," "Infinite Supply," "Intel,"
"JCPenney," "John Hancock," "Starwood Hotels and Resorts," "Toyota," and
"Women.com."

Beneath this customer list is the centered heading, "Our People." The
following text appears beneath this heading, "Modem Media is a global
organization of over 750 people focused on the needs of Global 500 and
select online businesses."

At the bottom of the page is the centered heading, "Our Mission." The
following text appears beneath this heading, "Create the means and reasons for
billions of people to do business with our clients."]
<PAGE>

[LOGO OF MODEM MEDIA]
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses payable by Modem
Media . Poppe Tyson, Inc. (the "Registrant") in connection with the sale of the
securities being registered hereby. All amounts are estimates except the
registration fee.

<TABLE>
<CAPTION>
Amount to be
Paid
------------
<S> <C>
SEC registration fee......................................... $ 61,523
NASD filing fee.............................................. 24,000
Nasdaq National Market additional share listing fee.......... 17,500
Printing and engraving expenses.............................. 450,000
Legal fees and expenses...................................... 250,000
Accounting fees and expenses................................. 150,000
Blue Sky fees and expenses................................... 5,000
Transfer agent and registrar fees............................ 10,000
Miscellaneous................................................ 31,977
----------
Total...................................................... $1,000,000
==========
</TABLE>

Item 15. Indemnification of Directors and Officers

Article Thirteen of the Registrant's Certificate of Incorporation and
Article VI of the Registrant's Bylaws provide for mandatory indemnification of
its directors and officers, and permissible indemnification of employees and
other agents, to the maximum extent permitted by the Delaware General
Corporation Law. In addition, the Registrant has entered into Indemnification
Agreements with certain of its officers and directors. Reference is also made
to the proposed form of Underwriting Agreement contained in Exhibit 1 hereto,
which provides for the indemnification of officers and directors of the
Registrant against certain liabilities.

Item 16. Exhibits and Financial Statement Schedules

(a) The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1* Form of Underwriting Agreement
5.1* Opinion of Davis Polk & Wardwell
5.2* Opinion of Sloane Levy, Esq.
11.1 Statement regarding computation of Per Share Earnings (included in the
Notes to the Consolidated Financial Statements of Modem Media . Poppe
Tyson, Inc.)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG LLP, Independent Accountants
23.3* Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.4* Consent of Sloane Levy, Esq. (included in Exhibit 5.2)
24.1** Power of Attorney (included on the signature page of the Registration
Statement filed on March 15, 2000)
</TABLE>
- ---------------------
* To be filed by amendment.

** Previously filed.

II-1
<PAGE>

Item 17. Undertakings

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made
of securities registered hereby, a post-effective amendment to this
registration statement :

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;

(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;

provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned Registrant hereby understands that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities
Act 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 Commission such indemnification is
against public policy as expressed in the Securities 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 registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

II-2
<PAGE>

(d) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the 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, 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-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this amendment to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Norwalk, State of Connecticut, on the 23rd day of
March, 2000.

Modem Media . Poppe Tyson, Inc.

By: /s/ Gerald M. O'Connell
-----------------------------------
Gerald M. O'Connell
Chief Executive Officer

Pursuant to the requirements of the Securities Act, this amendment to the
registration statement has been signed by the following persons in the
capacities indicated on the 23rd day of March, 2000.

<TABLE>
<CAPTION>
Signature Title
--------- -----

<C> <S>
/s/ Gerald M. O'Connell Chief Executive Officer
___________________________________________ and Chairman (Principal
Gerald M. O'Connell Executive Officer)

* President, Chief Operating
___________________________________________ Officer and Director
Robert C. Allen, II

* Chief Financial Officer
___________________________________________ (Principal Financial and
Steven C. Roberts Accounting Officer)

* Director
___________________________________________
Robert H. Beeby

* Director
___________________________________________
Donald M. Elliman, Jr

* Director
___________________________________________
Terry D. Peigh

* Director
___________________________________________
Don Peppers

* Director
___________________________________________
Donald L. Seeley

* Director
___________________________________________
</TABLE> Joseph R. Zimmel

*By: /s/ Gerald M. O'Connell
------------------------------

Gerald M. O'Connell

Attorney-in-Fact

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1* Form of Underwriting Agreement
5.1* Opinion of Davis Polk & Wardwell
5.2* Opinion of Sloane Levy, Esq.
11.1 Statement regarding computation of Per Share Earnings (included in
the Notes to the Consolidated Financial Statements of Modem
Media . Poppe Tyson, Inc.)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG LLP, Independent Accountants
23.3* Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.4* Consent of Sloane Levy, Esq. (included in Exhibit 5.2)
24.1** Power of Attorney (included on the signature page of the Registration
Statement filed on March 15, 2000)
</TABLE>
- ---------------------
* To be filed by amendment.

** Previously filed.

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports dated February 4, 2000 and November 16, 1998 and to all references to
our Firm included in or made a part of this registration statement.

/s/ Arthur Andersen LLP

Stamford, Connecticut

March 22, 2000

<PAGE>

Exhibit 23.2

CONSENT OF KPMG LLP, INDEPENDENT ACCOUNTANTS

The Board of Directors
Vivid Holdings, Inc.

We consent to the incorporation by reference in Amendment No. 1 to the
registration statement (No. 333-32542) on Form S-3 of Modem Media . Poppe
Tyson, Inc. of our report dated February 4, 2000, with respect to the
consolidated balance sheet of Vivid Holdings, Inc. as of December 31, 1999 and
the consolidated balance sheet of Vivid Publishing, Inc. (predecessor) as of
December 31, 1998, and the related consolidated statements of operations, cash
flows and stockholders' equity for the six-month period ended December 31,
1999, the six-month period ended June 30, 1999 (predecessor) and the year ended
December 31, 1998 (predecessor), which report appears in the Current Report on
Form 8-K/A of Modem Media . Poppe Tyson, Inc. dated March 15, 2000, and to the
reference to us under the heading "Experts" in the prospectus.

/s/ KPMG LLP

San Francisco, California

March 22, 2000