PROXICOM INC, 424B3, 1999-04-20

PROXICOM INC
424B3, 1999-04-20
COMPUTER PROGRAMMING SERVICES

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<PAGE> 1

4,500,000 SHARES
[PROXICOM(R) LOGO]

COMMON STOCK

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

This is the initial public offering of Proxicom, Inc. common stock. Proxicom is
offering 4,000,000 of the shares to be sold in this offering. The selling
stockholders that we identify in this prospectus are offering an additional
500,000 shares. Proxicom will not receive any proceeds from the sale of the
shares by the selling stockholders.

The initial public offering price is $13.00 per share. Our common stock has been
approved for listing on the Nasdaq National Market under the symbol "PXCM."

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE THE RISK FACTORS BEGINNING ON
PAGE 5.

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price.................................. $13.00 $58,500,000
Underwriting Discounts and Commissions................. $ 0.91 $ 4,095,000
Proceeds, Before Expenses, to Proxicom................. $12.09 $48,360,000
Proceeds to the Selling Stockholders................... $12.09 $ 6,045,000
</TABLE>

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

Proxicom has granted the underwriters the right to purchase up to 675,000 shares
to cover any over-allotments, at any time until 30 days after the date of this
prospectus.

BT ALEX. BROWN
PRUDENTIAL SECURITIES
THOMAS WEISEL PARTNERS LLC
FRIEDMAN BILLINGS RAMSEY

April 19, 1999
<PAGE> 2

[INSIDE FRONT COVER PAGE]

GRAPHIC:

Two-page design with "Internet" in large lettering across the top of both
pages. Upper left corner of the graphic's left page contains the statement "what
makes us different". Directly beneath this statement is the following paragraph:

In 1994, Proxicom developed some of the first Internet
commerce storefronts and discovered the key to successful
Internet solutions -- a seamless integration of strategy,
technology and creative design skills. Proxicom has continued to
grow these traditionally disparate talents within an iterative
process that shares best practices and incorporates industry
expertise. The result is a culture where people work together to
create innovative Internet solutions that improve business
processes and create new business opportunities.

The phrase "Integrated Internet Skills" is beneath this paragraph. A circle
with three pegs and the words "strategy", "technology" and "creative design" is
contained in the lower half of the left page.

The upper half of the graphic's right page contains a pyramid with five
levels. A level of the pyramid corresponds to each of the following items:

- Value Through Innovation
Creating innovative Internet solutions for our clients

- Proxicom Process(SM)
Speed, Quality and Reduced Risk

- Internet Best Practices
Sharing our collective Internet knowledge since 1994

- Industry Expertise
Internet focus with industry specific knowledge

- Integrated Skills
Strategy, Technology and Creative Design

Proxicom's logo is in the lower right corner of this page.

FRONT COVER GRAPHIC:

Contains pictures and descriptions of projects Proxicom has completed for
three clients, Calphalon, the American Electronics Association ("AEA") and GE
Plastics. This page is separated into three rows. The first row contains the
boxed word "Internet", a picture of the web site Proxicom designed for
Calphalon, and the following description of the work Proxicom performed for
Calphalon as well as the benefits Calphalon derived as a result:

CALPHALON

Business-to-Consumer Internet Commerce

Calphalon sought to launch a new site to fully exploit the
interactive potential of the Internet. Proxicom created a
solution for Calphalon that differentiates its offerings in
cookware products by uniting a complement of communications,
content and transaction capabilities through a single source.
The solution includes information for consumers, Calphalon's
full portfolio of product information, educational instructions,
a database of recipes and interactive capabilities. Calphalon
established a direct link with a new audience of prospective
customers, gaining invaluable knowledge of their interests. The
site also provides Calphalon with the ability to influence and
flexibly respond to market needs. Proxicom also created the
solutions branding and user interface
<PAGE> 3

to enhance Calphalon's marketing presence. The solution has
created efficiencies for Calphalon's business and has been used
to introduce a new line of cutlery products to test market
acceptance.

The second row contains the boxed word "Extranet" a picture of the extranet
Proxicom designed for AEA, and the following description of the work Proxicom
performed for AEA as well as the benefits AEA derived as a result:

AMERICAN ELECTRONICS ASSOCIATION

A New Internet-Based Membership Service

The American Electronics Association ("AEA"), the largest
high-tech trade association with over 3,000 member companies
nationwide such as Intel Corporation, Amazon.com and Yahoo!
Inc., sought to leverage the Internet to improve its business.
AEA wanted to transform the way it worked with its members, an
initiative central to AEA's strategic plans. Proxicom is
repositioning AEA, re-branding the company and creating a new
online membership service. The functional and dynamic extranet
Proxicom created ties into AEA's core systems enabling
distributed authoring and release of content as well as
personalization of information for its users. It will also
permit the sale of AEA products and services with real-time
pricing. The solution will redefine how AEA markets, increasing
sales, making publishing more efficient and establishing direct
communication with members and industry experts.

The third row contains the boxed word "Intranet", a picture of the intranet
Proxicom designed for GE Plastics and the following description of the work
Proxicom performed for GE Plastics as well as the benefits GE Plastics derived
as a result:

GE PLASTICS

Intranet Knowledge Management System

The employees at GE Plastics were faced with time-consuming
searches for marketing, technical, sales and customer service
information stored in decentralized databases, file systems and
non-networked PCs. Proxicom changed that by helping GE Plastics
transform its knowledge management and customer care tracking
systems through a company-wide, knowledge management Intranet.
The solution eliminated costly time spent searching for
information and provided the marketing, sales, IT and customer
service personnel with a valuable decision making tool that has
helped them dramatically improve their effectiveness and
successfully increase productivity.

The lower right corner of the graphic contains Proxicom's logo.
<PAGE> 4

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information and the financial statements and notes to those financial statements
which appear elsewhere in this prospectus.

PROXICOM, INC.

OUR BUSINESS

Proxicom is a leading provider of Internet solutions to Global 1000
companies and other large organizations. Since 1994, we have focused exclusively
on the Internet and have successfully completed over 600 client engagements. As
of December 31, 1998, we had a total of approximately 150 ongoing client
engagements.

In all of our client engagements we apply the Proxicom Process, a four-step
methodology that we use to deliver Internet solutions. Using the Proxicom
Process, we integrate strategy, technology and creative design to help our
clients transform their businesses with Internet solutions.

We sell and deliver our services and expertise through teams organized into
four industry groups, or vertical markets:

- energy and telecommunications;

- financial services;

- retail and manufacturing; and

- service industries.

This structure allows us to build industry expertise, develop market-specific
solutions for clients and replicate business solutions across client
engagements.

Our Internet solutions have included

- business to consumer electronic commerce Internet sites for Calphalon
Corporation, Cox Interactive Media, Inc. and Owens Corning, enabling
these clients to provide information about and sell products to
consumers;

- business to business electronic commerce extranets for the American
Electronics Association, Mercedes-Benz Credit Corp. and McKessonHBOC,
enabling these clients to transact business with other businesses; and

- company-specific intranets for GE Plastics, Hoffmann-La Roche, Inc. and
Merrill Lynch & Co., Inc., enabling persons within these organizations
to exchange information electronically.

OUR MARKET OPPORTUNITY

The Internet presents opportunities to transform businesses and entire
industries. Companies use the Internet to

- communicate and transact business on a one-to-one basis with existing
customers;

- target and acquire new customers;

- collaborate with their supply-chain partners;

- enable electronic commerce; and

- manage distribution relationships.

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<PAGE> 5

The Internet has also allowed businesses to identify new product and service
offerings which extend and complement their core markets. As a result,
organizations invest in Internet solutions to transform their core business and
technology strategies.

These opportunities are creating a significant and growing demand for
third-party Internet professional services. International Data Corp., a
technology industry research firm, forecasts that the market for Internet and
electronic commerce services worldwide will grow from $4.6 billion in 1997 to
$43.7 billion by 2002. Forrester Research, Inc., another technology industry
research firm, estimates the market for Internet and electronic commerce
services will grow from $5.4 billion in 1998 to $32.7 billion by 2002. These
projections represent a compound annual growth rate of more than 55% over these
periods. Forrester Research predicts that the Internet will be one of the
fastest growing areas within the information technology services industry.

OUR STRATEGY

Our strategy is to build upon our position as a leading Internet solutions
provider. To do this, we plan to

- leverage existing client relationships;

- further penetrate our vertical markets;

- continue geographic expansion;

- hire and retain skilled professionals;

- evolve the Proxicom Process;

- leverage technology partnerships; and

- extend reusable solutions.

We service our engagements with multi-disciplinary teams that work as
cohesive units. We facilitate collaboration among the client's business,
information technology and marketing functions. We believe our coordinated
approach results in better Internet solutions.

OUR OFFICES AND HISTORY

We started our business in 1991 as a Maryland corporation. We reorganized
as a Delaware corporation in 1996. Our principal offices are located at 11600
Sunrise Valley Drive in Reston, VA 20191. Our telephone number is 703-262-3200.

2
<PAGE> 6

THE OFFERING

Common stock offered by Proxicom............ 4,000,000 shares

Common stock offered by the selling
stockholders................................ 500,000 shares

Common stock outstanding after this
offering.................................... 23,901,103 shares

Use of proceeds............................. Proxicom will use the proceeds
of this offering for general
corporate purposes, including
working capital, expansion of
operations and sales and
marketing capabilities and
possible acquisitions. Proxicom
will not receive any proceeds
from the sale of shares by the
selling stockholders. See "Use
of Proceeds."

Nasdaq National Market symbol............... PXCM

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

"PROXICOM" IS A REGISTERED TRADEMARK OF PROXICOM, INC. IN ADDITION, PROXICOM HAS
FILED FOR TRADEMARK REGISTRATION OF "PROXICOM PROCESS" AND OTHER MARKS. THIS
PROSPECTUS ALSO INCLUDES TRADEMARKS AND TRADE NAMES OF OTHER PARTIES.
-------------------------
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<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table summarizes the financial data for our business. In
1998, our loss from operations and net loss included an $18.2 million
compensation expense associated with our merger with IBIS Consulting, Inc. Of
this expense, $17.2 million related to the exchange of stock options originally
granted to IBIS Consulting employees and did not result in cash payments. We
provide more detail about this expense in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations --Results of
Operations" section of this prospectus.

The first column of the following table summarizes our balance sheet on an
actual basis. The second column summarizes our balance sheet on a supplemental
basis to reflect our merger with ad hoc Interactive, Inc. in March 1999 as if ad
hoc Interactive had always been part of Proxicom. The third column is adjusted
to reflect

- the conversion of all shares of convertible preferred stock outstanding
as of the date of this prospectus into 4,231,194 shares of common stock;

- a $4.9 million charge associated with the issuance of preferred stock;

- the exercise of warrants to purchase 1,011,378 shares of convertible
preferred stock at $7.91 per share on April 13, 1999; and

- Proxicom's sale of 4,000,000 shares of common stock in this offering at
an initial public offering price of $13.00 per share and application of
the estimated net proceeds.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------
ACTUAL SUPPLEMENTAL ADJUSTED
------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash equivalents................................... $ 2,482 $ 2,586 $62,939
Working capital.................................... 2,380 1,927 62,280
Total assets....................................... 22,077 22,551 83,264
Stockholders' equity............................... 6,996 6,629 68,799
</TABLE>

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

Unless otherwise specifically stated, information in this prospectus
assumes that immediately prior to the closing of this offering all outstanding
shares of preferred stock are converted into shares of common stock and the
underwriters' over-allotment option will not be exercised.

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<PAGE> 8

RISK FACTORS

An investment in our common stock involves risks. You should carefully
consider the risks described below and the other information in this prospectus
including our financial statements and the related notes before you decide to
buy our common stock. The trading price of our common stock could decline due to
any of these risks, and you could lose all or part of your investment.

WE ARE GROWING QUICKLY. FUTURE GROWTH OF OUR BUSINESS COULD MAKE IT DIFFICULT TO
MANAGE OUR RESOURCES.

Our business is growing substantially, both through increased sales and
recent acquisitions. For instance, our sales have increased from $1.3 million in
1994 to $42.4 million in 1998. Our rapid growth has stretched, and could
continue to stretch, our resources. We expect that we will need to continue to
hire and retain management personnel and other employees. Our management has
limited experience managing a business of Proxicom's size or a public company.

In order to manage our growth effectively, we must establish offices in new
geographic locations, set fixed-price fees accurately, maintain high employee
utilization rates and maintain project quality, particularly if the average size
of our projects continues to increase.

Our performance may depend on the effective integration of acquired
businesses. This integration, even if successful, may be expensive and time
consuming and could strain our resources.

WE MAY NOT BE ABLE TO HIRE AND RETAIN HIGHLY SKILLED EMPLOYEES, WHICH COULD
AFFECT OUR ABILITY TO COMPETE EFFECTIVELY.

To succeed, we must hire, train, motivate, retain and manage employees who
are highly skilled in the Internet and its rapidly changing technology. Because
of the recent and rapid growth of the Internet, individuals who have Internet
expertise and can perform the services we offer are scarce. Competition for
these individuals, therefore, is intense. We might not be able to hire enough of
them or to train, motivate, retain and manage the employees we do hire. This
could hinder our ability to complete existing projects and bid for new projects.
In addition, because the competition for qualified employees in the Internet
industry is intense, hiring, training, motivating, retaining and managing
employees with the strategic, technical and creative skills we need is both
time-consuming and expensive.

WE HAVE LOST MONEY IN THREE OF THE LAST FOUR QUARTERS AND COULD LOSE MONEY IN
THE FUTURE BECAUSE PROJECTS MAY BE DELAYED OR CANCELLED.

Our financial results may fluctuate from quarter to quarter. In fact, we
have incurred operating losses in three of our last four quarters. In future
quarters, our operating results may not meet public market analysts' and
investors' expectations. If that happens, the price of our common stock may
fall. Many factors can cause these fluctuations, including

- the number, size, timing and scope of our projects;

- customer concentration;

- long and unpredictable sales cycles;

- contract terms of projects;

- degrees of completion of projects;

- project delays or cancellations;

- competition for and utilization of employees;

- how well we estimate the resources we need to complete projects;

- the integration of acquired businesses;

- pricing changes in the industry; and

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- economic conditions specific to the Internet and information technology
consulting.

A high percentage of our operating expenses, particularly personnel and
rent, are fixed in advance of any particular quarter. As a result, if we
experience unanticipated changes in our projects or in our employee utilization
rates, we could experience large variations in quarterly operating results and
losses in any particular quarter. Due to these factors, we believe you should
not compare our quarter-to-quarter operating results to predict our future
performance.

WE FAILED TO GENERATE CASH FROM OPERATIONS DURING 1996 AND 1998 AND COULD FAIL
TO GENERATE CASH FROM OPERATIONS IN THE FUTURE.

We did not generate cash from operations in these years largely due to the
expansion of our business. Particularly in 1998, we increased our number of
Internet solutions professionals and support personnel. We also incurred
expenses in connection with mergers. We plan to continue to expand and develop
our business, both internally and possibly through future acquisitions. This
could cause us to fail to generate cash from operations in the future.

WE HAVE A NUMBER OF SIGNIFICANT CLIENTS. IF WE LOSE A MAJOR CLIENT OR
SIGNIFICANT PROJECT, OUR REVENUES COULD BE ADVERSELY AFFECTED.

We generate much of our revenue from a limited number of major clients. As
a result, if we lose a major client or large project, our revenues could be
adversely affected. In 1998, for example, our two largest clients, Pacific Gas
and Electric Company and General Electric Company, accounted for approximately
15% and 14%, respectively, of our revenue. That year, our five largest clients
contributed approximately 38% of our revenue. In 1997, our two largest clients,
Pacific Gas and Electric Company and General Electric Company, accounted for
approximately 24% and 10%, respectively, of our revenue. Our five largest
clients contributed approximately 48% of our revenue in that year.

We perform varying amounts of work for specific clients from year to year.
A major client in one year may not use our services in another year. In
addition, we may derive revenue from a major client that constitutes a large
portion of a particular quarter's total revenue. If we lose any major clients or
any of our clients cancel or significantly reduce a large project's scope, our
business, financial condition and results of operations could be materially and
adversely affected. Also, if we fail to collect a large account receivable, we
could be subjected to significant financial exposure.

WE HAVE MANY SHORT-TERM CONTRACTS THAT CAN BE CANCELLED WITHOUT PENALTY. IF
CLIENTS TERMINATE CONTRACTS WITH US ON SHORT NOTICE, OUR RESULTS OF OPERATIONS
COULD SUFFER.

Our contracts with clients are generally short-term. Also, most clients can
reduce or cancel their contracts for our services without penalty and with
little or no notice. If a significant client or a number of small clients
terminate, significantly reduce or modify business relationships with us, our
business, financial condition and results of operations could be materially and
adversely affected. Consequently, you should not predict or anticipate our
future revenue based on the number of clients we have or the number and size of
our existing projects. When a client postpones, modifies or cancels a project,
we have to shift our employees to other projects and minimize the resulting
adverse impact on our operating results. In addition, our operating expenses are
relatively fixed and cannot be reduced on short notice.

IF WE FAIL TO MEET OUR CLIENTS' EXPECTATIONS, WE COULD DAMAGE OUR REPUTATION AND
HAVE DIFFICULTY ATTRACTING NEW BUSINESS.

Many of our projects are complex and critical to our clients. As a result,
if we fail or are unable to meet a client's expectations, we could damage our
reputation. This could adversely

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affect our ability to attract new business from that client or others. If we
fail to perform adequately on a project, a client could sue us for economic
damages.

WE COULD LOSE MONEY ON OUR CONTRACTS.

As part of our strategy, we generally enter into fixed-price,
fixed-timeframe contracts, rather than contracts based on payment for time and
materials. Often, we fix the price or timeframe before we finalize the design
specifications. If we miscalculate the resources or time we need for these
projects, our business, financial condition and results of operations could be
materially and adversely affected.

WE MAY NOT COMPETE SUCCESSFULLY WITH OUR COMPETITORS, WHICH COULD RESULT IN
REDUCED REVENUES.

We compete in markets that are new, intensely competitive and rapidly
changing. We may not compete successfully with our competitors. We currently
compete for client assignments and experienced personnel principally with the
following:

- large systems integrators such as International Business Machines
Corporation, Andersen Consulting and Computer Sciences Corporation;

- specialty systems integrators such as Cambridge Technology Partners,
Inc. and Sapient Corporation;

- strategy consulting firms such as McKinsey & Company, Inc. and Boston
Consulting Group, Inc.; and

- Internet professional services providers such as USWeb/CKS, Viant
Corporation, Scient Corporation and iXL Enterprises, Inc.

Many of these businesses have longer operating histories and significantly
greater financial, technical, marketing and managerial resources than we do.
International Business Machines Corporation, Andersen Consulting and Computer
Sciences Corporation have much longer operating histories, generate much greater
revenue and are better known than we are. Cambridge Technology Partners, Inc.
and Sapient Corporation generate significantly more revenue than we do. McKinsey
& Company, Inc. and Boston Consulting Group, Inc. offer a greater breadth of
management consulting services and have a much longer operating history than we
do.

Our markets have relatively low barriers to entry. We expect to continue to
face competition from new market entrants, including interactive marketing firms
such as Agency.com, Ltd. and Modern Media.PoppeTyson, Inc.

Competition in our market is based primarily on the following factors:

- Internet expertise and talent;

- quality, pricing and speed of service delivery;

- client references;

- integrated strategy, technology and creative design services; and

- vertical industry knowledge.

Some competitive factors are outside of our control. These factors include
our competitors' hiring and retention of senior staff, development of software
that is competitive with our products and services and response to client needs.

LACK OF GROWTH OR DECLINE IN INTERNET USAGE COULD CAUSE OUR BUSINESS TO SUFFER.

We have derived most of our revenue from projects involving the Internet.
The Internet is new and rapidly evolving. Our business will be adversely
affected if Internet usage does not continue to grow. A number of factors may
inhibit Internet usage. These factors include inadequate network infrastructure,
security concerns, inconsistent service quality and lack of cost-effective,
high-speed service. On the other hand, if Internet usage grows, the Internet

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<PAGE> 11

infrastructure may not support the demands this growth will place on it. The
Internet's performance and reliability may decline. In addition, outages and
delays have occurred throughout the Internet network infrastructure and have
interrupted Internet service. If these outages or delays occur frequently in the
future, Internet usage could grow more slowly or decline.

We may also incur substantial costs to keep up with changes surrounding the
Internet. Unresolved critical issues concerning the commercial use and
government regulation of the Internet include the following:

- security;

- cost and ease of Internet access;

- intellectual property ownership;

- privacy;

- taxation; and

- liability issues.

Any costs we incur because of these factors could materially and adversely
affect our business, financial condition and results of operations.

IF WE FAIL TO KEEP PACE WITH CHANGING TECHNOLOGIES, WE MAY LOSE CLIENTS.

Our market is characterized by rapidly changing technologies, frequent new
product and service introductions and evolving industry standards. If we cannot
keep pace with these changes, our business could suffer. The Internet's recent
growth and intense competition in our industry exacerbate these characteristics.
To achieve our goals, we need to develop strategic business and Internet
solutions that keep pace with continuing changes in industry standards,
information technology and client preferences. We will have to improve the
performance features and reliability of our services to adapt to rapidly
changing technologies. Also, as part of our business strategy, we reuse elements
of our Internet solutions for which there is repeat customer demand. We could
incur substantial costs if we need to modify our reusable solutions to adapt to
technological changes.

IF WE LOSE THE SERVICES OF OUR FOUNDER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
RAUL J. FERNANDEZ, OR OTHER KEY PERSONNEL, OUR BUSINESS AND STOCK PRICE COULD
SUFFER.

Our future success depends in large part on the continued services of a
number of our key personnel, including our founder, Chairman, President and
Chief Executive Officer, Raul J. Fernandez. We have no employment contract with
Mr. Fernandez or many of our other key personnel. The loss of the services of
Mr. Fernandez or any of our other key personnel could have a material adverse
effect on our business, financial condition and results of operations. We might
not be able to prevent key personnel, who may leave our employ in the future,
from disclosing or using our technical knowledge, practices or procedures. One
or more of our key personnel might resign and join a competitor or form a
competing company. As a result, we might lose existing or potential clients.

WE DEPEND ON INTELLECTUAL PROPERTY WHICH MAY BE DIFFICULT TO PROTECT. THIS COULD
AFFECT OUR ABILITY TO COMPETE EFFECTIVELY.

Our success depends, in part, upon our intellectual property rights. We do
not have any patents or patent applications pending. Existing trade secret and
copyright laws afford us only limited protection. Third parties may attempt to
disclose, obtain or use our solutions or technologies. This is particularly true
in foreign countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States. Others may independently
develop and obtain patents or copyrights for technologies that are similar or
superior to our technologies. If that happens, we may not be able to license
those technologies on reasonable terms, or at all.

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Generally, we develop software applications for specific client
engagements. We generally assign software ownership to the client and retain
only a license for limited uses. Issues relating to ownership of and rights to
use software applications and frameworks can be complicated. We may become
involved in disputes that affect our ability to resell or reuse these
applications and frameworks. Also, we may have to pay economic damages in these
disputes.

WE ARE, AND WILL CONTINUE TO BE, CONTROLLED BY OUR OFFICERS AND DIRECTORS, WHICH
COULD RESULT IN OUR TAKING ACTIONS THAT OTHER STOCKHOLDERS DO NOT APPROVE.

When this offering closes, our directors and executive officers will
beneficially own approximately 61% of the outstanding common stock. As a result,
they will continue to be able to control most matters requiring stockholder
approval. Among other things, they will be able to elect a majority of the
directors and approve significant corporate matters.

PROBLEMS RELATED TO THE YEAR 2000 ISSUE COULD REQUIRE US TO INCUR UNANTICIPATED
DELAYS AND EXPENSES.

Year 2000 problems could require us to incur delays and unanticipated
expenses. These delays and expenses could have a material adverse effect on our
business, financial condition and results of operations. Clients' and potential
clients' purchasing patterns may be affected by year 2000 issues as companies
expend significant resources to correct or replace their current systems for
year 2000 compliance. These clients and potential clients may have fewer funds
available to purchase our services. We may experience operations difficulties
because of undetected errors or defects in the technology we use in our internal
systems. We have made representations to clients concerning year 2000 compliance
and may become involved in disputes regarding year 2000 problems involving
solutions that we have developed or implemented. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Year 2000
Readiness Disclosure."

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

We have made three acquisitions and agreed to an investment in a joint
venture in the last 15 months. Any acquisitions or investments we make in the
future will involve risks. We may not be able to make acquisitions or
investments on commercially acceptable terms. If we do buy a company, we could
have difficulty retaining and assimilating that company's personnel. In
addition, we could have difficulty assimilating acquired products, services or
technologies into our operations. These difficulties could disrupt our ongoing
business, distract our management and employees, increase our expenses and
materially and adversely affect our results of operations. Furthermore, we may
incur debt or issue equity securities to pay for any future acquisitions. If we
issue equity securities, your ownership share of Proxicom could be reduced.

WE HAVE STARTED EXPANDING OUR BUSINESS OVERSEAS. OUR INTERNATIONAL EXPANSION
COULD RESULT IN FINANCIAL LOSSES DUE TO CHANGES IN FOREIGN ECONOMIC CONDITIONS
AS WELL AS FLUCTUATIONS IN CURRENCY AND EXCHANGE RATES.

We expect to expand our international operations and international sales
and marketing efforts. Recently, we commenced operations in Germany and began
servicing clients in Spain. We also plan to service clients in Italy soon. We
have limited experience in marketing, selling and distributing our services
internationally. International operations are subject to other inherent risks,
including the following:

- recessions in foreign economies;

- political and economic instability;

- fluctuations in currency exchange rates;

- difficulties and costs of staffing and managing foreign operations;

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- potentially adverse tax consequences;

- reduced protection for intellectual property rights in some countries;

- changes in regulatory requirements; and

- reductions in business activity during the summer months in Europe.

THIS OFFERING'S NET PROCEEDS MAY BE ALLOCATED IN WAYS WITH WHICH YOU AND OTHER
STOCKHOLDERS MAY NOT AGREE.

We have not determined how the majority of the proceeds of this offering
will be spent. Our management may spend this offering's net proceeds in ways
with which you and our other stockholders may not agree. See "Use of Proceeds."

THE TOTAL PRICE INVESTORS WILL PAY FOR OUR COMMON STOCK IN THIS OFFERING WILL
SUBSTANTIALLY EXCEED THE VALUE OF OUR ASSETS AFTER SUBTRACTING OUR LIABILITIES.

The price you will pay for our common stock will be substantially higher
than the book value per share of our outstanding stock after this offering. In
addition, investors in this offering will contribute 69.1% of the total amount
paid by all investors in our company but will own only 16.9% of the shares
outstanding.

OUR STOCK HAS NOT TRADED PUBLICLY, AND AFTER THIS OFFERING ITS MARKET PRICE MAY
FLUCTUATE WIDELY.

Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could fluctuate substantially due to

- future announcements concerning us or our competitors;

- quarterly fluctuations in operating results;

- announcements of acquisitions or technological innovations; or

- changes in earnings estimates or recommendations by analysts.

In addition, the stock prices of many technology companies fluctuate widely for
reasons which may be unrelated to operating results. Fluctuations in our common
stock's market price may affect our visibility and credibility in the Internet
solutions market.

THE PRICE PER SHARE OF OUR COMMON STOCK IN THIS OFFERING MAY NOT BE INDICATIVE
OF THE MARKET PRICE THAT WILL PREVAIL AFTER THIS OFFERING.

Since our stock has not yet traded publicly, our management and the
underwriters negotiated the common stock's initial public offering price per
share. The price they determined may not be indicative of the market price that
will prevail after this offering. As a result, you could suffer a loss if the
market price that prevails after this offering is less than the price you paid
per share.

FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD LOWER OUR STOCK
PRICE AND IMPAIR OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.

After this offering and a recently completed acquisition, we will have
23,901,103 shares of common stock outstanding. If the underwriters exercise
their over-allotment option in full, we will have 24,576,103 shares outstanding.
Sales of a large number of shares could adversely affect the market price of our
common stock and could impair our ability to raise funds in additional stock
offerings.

The shares of common stock sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless the
shares are purchased by an affiliate of ours, sales of which will be limited by
Rule 144 under the Securities Act. Holders of restricted shares generally will
be entitled to sell these shares in the public market without registration
either under Rule 144 or any other applicable exemption under the Securities
Act.

10
<PAGE> 14

As soon as practicable after this offering we intend to register up to
8,350,000 shares of common stock subject to outstanding stock options or
reserved for issuance under our stock plans. As of the date of this prospectus,
options to purchase 5,263,368 shares of common stock were outstanding.

In addition, upon completion of this offering, the holders of 19,056,133
shares of common stock have the right to request registration of these shares in
future public offerings of our equity securities.

IT MAY BE HARD FOR A THIRD PARTY TO ACQUIRE OUR COMPANY, AND THIS COULD DEPRESS
OUR STOCK PRICE.

Provisions of our certificate of incorporation, our bylaws and Delaware law
could make it difficult for a third party to acquire us, even if doing so would
benefit our stockholders. This could depress our stock price.

OUR BOARD OF DIRECTORS CAN ISSUE PREFERRED STOCK WITH RIGHTS ADVERSE TO THE
HOLDERS OF COMMON STOCK.

After the offering, our board of directors will be authorized, without
further stockholder approval, to issue up to 10,000,000 shares of preferred
stock. Issuance of preferred shares with rights to distributions, voting rights
or other rights superior to the common stock would be adverse to the holders of
common stock. See "Description of Capital Stock."

YOU SHOULD NOT EXPECT TO RECEIVE DIVIDENDS FROM US.

We do not expect to declare or pay any cash dividends in the foreseeable
future.

YOU SHOULD BE AWARE THAT THERE ARE BENEFITS OF THE OFFERING TO EXISTING
STOCKHOLDERS.

Several of our stockholders are selling shares in this offering. As
calculated under "Dilution," the average price per share paid by our existing
stockholders is $1.19. The net price per share paid to the selling stockholders
in this offering is $12.09. Therefore, the average realized gain per share to
the selling stockholders is $10.90. See "Dilution."

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH MAY NOT PROVE TO BE
ACCURATE.

This prospectus contains forward-looking statements. The outcome of the
events described in these forward-looking statements is subject to risks. Actual
results could differ materially. This "Risk Factors" section and those sections
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" as well as other sections in this
prospectus discuss some of the factors that could contribute to these
differences.

11
<PAGE> 15

USE OF PROCEEDS

Proxicom will receive proceeds of approximately $46.9 million from the sale
of the 4,000,000 shares of common stock it is offering, net of underwriting
discounts and estimated expenses, and based on an initial public offering price
of $13.00 per share. Proxicom will not realize any proceeds from the sale of
common stock by the selling stockholders.

The primary purposes of this offering are to obtain additional capital,
create a public market for our common stock and facilitate future access to
public markets. Proxicom intends to use the majority of the offering's net
proceeds for working capital and general corporate purposes (including increases
in personnel and marketing activities). Proxicom will use a portion of the
proceeds to pay off a $1.4 million note payable to an investment bank for
services in connection with the IBIS Consulting transaction. The note accrues
interest at 7.0% per annum and matures upon the earlier of August 21, 1999 or
the completion of an initial public offering. Proxicom may use a portion of the
proceeds for strategic acquisitions. From time to time, in the ordinary course
of business, Proxicom evaluates potential acquisitions of businesses, products
or technologies. In March 1999, Proxicom reached an agreement to invest
approximately $360,000 in a joint venture company in Italy with Ericsson
Telecommunicazioni SpA. Other than this transaction, Proxicom has no present
understandings or agreements with respect to any acquisition of businesses,
products or technologies.

Pending use of the net proceeds for the above purposes, Proxicom intends to
invest such funds in short-term, interest-bearing, investment-grade securities.
In addition to the use of the net proceeds received by it from the offering,
Proxicom also expects during the next 18 months to meet its working capital
requirements through existing cash and cash equivalents, short-term investments,
cash from sales of services, its credit facility and possibly other borrowings.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

DIVIDEND POLICY

With the exception of distributions that three current Proxicom
subsidiaries made before Proxicom acquired them, Proxicom has never declared or
paid any cash dividends on its capital stock. Proxicom intends to retain future
earnings, if any, to finance the expansion of its business and does not expect
to pay any cash dividends in the foreseeable future. Also, Proxicom is
prohibited from paying cash dividends under the terms of its credit facility.
See "Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Liquidity and Capital Resources."

12
<PAGE> 16

CAPITALIZATION

The following table presents our capitalization as of December 31, 1998 on
an actual basis and an adjusted basis. The adjusted basis presentation reflects

- the conversion of all shares of convertible preferred stock outstanding
as of the date of this prospectus into 4,231,194 shares of common stock;

- the $4.9 million charge associated with the issuance of the Series D
convertible preferred stock;

- the issuance of 1,011,378 shares of convertible preferred stock upon the
exercise of warrants at $7.91 per share on April 13, 1999;

- the issuance of 829,771 shares of our common stock in our 1999 merger
with ad hoc Interactive;

- amendments to the certificate of incorporation which will occur
immediately before the closing of this offering; and

- Proxicom's sale of 4,000,000 shares of common stock in this offering at
an initial public offering price of $13.00 per share and application of
the estimated net proceeds.

The adjusted basis presentation does not include 3,243,240 shares of common
stock issuable upon exercise of stock options outstanding or rights to receive
shares as of December 31, 1998. You should read this information together with
the financial statements and notes to those financial statements appearing
elsewhere in this prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------
ACTUAL ADJUSTED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, $.01 par value;
2,641,347 shares authorized, 1,629,969 shares issued
and 1,222,469 shares outstanding (actual); no shares
authorized, issued and outstanding (adjusted).......... $ 12 $ --
Series B convertible preferred stock, $.01 par value;
359,712 shares authorized, issued and outstanding
(actual); no shares authorized, issued and outstanding
(adjusted)............................................. 4 --
Series C convertible preferred stock, $.01 par value;
419,302 shares authorized, issued and outstanding
(actual); no shares authorized, issued and outstanding
(adjusted)............................................. 4 --
Series D convertible preferred stock, $.01 par value;
no shares authorized, issued and outstanding(1)........ -- --
Preferred stock, $.01 par value; no shares authorized,
issued and outstanding (actual); 10,000,000 shares
authorized, no shares issued and outstanding
(adjusted)............................................. -- --
Common stock, $.01 par value; 20,000,000 shares
authorized, 14,609,997 shares issued and 14,556,868
shares outstanding (actual); 100,000,000 shares
authorized, 23,670,962 shares issued and 23,617,833
shares outstanding (adjusted).......................... 146 236
Additional paid-in capital................................ 25,229 92,559
Retained deficit.......................................... (18,180) (23,777)
Comprehensive income...................................... 3 3
Treasury stock............................................ (222) (222)
-------- --------
Total stockholders' equity........................... 6,996 68,799
-------- --------
Total capitalization............................ $ 6,996 $ 68,799
======== ========
</TABLE>

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

(1) We issued 1,218,333 shares of Series D convertible preferred stock for $7.3
million on February 1, 1999.

13
<PAGE> 17

DILUTION

Proxicom's pro forma net tangible book value as of December 31, 1998, was
approximately $21.9 million, or $1.12 per share of common stock. We have
determined pro forma net tangible book value per share by subtracting intangible
assets from pro forma stockholders' equity and dividing that number by
19,617,833 pro forma shares of common stock outstanding as of December 31, 1998.
The preceding pro forma information gives effect to

- the conversion of all shares of convertible preferred stock outstanding
as of the date of this prospectus into 4,231,194 shares of common stock;

- the $4.9 million charge associated with the issuance of Series D
convertible preferred stock;

- the exercise of warrants to purchase 1,011,378 shares of convertible
preferred stock at $7.91 per share on April 13, 1999; and

- the issuance of 829,771 shares of our common stock in our 1999 merger
with ad hoc Interactive.

If Proxicom sells 4,000,000 shares of common stock in this offering at an
initial public offering price of $13.00 per share and assuming our receipt of
the estimated net proceeds therefrom, our pro forma adjusted net tangible book
value as of December 31, 1998, would have been approximately $68.8 million, or
$2.91 per share. This represents an immediate increase in such net tangible book
value of $1.79 per share to existing stockholders and an immediate dilution of
$10.09 per share to new investors. The following table illustrates this per
share dilution.

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $13.00
Pro forma net tangible book value as of December 31,
1998................................................... $1.12
Increase per share of common stock attributable to the
offering(1)............................................ 1.79
-----
Pro forma net tangible book value after the offering(1)..... 2.91
------
Net tangible book value dilution to new investors(1)........ $10.09
======
</TABLE>

The following table summarizes on a pro forma basis as of December 31,
1998, the total number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by existing
stockholders and by new investors (at an initial offering price of $13.00 per
share and without giving effect to the underwriting discount and estimated
offering expenses).

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE PAID
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 19,617,833 83.1% $23,289,000 30.9% $ 1.19
New investors.............. 4,000,000 16.9 52,000,000 69.1 13.00
---------- ----- ----------- -----
Total............ 23,617,833 100.0% $75,289,000 100.0%
========== ===== =========== =====
</TABLE>

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

(1) Does not include options to purchase or rights to receive outstanding as of
December 31, 1998 a total of 3,243,240 shares of common stock with a
weighted average per share exercise price of $5.93. If the options were to
be exercised in full for cash, pro forma net tangible book value per share
after the offering would be $3.28, the increase per share attributable to
new investors would be $2.16, and the dilution per share to new investors
would be $9.72.

14
<PAGE> 18

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables contain selected consolidated financial data as of
December 31 in each of the years 1994 through 1998 and for each of the years in
the five-year period ended December 31, 1998. The selected consolidated
financial data for each of the years in the five-year period ended December 31,
1998 have been derived from Proxicom's consolidated financial statements, which
have been audited by PricewaterhouseCoopers LLP, independent accountants. The
selected financial data are qualified by reference to, and should be read in
conjunction with, Proxicom's consolidated financial statements and the notes to
those financial statements, included elsewhere in this prospectus. Proxicom
merged with ad hoc Interactive in March 1999. The supplemental consolidated
financial statements and the notes to those supplemental consolidated financial
statements, which reflect the merger on a pooling of interests method of
accounting, are included elsewhere in this prospectus. Amounts reflected in such
supplemental statements are not materially different than amounts shown below.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ 1,258 $ 6,089 $12,431 $27,356 $ 42,405
Cost of revenue............................. 758 2,620 4,756 12,077 23,862
------- ------- ------- ------- --------
Gross profit................................ 500 3,469 7,675 15,279 18,543
------- ------- ------- ------- --------
Operating expenses:
General and administrative................ 370 2,062 5,405 9,664 15,325
Selling and marketing..................... -- 242 652 1,711 2,896
Research and development.................. -- -- 404 961 692
Acquisition and merger costs.............. -- -- -- -- 2,886
Stock-based and other compensation(1)..... -- -- -- -- 18,175
------- ------- ------- ------- --------
Total.................................. 370 2,304 6,461 12,336 39,974
------- ------- ------- ------- --------
Income (loss) from operations............... 130 1,165 1,214 2,943 (21,431)
Interest income (expense), net.............. 3 5 55 80 (111)
------- ------- ------- ------- --------
Income (loss) before income taxes........... 133 1,170 1,269 3,023 (21,542)
Income tax provision (benefit).............. 37 294 185 330 (900)
------- ------- ------- ------- --------
Net income (loss)........................... $ 96 $ 876 $ 1,084 $ 2,693 $(20,642)
======= ======= ======= ======= ========
Basic net income (loss) per common share.... $ 0.01 $ 0.07 $ 0.08 $ 0.21 $ (1.50)
======= ======= ======= ======= ========
Diluted net income (loss) per common
share..................................... $ 0.01 $ 0.07 $ 0.08 $ 0.16 $ (1.50)
======= ======= ======= ======= ========
Weighted average common shares
outstanding............................... 12,492 13,027 12,993 12,626 13,762
======= ======= ======= ======= ========
Weighted average common shares and common
share equivalents......................... 12,492 13,027 13,536 16,333 13,762
======= ======= ======= ======= ========
Unaudited pro forma data(2)(3):
Basic net loss per common share........... $ (1.31)
========
Diluted net loss per common share......... $ (1.31)
========
Weighted average common shares
outstanding............................ 15,763
========
Weighted average common shares and common
share equivalents...................... 15,763
========
</TABLE>

15
<PAGE> 19

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, 1998
------------------------------------------ -----------------------------
1994 1995 1996 1997 1998 SUPPLEMENTAL(4) ADJUSTED(5)
---- ------ ------ ------- ------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash equivalents........... $ 70 $ 802 $1,119 $ 2,343 $ 2,482 $ 2,586 $62,939
Working capital............ 177 718 5,663 7,520 2,380 1,927 62,280
Total assets............... 548 2,395 8,696 16,097 22,077 22,551 83,264
Stockholders' equity....... 235 1,111 7,085 10,376 6,996 6,629 68,799
</TABLE>

- -------------------------
(1) Stock-based and other compensation was associated with a merger transaction
with IBIS Consulting and includes (a) a $17.2 million non-cash charge
relating to the elimination of a repurchase requirement for formula stock
and (b) $1.0 million in cash bonus payments required under the historical
IBIS Consulting plan.

(2) Pro forma data reflect the conversion of 2,001,483 shares of preferred stock
outstanding at December 31, 1998 into common stock.

(3) During 1998, Proxicom merged with two companies in transactions accounted
for as poolings of interests. Both companies had elected a status under
Subchapter S of the Internal Revenue Code that exempted them from corporate
income tax. If these Subchapter S corporations had been subject to taxation
in 1998, pro forma net loss would not have differed materially. See Note 2
to the consolidated financial statements.

(4) Supplemental data reflect the issuance of 829,771 shares of our common stock
in our 1999 merger with ad hoc Interactive and the consolidated balance
sheet data as if ad hoc Interactive had always been part of Proxicom.

(5) Adjusted data reflect (a) the conversion of all shares of convertible
preferred stock outstanding as of the date of this prospectus into 4,231,194
shares of common stock; (b) the $4.9 million charge associated with the
issuance of preferred stock; (c) the issuance of 1,011,378 shares of
convertible preferred stock upon the exercise of warrants at $7.91 per share
on April 13, 1999; and (d) Proxicom's sale of 4,000,000 shares of common
stock in this offering at an initial public offering price of $13.00 per
share and application of the estimated net proceeds.

16
<PAGE> 20

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

You should read the following discussion together with "Selected
Consolidated Financial Data," our consolidated and supplemental consolidated
financial statements and the notes to those financial statements elsewhere in
this prospectus. The discussion below would not be materially different if based
on the supplemental consolidated financial statements and related notes. In
addition to historical information, this discussion contains forward-looking
information that involves risks and uncertainties. Proxicom's actual results
could differ materially from those anticipated by such forward-looking
information due to competitive factors, risks associated with Proxicom's
expansion plans and other factors discussed under "Risk Factors" and elsewhere
in this prospectus.

OVERVIEW

Our revenue is generally comprised of fees generated for professional
services. We provide our services primarily on a fixed-price, fixed-timeframe
basis. We use an internally developed process to estimate and propose fixed
prices for such projects. The estimation process accounts for standard billing
rates particular to each project, the technology environment and application
type to be applied, and the project's timetable and overall technical
complexity. A Proxicom senior management team member must approve all of our
fixed-price proposals. For these contracts, we recognize revenue using a
percentage-of-completion method primarily based on costs incurred. We make
provisions for estimated losses on uncompleted contracts on a contract-
by-contract basis and recognize such provisions in the period in which the
losses are determined. Less frequently, we provide services on a time and
materials basis. In such cases, we recognize revenue as we incur costs.

Proxicom's financial results may fluctuate from quarter to quarter based on
such factors as the number, complexity, size, scope and lead time of projects in
which Proxicom is engaged. More specifically, these fluctuations can result from
the contractual terms and degree of completion of such projects, any delays
incurred in connection with projects, employee utilization rates, the adequacy
of provisions for losses, the accuracy of estimates of resources required to
complete ongoing projects and general economic conditions. In addition, revenue
from a large client may constitute a significant portion of Proxicom's total
revenue in a particular quarter.

In August 1998, Proxicom completed a merger with IBIS Consulting, Inc. by
exchanging 4,988,297 shares of Proxicom common stock for all the common stock of
IBIS Consulting. In addition, IBIS Consulting options were converted into
options to purchase 345,034 shares of Proxicom common stock. Proxicom incurred
acquisition and merger costs of $2.8 million and stock-based and other
compensation expense of $18.2 million associated with IBIS Consulting. In
connection with this transaction, the president of IBIS Consulting was elected
to Proxicom's board of directors. In January 1998, Proxicom completed a merger
with Square Earth, Inc. by exchanging 534,999 shares of Proxicom common stock
for all the common stock of Square Earth. In addition, Square Earth options were
converted into options to purchase 41,474 shares of Proxicom common stock.
Proxicom incurred acquisition and merger costs of $130,000 in connection with
this transaction. Proxicom accounted for each of these transactions as a pooling
of interests. All prior period consolidated financial statements have been
restated to include IBIS Consulting's and Square Earth's results of operations,
financial position and cash flows.

RECENT DEVELOPMENTS

As of March 26, 1999, Proxicom merged with ad hoc Interactive, Inc., a
California-based Internet solutions provider, by exchanging 829,771 shares of
Proxicom common stock and rights to receive 39,333 shares of Proxicom common
stock for all of the outstanding stock and stock rights of ad hoc Interactive.
The transaction was accounted for as a pooling of interests. In the

17
<PAGE> 21

transaction, ad hoc Interactive stockholders became parties to the stockholders
agreement and registration rights agreement described in the "Certain
Transactions" section of this prospectus. Taking the merger into account,
Proxicom's revenue for the three-month period ended March 31, 1999 was $13.3
million, a 64.8% increase from revenue of $8.0 million for the three-month
period ended March 31, 1998. Proxicom recorded charges for merger related costs
that included legal and accounting fees and other costs of $300,000 and
$130,000, respectively, in the three-month periods ended March 31, 1999 and
1998. The $300,000 charge was directly associated with the ad hoc Interactive
merger. Giving effect to the charges and adjusted to reflect the ad hoc
Interactive merger, net loss for the three-month periods ended March 31, 1999
and 1998 was $148,000 and $487,000, respectively. Exclusive of the after-tax
effect of these acquisition related charges and adjusted to reflect the merger,
net income for the three-month period ended March 31, 1999 was $84,000, compared
to a loss of $408,000 for the three-month period ended March 31, 1998.

In addition, in March 1999, Proxicom signed an agreement with Ericsson
Telecommuncazioni SpA. Under the agreement, Proxicom will make a 19.9%
investment in an Italian joint venture company. Ericsson will own the remaining
81.1% interest. The joint venture company will provide Internet solutions to
Italian-based businesses. The initial share capital of the joint venture company
will be approximately $1.7 million, which Proxicom and Ericsson will contribute
in proportion to their shareholder percentage interests. Proxicom will enter
into a services agreement with the joint venture company under which Proxicom
will provide consulting, project management and technical design services to the
joint venture's clients.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the relative
composition of revenue and selected statements of operations data as a
percentage of revenue:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Revenue..................................................... 100.0% 100.0% 100.0%
Cost of revenue............................................. 38.3 44.1 56.3
----- ----- -----
Gross profit................................................ 61.7 55.9 43.7
----- ----- -----
Operating expenses:
General and administrative................................ 43.5 35.3 36.1
Selling and marketing..................................... 5.2 6.3 6.8
Research and development.................................. 3.2 3.5 1.6
Acquisition and merger costs.............................. -- -- 6.8
Stock-based and other compensation........................ -- -- 42.9
----- ----- -----
Total.................................................. 51.9 45.1 94.2
----- ----- -----
Income (loss) from operations............................... 9.8 10.8 (50.5)
Interest income (expense), net.............................. 0.4 0.3 (0.3)
----- ----- -----
Income (loss) before income taxes........................... 10.2 11.1 (50.8)
Income tax provision (benefit).............................. 1.5 1.2 (2.1)
----- ----- -----
Net income (loss)........................................... 8.7% 9.9% (48.7)%
===== ===== =====
</TABLE>

1998 COMPARED TO 1997

Revenue. In 1998, revenue increased $15.0 million, or 55.0%, to $42.4
million from $27.4 million in 1997. This increase in revenue reflects increases
in both the size and number of our client engagements. Approximately 65% of this
increase is attributable to increased engagement size and the remainder is
attributable to increased numbers of engagements. IBIS Consulting accounted for
$8.9 million, or 59%, of the increase in Proxicom's 1998 revenues.

18
<PAGE> 22

Square Earth's contribution was not separately accounted for because its
operations were fully integrated into ours following the merger in January 1998.

Cost of Revenue. Cost of revenue consists primarily of salaries and
associated employee benefits for personnel directly assigned to client projects,
non-research and development efforts and non-reimbursed direct expenses incurred
to complete projects, such as technical consulting fees. These costs increased
$11.8 million, or 97.6%, to $23.9 million in 1998 from $12.1 million in 1997.
The increase during 1998 was due primarily to increases in the number of
personnel needed to service these engagements and the related complexity of the
engagements. Approximately 75% of the increase was attributable to personnel
cost increases. Service project personnel increased from 199 at December 31,
1997 to 311 at December 31, 1998. We usually do not fully utilize our consulting
and delivery personnel on billable projects during their initial months of
employment. During this time, they undergo training and become integrated into
our operations. Additionally, in 1998, we re-deployed engineers who were active
in developing and enhancing replicable frameworks. During this transition phase,
the engineer utilization was lower due to start-up requirements. Also, during
the second half of 1998, due to market conditions, customer demand in our
financial services and energy industry groups softened, which adversely affected
service utilization. As a percentage of revenue, cost of revenue increased to
56.3% during 1998 as compared to 44.1% during 1997.

Gross Profit. In 1998, gross profit increased $3.2 million, or 21%, to
$18.5 million from $15.3 million in 1997. The gross profit dollar increase
reflects the increase in revenue during 1998. As a percentage of revenue, gross
profit decreased to 43.7% during 1998 as compared to 55.9% during 1997. The
percentage decrease reflects reduced overall utilization of consulting and
delivery personnel as discussed in the cost of revenue section. Employee
utilization can be affected by multiple factors, including rapid growth and
reductions in the number or size of projects in any period. Reduction in
employee utilization rates could cause further decline in gross profit as a
percentage of revenue.

General and Administrative. General and administrative costs consist of
salaries for executive and selected senior management, finance, recruiting,
administrative groups and associated employee benefits, facilities costs
including depreciation and amortization, computer and office equipment operating
leases, training, travel and all other branch and corporate costs. These costs
increased $5.6 million, or 58.6%, to $15.3 million in 1998 from $9.7 million in
1997. This increase was due primarily to increases in personnel and facilities
and related costs due to expanded leasing commitments in Reston, VA, New York,
NY, San Francisco, CA and the establishment of new offices in Chicago, IL and
Munich, Germany to support the internal growth of our operations. Approximately
70% of the increase is attributable to the facilities and related cost
increases. As a percentage of revenue, general and administrative expenses
increased to 36.1% in 1998 as compared to 35.3% in 1997. We wrote off $959,000
in doubtful accounts in 1998, which included approximately $600,000 from
disputes with two customers. We believe the current allowance for doubtful
accounts balance of $500,000 is sufficient for other doubtful accounts.

Selling and Marketing. Selling and marketing costs consist primarily of
salaries and associated benefits, travel expenses of selling and marketing
personnel and promotional expenses. Selling and marketing costs increased $1.2
million, or 69.3%, to $2.9 million in 1998 from $1.7 million in 1997.
Approximately 60% of this increase was due to marketing program expenditures and
the remaining increase was due to increased personnel-related costs incurred in
sales promotion efforts. As a percentage of revenue, selling and marketing
increased to 6.8% from 6.3% during 1997.

Research and Development. Research and development costs, primarily
software development, consist of salaries assigned directly to research and
development projects, associated employee benefits and direct expenses incurred
to complete research projects, including non-

19
<PAGE> 23

employee consulting. Research and development costs decreased $269,000, or
28.0%, to $692,000 in 1998 from $961,000 in 1997. We attribute this decrease to
our re-deploying engineers and technicians active in developing and enhancing
replicable frameworks to client service projects during the third quarter of
1998. For 1998 and 1997, we charged all of our costs for research and
development to operations as incurred. We did this because the period between
technological feasibility and general release was relatively short and the costs
incurred during this period were not significant.

Acquisition and Merger Costs. We incurred charges of approximately $2.9
million in 1998 for costs associated with the Square Earth and IBIS Consulting
transactions. These transaction costs related to professional fees and other
direct expenses. We did not record any such expenses for the year ended December
31, 1997 because we did not acquire any entities during that year.

Stock-based and Other Compensation. We incurred charges of $18.2 million
in 1998 for costs associated with our IBIS Consulting transaction. Of these
charges, $17.2 million related to the elimination of a repurchase requirement
for formula stock options and $1.0 million consisted of cash bonus payments
required under the historical IBIS Consulting plan. We did not record any
expense of this type for the year ended December 31, 1997 because no
formula-based stock options were exercised.

Interest Income (Expense), Net. Interest income (expense), net decreased
$191,000, or 238.8%, to interest expense of $111,000 in 1998 from interest
income of $80,000 in 1997. This decrease was due primarily to interest expense
we incurred from borrowings under our lines of credit during 1998 to support our
internal growth. Interest expense of $227,000 was offset by interest income of
$116,000 earned during 1998. We generally invest in U.S. Government treasury
bills and money market accounts. The amount of interest income fluctuates based
upon the amount of funds available for investment and prevailing interest rates.

Income Tax Provision (Benefit). Operating losses generated in 1998 were
carried back for tax purposes creating a tax benefit. The $900,000 income tax
benefit in 1998 represents a benefit from combined federal and state income
taxes at an effective rate of 4.2%, or 20.9% excluding the $17.2 million
non-deductible stock-based compensation charge. Income tax expenses of $330,000
in 1997 represented combined federal and state income taxes at an effective rate
of 10.9%. Our effective tax rate was favorably impacted in both 1997 and 1998 by
the transactions with Square Earth and IBIS Consulting, which were Subchapter S
corporations with pass-through tax status before the transactions.

1997 COMPARED TO 1996

Revenue. Revenue increased $15.0 million, or 120.0%, to $27.4 million in
1997 from $12.4 million in 1996. This increase is directly attributable to
increased client engagement size. IBIS Consulting and Square Earth accounted for
$6.3 million, or 42%, and $0.8 million, or 5%, respectively, of the increase in
Proxicom's 1997 revenue.

Cost of Revenue. Cost of revenue increased $7.3 million, or 153.9%, to
$12.1 million in 1997 from $4.8 million in 1996. This increase was due primarily
to increases in the size of our client engagements and the cost of additional
consulting and delivery personnel. Approximately 85% of the increase was
attributable to the increased personnel costs. We usually do not fully utilize
our consulting and delivery personnel on billable projects during their initial
months of employment. During this time, they undergo training and become
integrated into our operations. We had 126 consulting and delivery personnel at
December 31, 1996 and 199 at December 31, 1997. As a percentage of revenue, cost
of revenue increased to 44.1% during 1997 as compared to 38.3% during 1996.

Gross Profit. In 1997, gross profit increased $7.6 million, or 99%, to
$15.3 million from $7.7 million in 1996. The gross profit dollar increase
reflects the increase in revenue during

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<PAGE> 24

1997. As a percentage of revenue, gross profit decreased to 55.9% during 1997 as
compared to 61.7% during 1996. The percentage decrease reflects reduced
utilization of consulting and delivery personnel as discussed in the cost of
revenue section.

General and Administrative. General and administrative costs increased
$4.3 million, or 78.8%, to $9.7 million in 1997 from $5.4 million in 1996. This
increase was due primarily to increases in personnel, the leasing of a new
company headquarters in Reston, VA, costs incurred in connection with the
opening of our New York, NY office in 1997 and related facility costs to support
the growth of our operations. Approximately 65% of the cost increase is
attributable to increased facility and related costs.

Selling and Marketing. Selling and marketing costs increased $1.0 million,
or 162.4%, to $1.7 million in 1997 from $652,000 in 1996. This increase was due
to the expansion of our selling and marketing personnel to 15 employees at
December 31, 1997 from nine employees at December 31, 1996 and increased
promotional activities. Approximately 75% of the cost increase is attributable
to increased personnel costs.

Research and Development. Research and development costs increased
$557,000, or 137.9%, to $961,000 in 1997 from $404,000 in 1996. This increase is
attributable to increases in the number of engineers and technicians active in
developing and enhancing replicable frameworks. In 1997 and 1996, all of our
costs for research and development were charged to operations as incurred since
the period between technological feasibility and general release was relatively
short and the costs incurred during this period were not significant.

Interest Income (Expense), Net. Interest income increased $25,000, or
45.5%, to $80,000 in 1997 from $55,000 in 1996. This increase was due primarily
to our interest income earned on the invested portion of the proceeds of our
private financings during 1997. Interest income of $174,000 was offset by
interest expense of $94,000 from increased drawings under our lines of credit
during 1997 to support our internal growth.

Income Tax Provision. Income tax expense increased $145,000, or 78.4%, to
$330,000 in 1997 from $185,000 in 1996 and represented combined federal and
state income taxes at an effective marginal rate of 10.9% in 1997 and 14.6% in
1996. The comparatively low tax rate of 10.9% was caused primarily by the
transactions with Square Earth and IBIS Consulting, which were both Subchapter S
corporations with pass-through tax status before the transactions.

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<PAGE> 25

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth unaudited consolidated quarterly financial
data for the periods indicated. We derived this data from unaudited consolidated
financial statements, and, in the opinion of our management, they include all
adjustments, which consist only of normal recurring adjustments, necessary to
present fairly the financial results for the periods. Results of operations for
any previous fiscal quarter do not necessarily indicate what results may be for
any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.................. $5,267 $6,835 $7,190 $8,064 $7,744 $10,065 $ 12,123 $12,473
Cost of revenue.......... 2,283 2,971 3,208 3,615 4,450 5,447 6,759 7,206
------ ------ ------ ------ ------ ------- -------- -------
Gross profit............. 2,984 3,864 3,982 4,449 3,294 4,618 5,364 5,267
------ ------ ------ ------ ------ ------- -------- -------
Operating expenses:
General and
administrative....... 1,720 2,245 2,743 2,956 3,003 3,985 4,183 4,154
Selling and
marketing............ 392 389 436 494 712 648 909 627
Research and
development.......... 89 82 183 607 228 220 244 --
Acquisition and merger
costs................ -- -- -- -- 130 -- 2,756 --
Stock-based and other
compensation......... -- -- -- -- -- -- 18,175 --
------ ------ ------ ------ ------ ------- -------- -------
Total................ 2,201 2,716 3,362 4,057 4,073 4,853 26,267 4,781
------ ------ ------ ------ ------ ------- -------- -------
Income (loss) from
operations............. 783 1,148 620 392 (779) (235) (20,903) 486
Interest income
(expense), net......... 26 22 (15) 47 43 (25) (60) (69)
------ ------ ------ ------ ------ ------- -------- -------
Income (loss) before
income taxes........... 809 1,170 605 439 (736) (260) (20,963) 417
Income tax provision
(benefit).............. 4 91 86 149 (491) (452) (132) 175
------ ------ ------ ------ ------ ------- -------- -------
Net income (loss)........ $ 805 $1,079 $ 519 $ 290 $ (245) $ 192 $(20,831) $ 242
====== ====== ====== ====== ====== ======= ======== =======
AS A PERCENTAGE OF
REVENUE:
Revenue.................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.......... 43.3 43.5 44.6 44.8 57.5 54.1 55.8 57.8
------ ------ ------ ------ ------ ------- -------- -------
Gross profit............. 56.7 56.5 55.4 55.2 42.5 45.9 44.2 42.2
------ ------ ------ ------ ------ ------- -------- -------
Operating expenses:
General and
administrative....... 32.7 32.8 38.2 36.7 38.8 39.6 34.5 33.3
Selling and
marketing............ 7.4 5.7 6.1 6.1 9.2 6.4 7.5 5.0
Research and
development.......... 1.7 1.2 2.5 7.5 2.9 2.2 2.0 --
Acquisition and merger
costs................ -- -- -- -- 1.7 -- 22.7 --
Stock-based and other
compensation......... -- -- -- -- -- -- 149.9 --
------ ------ ------ ------ ------ ------- -------- -------
Total................ 41.8 39.7 46.8 50.3 52.6 48.2 216.6 38.3
------ ------ ------ ------ ------ ------- -------- -------
Income (loss) from
operations............. 14.9 16.8 8.6 4.9 (10.1) (2.3) (172.4) 3.9
Interest income
(expense), net......... 0.5 0.3 (0.2) 0.5 0.6 (0.3) (0.5) (0.6)
------ ------ ------ ------ ------ ------- -------- -------
Income (loss) before
income taxes........... 15.4 17.1 8.4 5.4 (9.5) (2.6) (172.9) 3.3
Income tax provision
(benefit).............. 0.1 1.3 1.2 1.8 (6.3) (4.5) (1.1) 1.4
------ ------ ------ ------ ------ ------- -------- -------
Net income (loss)........ 15.3% 15.8% 7.2% 3.6% (3.2)% 1.9% (171.8)% 1.9%
====== ====== ====== ====== ====== ======= ======== =======
</TABLE>

We have generally realized lower revenue in the first quarter of the year
than in the other quarters. We believe that this has been due primarily to
client budget cycles and the short-term nature of our contracts. We believe that
period to period comparisons of our operating results are not necessarily
meaningful and that you should not rely on these comparisons as indicators of
future performance.

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<PAGE> 26

LIQUIDITY AND CAPITAL RESOURCES

In October 1998, Proxicom entered into a $10.0 million revolving credit
facility with NationsBank, N.A. to be used for working capital purposes and
permitted acquisitions. The interest rate on amounts borrowed under the credit
agreement is LIBOR plus 2.0%. The credit facility expires on August 31, 2000,
and will renew automatically for one additional year at the sole discretion of
NationsBank. The credit facility contains restrictions on Proxicom and its
subsidiaries (including a prohibition on the payment of cash dividends by
Proxicom) and requires Proxicom to comply with financial tests and to maintain
specified financial ratios. The credit agreement is secured by a first priority
lien on all current and future assets of Proxicom and its subsidiaries and a
first priority pledge of the stock of IBIS Consulting and Square Earth. As of
the date of this prospectus, Proxicom had no outstanding borrowings under the
credit facility.

Cash and cash equivalents increased to $2.5 million at December 31, 1998,
from $2.3 million at December 31, 1997. Net cash provided by operating
activities of $1.3 million for 1997 was attributable to the growth in our
revenue and operations. The net cash used in operating activities of $4.0
million for 1998 was primarily offset with borrowings under our credit facility.

Unbilled services increased $2.9 million from $1.4 million at December 31,
1997 to $4.3 million at December 31, 1998. This increase was primarily due to
growth in the size and complexity of our projects. Larger, more complex projects
typically require completion of specified performance milestones prior to
billing clients, as opposed to providing for monthly progress billing.
Approximately 25% of our projects in 1998 required performance milestones to be
reached before invoicing. We believe our project size and complexity may
continue to increase in the future and that an increasing portion of our
projects will require completion of milestones prior to billing. If this occurs,
our unbilled services receivables can be expected to increase. All unbilled
services receivables as of December 31, 1998 are expected to be invoiced during
1999.

Capital expenditures of approximately $1.7 million, $2.0 million and $1.4
million for 1998, 1997 and 1996, respectively, were used primarily for computer
equipment, office equipment and leasehold improvements related to Proxicom's
growth. Capital expenditures for 1999 are expected to be approximately $2.0
million and will be made principally for computer equipment, internally used
software purchases and leasehold improvements to support our growth. A total of
approximately $631,000 was raised through the exercise of stock options in 1998,
and $3.5 million was raised through the private sale of convertible preferred
stock in 1997.

In February 1999, Proxicom completed the sale of 1,218,333 shares of Series
D convertible preferred stock for $7.3 million. At the closing of this offering,
all of these shares will be converted into common stock on a one-for-one basis.
Proxicom will be required to take a $4.9 million charge to additional paid-in
capital for the difference between the conversion feature and the estimated fair
value of the underlying common stock. Although not reflected on the statement of
operations, the charge will be reflected as a reduction to income and earnings
per share available for common stockholders. See "Certain Transactions -- Stock
Purchase Agreements and Related Matters -- Series D Purchase Agreement."

In connection with the issuance of Series A convertible preferred stock,
Proxicom issued warrants to purchase 1,011,378 shares of Series A convertible
preferred stock. The warrants were exercised for a purchase price of $8.0
million on April 13, 1999.

Proxicom anticipates that the net proceeds of this offering, together with
existing sources of liquidity and funds generated from operations, should
provide adequate cash to fund its currently anticipated cash needs through at
least the next 18 months. To the extent Proxicom is unable to fund its
operations from cash flows, it may need to obtain financing from external
sources in the form of either additional equity or indebtedness. There can be no
assurance that additional

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<PAGE> 27

financing will be available at all, or that, if available, such financing will
be obtainable on terms favorable to Proxicom.

YEAR 2000 READINESS DISCLOSURE

Background. Many computer systems and applications currently use two-digit
fields to designate a year. As the century date change occurs, date-sensitive
systems will recognize the year 2000 as 1900, or not at all. This inability to
recognize, or properly treat, the year 2000 may cause systems to process
financial and operational information incorrectly, resulting in system failures
and other business problems.

Risk Factors. We may experience operations interruptions because of year
2000 problems. Clients' and potential clients' purchasing patterns may be
affected by year 2000 issues as companies expend significant resources to
correct their current systems for year 2000 compliance. These clients and
potential clients may have fewer funds available to purchase our services. Also,
we may experience operations difficulties caused by undetected errors or defects
in the technology we use in our internal systems. We may become involved in
disputes regarding year 2000 problems involving solutions we developed or
implemented or the interaction of our Internet solutions with other
applications. Year 2000 problems could require us to incur delays and
unanticipated expenses. We have formulated an approach to address our exposure
to these risk factors.

Approach. We are assessing the impact of the year 2000 issue on our
current and future products, internal information systems and non-information
technology systems. We have performed a preliminary assessment of the year 2000
readiness of our information technology systems, including the hardware and
software we use to provide and deliver our Internet solutions. We plan to
perform a year 2000 simulation on our software and systems during the second
quarter of 1999. Based on the results, we will revise our solutions software
code as necessary.

We will require all vendors who provide material hardware or software for
our information technology systems to provide assurances of their year 2000
compliance. We will also seek assurances of year 2000 compliance from our
material non-information technology providers. We plan to complete this process
during the first half of 1999. Until our testing is complete and all of our
material vendors and providers are contacted, we will not be able completely to
evaluate whether our systems will need to be revised or replaced.

We have identified processes that will require year 2000 readiness testing.
We are in the process of establishing dedicated test environments for year 2000
readiness testing. We anticipate that testing will be largely complete by the
second quarter of 1999.

Status. Our testing to date has included our major infrastructure items,
hardware platforms and operating systems in our largest offices. Desktop
computing, servers, switching and routing platforms have been inventoried in
most locations, with only minor modifications required to the network and
routing platforms. Personal computer platforms have been identified and tested
in our Reston, VA and New York, NY locations. This effort is estimated to be 80%
complete. Installation of the software components that will bring the computing
platforms into compliance is estimated to be 25% complete, with full completion
scheduled in all locations by the end of April 1999. Embedded systems are
considered to be tested at a 20% level, with full testing to be completed by
June 1999.

We have largely completed the implementation of year 2000 compliant
internal computer applications for our main financial and order processing
systems.

Cost. Based on the work done to date, we predict that the cost for work
and material and upgrades needed to complete our year 2000 certification process
will be approximately $150,000. This includes the cost of material upgrades,
software modification and related consulting fees.

Contingency Plans. As discussed above, we are engaged in an ongoing year
2000 assessment and have not yet developed any contingency plans. We will assess
the results of our year 2000 simulation testing and third-party vendor and
service provider responses to determine the nature and extent of any contingency
plans.

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<PAGE> 28

BUSINESS

OVERVIEW

Our Internet solutions have included

- business to consumer electronic commerce Internet sites for Calphalon
Corporation, Cox Interactive Media, Inc. and Owens Corning;

- business to business electronic commerce extranets for the American
Electronics Association, Mercedes-Benz Credit Corp. and McKessonHBOC;
and

- company-specific intranets for GE Plastics, Hoffmann-La Roche, Inc. and
Merrill Lynch & Co., Inc.

We apply our proprietary methodology, the Proxicom Process, in all of our
client engagements. Using the Proxicom Process, we integrate strategy,
technology and creative design to help our clients transform their businesses
with Internet solutions.

INDUSTRY BACKGROUND

The Internet presents opportunities to transform businesses and entire
industries as organizations exploit its potential to extend and enhance their
business activities. Companies are using the Internet to communicate and
transact business on a one-to-one basis with existing customers and to target
and acquire new customers. At the same time, companies are using the Internet to
collaborate with their supply-chain partners, enable electronic commerce and
manage distribution relationships. The Internet has also allowed businesses to
identify new product and service offerings which extend and complement their
core markets. As a result, organizations are investing in the strategic use of
Internet solutions to transform their core business and technology strategies.

Faced with growing competition, deregulation and globalization, companies
are increasingly looking to utilize Internet technology to help build
competitive advantage. Much as client/server technologies opened information
access within organizations beginning in the late 1980s, the Internet now offers
the potential for organizations to extend their businesses beyond traditional
limits. The Internet extends the business role of technology from
employee-focused productivity enhancement to customer-focused revenue
generation, raising the importance and complexity of new technology deployment.

Successful adoption of the Internet in this new context poses strategic,
technical and creative design challenges. Alignment of business and Internet
strategies requires an understanding of how the Internet transforms
relationships between businesses and their internal organizations, customers and
business partners. Also, companies facing technology investment decisions often
need outside technical expertise to recognize \viable Internet tools, develop
feasible architectures and implement strategies. Companies must also be able to
integrate new Internet applications with their existing systems. Finally, a
successful solution requires that the Internet application, particularly the
user interface, be engaging and easy to use.

Few businesses have the range of skills necessary to successfully transform
the way they use technology and implement Internet solutions. Moreover, it is
difficult to find these skills externally in the supply-constrained Internet
professional services market. Even if businesses obtain skills in all three of
the strategy, technology and creative disciplines, they often have little
experience coordinating them to exploit fully the Internet and other advanced
technologies.

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<PAGE> 29

The combination of these factors is creating a significant and growing
demand for third-party Internet professional services. International Data Corp.,
a technology industry research firm, forecasts that the market for Internet and
electronic commerce services worldwide will grow from $4.6 billion in 1997 to
$43.7 billion by 2002. Forrester Research, Inc., another technology industry
research firm, estimates the market for Internet and electronic commerce
services will grow from $5.4 billion in 1998 to $32.7 billion by 2002. These
projections represent a compound annual growth rate of more than 55% over these
periods. Forrester Research predicts that the Internet will be one of the
fastest-growing areas within the information technology services industry. While
business to consumer solutions are expected to continue to be a large part of
the Internet and electronic commerce services market, Proxicom believes that
business to business corporate intranet/extranet solutions will represent a
growing percentage of the overall market.

Vendors addressing the Internet professional services market can be broadly
divided into four major categories:

- Large systems integrators provide technology expertise across a wide
range of offerings which address business process requirements.

- Specialty systems integrators frequently offer traditional distributed
computing models adapted to the Internet.

- Strategy consulting firms seek to help companies define models of how
they can use the Internet as a new channel and knowledge-sharing tool.

- Internet professional services providers bring Internet expertise, often
with a focus on either the creative, technology or strategy element.

While vendors in each category have specific strengths, each tends to address
only a piece of the Internet puzzle. Few vendors addressing the Internet
professional services market successfully integrate business and marketing
strategy with expertise in Internet-specific technology and creative design
services to help businesses achieve the full potential that the Internet offers.

Proxicom believes organizations are increasingly searching for a
single-source professional services firm that can deliver integrated strategy,
technology and creative design skills specifically for the Internet.
Furthermore, Proxicom believes that organizations will increasingly look to
Internet solutions providers that can leverage industry best practices, increase
predictability of success for Internet solutions and decrease risks associated
with implementation.

PROXICOM'S SOLUTION

Proxicom is an Internet solutions provider that focuses on creating
business value for its clients. Proxicom's solution has five essential elements:

- a structured methodology, the Proxicom Process;

- integrated Internet strategy, technology and creative design services;

- industry and business domain expertise;

- in-depth Internet and advanced technologies expertise; and

- knowledge management and knowledge sharing infrastructure.

Proxicom Process: Proprietary Methodology and Managed Risk. The Proxicom
Process is Proxicom's proprietary methodology for managing client engagements
that integrates strategy, technology and creative design services. The Proxicom
Process emphasizes an iterative development cycle with multiple incremental
releases to incorporate user feedback and to keep pace with the Internet's
ongoing technological changes. The four phases of the Proxicom Process'
development cycle are (a) Define Internet Strategy, (b) Plan Solution, (c)
Design Solution and (d) Implement Solution. Using the Proxicom Process, Proxicom
structures projects
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<PAGE> 30

tightly and offers fixed-price, fixed-timeframe engagements. This provides
clients with greater certainty regarding the time and cost of implementation.
Proxicom's approach improves quality of delivery and alignment of an Internet
initiative with a client's business. This approach is geared toward minimizing
the risk of technical or competitive obsolescence faced by companies using the
Internet.

Integrated Internet Strategy, Technology and Creative Design
Services. Proxicom delivers its solutions through collaborative,
multi-disciplinary teams that apply the collective strengths of their strategy,
technology and creative design professionals. Proxicom believes that this
approach results in coordinated planning among its professionals from all three
disciplines, a challenge that many organizations struggle to address. Proxicom's
delivery process fosters collaboration within its multi-disciplinary teams to
help clients achieve internal cooperation among previously independent business
functions. Proxicom believes its multi-disciplinary approach results in better,
more efficient Internet solutions in which business and communications
strategies are consistently balanced with the opportunities and capabilities of
Internet technologies.

Industry and Business Domain Expertise. Over the course of more than 600
engagements since 1994, Proxicom has gained significant expertise in specific
industries and types of business solutions. Proxicom's expertise provides
clients with a clear vision of the Internet's potential to improve their
business processes and competitive positions. Proxicom organizes its delivery of
services into vertical industry groups: energy and telecommunications, financial
services, retail and manufacturing and service industries. Through strategic
hires and numerous engagements, Proxicom has developed significant knowledge and
expertise in its targeted industries. Proxicom complements its industry
specialization with expertise in cross-industry solution areas such as
electronic commerce, supply chain management and interactive marketing. Proxicom
leverages its experience in these industries and solution areas across the
entire company through best practices as well as proprietary solution
frameworks, software tools and components to provide clients the full value of
Proxicom's industry and business domain expertise.

In-depth Internet and Advanced Technology Expertise. Proxicom has
developed an in-depth understanding of the specific challenges of deploying
Internet solutions. Proxicom is expert at building, extending and complementing
technologies that have the ability to transform businesses. Proxicom helps its
clients utilize leading-edge technologies and minimize the expenses associated
with hiring, training and retaining scarce information technology skill sets.
Because Proxicom's expertise is not limited to a single technology or
architecture, Proxicom is able to help clients choose the appropriate technology
to provide the best long-term business solution.

Knowledge Management and Knowledge Sharing Infrastructure. Through the
Proxicom Process, Proxicom continuously incorporates the multi-disciplinary
knowledge gained in Proxicom's engagements. This intellectual capital is tracked
and stored in Proxicom's corporate intranet, which acts as an integrated
knowledge management repository. Proxicom's intranet is both a solutions library
that facilitates the dissemination of intellectual capital across Proxicom and
an internal project management system that captures detailed information on the
resources required to achieve specific tasks on a project. In this way,
Proxicom's clients can benefit from industry best practices as well as
Proxicom's experiences. This system improves Proxicom's ability to predict
project completion requirements and increases the reusability of its
intellectual capital, thereby reducing risk for its clients. Proxicom's
week-long "boot camp" orientation and training program for all new employees
also facilitates knowledge sharing.

PROXICOM'S GROWTH STRATEGY

Proxicom's strategy is to build upon its position as a leading provider of
transformational Internet solutions that add significant and measurable business
value to Global 1000 companies and other large organizations. The following are
the key elements of Proxicom's strategy.

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<PAGE> 31

Leverage Existing Clients. Proxicom believes it must continue to satisfy
its customers. A strong track record of delivering high quality Internet
solutions often increases the amount, scope and sophistication of services
requested by existing clients. This reinforces Proxicom's growing reputation as
an innovative provider of mission-critical Internet solutions. Proxicom also
believes that maintaining a reputation for delivering innovative Internet
solutions and client satisfaction will increase its ability to attract new
clients through increased referral-driven sales and strong references.

Further Penetrate our Vertical Markets. Proxicom believes that its
expertise in specific industry dynamics and solutions considerably enhances its
ability to help companies apply the Internet to gain competitive advantage. In
each of its vertical industry groups, Proxicom employs industry experts, pursues
targeted sales and marketing, develops industry-specific offerings and
capitalizes on referrals from existing clients. Proxicom will continue to
emphasize this focus and seek to expand the scope of its industry expertise.

Continue Geographic Expansion. Proxicom believes that expanding
geographically will increase its ability to attract and better service clients.
Proxicom has already established offices in Reston, VA, San Francisco, CA, New
York, NY, Munich, Germany, Sacramento, CA, Chicago, IL and Houston, TX. All of
these offices have contributed to Proxicom's continued ability to attract large
clients. Proxicom plans to continue establishing offices in key geographic
locations through an integrated process of organic growth and targeted
acquisitions. Recently, Proxicom reached a preliminary understanding with
Ericsson Telecommunicazioni SpA to invest in a joint venture company. Through
the joint venture company, Proxicom would deliver its Internet consulting
services in Italy.

Hire and Retain Skilled Professionals. Proxicom believes its delivery of
integrated strategy, technology and creative design services distinguishes it
from other Internet professional services providers. To deliver these services,
Proxicom must hire and retain skilled professionals in all three disciplines and
continue to foster collaboration among them. Proxicom has a dedicated
organizational development team that initiates and oversees the training and
development of Proxicom's professionals. Key organizational development
initiatives include a week-long "boot camp" orientation and training program for
all new employees and "Proxicom University," which provides ongoing technical
and project management classes as well as career path management and guidance.
Proxicom is committed to recruiting and hiring quality professionals and to
maintaining a culture that motivates its staff while cultivating collaboration
and retention.

Evolve the Proxicom Process. Proxicom believes that continued evolution of
the Proxicom Process will strengthen its competitive position. Proxicom enhances
the Proxicom Process by incorporating best practices identified over numerous
engagements. This enables clients to benefit from Proxicom's cumulative
experience. Proxicom will continue to refine and enhance the Proxicom Process to
enable continued delivery of high quality solutions to clients on time and on
budget.

Leverage Technology Partnerships. Proxicom believes its relationships with
leading technology vendors, such as Microsoft Corporation and Netscape
Communications Corporation, will provide increased visibility and sales
opportunities. Proxicom's status as a Microsoft Certified Solution Provider
Partner has yielded considerable sales opportunities. Proxicom has also formed
strategic alliances with leading hosting and co-location providers, such as
Exodus Communications, Inc. Proxicom is committed to furthering these
relationships and building other strategic partnerships that can contribute to
its growth.

Extend Reusable Solutions. Proxicom leverages those elements of its
Internet solutions for which there is repeat customer demand. Reusable solutions
increase productivity, accelerate solutions development and enhance the
profitability of Proxicom's engagements. Proxicom's industry and business
solutions experts develop replicable solutions for target markets, including
best practices, tools, functionality, software and standard interfaces for
leading third-party
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applications. Proxicom has a dedicated framework reuse group that supports these
efforts and leverages them across the organization. The group also identifies
software reuse opportunities before and after client engagements, prepares code
for reuse and maintains version control. Proxicom intends to continue to
leverage its experience to create reusable solutions that can be used in future
engagements. On most engagements, Proxicom retains the right to reuse the
solutions' underlying components.

PROXICOM'S SERVICES

Proxicom's range of Internet solutions includes business to consumer
electronic commerce Internet sites, business to business electronic commerce
extranets and company-specific intranets. Proxicom's solutions may also extend a
packaged application to the Internet. Proxicom provides Internet solutions
through an integrated set of strategy, technology and creative design services.
Proxicom sells and delivers its solutions through its vertical industry groups.
Through these vertical groups, Proxicom leverages its experience, best practices
and sales and delivery skills across clients with similar needs. Proxicom also
leverages its cross-industry specialties in electronic commerce, supply chain
management and interactive marketing. Using the Proxicom Process, Proxicom
services every engagement with a multi-disciplinary team headed by a dedicated
project manager who coordinates business strategy, technology and creative
design services.

Strategy. Proxicom uses its business and interactive marketing strategy
services to align a client's Internet strategy with its business and marketing
goals. Business strategy services include business case development, business
process consulting and competitive benchmarking. Interactive marketing strategy
services focus on understanding our clients' customers, competitors, target
markets and opportunities, and advising them on appropriate strategies to take
advantage of the Internet. Proxicom works with clients to evolve, understand and
analyze business and marketing goals, operational methods and success criteria.
Proxicom's industry and solution expertise contributes significantly to its
ability to create Internet strategies that offer distinct competitive advantage.

Technology. Proxicom develops Internet solutions that exploit the latest
proven technologies to transform business processes. Proxicom has extensive
experience providing technology implementation services, including systems and
network architecture design, custom application development, legacy and third
party software integration, as well as technology advisory services. Proxicom is
experienced at designing, developing and deploying mission-critical Internet
solutions and integrating these applications with legacy systems to capitalize
on existing technology investments.

Creative Design. Proxicom's creative design services address navigation,
layout, information architecture, personalization and branding. Proxicom's
creative design services also ensure that its Internet solutions have direct,
immediate and relevant appeal and utility. As the Internet has become an
important point of contact with customers, employees and business partners, the
user interface of these applications is an increasingly visible component of a
company's brand and identity. Proxicom creates Internet solutions that maximize
the ease and quality of experience for a variety of users.

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<PAGE> 33

THE PROXICOM PROCESS
[ARTWORK]

Proxicom delivers its services using a proprietary multi-phase methodology
called the Proxicom Process, which serves as a roadmap to define, develop and
manage Internet solutions. The Proxicom Process benefits Proxicom's clients by
enabling Proxicom to offer fixed-price, fixed-timeframe engagements and thereby
meet clients' needs for certainty. The iterative nature of the Proxicom Process
enables Proxicom to refine applications through the extensive use of prototypes
and phased application releases. Proxicom also uses the Proxicom Process to
reduce the time-to-market of a deployed solution. The Proxicom Process fully
integrates working groups and emphasizes collaboration between the Proxicom team
and the client.

Proxicom uses the Proxicom Process to manage project scope and client
expectations and to deliver solutions on time and on budget. The Proxicom
Process offers mechanisms for rapid adoption of best practices and reinforces
consistent quality across all projects. It provides for quality assurance with
unit, integration and systems testing procedures throughout design, development
and deployment to ensure quality delivery and client satisfaction. The Proxicom
Process also aggregates and replenishes the intellectual capital of Proxicom's
entire organization, thereby leveraging Proxicom's cumulative experience.
Proxicom continually seeks to evolve the Proxicom Process by identifying best
practices during project reviews with Proxicom's delivery teams and clients.

All of Proxicom's client engagements utilize the Proxicom Process, which
Proxicom customizes to suit specific project needs. The inclusion, timing and
cost of any phase will depend on the type of solution and the scope of work. The
Proxicom Process is scalable and may be used effectively for projects of all
sizes. The following are the phases of the Proxicom Process:

Define Internet Strategy. The scope of the Define Internet Strategy phase
ranges from defining an Internet vision for the client's overall business to
developing a strategy for a specific Internet solution or offering. The Internet
vision is a business strategy engagement where Proxicom assesses the client's
opportunities to leverage the Internet both as a technology and as a profitable
business medium. The Internet vision engagement often involves Proxicom's
interactive marketing discipline, which assesses market opportunities and
competition. For a specific Internet solution, the Define Internet Strategy
deliverable examines the strategic

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<PAGE> 34

objectives of the solution, how its success will be measured, and how the
solution will be marketed, launched and publicized.

Plan Solution. The Plan Solution phase determines the scope and nature of
the engagement and articulates the project's tactical objectives. These
objectives are refined over the course of multiple working sessions with the
client. This phase results in a project plan outlining tasks, deliverables and
key milestones, which are translated into a detailed contractual agreement for
the next phases of the engagement. The plan includes detailed cost estimates as
well as organizational roles and responsibilities for Proxicom, the client and
other parties.

Design Solution. The Design Solution phase uses rapid prototyping
techniques in an iterative fashion to determine and refine application
requirements and specifications. A multi-disciplinary team works in tandem with
the client to translate the business, marketing, technical and creative
requirements of the solution into a cohesive design. This phase generally has
four major parts.

- Business Requirements Definition. Requirements, which form the
foundation for successful solution designs, are refined through
successive iterations and collaborations with appropriate client and
user constituencies.

- Creative Design Composition. Content and information for the solution
are defined and organized. The look and feel of the solution is designed
in a series of detailed site flow compositions that show page content,
navigation and links. Proxicom works closely with the client to
coordinate the brand image and advertising campaigns on an ongoing
basis.

- Technical Architecture Definition. The solution is analyzed from a
technical viewpoint, including the development, test and operational
architectures required. The technical, application and data
architectures of the solution are documented, addressing the
requirements for hardware, software and network environments, databases
and third party products.

- Specification and Prototype Development. Rapid prototyping is used to
construct portions of the solution. A visual prototype is used to define
page style, layout, information architecture and navigation. Functional
prototypes are used to test complex processing requirements and the
effectiveness of the application and data architectures. This iterative
process allows the client to review and refine the application as it
takes shape during the development process.

Implement Solution. The Implement Solution phase involves the further
enhancement of prototypes to construct a production-ready solution by further
developing and combining the prototypes. Unit, integration and systems testing
and quality assurance procedures are incorporated throughout the development
process to verify that the solution conforms with the design specifications.
Testing is performed across multiple browsers and environments to ensure uniform
accessibility. Once the client gives final approval of the developed solution,
Proxicom works with the client through installation and roll-out. This work may
include system migration, data conversion and training.

SALES AND MARKETING

Proxicom's sales and marketing activities are aligned with its vertical
industry groups. Each vertical industry group vice president is responsible for
developing Proxicom's business within each respective industry, targeting new
clients and cultivating repeat business with existing clients. Proxicom believes
that its vertical approach is a differentiating factor during the sales process,
as it demonstrates Proxicom's understanding of the client's specific business
and technology issues. Proxicom's sales approach is highly consultative and
involves industry and solutions experts who draw on their practical experiences
with other clients that have faced similar challenges. Proxicom also assigns
senior client executives to strategic accounts to support and expand client
relationships.
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<PAGE> 35

Proxicom has 13 dedicated direct sales professionals to support the
vertical industry groups. These professionals are assigned to specific
geographic regions in order to maximize responsiveness to clients. They work
jointly with the vertical industry groups to secure new opportunities and manage
the sales process. Service directors responsible for delivery collaborate with
the sales professionals to form a joint sales approach for identifying and
winning follow-on business. Proxicom's marketing efforts are designed to create
brand recognition and demand for the Proxicom's services. Proxicom's four-person
marketing team is organized to provide support for each vertical industry group.
Marketing programs include promoting customer success stories, creating industry
and solution specific campaigns, pursuing public relations opportunities and
promoting Proxicom's executives for speaking opportunities and
Proxicom-sponsored event management.

Proxicom complements its internal sales and marketing efforts with selected
industry partnerships. Several Internet product vendors such as Microsoft
Corporation, Netscape Communications Corporation, Oracle Corporation,
BroadVision, Inc. and TRADE'ex Electronic Commerce Systems, Inc., and high-end
hosting vendors, such as Exodus Communications, Inc., MCI WorldCom, Inc. and ANS
Communications, Inc., recommend Proxicom services to their clients. See
"-- Marketing and Technology Relationships."

CLIENTS

Within each vertical group, Proxicom targets Global 1000 companies and
other large organizations. The following is a representative sample of
Proxicom's current clients.

<TABLE>
<S> <C>
ENERGY AND TELECOMMUNICATIONS RETAIL AND MANUFACTURING
Aramco Services Company Amgen, Inc.
Buckeye Pipe Line Company L.P. Calphalon Corporation
Pacific Gas and Electric Company Corning Incorporated
Schlumberger N.V. GAP, Inc.
TransCanada Pipelines Ltd. GE Plastics
Transport4 Harman International
Hewlett-Packard Corporation
FINANCIAL SERVICES Hoffmann-La Roche, Inc.
American International Group, Inc. McKessonHBOC
GE Capital Corporation Owens Corning
Kemper Insurance Companies Ritz Camera Centers, Inc.
Mercedes-Benz Credit Corp. Saab Cars USA, Inc.
Merrill Lynch & Co., Inc. Wyeth-Ayerst Laboratories

SERVICE INDUSTRIES
American Electronics Association
Booz-Allen & Hamilton Inc.
Cox Interactive Media, Inc.
Excite, Inc.
Interealty Corp.
Marriott International, Inc.
Ziff-Davis Inc.
</TABLE>

In 1998, our five largest clients accounted for approximately 38% of our
revenue. Our two largest clients in 1998, Pacific Gas and Electric Company and
General Electric Company, contributed approximately 15% and 14%, respectively,
of our revenue. In 1997, our five largest clients accounted for approximately
48% of our revenue. Our two largest clients, Pacific Gas and Electric Company
and General Electric Company, contributed approximately 24% and 10%,
respectively, of our revenue. As of December 31, 1998, we had approximately 150
ongoing client engagements.

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<PAGE> 36

CASE STUDIES

CALPHALON CORPORATION: BUSINESS-TO-CONSUMER INTERNET COMMERCE

Calphalon Corporation is a leading U.S. manufacturer of cookware products
and kitchen accessories. The company's first Internet initiative was an
internally developed, one-way, static Web site. In preparation for the holidays,
Calphalon sought to launch a new site to take advantage of the full interaction
potential of the Internet. Calphalon engaged Proxicom to design and deploy its
new consumer focused transactional offering.

The consumer product experts in Proxicom's retail and manufacturing
practice began by determining an Internet strategy that would best differentiate
Calphalon. Through a rapid, iterative development process, Proxicom completed
the project's first phase in less than a month: a transaction enabled solution
including a select catalog of product information and images. Subsequent
expansion increased information for consumers, adding the full complement of
product information, new indexed product instruction, a database of recipes and
expanded transactions and interactive capabilities. A key success of the
solution was Proxicom's design of the site, which was integrated with
Calphalon's overall communications programs and image. The design, based on an
easy-to-navigate information architecture, was created to ensure an intuitive
user experience that meant quick adoption and satisfaction for its audience.

Proxicom helped Calphalon introduce a new means of doing business through
an Internet channel. The solution differentiates Calphalon's offering in
cookware products by uniting a complement of communications, content and
transaction capabilities through a single source. Using the site, Calphalon
gains invaluable knowledge of its customers and their interests. It establishes
a direct connection with a new audience and capitalizes on a new opportunity to
influence and serve the market for cooking enthusiasts. At the same time,
Calphalon enhances its brand presence. The solution has created efficiencies for
Calphalon's business and has been used to introduce a new line of cutlery
products to test market acceptance. As a result of the Internet initiative,
Calphalon has engaged Proxicom for ongoing site enhancements.

AMERICAN ELECTRONICS ASSOCIATION: A NEW INTERNET-BASED MEMBERSHIP SERVICE

The American Electronics Association is the largest high-tech trade
association, with over 3,000 member companies nationwide such as Intel
Corporation, Sun Microsystems Inc., Amazon.com, Yahoo! Inc. and Cisco Systems,
Inc. As a trusted partner for information, industry benchmarking, public policy,
international issues and conferences, AEA sought to leverage the Internet to
transform how it attracted and worked with members. Following a rigorous
competitive process, AEA selected Proxicom because of its experience and
integrated mix of strategy, technology and creative design skills. Proxicom's
charter was to reposition AEA and electronically enable their entire business
through a new Internet-based membership service.

In close collaboration with AEA, Proxicom's team repositioned the AEA brand
and communications identity. The new identity will serve as the front-end to a
fully functional Internet and extranet integrated into AEA's core systems.
Public and private sections are built on the Microsoft Site Server 3.0 Commerce
Edition platform which interacts with the legacy systems and builds off of
membership directory data. The site allows for distributed and dynamic rendering
of content that is presented to users through sophisticated personalization
based on their profile. The electronic commerce solution permits purchasing with
real-time variable pricing for AEA events and products. Additional features
include online discussions in support of grassroots campaigns, member generated
content, a comprehensive job bank section, queries across research data and a
powerful site analysis tool for audience and return on investment analysis.

The solution will redefine how AEA markets itself through a new brand and
message to the industry. AEA will gain a new, easier means to create and
distribute information and a powerful

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<PAGE> 37

way to personalize it for the end user. This solution will be a vehicle that
increases sales and allows for direct, real-time communications with members and
industry experts. It will also provide a sophisticated knowledge management,
communications and commerce portal that will enable AEA to better attract and
retain members.

GE PLASTICS: INTRANET KNOWLEDGE MANAGEMENT SYSTEM

GE Plastics, a business unit of the General Electric Company, faced a
problem common to many businesses: electronic methods for internal communication
and information-sharing were inefficient. Employees attempting to share
marketing, technical, sales and customer service information were consistently
faced with time-consuming searches among decentralized databases and file
systems as well as un-networked personal computers. GE Plastics engaged Proxicom
to help define and deploy an organization-wide intranet that would facilitate
knowledge sharing across its five divisions.

Working closely with GE, Proxicom's dedicated client service team began the
project by benchmarking GE Plastics' internal business processes and
technologies. A strategy was then developed to build an intranet that was
searchable across the multiple business units and would leverage their immense
storehouses of information. Proxicom rapidly designed and deployed an
easy-to-use intranet that tied into the legacy databases. Through the intranet,
product, marketing, customer and technology data has become accessible and
searchable from a browser-based interface that simulates a centralized data
source. The intranet has facilitated many workflow improvements, including the
automation of the GE Plastics' customer satisfaction review process, which
includes extensive customer satisfaction surveys. Prior to the intranet, the
process was entirely paper-based. Currently, the surveys are not only available
on the intranet but are part of an overall workflow process incorporating trend
analysis and audit trail capabilities.

The intranet established at GE Plastics leveraged its legacy system
investments and enabled more rapid deployment of solutions at significantly
lower cost than a major infrastructure overhaul. GE Plastics' global intranet
knowledge management system produces significant benefits for GE Plastics as a
valuable decision-making tool. Effectiveness of marketing, sales, information
technology and customer service personnel has improved dramatically, as
employees throughout GE Plastics are spending less time searching and entering
information and more time doing their jobs, making decisions and implementing
strategic plans.

PACIFIC GAS AND ELECTRIC COMPANY: ENTERPRISE DISTRIBUTED OBJECT APPLICATION

Pacific Gas and Electric Company, one of the largest investor-owned
utilities in the country, provides gas and electric services to 12 million
people throughout Northern California. With the Gas Accord, approved by the
California Public Utilities Commission in August 1997, Pacific Gas and Electric
was faced with fundamental changes in its gas business and an increasingly
competitive environment. Pacific Gas and Electric had an opportunity to increase
revenue by offering value-added services, such as different levels of service,
flexible billing options, and helping customers reduce their operational and
financial risk. Pacific Gas and Electric chose Proxicom as its development
partner to design, develop and implement its comprehensive gas transportation
system.

The oil and gas experts in Proxicom's energy practice began by helping
Pacific Gas and Electric design a system that would be flexible enough to
facilitate all business transactions. This meant the system had to do more than
move the gas from place to place; it had to include functionality for selling
Pacific Gas and Electric 's transmission and storage capacity, trading the
commodity gas among energy marketers, delivering the gas to intermediaries and
end users, and billing customers (gas producers, gas marketers and end users).
The real challenge for Proxicom and Pacific Gas and Electric was that the system
had to be developed before the new structure was finalized, which meant that
requirements were changing throughout the development process. Proxicom built a
system that allowed instant access to pipeline capacity and throughput
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<PAGE> 38

data, was dispersed across 20 states and Canada, and was extensible enough to
allow for quick time to market new services. Whereas the old system had taken
Pacific Gas and Electric six years to build, this system was put into operation
just 12 months after the requirements were developed. Proxicom used an iterative
object-oriented development methodology to create a multi-tiered application
architecture so that changes in business rules, as are often necessitated by a
rapidly changing industry, could be easily incorporated.

Proxicom helped Pacific Gas and Electric become a competitive player at the
forefront of the newly restructured gas industry. The system that was developed
is at the core of Pacific Gas and Electric 's gas business, accounting for $360
million in revenue, with two million residential, 1,200 industrial and 150
energy marketer customers. This new system provides strategic trend information
to Pacific Gas and Electric and enables it to offer a high level of services to
its customers, including remote access via the Internet. Because the gas
transportation system was designed to be flexible and extensible, Pacific Gas
and Electric and Proxicom were able to reuse the components developed under the
Gas Accord to develop a gas gathering contract system in just three months. This
new system allows Pacific Gas and Electric to leverage its existing system
infrastructure and reduce maintenance and support costs.

MARKETING AND TECHNOLOGY RELATIONSHIPS

Proxicom complements its internal sales and marketing efforts with formal
and selected industry partnerships. A number of Internet product vendors,
including Microsoft Corporation, Netscape Communications Corporation, Oracle
Corporation, BroadVision, Inc. and TRADE'ex Electronic Commerce Systems, Inc.,
and leading hosting providers, including Exodus Communications, Inc., Digex
Incorporated, MCI WorldCom, Inc. and ANS Communications, Inc., recommend
Proxicom services to their clients.

Proxicom has arrangements with a number of technology vendors to obtain
privileged access to their technologies. By establishing these alliances,
Proxicom has gained pre-release technology which enables it to maintain
leading-edge technical skills. Microsoft, Netscape and BroadVision have all
provided advance versions of their technologies to Proxicom. Obtaining the
validation by industry leaders such as Microsoft and Netscape has added
considerably to Proxicom's visibility, credibility and brand image. Proxicom's
relationships with Microsoft and BroadVision are summarized below.

Proxicom has been a Microsoft Certified Solution Provider Partner since
1995, when it began actively cultivating a broad base of Microsoft products,
skills and certifications. In the spring of 1998, Proxicom was promoted to
Solutions Provider Partner, the highest level within that program. The Solution
Provider Partner program provides Internet-specific technical assistance.
Through this program, Microsoft and Proxicom conduct joint marketing efforts,
training programs and sales initiatives, in particular targeting Proxicom's
specialty industries.

Recently, Proxicom has become a BroadVision Integration Partner.
BroadVision and Proxicom work together to deploy BroadVision's "One-to-One"
commerce platform. In addition, several joint marketing events and sales
activities are planned. As an Integration Partner, Proxicom receives high-level
technical and sales support from BroadVision. Creating this relationship with
BroadVision allows Proxicom to enter the packaged applications systems
integration market, leveraging its Internet expertise with the market demand for
rapid deployment of new technology.

In addition, in March 1999, Proxicom signed an agreement with Ericsson
Telecommunicazioni SpA. Under the agreement, Proxicom made a 19.9% investment in
an Italian joint venture company. Ericsson will own the remaining 81.1%
interest. Proxicom will provide Internet solutions to Italian-based businesses
through the joint venture company.

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IBIS CONSULTING MERGER

On August 21, 1998, Proxicom merged with IBIS Consulting, Inc. by
exchanging 4,988,297 shares of Proxicom common stock and options to purchase
345,034 shares of Proxicom common stock for all the common stock of IBIS
Consulting. IBIS Consulting is a San Francisco-based Internet professional
services provider. IBIS Consulting's services and culture are highly
complementary to those of Proxicom. Proxicom has integrated IBIS Consulting's
systems, Internet professionals and management into its operations. As a result
of this transaction, Proxicom has expanded its presence to the West Coast and
broadened its resource base, sales reach and expertise.

PERSONNEL AND CULTURE

As of December 31, 1998, Proxicom had 380 employees. Of these, 311 were
consulting and service delivery professionals, and 69 were management and
administrative personnel performing marketing, sales, human resources, finance,
accounting, legal, internal information systems and administrative functions.

Proxicom believes that its ability to provide integrated business strategy,
technology and creative design services is dependent upon the continuation of
its culture of mutual respect among the three disciplines. As a result,
Proxicom's employees and its culture are fundamental to the value proposition it
offers clients. Proxicom's culture is predicated on personal integrity, open
communications, collaboration and professional development. Proxicom fosters an
entrepreneurial spirit that attracts talented professionals, creates innovative
solutions and provides the opportunity for every individual to succeed.

Proxicom has a particular emphasis on recruiting and retaining people with
leading-edge technical skills and project management experience. Proxicom has
been very successful with internal referral-driven recruiting, which has
accounted for nearly one-third of its hires to date. Proxicom continues to
encourage employee referrals with monetary incentives. Proxicom has developed a
structured recruiting program including a staff of dedicated recruiters tasked
with bringing in experienced professionals, MBA and college hires, and
maintaining a tracking database of potential candidates. Proxicom runs a
year-round internship program with several leading undergraduate and MBA
programs.

In addition to recruiting, Proxicom is committed to employee training and
retention. Proxicom has a dedicated organizational development team that
initiates and oversees the training and development of Proxicom's professionals.
Key organizational development initiatives include a week-long "boot camp"
orientation and training program for all new employees and "Proxicom
University," which provides ongoing technical and project management classes as
well as career path management and guidance. To support its internal initiatives
for employee development, Proxicom has also instituted programs such as tuition
reimbursement and external training. Proxicom plans to continue to invest in
attracting the best employees and in maintaining a low turnover rate.

None of Proxicom's employees is represented by a labor union, nor has
Proxicom ever experienced a work stoppage. Proxicom believes its employee
relations are good.

COMPETITION

The market for Proxicom's services is subject to rapid technological change
and increased competition from large existing players, new entrants and internal
information systems groups. Traditional players competing in this space can be
broken down into four major categories -- large systems integrators (e.g.,
International Business Machines Corporation, Andersen Consulting and Computer
Sciences Corporation), specialty systems integrators (e.g., Cambridge Technology
Partners, Inc. and Sapient Corporation), strategy consulting firms (e.g.,
McKinsey & Company,

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<PAGE> 40

Inc. and Boston Consulting Group, Inc.), and Internet professional services
providers (e.g., USWeb/CKS, Viant Corporation, Scient Corporation and iXL
Enterprises, Inc.) -- many of which have considerably more financial resources,
marketing depth and name recognition than Proxicom. Occasionally Proxicom
competes with newer entrants including interactive marketing firms (e.g.,
Agency.com, Ltd. and Modem Media.Poppe Tyson, Inc.). Proxicom expects future
consolidation in the Internet professional services market to create larger,
more viable competitors. Potential clients' internal information systems groups
also compete with Proxicom.

Proxicom believes the principal competitive factors in the Internet
professional services market include Internet expertise and talent, client
references, integrated strategy, technology and creative design services,
quality, pricing and speed of service delivery and vertical industry knowledge.
Proxicom believes it competes favorably with respect to these factors. Proxicom
believes it is in a good position to attract talent with its growth and an
entrepreneurial culture. Proxicom believes it offers its clients a unique
combination of integrated strategy, technology and creative design services. In
addition, Proxicom believes it has established itself as a leader in
Internet-specific industry and domain expertise. Through its replicable solution
frameworks and its attention to client satisfaction, Proxicom has created a
strong track record of customer successes. Proxicom believes the market will
continue to offer significant opportunity for multiple players.

INTELLECTUAL PROPERTY RIGHTS

Proxicom's success is dependent, in part, upon its proprietary Proxicom
Process, its solution components, and other intellectual property rights. We do
not have any patents or patent applications pending. Proxicom relies on a
combination of trade secret, nondisclosure and other contractual agreements, and
copyright and trademark laws to protect its proprietary rights. Existing trade
secret and copyright laws afford us only limited protection. Proxicom enters
into confidentiality agreements with its employees, generally requires that its
consultants and clients enter into such agreements, and limits access to and
distribution of Proxicom's proprietary information. There can be no assurance
that the steps Proxicom has taken in this regard will be adequate to deter
misappropriation of its proprietary information or that Proxicom will be able to
detect unauthorized use and take appropriate steps to enforce its intellectual
property rights.

Proxicom's business generally involves the development of software
applications for specific client engagements. Ownership of such software is
frequently assigned to the client, with Proxicom retaining a license or other
contractual rights for limited uses.

FACILITIES

Proxicom's headquarters and principal administrative, finance, legal, sales
and marketing operations are located in approximately 65,000 square feet of
leased office space in Reston, VA. Proxicom's lease is for a term of seven years
and expires on July 13, 2002. The building is beneficially owned by Mario M.
Morino, one of our stockholders and a member of our board of directors. Proxicom
also leases office space in San Francisco, CA, New York, NY, Munich, Germany,
Sacramento, CA, Chicago, IL and Houston, TX. Proxicom expects that it will need
additional space as it expands its business and believes that it will be able to
obtain space as needed.

LEGAL PROCEEDINGS

Proxicom is not a party to any material legal proceedings.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table presents information about each of Proxicom's executive
officers and directors. Proxicom's board of directors is divided in to three
classes serving staggered three-year terms.

<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITION(S) WITH COMPANY EXPIRES
---- --- ------------------------ --------
<S> <C> <C> <C>
Raul J. Fernandez.............. 32 President, Chief Executive Officer and Chairman 2001
Brenda A. Wong................. 34 Senior Vice President, Organizational Strategies 2001
and Director
Larry D. Clark................. 41 Senior Vice President, Services
Harold R. Gubnitsky............ 36 Senior Vice President, Sales and Marketing
Kenneth J. Tarpey.............. 46 Senior Vice President, Chief Financial Officer
and Treasurer
Christopher Capuano............ 38 Vice President, General Counsel and Corporate
Secretary
David C. Hodgson............... 42 Director 2002
Jack Kemp...................... 63 Director 2000
Theodore J. Leonsis............ 42 Director 2002
John A. McKinley, Jr........... 41 Director 2000
Mario M. Morino................ 55 Director 2000
</TABLE>

Raul J. Fernandez founded Proxicom and has served as President, Chief
Executive Officer and Chairman of the board of directors of Proxicom since its
inception in 1991. Prior to starting Proxicom, Mr. Fernandez served as the
Director of Emerging Technologies at Digicon, Inc., a government contracting
firm. Mr. Fernandez is a member of the board of directors of the Northern
Virginia Technology Council, a trade organization.

Brenda A. Wong has been Senior Vice President, Organizational Strategies
and a director since August 1998. Prior to joining Proxicom, she was president
of IBIS Consulting, Inc., an Internet and information technology solutions
provider which she co-founded in February 1994 and which merged with Proxicom in
August 1998. From 1989 to 1993, Ms. Wong was a Senior Consultant at Price
Waterhouse LLP.

Larry D. Clark has been Senior Vice President, Services since March 1998.
Prior to joining Proxicom, from May 1992 until March 1998, Mr. Clark held
various executive positions with MCI Systemhouse Corporation, the systems
integration, technology development and information technology outsourcing arm
of MCI Communications Corp., where he was, most recently, Vice President and
General Manager of the United States East Region and was responsible for
managing the company's East Region business unit. From 1990 until 1992, Mr.
Clark was a Senior Engagement Manager at McKinsey & Company, Inc., a consulting
firm. Prior to that, Mr. Clark held various management positions with The
Information Consulting Group and Andersen Consulting.

Harold R. Gubnitsky has been Senior Vice President, Sales and Marketing
since January 1999. Prior to joining Proxicom, from August 1995 to January 1999,
he served as a Vice President of Cambridge Technology Partners, Inc., a
technology systems integration firm. From 1991 to 1995, Mr. Gubnitsky was the
managing director of The Systems Consulting Group, Inc., a technology consulting
company that was sold to Cambridge Technology Partners, Inc.

Kenneth J. Tarpey has been Senior Vice President and Chief Financial
Officer of Proxicom since March 1997. Prior to joining Proxicom, from August
1996 until March 1997, Mr. Tarpey

38
<PAGE> 42

served as Vice President and Chief Financial Officer of Nat Systems
International, Inc., a developer and vendor of software application development
tools. From April 1995 to August 1996, Mr. Tarpey served as Vice President,
Finance, Chief Financial Officer, Treasurer and Assistant Secretary of SQA,
Inc., a developer and marketer of automated quality testing software products.
From November 1989 to April 1995, Mr. Tarpey held various executive positions at
Symbolics, Inc., a hardware and software company, including Chairman of the
board of directors, President, Chief Executive Officer and Chief Financial
Officer.

Christopher Capuano has been Vice President, General Counsel and Corporate
Secretary of Proxicom since June 1996 and was a director from August 1996 until
August 1998. Prior to joining Proxicom, from 1993 until June 1996, Mr. Capuano
was a Manager and Senior Manager with Price Waterhouse LLP. From 1994 to 1997,
Mr. Capuano was also an Adjunct Professor of Law at Georgetown University Law
Center. Mr. Capuano was associated previously with the law firm of Willkie, Farr
& Gallagher.

David C. Hodgson has been a director of Proxicom since August 1996. Mr.
Hodgson is a managing member of General Atlantic Partners, LLC, a private equity
investment firm that invests in software and information technology companies on
a worldwide basis. Mr. Hodgson has been with General Atlantic Partners, LLC (or
its predecessor) since 1982. Mr. Hodgson is also a director of Atlantic Data
Services, Inc., a provider of professional computer services for the banking
industry, Baan Company N.V., a business management software company, ProBusiness
Services, Inc., an employee administrative services company, and several private
information technology companies.

Jack Kemp has been a director of Proxicom since January 1997. Mr. Kemp has
been Co-Director of Empower America from 1993 to the present. Mr. Kemp served as
the Secretary of Housing and Urban Development from February 1989 until January
1992 and, before that, for 18 years as a member of the United States House of
Representatives. Mr. Kemp is also a director of Oracle Corporation, American
Bankers Insurance Group, Inc., Carson, Inc., a manufacturer and marketer of
personal care products, Everen Capital Corporation, a securities firm, and The
Sports Authority, Inc., a sporting goods retailer.

Theodore J. Leonsis has been a director of Proxicom since January 1999. In
March 1999, Mr. Leonsis was appointed President, Interactive Properties Group of
America Online, Inc. From November 1996 to March 1999, Mr. Leonsis was President
of America Online Studios, a division of America Online, Inc. Prior to that, Mr.
Leonsis was President of America Online Services Company, also a division of
America Online, Inc. from 1994 to 1996. Mr. Leonsis was previously Chief
Executive Officer of Redgate Communications Corporation, a media marketing
company which was founded in 1987 and sold to America Online, Inc. in 1994. Mr.
Leonsis is also a director of U.S.A. Floral Products, Inc., a floral retailer,
and Preview Travel, Inc., an Internet travel company.

John A. McKinley, Jr. has been a director of Proxicom since January 1997.
Mr. McKinley has been Senior Vice President, Chief Technology Officer of Merrill
Lynch & Co., Inc. since October 1998. Prior to that, from 1995 to 1998, Mr.
McKinley was the Chief Technology and Information Officer for GE Capital
Corporation. From February 1982 until January 1995, Mr. McKinley held various
positions with Ernst & Young LLP, where he was most recently a partner
concentrating in the financial services and airline industries.

Mario M. Morino has been a director of Proxicom since January 1997. Mr.
Morino is an investor in and adviser to various firms in the information
technology sector. Mr. Morino was co-founder and Vice Chairman of Legent
Corporation until his retirement in September 1992.

39
<PAGE> 43

BOARD COMMITTEES

The audit committee reviews, acts on and reports to the board of directors
with respect to various auditing and accounting matters. These matters include
the selection of Proxicom's auditors, the scope of the annual audits, fees to be
paid to the auditors, the performance of Proxicom's independent auditors and
Proxicom's accounting practices. The audit committee consists of Messrs. Hodgson
and McKinley.

The compensation committee determines the salaries and incentive
compensation of Proxicom's officers and provides recommendations for the
salaries and incentive compensation of other employees and consultants. The
compensation committee also administers Proxicom's various incentive
compensation, stock and benefit plans. The compensation committee consists of
Messrs. Hodgson, Leonsis and Morino.

DIRECTOR COMPENSATION

Proxicom does not currently compensate its directors who are also employees
of Proxicom. Each non-employee director currently receives $1,500 of cash
compensation and is reimbursed for reasonable travel expenses for each board
meeting attended. For a description of the 1997 Stock Option Plan for
Non-Employee Directors, see "-- Stock Plans."

SEVERANCE AGREEMENTS

On February 16, 1999, Christopher Capuano, Larry D. Clark and Kenneth J.
Tarpey each entered into severance agreements with Proxicom. These agreements
provide that, in the event of termination, each of Messrs. Capuano, Clark and
Tarpey are to receive severance payments from Proxicom for services previously
rendered. These payments are to include the following amounts: (1) any
compensation accrued by the employee, but not yet paid by Proxicom, including
any unpaid salary, a pro rata portion of the employee's annual bonus and any
accrued vacation pay and (2) one year of the employee's salary and annual bonus.
Proxicom will also continue for a period of one year or such longer period as
may be required by law to provide benefits to the employee at least equal to
those that would have been provided to him had his employment not been
terminated. Messrs. Capuano, Clark and Tarpey are entitled to these payments and
benefits if (1) they are terminated other than for cause or (2) they terminate
their employment for good reason, as defined in the agreement, following a
change in control.

40
<PAGE> 44

EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to or earned by
Proxicom's Chief Executive Officer and all other executive officers whose salary
and bonus for services rendered in all capacities to Proxicom for the fiscal
year ended December 31, 1998 exceeded $100,000. We will use the term "named
executive officers" to refer to these people later in this prospectus.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
----------------------
ANNUAL COMPENSATION SECURITIES
----------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION(S) SALARY BONUS OTHER OPTIONS/SARS
- ------------------------------ -------- -------- ----- ------------
<S> <C> <C> <C> <C>
Raul J. Fernandez............. $185,742 $ -- $720(1) --
Chairman, Chief Executive
Officer
and President
Larry D. Clark................ 262,990 113,836 -- 300,000
Senior Vice President,
Services
Christopher Capuano........... 166,300 41,450 -- 25,000
Vice President, General
Counsel and Secretary
Kenneth J. Tarpey............. 154,553 44,250 -- 50,000
Senior Vice President, Chief
Financial Officer and
Treasurer
</TABLE>

- -------------------------
(1) Pertains to an automobile allowance.

OPTION GRANTS IN LAST FISCAL YEAR

The following table summarizes the options granted to each of Proxicom's
named executive officers during the fiscal year ended December 31, 1998.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(1)
OPTIONS EMPLOYEES EXERCISE EXPIRATION ---------------------
NAME GRANTED IN FISCAL YEAR PRICE(2) DATE 5% 10%
- ---- ---------- -------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Larry D. Clark............ 300,000 13.5% $4.77 3/30/08 $899,948 $2,280,645
Christopher Capuano....... 25,000 1.1 4.77 1/23/08 74,996 190,054
Kenneth J. Tarpey......... 50,000 2.2 7.00 4/1/08 220,113 557,810
</TABLE>

- -------------------------
(1) The potential realizable value is calculated based on the term of the option
at the time of grant (10 years). Assumed stock price appreciation of 5% and
10% is based on the fair value at the time of the grant.

(2) The exercise price equals the fair market value of the common stock as of
the grant date as determined by the board of directors.

41
<PAGE> 45

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table presents information with respect to stock options
owned by the named executive officers at December 31, 1998 and with respect to
stock options exercised by the named executive officers during the fiscal year
ended December 31, 1998.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Larry D. Clark................... -- 300,000 -- $2,469,000
Christopher Capuano.............. 20,000 55,000 189,650 483,700
Kenneth J. Tarpey................ 25,000 125,000 220,750 962,250
</TABLE>

- -------------------------
(1) There was no public trading market for the common stock as of December 31,
1998. Accordingly, these values have been calculated on the basis of the
initial public offering price of $13.00 per share, less the applicable
exercise price per share, multiplied by the number of shares underlying such
options.

STOCK PLANS

1996 Stock Option Plan. The 1996 Stock Option Plan provides for the grant
of options and other stock-based compensation to employees, directors, officers
and consultants of Proxicom. There are 7,000,000 shares of common stock reserved
for issuance under this plan. As of the date of this prospectus there were
options to purchase or rights to receive 5,076,701 shares of common stock at a
weighted average exercise price of $8.32 per share outstanding under this plan.
Options granted under this plan typically vest over time, subject to
acceleration in the event of a change of control of Proxicom. No option granted
under this plan is exercisable after the tenth anniversary of the option's date
of grant.

1997 Stock Option Plan for Non-Employee Directors. The 1997 Stock Option
Plan for Non-Employee Directors provides for automatic grants of stock options
to eligible non-employee directors. There are 350,000 shares of common stock
reserved for issuance under this plan. As of the date of this prospectus, there
were options to purchase 186,667 of these shares at a weighted average price of
$5.26 per share outstanding under this plan. Under the Directors Plan, each non-
employee director is granted an option to purchase 35,000 shares of common stock
upon first election to the board. Each non-employee director is also granted an
additional option to purchase 35,000 shares of common stock upon reelection to
the board. See "-- Director Compensation." Options granted under this plan
before December 15, 1998 vest over three years, subject to acceleration in the
event of a change of control of Proxicom. Options granted after December 15,
1998 vest on the date of grant. No option granted under this plan is exercisable
after the tenth anniversary of the option's date of grant.

Employee Stock Purchase Plan. Proxicom's Employee Stock Purchase Plan
provides for the issuance of 1,000,000 shares of common stock. All Proxicom
employees whose customary employment is more than 20 hours per week and for more
than five months in any calendar year are eligible to participate in the Stock
Purchase Plan, provided that any employee who would own five percent or more of
the total combined voting power or value of Proxicom's stock immediately after
any grant is not eligible to participate. Eligible employees must authorize
Proxicom to deduct an amount from their pay during offering periods established
by the compensation committee. Common stock may be purchased at not less than
85% of the lesser of the market price of the common stock on the first or last
business day of each offering period.

42
<PAGE> 46

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

For more information about transactions and relationships between Proxicom
and Messrs. Hodgson, Leonsis and Morino, you should see the "-- Executive
Officers and Directors" and "Certain Transactions" subsections of this
prospectus.

43
<PAGE> 47

CERTAIN TRANSACTIONS

STOCK PURCHASE AGREEMENTS AND RELATED MATTERS

Series A Purchase Agreement. On August 30, 1996, Proxicom sold the
following numbers of shares of Series A convertible preferred stock to the
following purchasers at a price of $3.27 per share.

<TABLE>
<S> <C>
General Atlantic Partners 34, L.P. ......................... 1,389,218
GAP Coinvestment Partners, L.P. ............................ 240,751
</TABLE>

At the same time, Proxicom also granted General Atlantic Partners 34 and GAP
Coinvestment warrants exercisable for 861,834 shares and 149,544 shares,
respectively, of Series A preferred stock, or common stock in the event of an
initial public offering of securities, at an exercise price of $7.91 per share.
In this transaction, Proxicom repurchased from Mr. Fernandez, Proxicom's
Chairman, President and Chief Executive Officer, 100,917 shares of common stock
at a price of $3.27 per share. In addition, Proxicom, General Atlantic Partners
34, GAP Coinvestment and Mr. Fernandez entered into a stockholders agreement and
a registration rights agreement. See "-- Stockholders Agreement" and
"-- Registration Rights Agreement." Under the terms of the Series A convertible
preferred stock, Mr. Hodgson was elected to the board of directors. See
"Management." In January 1998, General Atlantic Partners 34 and GAP Coinvestment
converted 347,311 shares and 60,189 shares of Series A preferred stock,
respectively, into an equivalent number of shares of common stock. General
Atlantic Partners 34 and GAP Coinvestment exercised their warrants on April 13,
1999.

Series B Purchase Agreement. On February 20, 1997, Proxicom sold the
following numbers of shares of Series B convertible preferred stock to the
following purchasers at a price of $4.17 per share.

<TABLE>
<S> <C>
General Atlantic Partners 34, L.P. ......................... 81,535
GAP Coinvestment Partners, L.P. ............................ 14,388
FBR Technology Venture Partners L.P. ....................... 23,981
The Mario M. Morino Trust................................... 239,808
</TABLE>

In this transaction, Proxicom repurchased from Mr. Fernandez 359,712 shares of
common stock at a price of $4.17 per share. Also, FBR Technology Venture
Partners and the Morino Trust became parties to the above referenced
stockholders agreement and registration rights agreement. See "-- Stockholders
Agreement" and "-- Registration Rights Agreement." Under the stockholders
agreement's terms, Mr. Morino was elected to the board of directors. See
"Management."

Series C Purchase Agreement. On November 24, 1997, Proxicom sold 419,302
shares of Proxicom Series C convertible preferred stock to GE Capital
Corporation at a price of $4.77 per share. In this transaction, GE Capital
became a party to the above referenced stockholders agreement and the
registration rights agreement. See "-- Stockholders Agreement" and
"-- Registration Rights Agreement."

During the fiscal years ended December 31, 1996, 1997 and 1998, GE Capital
paid Proxicom approximately $463,000, $1,056,000 and $775,000 for Internet
professional services. Proxicom expects to continue to provide Internet
professional services to GE Capital.

44
<PAGE> 48

Series D Purchase Agreement. On February 1, 1999, Proxicom sold the
following number of shares of Series D convertible preferred stock to the
following purchasers at a purchase price of $6.00 per share.

<TABLE>
<S> <C>
Jack Kemp................................................... 16,373
Theodore Leonsis............................................ 43,660
John McKinley............................................... 43,660
General Atlantic Partners 52, L.P. ......................... 628,850
GAP Coinvestment Partners II, L.P. ......................... 141,571
The Mario M. Morino Trust................................... 54,575
GE Capital Equity Investments, Inc. ........................ 250,350
The Washington Post Company................................. 39,294
</TABLE>

In this transaction, all new investors became parties to the stockholders
agreement and the registration rights agreement. See "-- Stockholders Agreement"
and "-- Registration Rights Agreement." Also, simultaneously with this
transaction, Messrs. Fernandez, Hoenigman and McDonald and Ms. Wong sold a total
of 698,667 shares of common stock to the purchasers of the Series D preferred
stock for aggregate consideration of $4.2 million.

Stockholders Agreement. Proxicom, Messrs. Fernandez, Hoenigman and
McDonald, Ms. Wong each of the preferred stockholders and the former
stockholders of ad hoc Interactive, Inc. are parties to a stockholders
agreement. The stockholders agreement contains arrangements with respect to
voting, rights of first refusal and "tag-along" rights, as well as other
agreements relating to corporate governance. The stockholders agreement will
terminate by its terms immediately prior to the closing of this offering.

REGISTRATION RIGHTS AGREEMENT

Proxicom has a registration rights agreement with Messrs. Fernandez,
Hoenigman and McDonald, Ms. Wong, the former stockholders of ad hoc Interactive,
Inc. and each of the preferred stockholders. The stockholder parties to this
agreement own beneficially an aggregate of 19,056,133 shares of common stock.
After this offering closes, General Atlantic Partners 34 and 52, GAP
Coinvestment and GAP Coinvestment II will be entitled to one demand registration
right under the Securities Act, subject to limitations. This means they can
demand that Proxicom register the sale of their shares. In addition, all
stockholder parties will be entitled to piggyback registration rights as to the
registration of the sale of their shares of common stock under the Securities
Act. In the event that Proxicom proposes to register any shares of its common
stock under the Securities Act, either for its account or for the account of
other security holders, the holders of shares to be registered are entitled to
receive notice of the registration and are entitled to include their shares in
it. The underwriters of an offering can limit the number of shares of common
stock held by security holders with registration rights to be included in the
registration.

OTHER TRANSACTIONS

In December 1995, Proxicom loaned $155,000 to a partnership owned by Mr.
Fernandez. The partnership purchased computer equipment with the borrowed funds
and leased the equipment to Proxicom. The partnership ceased operations in 1997
and all assets and liabilities of the partnership were transferred to Proxicom
at book value of approximately $90,000.

In February 1997, Proxicom leased approximately 65,000 square feet of
office space in Reston, VA. The lessor is 11600 Sunrise Limited Partnership, a
limited partnership of which Mario M. Morino, a Proxicom director and
stockholder, is the general partner. The lease term commenced on July 1, 1997
and has a seven-year term. Lease payments totaled approximately $331,000 for
1997 and $864,000 for 1998 and will increase at an annual rate of 3.0%.

We believe that all transactions disclosed above were made on terms no less
favorable to Proxicom than would have been obtained from unaffiliated third
parties.
45
<PAGE> 49

PRINCIPAL AND SELLING STOCKHOLDERS

The following table presents information regarding the beneficial ownership
of common stock as of the date of this prospectus and as adjusted to reflect the
sale of common stock in this offering by:

- each person (or group of affiliated persons) who is the beneficial owner
of more than 5% of the outstanding common stock;

- each of the named executive officers;

- each Proxicom director;

- all of the executive officers and directors as a group; and

- each selling stockholder.

The persons named in this table have sole voting power for all shares of
common stock shown as beneficially owned by them, subject to community property
laws where applicable and except as indicated in the footnotes to this table.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, or SEC. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days after the date of this prospectus, are
deemed outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.

The "Beneficial Ownership After the Offering" share numbers and percentages
assume that the option granted to the underwriters to purchase additional shares
is not exercised.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
----------------------- SHARES -----------------------
NAME NUMBER PERCENTAGE TO BE SOLD NUMBER PERCENTAGE
- ---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Raul J. Fernandez.............. 8,101,759 40.7% -- 8,101,759 33.9%
General Atlantic Partners,
LLC(1)....................... 3,913,664 19.7 -- 3,913,664 16.4
Vincent Hoenigman(2)........... 1,446,494 7.3 100,000 1,196,494 5.0
The Hoenigman Charitable
Remainder Unitrust........... 150,000 * 150,000 0 *
Scott McDonald(3).............. 1,377,983 6.9 200,000 1,177,983 4.9
Carsten Sorensen(4)............ 262,537 1.3 50,000 212,537 *
Christopher Capuano............ 56,250 * -- 56,250 *
Larry D. Clark................. 75,000 * -- 75,000 *
Kenneth J. Tarpey(5)........... 65,500 * -- 65,500 *
David C. Hodgson(1)(6)......... 3,936,998 19.8 -- 3,936,998 16.5
Jack Kemp(7)................... 48,334 * -- 48,344 *
Theodore J. Leonsis(8)......... 101,667 * -- 101,667 *
John A. McKinley, Jr.(9)....... 90,001 * -- 90,001 *
Mario M. Morino(10)............ 346,475 1.7 -- 346,475 1.5
Brenda A. Wong(11)............. 1,730,820 8.7 -- 1,730,820 7.2
Jeremy Wagner(12).............. 1,556,987 7.8 -- 1,556,987 6.5
All executive officers and
directors as a group (11
persons)..................... 14,552,804 72.6 -- 14,552,804 60.5
</TABLE>

- -------------------------
* Less than 1% of the outstanding shares.

(1) General Atlantic Partners 34 holds 1,903,741 shares of Series A preferred
stock, 81,535 shares of Series B preferred stock and 347,311 shares of
common stock. GAP

46
<PAGE> 50

Coinvestment holds 330,106 shares of Series A preferred stock, 14,388
shares of Series B preferred stock and 60,189 shares of common stock.
General Atlantic Partners 52 holds 628,850 shares of Series D preferred
stock and 331,372 shares of common stock. GAP Coinvestment II holds 141,571
shares of Series D preferred stock and 74,601 shares of common stock. The
general partner of General Atlantic Partners 34 and General Atlantic
Partners 52 is GAP, LLC, a Delaware limited liability company. The managing
members of GAP LLC are also the general partners of GAP Coinvestment and
GAP Coinvestment II. Mr. Hodgson is a managing member of GAP LLC. Mr.
Hodgson is a general partner of GAP Coinvestment and GAP Coinvestment II.
General Atlantic Partners 34, General Atlantic Partners 52, GAP
Coinvestment, GAP Coinvestment II and GAP LLC, together, are a "group"
within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934.
Mr. Hodgson disclaims beneficial ownership of the securities held by
General Atlantic Partners 34, General Atlantic Partners 52, GAP
Coinvestment and GAP Coinvestment II, except to the extent of his
respective pecuniary interest in those entities. The address of GAP LLC and
Mr. Hodgson is c/o General Atlantic Service Corporation, 3 Pickwick Plaza,
Greenwich, CT 06830.

(2) Includes 149,650 shares of common stock held in escrow over which Mr.
Hoenigman has sole voting power and 150,000 shares owned by The Hoenigman
Charitable Remainder Unitrust of which Mr. Hoenigman is the sole trustee.
Mr. Hoenigman is an employee of Proxicom. His address is c/o Proxicom,
Inc., 11600 Sunrise Valley Drive, Reston, VA 20191.

(3) Includes 171,099 shares of common stock held in escrow over which Mr.
McDonald has sole voting power. Mr. McDonald is an employee of Proxicom.
His address is c/o Proxicom, Inc., 11600 Sunrise Valley Drive, Reston, VA
20191.

(4) Includes 212,537 shares of common stock issuable upon the exercise of stock
options. Mr. Sorensen is an employee of Proxicom.

(5) Includes 12,500 shares of common stock issuable upon the exercise of stock
options and 3,000 shares of common stock owned by members of Mr. Tarpey's
immediate family.

(6) Includes all of the shares beneficially owned by GAP LLC and 23,334 shares
of common stock issuable upon the exercise of stock options.

(7) Includes 23,334 shares of common stock issuable upon the exercise of stock
options and 16,373 shares of Series D preferred stock.

(8) Includes 35,000 shares of common stock issuable upon the exercise of stock
options and 43,660 shares of Series D preferred stock.

(9) Includes 23,334 shares of common stock issuable upon the exercise of stock
options and 43,660 shares of Series D preferred stock.

(10) Represents (a) 239,808 shares of Series B preferred stock held by the Mario
M. Morino Trust, (b) 54,575 shares of Series D preferred stock held by the
Mario M. Morino Trust and (c) 23,334 shares of common stock issuable upon
the exercise of stock options.

(11) Represents (a) 178,082 shares of common stock held in escrow over which Ms.
Wong has sole voting power and (b) 1,552,738 shares of common stock held in
trust by Ms. Wong and her husband, Jeremy Wagner.

(12) Includes 1,552,738 shares of common stock Mr. Wagner and Ms. Wong hold in
trust. Ms. Wong and Mr. Wagner share voting and investment power with
respect to the 1,552,738 shares of common stock which they hold in trust.

47
<PAGE> 51

DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon the closing of the offering, Proxicom's authorized capital stock will
consist of 100,000,000 shares of common stock, $.01 par value per share, and
10,000,000 shares of preferred stock, $.01 par value per share.

COMMON STOCK

As of the date of this prospectus, there were 15,669,909 shares of common
stock outstanding and held of record by 180 stockholders. Based upon the number
of shares outstanding as of the date of this prospectus and giving effect to the
issuance of 4,000,000 shares of common stock by Proxicom in this offering and
the conversion of the outstanding preferred stock there will be 23,901,103
shares of common stock outstanding upon completion of this offering.

Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. They do not have cumulative voting
rights. As a result, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably,
dividends, if any, as the board of directors may declare out of funds legally
available, subject to any preferential dividend rights of any then-outstanding
preferred stock. Upon the liquidation, dissolution or winding up of Proxicom,
the holders of common stock are entitled to receive ratably the net assets of
Proxicom available after the payment of all debts and other liabilities and
subject to the prior rights of any then-outstanding preferred stock. Holders of
the common stock have no preemptive, subscription, redemption or conversion
rights. The outstanding shares of common stock are, and the shares offered by
Proxicom in the offering will be, when issued in consideration for payment,
fully paid and nonassessable. The rights, preferences and privileges of holders
of common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock which Proxicom may
designate and issue in the future. See "-- Preferred Stock."

PREFERRED STOCK

As of the date of this prospectus, Proxicom had outstanding an aggregate of
4,231,194 shares of preferred stock, consisting of 2,233,847 shares of Series A
convertible preferred stock, 359,712 shares of Series B convertible preferred
stock, 419,302 shares of Series C convertible preferred stock and 1,218,333
shares of Series D convertible preferred stock. All of these shares will
automatically convert to common stock, on a one share for one share basis,
immediately prior to this offering's closing.

Following the closing of this offering, the board of directors will be
authorized, without further stockholder approval, to issue from time to time up
to an aggregate of 10,000,000 shares of preferred stock in one or more series.
The board of directors may fix or alter the designations, preferences, rights
and any qualification, limitations or restrictions of the shares of any series,
including the dividend rights, dividend rates, conversion rights, voting rights,
redemption terms and prices, liquidation preferences and the numbers of shares
constituting any series. As of the closing of this offering, no shares of
preferred stock will be outstanding. Although the ability of the board of
directors to designate and issue preferred stock could provide flexibility in
possible acquisitions or other corporate purposes, issuance of preferred stock
may have adverse effects on the holders of common stock. The effects include

- restrictions on dividends on the common stock if dividends on the
preferred stock have not been paid;

- dilution of voting power of the common stock to the extent the
preferred stock has voting rights; or

48
<PAGE> 52

- deferral of participation in Proxicom's assets upon liquidation until
satisfaction of any liquidation preference granted to holders of the
preferred stock.

In addition, issuance of preferred stock could make it more difficult for a
third party to acquire a majority of the outstanding voting stock and
accordingly may be used as an "anti-takeover" device. The board of directors,
however, currently does not contemplate the issuance of any preferred stock and
is not aware of any pending transactions that would be affected by such
issuance.

ANTI-TAKEOVER EFFECTS OF PROXICOM'S CERTIFICATE OF INCORPORATION AND BYLAWS AND
PROVISIONS OF DELAWARE LAW

Proxicom's certificate of incorporation and bylaws and provisions of
Delaware corporate law may hinder or delay a third party's attempt to acquire
Proxicom. They may also make it difficult for the stockholders to remove
incumbent management.

Classified Board of Directors; Removal; Vacancies. The certificate of
incorporation divides the board of directors into three classes. The directors
in each class serve three-year terms. The directors' terms are staggered by
class. Proxicom's classified board of directors is intended to provide
continuity and stability in the board of director's membership and policies.
However, the classified board of directors makes it more difficult for
stockholders to change the board of directors' composition quickly. Also, under
the certificate of incorporation, directors may be removed only for cause by a
two-thirds stockholder vote. In addition, a majority of the directors then in
office can fill board vacancies and newly created directorships resulting from
any increase in the size of the board of directors. This is true even if those
directors do not constitute a quorum or if only one director is left in office.
These provisions could prevent stockholders, including parties who want to take
over or acquire Proxicom, from removing incumbent directors without cause and
filling the resulting vacancies with their own nominees.

Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. The bylaws will establish an advance notice procedure
regarding nominations of directors by stockholders and other stockholder
proposals. The advance notice procedure will not apply to nominations of
directors by the board of directors. For matters a stockholder wishes to bring
before an annual meeting of stockholders, the stockholder must deliver Proxicom
notice not less than 60 days nor more than 90 days before the first anniversary
of the preceding year's annual meeting of nominations and other business to be
brought before a Proxicom annual meeting. The stockholder must put information
in the notice regarding

- the stockholder and its holdings;

- the background of any nominee for director;

- the written consent to being named as a nominee and to serving as a
director if elected;

- any business desired to be brought before the meeting;

- the reasons for conducting the business at the meeting; and

- any material interest of the stockholder in the business proposed.

At a special meeting of stockholders called to elect directors,
stockholders can make a nomination only if they deliver to Proxicom a notice
that complies with the above requirements to Proxicom no later than the tenth
day following the day on which public announcement of the special meeting is
made. The bylaws could preclude a nomination for the election of directors or
the conduct of certain business at a particular meeting if the proper procedures
are not followed. This may discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of Proxicom.

Special Stockholders' Meetings. Proxicom's certificate of incorporation
and bylaws will permit special meetings of the stockholders to be called only by
the board of directors, the

49
<PAGE> 53

Chairman, the Chief Executive Officer or the President or holders of at least
75% of Proxicom's securities that are outstanding and entitled to vote in an
election of directors.

Limitations on Stockholder Action by Written Consent. The certificate of
incorporation will place limits on the stockholders' ability to act by written
consent. Specifically, any action to be taken at a stockholders' meeting may be
taken without a meeting only if consented to generally by stockholders having
voting power of at least 75% of the voting power of all shares of each class or
series entitled to vote on the action.

Authorized But Unissued Shares. Proxicom without stockholder approval can
issue shares of common stock and preferred stock up to the number of shares
authorized for issuance in its certificate of incorporation, except as limited
by Nasdaq rules. Proxicom could use these additional shares for a variety of
corporate purposes. These purposes include future public offerings to raise
additional capital, corporate acquisitions and employee benefit plans.
Proxicom's ability to issue these shares of common stock and preferred stock
could make it more difficult or discourage an attempt to obtain control of
Proxicom by means of a proxy contest, tender offer, merger or otherwise.

Section 203 of Delaware Law. After this offering is completed, Section 203
of the Delaware General Corporation Law will apply to Proxicom. This section
will prohibit Proxicom from engaging in a "business combination" with an
"interested stockholder." This restriction will apply for 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 (1) mergers, (2) asset sales and (3) other transactions
resulting in a financial benefit to an interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of Proxicom's
voting stock. Section 203 could delay, defer or prevent a change in control of
Proxicom. It might also reduce the price that investors might be willing to pay
in the future for shares of common stock.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The certificate of incorporation will provide that directors of Proxicom
shall not be personally liable to Proxicom or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (1) for
any breach of the director's duty of loyalty to Proxicom or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under a provision of Delaware law
relating to unlawful payment of dividends or unlawful stock purchase or
redemption of stock or (4) for any transaction from which the director derives
an improper personal benefit. As a result of this provision, Proxicom and its
stockholders may be unable to obtain monetary damages from a director for breach
of his or her duty of care.

The bylaws will provide for the indemnification of directors and officers
and any person who is or was serving at the request of Proxicom as a director,
officer, employee, partner or agent of another corporation or of a partnership,
joint venture, limited liability company, trust or other enterprise to the
fullest extent authorized by, and subject to the conditions set forth in, the
Delaware General Corporation Law against all expenses, liabilities and losses.
The indemnification provided under the bylaws will include the right to be paid
by Proxicom the expenses in advance of any proceeding for which indemnification
may be had in advance of its final disposition.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is the Bank of New
York.

LISTING

Our common stock has been approved for listing on the Nasdaq National
Market under the trading symbol "PXCM."
50
<PAGE> 54

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our common stock in the public market could
adversely affect our common stock's prevailing market price. Upon completion of
this offering, we will have outstanding an aggregate of 23,901,103 shares of our
common stock, assuming no exercise of the underwriters over-allotment option and
no exercise of outstanding options. Of these shares, all of the shares sold in
this offering will be freely tradable without restriction or further
registration under the Securities Act, unless the shares are purchased by
"affiliates" of Proxicom as that term is defined in Rule 144 under the
Securities Act.

The remaining 19,401,103 shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Securities Act Rule 144 or 701. We summarize these two rules below. The
provisions of Rules 144 and 701 provide that the restricted securities will be
available for sale in the public market on the date which is one year from the
date they were issued, subject to the volume limitations and other conditions of
Rule 144.

LOCK-UP AGREEMENTS

All of Proxicom's officers and directors, and several of its stockholders,
who will own an aggregate of 19,853,393 shares (of which 1,305,454 shares are
issuable upon the exercise of options) of common stock after this offering
closes, have signed lock-up agreements. Under these agreements, they agreed,
among other things, not to transfer or dispose of any shares of common stock, or
any securities convertible into shares of common stock, for a period of 180 days
after the date of this prospectus. Transfers or dispositions can be made sooner
with the prior written consent of BT Alex. Brown Incorporated. This consent may
be given at any time without public notice.

RULE 144

Under Rule 144, 12,156,044 shares of common stock will be freely tradable
90 days after this offering closes. Of these shares of common stock, 11,507,439
shares are subject to lock-up agreements. In general, under Rule 144, beginning
90 days after the closing of this offering, a person who has owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

- one percent of the number of shares of common stock then outstanding,
which will equal approximately 239,011 shares immediately after this
offering; or

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

Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about
Proxicom.

Under Rule 144(k), 23,981 shares of common stock will be freely tradable
after this offering closes. None of these shares of common stock are subject to
lock-up agreements. Under Rule 144(k), a person who is not one of our affiliates
at any time during the 90 days preceding a sale, and who has owned the shares
proposed to be sold for at least two years, is entitled to sell the shares
without complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144. Therefore, unless otherwise restricted, "Rule
144(k) shares" may be sold immediately upon the completion of this offering.

51
<PAGE> 55

RULE 701

As of the date of this prospectus, a total of 5,185,662 shares of common
stock have been issued or are issuable upon the exercise of options. All of
these shares, subject to option vesting, will be eligible for sale in reliance
on Rule 701 beginning 90 days after the closing of this offering. Of these
shares of common stock, 1,380,454 are subject to lock-up agreements. In general,
under Rule 701 as currently in effect, any of our employees, consultants or
advisors who has purchased shares from us in connection with a compensatory plan
or other agreement is eligible to resell such shares 90 days after the effective
date of this offering in reliance on Rule 144, but without compliance with
restrictions, including the holding period, contained in Rule 144.

REGISTRATION RIGHTS

Upon completion of this offering, Proxicom stockholders, who will own an
aggregate of 19,056,133 shares of common stock, will have registration rights as
to their shares. Of these shares of common stock, 18,042,029 shares are subject
to lock-up agreements. GAP 34, GAP 52, GAP Coinvestment and GAP Coinvestment II,
who will own an aggregate of 3,913,664 shares of our common stock, or their
transferees, will be entitled to demand that Proxicom register their shares. In
addition, all of the Proxicom stockholders who have registration rights are
entitled to piggyback registration. See "Certain Transactions -- Registration
Rights Agreement." After registration, these shares will be freely tradable
without restriction under the Securities Act, unless the shares are purchased by
affiliates. Any sales of securities by these stockholders could have a material
adverse effect on the trading price of our common stock.

STOCK PLANS

As soon as practicable after this offering, we intend to file a
registration statement under the Securities Act covering 8,350,000 shares of
common stock reserved for issuance under our stock plans. As of the date of this
prospectus, options to purchase 5,263,368 shares of common stock were
outstanding. The registration statement is expected to be filed and become
effective as soon as practicable after the effective date of this offering.
Accordingly, shares registered under such registration statement will, subject
to vesting provisions and Rule 144 volume limitations applicable to our
affiliates, be available for sale in the open market shortly after this offering
closes, and in the case of our officers, directors and stockholders who have
entered into lock-up agreements, after the 180-day lock-up agreements expire.

52
<PAGE> 56

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement dated the
date hereof, the underwriters named below, through their representatives BT
Alex. Brown Incorporated, Prudential Securities Incorporated, Thomas Weisel
Partners LLC and Friedman, Billings, Ramsey & Co., Inc., have severally agreed
to purchase from Proxicom and the selling stockholders the following respective
numbers of shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
BT Alex. Brown Incorporated................................. 1,647,000
Prudential Securities Incorporated.......................... 732,000
Thomas Weisel Partners LLC.................................. 732,000
Friedman, Billings, Ramsey & Co., Inc. ..................... 549,000
BancBoston Robertson Stephens Inc. ......................... 60,000
CIBC World Markets.......................................... 60,000
Deutsche Bank Securities Inc. .............................. 60,000
Donaldson, Lufkin & Jenrette Securities..................... 60,000
Hambrecht & Quist LLC....................................... 60,000
Lehman Brothers Inc. ....................................... 60,000
NationsBanc Montgomery Securities LLC....................... 60,000
Salomon Smith Barney Inc. .................................. 60,000
Adams, Harkness & Hill, Inc. ............................... 40,000
FAC/Equities................................................ 40,000
First Union Capital Markets Corp. .......................... 40,000
Gerard Klauer Mattison & Co., Inc. ......................... 40,000
Hoak Breedlove Wesneski & Co. .............................. 40,000
Legg Mason Wood Walker, Incorporated........................ 40,000
Edgar M. Norris & Co. Inc. ................................. 40,000
The Robinson-Humphrey Company, LLC.......................... 40,000
SoundView Technology Group, Inc. ........................... 40,000
---------

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

The underwriters are obligated to purchase all of the shares of common
stock offered hereby, other than those covered by the over-allotment option
described below, if any such shares are purchased.

The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover page of this prospectus and
to some dealers at a price that represents a concession not in excess of $0.91
per share under the public offering price. The underwriters may allow, and such
dealers may re-allow, a concession not in excess of $0.10 per share to other
dealers. After the initial offering, the offering price and other selling terms
may be changed by the representatives of the underwriters.

Proxicom has granted to the underwriters an option, exercisable not later
than 30 days after the date of this prospectus, to purchase up to 675,000
additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. The underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the common stock offered
hereby. To the extent that the underwriters exercise such options, each of the
underwriters will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above table bears
to

53
<PAGE> 57

675,000. Proxicom will be obligated, pursuant to the option, to sell such shares
to the underwriters to the extent the option is exercised. If any additional
shares of common stock are purchased, the underwriters will offer additional
shares on the same terms as those on which the shares are being offered.

The following table summarizes the compensation to be paid to the
underwriters by Proxicom and the selling stockholders, and the expenses payable
by Proxicom.

<TABLE>
<CAPTION>
TOTAL
--------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and Commissions paid by
Proxicom....................................... $0.91 $3,640,000 $4,254,250
Expenses payable by Proxicom..................... -- 1,500,000 1,500,000
Underwriting Discounts and Commissions paid by
selling stockholders........................... 0.91 455,000 455,000
</TABLE>

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 10% of the shares of the common stock offered
hereby for purchase by our directors, officers and employees and their business
associates and related persons. The number of shares of our common stock offered
to the public will be reduced to the extent these persons purchase such reserved
shares. The underwriters will offer to the public on the same basis as the other
shares offered hereby any reserved shares which are not so purchased by these
persons.

Proxicom has agreed to indemnify the underwriters against liabilities in
connection with this offering, including liabilities under the Securities Act.

Each of Proxicom's officers and directors and Proxicom's larger
stockholders have agreed not to offer, sell, contract to sell or otherwise
dispose of, or enter into any transaction which is designed to, or could be
expected to, result in the disposition of any portion of, any common stock for a
period of 180 days after the effective date of the registration statement of
which this prospectus is a part without the prior written consent of BT Alex.
Brown Incorporated. This consent may be given at any time without public notice.

Proxicom has entered into a similar agreement, except that we may issue,
and grant options or warrants to purchase, shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock, pursuant to the exercise of outstanding options and warrants and
our issuance of options and stock granted under the existing stock option and
stock purchase plans.

The representatives of the underwriters have advised Proxicom that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the common stock. Specifically, the underwriters may over-allot
shares of the common stock in connection with this offering, thereby creating a
short position in the common stock for their own account. Additionally, to cover
such over-allotments or to stabilize the market price of the common stock, the
underwriters may bid for, and purchase, shares of the common stock in the open
market. Finally, the representatives, on behalf of the underwriters, also may
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.

54
<PAGE> 58

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 been named as a lead or co-manager on 20 filed
public offerings of equity securities, of which six have been completed, and has
acted as a syndicate member in an additional eight public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors or controlling persons, except that Jack
Kemp is a member of Proxicom's board of directors and a member of the advisory
board of Thomas Weisel Partners and except with respect to the contractual
relationship created by the underwriting agreement.

FBR Technology Venture Partners L.P., an affiliate of Friedman, Billings,
Ramsey & Co., Inc., owns 23,981 shares of Series B preferred stock.

PRICING OF THIS OFFERING

Prior to this offering, there was no public market for our common stock.
Consequently, the initial public offering price for our common stock was
negotiated among Proxicom, the selling stockholders and the representatives of
the underwriters. Among the factors considered in determining the public
offering price were:

- the history and prospects of Proxicom's business and the industry in
which it competes;

- an assessment of Proxicom's management and the present state of
Proxicom's development;

- prevailing market conditions in the U.S. economy and the industry in
which Proxicom competes;

- Proxicom's revenues, operating cash flow and earnings in recent periods;

- the market capitalizations and stages of development of other companies
which the representatives of the underwriters believe to be comparable to
Proxicom; and

- estimates of Proxicom's business potential.

LEGAL MATTERS

The validity of the shares of common stock being offered hereby and other
legal matters will be passed upon for Proxicom by Hogan & Hartson L.L.P.,
Washington, D.C. Legal matters in connection with the offering will be passed
upon for the underwriters by Hale and Dorr LLP, Washington, D.C.

EXPERTS

The financial statements as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1. It
includes exhibits and schedules. This prospectus is part of the registration
statement. It does not contain all of the information that is in the
registration statement. The registration statement contains more information
about Proxicom and the common stock. Statements contained in this prospectus
concerning the provisions of documents filed as exhibits to the registration
statement are necessarily summaries which disclose the material terms of such
documents. Each of these
55
<PAGE> 59

statements is qualified in its entirety by reference to the copy of the
applicable document filed with the SEC. You may read and copy all or any portion
of the registration statement at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room's
operations. The registration statement is also available to you on the SEC's
Internet site (http://www.sec.gov). We intend to furnish our stockholders with
annual reports containing financial statements audited by our independent
accountants and quarterly reports containing unaudited financial statements for
the first three quarters of each fiscal year.

56
<PAGE> 60

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Stockholders'
Equity.................................................... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 61

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors
of Proxicom, Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the financial
position of Proxicom, Inc. (the "Company") and its subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As described in Note 2, on March 26, 1999, Proxicom, Inc. merged with ad
hoc Interactive, Inc. in a transaction accounted for as a pooling of interests.
The accompanying supplemental consolidated financial statements give retroactive
effect to the merger of Proxicom, Inc. with ad hoc Interactive, Inc.

In our opinion, based upon our audits, the accompanying supplemental
consolidated balance sheets and the related supplemental consolidated statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Proxicom, Inc. and
its subsidiaries at December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP
McLean, Virginia
February 5, 1999,
except as to the pooling of interests with
ad hoc Interactive, Inc. which is as of March 26, 1999

F-2
<PAGE> 62

PROXICOM, INC.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------ DECEMBER 31,
1997 1998 1998
------- -------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,343 $ 2,482
Investments............................................... 1,101 278
Accounts receivable, net of allowance of $626 and $500,
respectively............................................ 7,747 9,613
Unbilled services......................................... 1,369 4,259
Prepaid income taxes...................................... 207 130
Prepaid expenses.......................................... 305 402
Other current assets...................................... 169 297
------- --------
Total current assets.................................... 13,241 17,461
Property and equipment, net................................. 2,572 2,858
Deferred tax assets and other............................... 284 1,758
------- --------
Total assets............................................ $16,097 $ 22,077
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lines of credit........................................... $ 264 $ 5,436
Trade accounts payable.................................... 1,245 639
Accrued compensation...................................... 1,404 3,714
Deferred revenue.......................................... 1,147 1,356
Deferred tax liabilities.................................. 616 1,423
Note payable.............................................. -- 1,400
Other accrued liabilities................................. 1,045 1,113
------- --------
Total current liabilities............................... 5,721 15,081
------- --------
Commitments and contingencies (Note 14)
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, $.01 par value;
2,641,347 shares authorized; 1,629,969 shares issued and
outstanding at December 31, 1996 and 1997; 1,629,969
shares issued and 1,222,469 shares outstanding at
December 31, 1998....................................... 16 12 --
Series B convertible preferred stock, $.01 par value;
359,712 shares authorized, issued and outstanding at
December 31, 1997 and 1998.............................. 4 4 --
Series C convertible preferred stock, $.01 par value;
419,302 shares authorized, issued and outstanding at
December 31, 1997 and 1998.............................. 4 4 --
Common stock, $.01 par value, 20,000,000 shares
authorized; 13,026,801 shares and 14,609,997 shares
issued at December 31, 1997 and 1998, respectively;
12,566,172 and 14,556,868 shares outstanding at December
31, 1997 and 1998, respectively......................... 130 146 166
Additional paid-in capital................................ 8,794 25,229 25,229
Retained earnings (deficit)............................... 3,255 (18,180) (18,180)
Comprehensive income...................................... 3 3 3
Treasury stock............................................ (1,830) (222) (222)
------- -------- -------
Total stockholders' equity.............................. 10,376 6,996 6,996
------- -------- -------
Total liabilities and stockholders' equity.............. $16,097 $ 22,077
======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 63

PROXICOM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Revenue.................................................. $12,431 $27,356 $ 42,405
Cost of revenue.......................................... 4,756 12,077 23,862
------- ------- --------
Gross profit............................................. 7,675 15,279 18,543
------- ------- --------
Operating expenses:
General and administrative............................. 5,405 9,664 15,325
Selling and marketing.................................. 652 1,711 2,896
Research and development............................... 404 961 692
Acquisition and merger costs........................... -- -- 2,886
Stock-based and other compensation..................... -- -- 18,175
------- ------- --------
Total............................................... 6,461 12,336 39,974
------- ------- --------
Income (loss) from operations............................ 1,214 2,943 (21,431)
Interest income (expense), net........................... 55 80 (111)
------- ------- --------
Income (loss) before income taxes........................ 1,269 3,023 (21,542)
Income tax provision (benefit)........................... 185 330 (900)
------- ------- --------
Net income (loss)........................................ $ 1,084 $ 2,693 $(20,642)
======= ======= ========
Basic net income (loss) per common share................. $ 0.08 $ 0.21 $ (1.50)
======= ======= ========
Diluted net income (loss) per common share............... $ 0.08 $ 0.16 $ (1.50)
======= ======= ========
Weighted average common shares outstanding............... 12,993 12,626 13,762
======= ======= ========
Weighted average common shares and common share
equivalents............................................ 13,536 16,333 13,762
======= ======= ========
Unaudited pro forma data (Note 3):
Basic net loss per common share........................ $ (1.31)
========
Diluted net loss per common share...................... $ (1.31)
========
Weighted average common shares outstanding............. 15,763
========
Weighted average common shares and common share
equivalents......................................... 15,763
========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 64

PROXICOM, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
UNREALIZED
GAIN
COMMON STOCK PREFERRED STOCK ADDITIONAL (LOSS) TREASURY STOCK RETAINED
------------------- ------------------ PAID-IN ON ------------------ EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL SECURITIES SHARES AMOUNT (DEFICIT)
---------- ------ --------- ------ ---------- ---------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................... 12,491,802 $125 -- $-- $ -- $-- -- $ -- $ 986
Issuance of preferred
Series A and warrants... -- -- 1,629,969 16 5,314 -- -- -- --
Capitalization of Square
Earth, Inc.............. 534,999 5 -- -- 17 -- -- -- (8)
Treasury stock
acquired................ -- -- -- -- -- -- 100,917 (330) --
Comprehensive income
(loss).................. -- -- -- -- -- (4) -- -- --
Net income............... -- -- -- -- -- -- -- -- 1,084
Distributions............ -- -- -- -- -- -- -- -- (120)
---------- ---- --------- --- ------- --- -------- ------- --------
Balance at December 31,
1996.................... 13,026,801 130 1,629,969 16 5,331 (4) 100,917 (330) 1,942
Issuance of preferred
Series B................ -- -- 359,712 4 1,496 -- -- -- --
Treasury stock
acquired................ -- -- -- -- -- -- 359,712 (1,500) --
Issuance of preferred
Series C................ -- -- 419,302 4 1,967 -- -- -- --
Comprehensive income..... -- -- -- -- -- 7 -- -- --
Net income............... -- -- -- -- -- -- -- -- 2,693
Subchapter S Corporation
distributions........... -- -- -- -- -- -- -- -- (1,380)
---------- ---- --------- --- ------- --- -------- ------- --------
Balance at December 31,
1997.................... 13,026,801 130 2,408,983 24 8,794 3 460,629 (1,830) 3,255
Conversion of preferred
Series A................ -- -- (407,500) (4) (1,604) -- (407,500) 1,608 --
Exercise of stock
options................. 86,702 1 -- -- 302 -- -- -- --
Subchapter S Corporation
distributions........... -- -- -- -- -- -- -- -- (793)
Stock-based
compensation............ 1,496,494 15 -- -- 17,956 -- -- -- --
Unearned stock-based
compensation............ -- -- -- -- (219) -- -- -- --
Net loss................. -- -- -- -- -- -- -- -- (20,642)
---------- ---- --------- --- ------- --- -------- ------- --------
Balance at December 31,
1998.................... 14,609,997 $146 2,001,483 $20 $25,229 $ 3 53,129 $ (222) $(18,180)
========== ==== ========= === ======= === ======== ======= ========

TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at December 31,
1995.................... $ 1,111
Issuance of preferred
Series A and warrants... 5,330
Capitalization of Square
Earth, Inc.............. 14
Treasury stock
acquired................ (330)
Comprehensive income
(loss).................. (4)
Net income............... 1,084
Distributions............ (120)
--------
Balance at December 31,
1996.................... 7,085
Issuance of preferred
Series B................ 1,500
Treasury stock
acquired................ (1,500)
Issuance of preferred
Series C................ 1,971
Comprehensive income..... 7
Net income............... 2,693
Subchapter S Corporation
distributions........... (1,380)
--------
Balance at December 31,
1997.................... 10,376
Conversion of preferred
Series A................ --
Exercise of stock
options................. 303
Subchapter S Corporation
distributions........... (793)
Stock-based
compensation............ 17,971
Unearned stock-based
compensation............ (219)
Net loss................. (20,642)
--------
Balance at December 31,
1998.................... $ 6,996
========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 65

PROXICOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 1,084 $ 2,693 $ (20,642)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 356 818 1,407
Increase (decrease) in deferred income taxes........... 52 321 (667)
Provision for stock compensation....................... -- 220 17,425
Provision for doubtful accounts........................ 225 389 (126)
Changes in assets and liabilities:
Increase in accounts receivable...................... (2,104) (5,506) (1,740)
Increase in unbilled services........................ (383) (649) (2,890)
(Increase) decrease in prepaid income taxes.......... (276) 77 77
Increase in prepaid expenses......................... (122) (175) (97)
Increase in other assets............................. (43) (55) (128)
Increase (decrease) in trade accounts payable........ 173 979 (606)
(Decrease) increase in accrued compensation.......... (201) 769 2,310
Increase in note payable............................. -- -- 1,400
Increase in deferred revenue......................... 499 648 209
Increase in other accrued liabilities................ 255 722 68
------- ------- ---------
Net cash (used in) provided by operating
activities...................................... (485) 1,251 (4,000)
------- ------- ---------
Cash flows from investing activities:
Purchases of property and equipment....................... (1,374) (1,999) (1,694)
Purchases of investments.................................. (2,285) (104) (390)
Sales of investments...................................... -- 1,288 1,213
------- ------- ---------
Net cash used in investing activities............. (3,659) (815) (871)
------- ------- ---------
Cash flows from financing activities:
Issuance of preferred stock and warrants, Series A........ 5,330 -- --
Issuance of preferred stock, Series B..................... -- 1,500 --
Issuance of preferred stock, Series C..................... -- 1,971 --
Issuance of common stock.................................. 22 -- --
Exercise of stock options................................. -- -- 631
Purchase of treasury stock................................ (330) (1,500) --
Borrowings under line of credit........................... 3,585 6,690 11,881
Payments under line of credit............................. (3,826) (6,493) (6,709)
Subchapter S corporation distributions.................... (120) (1,380) (793)
Decrease in due to majority stockholder................... (200) -- --
------- ------- ---------
Net cash provided by financing activities......... 4,461 788 5,010
------- ------- ---------
Net increase in cash and cash equivalents................... 317 1,224 139
Cash and cash equivalents at beginning of period............ 802 1,119 2,343
------- ------- ---------
Cash and cash equivalents at end of period.................. $ 1,119 $ 2,343 $ 2,482
======= ======= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 66

PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

Proxicom, Inc. ("Proxicom") is a leading provider of Internet solutions to
Global 1000 companies and other large organizations. Since 1994, Proxicom has
focused exclusively on the Internet. Proxicom's Internet solutions include
business to consumer electronic commerce Internet sites, business to business
electronic commerce extranets, and company-specific intranets.

In August 1996, Proxima, Inc. ("Proxima"), a Maryland corporation
reincorporated as a Delaware corporation, through a merger transaction, changing
its name to Proxicom, Inc.

Renaissance Leasing Corp. ("Renaissance") was a partnership substantially
owned by the majority stockholder of Proxicom. Renaissance purchased computer
equipment with funds borrowed from Proxicom and leased all such assets to
Proxicom. Renaissance ceased operations in 1997 and all assets and liabilities
of Renaissance were transferred to Proxicom at book value of approximately
$90,000. Proxicom and Renaissance were companies under common control and have
been accounted for in a manner similar to a pooling of interests.

2. MERGERS

In August 1998, Proxicom completed a merger with IBIS Consulting, Inc.
("IBIS Consulting"), a Subchapter S Corporation incorporated during 1994, by
exchanging 4,988,297 shares of Proxicom's common stock for all the common stock
of IBIS Consulting. Each share of IBIS Consulting was exchanged for 0.2327868
shares of Proxicom common stock. In addition, outstanding IBIS Consulting
employee stock options were converted at the same exchange factor into options
to purchase 345,034 shares of Proxicom common stock (Note 9).

There were no transactions between Proxicom and IBIS Consulting prior to
the combination. No material adjustments were made to conform to Proxicom's
accounting policies.

Effective January 1, 1998, Proxicom completed a merger with Square Earth,
Inc. ("Square Earth"), a Subchapter S Corporation incorporated during 1996, by
exchanging 534,999 shares of its common stock for all the common stock of Square
Earth. Each share of Square Earth was exchanged for 0.445833 shares of Proxicom
common stock. In addition, outstanding Square Earth employee stock options were
converted at the same exchange factor into options to purchase 41,474 shares of
Proxicom common stock (Note 9).

There were no transactions between Proxicom and Square Earth prior to the
combination. No material adjustments were made to conform to Proxicom's
accounting policies.

Stand-alone financial information is shown in the following table.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
----------------- JUNE 30,
1996 1997 1998
------ ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue
IBIS Consulting.................... $3,884 $10,170 $8,054
Square Earth....................... 593 1,403 *
Net income (loss)
IBIS Consulting.................... $ 938 $ 2,078 $1,391
Square Earth....................... (95) 2 *
</TABLE>

- -------------------------
* Not applicable to reporting period.

F-7
<PAGE> 67
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The IBIS Consulting and Square Earth mergers constituted tax-free
reorganizations and have been accounted for as poolings of interests under
Accounting Principles Board Opinion No. 16, Business Combinations. Accordingly,
all prior period consolidated financial statements presented have been restated
to include the combined results of operations, financial position and cash flows
of IBIS Consulting and Square Earth as though they had been a part of Proxicom
since their inception.

Proxicom incurred charges of approximately $2.9 million in 1998 for costs
associated with the IBIS Consulting and Square Earth transactions. Those
transaction costs related to professional fees and other direct expenses
relating to the acquisitions.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 amounts reported in the consolidated financial
statements. Actual results may differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts and
balances of Proxicom, IBIS Consulting, Square Earth and Renaissance (hereafter
collectively the "Company" or "Proxicom"). All significant intercompany
transactions and balances have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

Highly liquid investments having original maturities of 90 days or less at
the date of acquisition are classified as cash equivalents. The carrying values
of cash equivalents approximate fair values.

REVENUE RECOGNITION

Revenue from Internet professional services are recognized based on the
nature of the contract. Revenue from fixed-price contracts is recognized using
the percentage-of-completion method based on the ratio of costs incurred to
total estimated costs. Revenue from time-and-materials contracts is accounted
for as time is incurred and billed. Net revenues exclude reimburseable expenses
charged to clients.

The Company periodically evaluates cost and revenue assumptions in
fixed-price contracts. Provisions for estimated losses on uncompleted contracts
are made on a contract by contract basis and are recognized in the period in
which such losses are determined. Most contracts are cancellable by either the
Company or the customer upon 30 days notice, with payment due for services
completed through the date of termination. No significant losses have been
incurred on cancelled contracts.

Deferred revenue is recognized on fixed-price contracts to reflect billings
in excess of revenue recognized under the percentage-of-completion method.

F-8
<PAGE> 68
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Unbilled services on contracts are comprised of costs plus earnings in
excess of contractual billings on such contracts. Billings in excess of cost
plus earnings are classified as deferred revenue.

RESEARCH AND DEVELOPMENT EXPENSES FOR SOFTWARE PRODUCTS

Research and development costs are expensed as incurred. Statement of
Financial Accounting Standards ("SFAS") No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed, requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility and prior to general release of the
software. Based on the Company's development process, technological feasibility
is established upon completion of a working model. The period between
technological feasibility and general release is relatively short and the costs
incurred during this period have been insignificant for capitalization.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization
are computed on the straight-line method over the estimated useful lives of the
related assets ranging from three to five years. Leasehold improvements are
amortized on a straight-line method over the shorter of the improvements'
estimated useful lives or related remaining lease term. Long-lived assets held
and used by the Company are reviewed for impairment whenever changes in
circumstances indicate the carrying value of an asset may not be recoverable.

INVESTMENTS

The Company classifies its investments as available-for-sale as defined by
SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of taxes, reported as comprehensive income within
stockholders' equity. Comprehensive income is not materially different from net
income in any period presented.

INCOME TAXES

The provision for income taxes is determined in accordance with SFAS No.
109, Accounting for Income Taxes, which requires the use of the asset and
liability approach. Under this approach, deferred taxes represent the expected
future tax consequences of temporary differences between the carrying amounts
and tax bases of assets and liabilities.

STOCK-BASED COMPENSATION

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees, and complies with the disclosure
provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Under APB
No. 25, compensation expense is based on the difference, if any, on the date of
the grant, between the fair value of the Company's stock and the exercise price.
A new measurement date for purposes of determining compensation is established
when there is a substantive change to the terms of an underlying option. See
Note 9.

BASIC AND DILUTED NET INCOME PER COMMON SHARE

Basic net income per common share is based on the weighted average number
of shares of common stock outstanding during each year. Diluted net income per
common share is based on
F-9
<PAGE> 69
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the weighted average number of shares of common stock outstanding during each
year, adjusted for the effect of common stock equivalents arising from the
assumed exercise of stock options, if dilutive. See Note 15.

All per share amounts have been restated to reflect the re-incorporation
discussed at Note 1 and the mergers of IBIS Consulting and Square Earth
discussed at Note 2.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's cash and cash equivalents,
investments, accounts receivable, trade accounts payable and note payable
approximate fair value due to the short maturity and ready liquidity of those
instruments.

CONCENTRATION OF CREDIT RISK

Revenue in the years ended 1996, 1997 and 1998 and receivables as of
December 31, 1997 and 1998 were concentrated with four customers as follows
(amounts represent percentage of total revenue and accounts receivable,
respectively):

<TABLE>
<CAPTION>
ACCOUNTS
REVENUE RECEIVABLE
--------------------- -------------
YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------- -------------
1996 1997 1998 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Customer A....................................... 14.4% 23.8% 14.7% 20.2% 7.8%
Customer B....................................... * 10.1 13.7 3.8 13.7
Customer C....................................... 14.7 * * * *
Customer D....................................... 13.5 * * * *
</TABLE>

- -------------------------
* Represents less than 10% of total.

The Company performs initial credit evaluations of its new customers and
generally does not require collateral from its customers. The Company maintains
an allowance for potential losses when identified.

RECENT ACCOUNTING PRONOUNCEMENTS

During 1998, the Company adopted FAS 131, Disclosures About Segments of An
Enterprise and Related Information. This Statement changes the way public
companies report information about segments of their business in annual
financial statements and requires disclosure of selected segment information. It
also requires entity-wide disclosures about the products and services an entity
provides, the material countries in which it holds assets and reports revenues,
and its major customers. The Company currently operates in one operating and
geographic segment. The adoption of SFAS No. 131 does not have a material effect
on the current reporting or disclosure requirements.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. SFAS No. 133 will be effective for the Company's
fiscal year

F-10
<PAGE> 70
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ending December 31, 2000. The Company has no derivative or hedging activity in
any of the periods presented.

PRO FORMA BALANCE SHEET, NET INCOME AND EARNINGS PER SHARE (UNAUDITED)

The pro forma stockholders' equity presents the effect of the automatic
conversion of the preferred stock outstanding as of December 31, 1998, as
described in Note 10, at the consummation of the public offering.

As discussed in Note 2, the Company merged with IBIS Consulting and Square
Earth during 1998, both previously Subchapter S Corporations. Pro forma net
income (loss) assuming that IBIS Consulting and Square Earth were taxable
entities during the periods presented is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before income taxes........................... $1,269 $3,023 $(21,542)
Pro forma income tax provision (benefit).................... 781 1,248 (900)
Pro forma net income (loss)................................. 488 1,775 (20,642)
</TABLE>

4. INVESTMENTS

The following is a summary of investments classified as current assets at
December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ---------- ---------- ------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. Treasury securities and obligations
of U.S. government agencies............ $1,098 $4 $(1) $1,101
DECEMBER 31, 1998
U.S. Treasury securities and obligations
of U.S. government agencies............ $275 $3 $-- $ 278
</TABLE>

The cost and fair value of available-for-sale securities by contractual
maturity are as follows (in thousands):

<TABLE>
<CAPTION>
FAIR
COST VALUE
------ ------
<S> <C> <C>
DECEMBER 31, 1997
Due in one year or less................................... $ 501 $ 501
Due after one year through three years.................... 597 600
------ ------
$1,098 $1,101
====== ======
DECEMBER 31, 1998
Due in one year or less................................... $ 200 $ 202
Due after one year through three years.................... 75 76
------ ------
$ 275 $ 278
====== ======
</TABLE>

F-11
<PAGE> 71
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company realized gains from the sales of investments of $2,000 and
$9,000 for the years 1997 and 1998, respectively, and realized losses from the
sales of investments of $2,000 in 1998.

5. ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable......................................... $8,373 $10,113
Allowance for doubtful accounts............................. (626) (500)
------ -------
Net accounts receivable..................................... $7,747 $ 9,613
====== =======
</TABLE>

No accounts receivable at December 31, 1998 or 1997 were the result of
long-term contracts.

The Company wrote off doubtful accounts of $59,000, $71,000 and $959,000
for the years ended December 31, 1996, 1997 and 1998, respectively.

6. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment.......................................... $2,530 $3,304
Office and other equipment.................................. 536 693
Purchased software.......................................... 397 596
Leasehold improvements...................................... 345 934
Automobile.................................................. 26 --
------ ------
3,834 5,527
Less: Accumulated depreciation and amortization............. (1,262) (2,669)
------ ------
Total property and equipment, net........................... $2,572 $2,858
====== ======
</TABLE>

7. LINES OF CREDIT

At December 31, 1997, the Company had a $2.0 million revolving line of
credit with a bank. Interest is payable monthly at the bank's prime rate plus
0.5% (9.00% at December 31, 1997). The line of credit is secured by
substantially all of the Company's assets, and includes various customary
financial and other covenants including maintenance of a minimum level of
tangible net worth. No borrowings were outstanding under the line of credit as
of December 31, 1997. There are no commitment fees under this line of credit.

In February 1998, the Company increased the line of credit to $5.0 million
and the bank decreased the interest rate to prime. All other material financial
covenants remained unchanged. No borrowings were outstanding under this facility
as of December 31, 1998.

At December 31, 1997, Square Earth had a $350,000 line of credit with a
bank. The line of credit included various customary financial and other
covenants including maintenance of a minimum level of tangible net worth.
Borrowings of $264,000 and $0 were outstanding under the line of credit as of
December 31, 1997 and 1998, respectively.

F-12
<PAGE> 72
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In July 1998, IBIS Consulting entered into a line of credit with a bank in
the amount of $500,000. The line expires in August 1999. This line of credit
replaced a previously existing $200,000 line of credit with the same bank. No
borrowings were outstanding under this facility as of December 31, 1998.

In October 1998, the Company entered into a $10.0 million revolving line of
credit with a bank. All prior existing lines of credit were paid in full and
terminated. The use of the line generally is restricted to working capital
requirements and approved acquisitions as defined in the line of credit
agreement. Interest on this line is payable on a monthly basis at a variable
rate of LIBOR plus 2%. The line of credit is secured by the Company's
consolidated real and personal property, including intellectual property rights
and all cash and non-cash proceeds of these assets. Included in the line of
credit are various customary financial and other covenants including maintenance
of a minimum level of tangible net worth. The line of credit expires on August
31, 2000. At December 31, 1998, the Company has outstanding letters of credit of
$205,000 which reduce amounts available under the line. Borrowings of $5.4
million and $4.4 million were outstanding and available, respectively, against
the line as of December 31, 1998.

Commitment fees of 0.25% paid on the unused line of credit during 1998 were
not material. There were no commitment fees under the previous lines of credit
for 1997 and 1998.

Interest expense was $33,000, $94,000 and $227,000 for the years ended
December 31, 1996, 1997 and 1998, respectively.

8. NOTE PAYABLE

On August 10, 1998, the Company entered into a $1.4 million note payable
with an investment banking firm in connection with professional services for the
IBIS Consulting transaction. The note accrues interest at 7% per annum and
matures in the earlier of August 21, 1999 or upon completion of an initial
public offering. This unsecured note is subordinated only to the Company's
senior bank facilities.

9. STOCK OPTION PLANS

PROXICOM STOCK OPTION PLANS FOR EMPLOYEES AND NON-EMPLOYEES

In 1996, Proxicom established a stock option plan (the "Plan") under which
eligible employees and eligible non-employees may be granted options to purchase
shares of the Company's common stock. The Plan provides for the issuance of a
maximum of 4,150,000 shares of common stock. Under the Plan, the option purchase
price for each grant is equal to the fair value of the common stock at the date
of the grant as determined by the Board of Directors. Options granted under the
plan generally vest ratably over a four-year period and expire 10 years from the
date of the grant.

IBIS CONSULTING

F-13
<PAGE> 73
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

termination of employment, based on a pre-determined formula. After exercise,
IBIS Consulting retained the right and obligation to reacquire the shares based
on the formula price upon termination of the employee prior to the completion of
an initial public offering or sale of IBIS Consulting.

In July 1998, one employee exercised his option to acquire 1,496,494
shares. The employee paid IBIS Consulting $330,000 to exercise the options and
received $275,000, less applicable taxes under a tax reimbursement cash bonus
arrangement.

The Company recognized compensation expense in 1997 and a liability related
to both these options and the underlying cash bonus arrangement in the amount of
$220,000.

In January 1997, IBIS Consulting granted options to purchase 256,065 shares
to another employee with an exercise price of $0.403 per share. These options
were subject to a vesting schedule. Employment was terminated in 1997 and the
unvested options lapsed upon termination.

In January 1998, IBIS Consulting announced the grant of options under a
1998 plan and the conversion of options outstanding under the 1997 plan. In July
1998, IBIS Consulting granted such options to employees covering 82,497 shares
with an exercise price of $4.72 per share. The options are subject to an
18-month vesting schedule. Concurrent with this 1998 option grant, the remaining
1997 options of 262,537 shares were converted to the 1998 Plan. IBIS
Consulting's previous obligation to repurchase and the employees obligation to
sell the vested options upon termination of employment was eliminated.

In connection with the Company's merger with IBIS Consulting, the Company
assumed all outstanding options to purchase shares of common stock of IBIS
Consulting. These options were converted into options to purchase equivalent
shares of the Company's common stock based on the merger exchange formula and
subsequently included under the Plan.

SQUARE EARTH, INC.

In connection with the Company's merger with Square Earth, the Company
assumed all outstanding options to purchase shares of common stock of Square
Earth. These options were converted into options to purchase equivalent shares
of the Company's common stock based on the merger exchange formula and
subsequently included under the Plan.

STOCK-BASED AND OTHER COMPENSATION

In early 1997, prior to Proxicom's investment in IBIS Consulting, IBIS
Consulting entered into an arrangement with an employee providing that
individual with 1,496,494 fully vested stock options which were subject to
certain conditions, including provisions requiring IBIS Consulting to buy back
the common stock resulting from exercise of the options and requiring the
employee to sell such shares to IBIS Consulting at a pre-determined formula upon
termination of employment. The employee exercised these options in July 1998.
Due to a change of control provision in the initial option agreement, concurrent
to the merger of IBIS Consulting and Proxicom, the repurchase requirement on the
stock and stock options was eliminated allowing the employees to freely trade
the stock.

As a consequence of the above change of control provision triggered by the
merger, and the conversion of options from the 1997 plan to the 1998 plan, the
Company recorded non-cash stock-based compensation of approximately $17.0
million equal to the difference between the pre-determined formula price and the
then fair value of the underlying stock or stock options. As
F-14
<PAGE> 74
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the shares were fully vested, the compensation expense was recognized at the
time of the merger.

In connection with other stock option grants during the year ended December
31, 1998, the Company recognized additional stock-based compensation totaling
$219,000, and deferred stock-based compensation which is being amortized through
December 31, 1999, the 18-month vesting period of the related options. The
Company did not recognize any amortization expense during the years ended
December 31, 1996 and 1997.

PROXICOM STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

In February 1997, the Company established a stock option plan for
non-employee directors (the "Directors Plan") and has reserved 350,000 shares of
common stock for issuance under the provisions of this plan. Options granted
prior to December 15, 1998 generally vest over the three-year term as a
director. Options under the Directors Plan issued subsequent to December 15,
1998 are expected to be issued on a fully vested basis. Options for 175,000
shares have been granted through December 31, 1998 under the Directors Plan.

ACCOUNTING FOR STOCK OPTIONS ISSUED TO EMPLOYEES AND NON-EMPLOYEE DIRECTORS

The Company accounts for its stock options issued to employees and
non-employee directors in accordance with APB 25 under which compensation
expense of $0, $220,000, and $17.2 million was recognized for the options
granted in 1996, 1997 and 1998, respectively. The Company has provided
additional pro forma disclosures as required by SFAS No. 123, "Accounting for
Stock-Based Compensation."

For disclosure purposes, the fair value of each stock option granted is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for stock options granted in
1996, 1997 and 1998: no annual dividends, expected volatility of 0.0%, risk-free
interest rate ranging from 5.1% to 6.1% and expected life of one to four years.
The weighted-average fair values of the stock options granted in 1996, 1997 and
1998 were $0.75, $3.18 and $1.21, respectively.

Under the above model, the total value of stock options granted in 1996,
1997 and 1998 were $490,000, $8.8 million and $2.4 million, respectively, which
would be amortized on a pro forma basis over the option vesting period. Had the
Company determined compensation cost for these plans in accordance with SFAS No.
123, the Company's pro forma net income (loss) would have been approximately
$1.1 million, ($635,000) and ($7.0 million) in 1996, 1997 and 1998,
respectively, and pro forma basic and diluted earnings per common share would
have been $0.08, ($0.05) and ($0.51) in 1996, 1997 and 1998, respectively.

ACCOUNTING FOR STOCK OPTIONS ISSUED TO NON-EMPLOYEES

The Company accounts for its stock options granted to eligible
non-employees on the fair value method in accordance with SFAS No. 123.
Stock-based compensation related to non-employee stock option grants is not
material in any period presented.

F-15
<PAGE> 75
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK OPTION ACTIVITY

The following tables summarize stock option activity for Proxicom and IBIS
Consulting option grants:

<TABLE>
<CAPTION>
PROXICOM IBIS CONSULTING
OPTIONS OUTSTANDING OPTIONS OUTSTANDING
------------------------- --------------------------
NUMBER OF NUMBER OF
SHARES OPTION PRICE SHARES OPTION PRICE
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
December 31, 1995
Grants........................... 652,750 $3.30 -- $ --
Exercised........................ -- -- -- --
Cancellations.................... -- -- -- --
--------- ----------
December 31, 1996................ 652,750 3.30 -- --
Grants........................... 756,324 4.25 2,015,096 0.24
Exercised........................ -- --
Cancellations.................... (161,550) 3.41 (256,065) .40
--------- ----------
December 31, 1997................ 1,247,524 3.86 1,759,031 0.22
Grants........................... 2,051,584 7.94 82,497 4.72
Exercised........................ (86,702) 3.49 (1,496,494) 0.22
Cancellations.................... (353,533) 5.75 -- --
--------- ----------
December 31, 1998................ 2,858,873 6.57 345,034 1.30
========= ==========
Options exercisable at:
December 31, 1998................ 365,030 3.73 304,183 0.83
========= ==========
December 31, 1997................ 132,115 3.30 1,496,494 0.22
========= ==========
December 31, 1996................ -- -- -- --
========= ==========
</TABLE>

The weighted-average exercise prices for Proxicom options outstanding at
December 31, 1996, 1997 and 1998 were $3.30, $3.86 and $6.57, respectively and
exercise prices ranged from $3.30 to $4.78 at December 31, 1998. The
weighted-average exercise prices for IBIS Consulting options at December 31,
1997, and 1998 were $0.22 and $1.30 and exercise prices ranged from $0.22 to
$4.72 at December 31, 1998. These options will expire if not exercised at
specific dates ranging from January 1998 to December 2008 and the
weighted-average remaining contractual life of the options outstanding was
approximately nine years.

10. CONVERTIBLE PREFERRED STOCK AND WARRANTS

On August 30, 1996, the Company consummated a transaction whereby: (i) the
Company repurchased from the Company's Chief Executive Officer 100,917 shares of
common stock at a price of $3.27 per share, for a total purchase price of
approximately $330,000; and, (ii) the Company issued a total of 1,629,969 shares
of Series A convertible preferred stock (the "Series A Preferred Stock") at a
price of $3.27 per share, or approximately $5.3 million. At the stockholders'
option, but in any event automatically upon an initial public offering of the
Company's common stock, each share of Series A Preferred Stock will be
convertible into one share of common stock. The Series A Preferred Stock has a
liquidation preference and is not entitled to any dividends (unless cash
dividends are declared and paid on the common stock, in which case the Series A
Preferred Stock will share on an "as if" converted basis). The holders of

F-16
<PAGE> 76
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Series A Preferred Stock have registration rights and are entitled to place
two persons on the Company's Board.

One investor in the Series A Preferred Stock also received warrants to
purchase 1,011,378 additional shares of Series A Preferred Stock from the
Company at a price of $7.91 per share. The warrants expire in August 2003 and
are exercisable after December 31, 1997. After December 31, 1997, the warrants
may be converted into shares of common stock at the option of the warrant
holder. The conversion formula is based on the difference between the market
value of the common stock less the warrant exercise price divided by the market
value of the common stock. The value of the warrants was not material.

In February 1997, the Company consummated a transaction whereby: (i) the
Company repurchased from the Company's Chief Executive Officer 359,712 shares of
common stock at a price of $4.17 per share, for a total purchase price of
approximately $1.5 million; (ii) the Company issued a total of 359,712 shares of
Series B convertible preferred stock (the "Series B Preferred Stock") at a price
of $4.17 per share or approximately $1.5 million. The Series B Preferred Stock
has essentially the same rights and privileges as the Series A Preferred Stock.

In December 1997, the Company issued a total of 419,302 shares of Series C
convertible preferred stock (the "Series C Preferred Stock") at a price of $4.77
per share or approximately $2.0 million. The Series C Preferred Stock has
essentially the same rights and privileges as the Series A and B Preferred
Stock.

In January 1998, the Company issued 407,500 shares of treasury stock in
conjunction with the conversion of 407,500 shares of Series A Preferred Stock
into common stock.

In February 1999, the Company issued a total of 1,218,333 shares of Series
D convertible preferred stock (the "Series D Preferred Stock") at a price of
$6.00 per share or approximately $7.3 million. In connection with this
transaction, 758,667 shares of common stock were purchased by the investors from
selling stockholders in amounts proportionate to the investors participation in
the Series D Preferred Stock issuance. The Series D Preferred Stock has
essentially the same rights and privileges as the Series A, B and C Preferred
Stock. Because the Series D Preferred Stock was sold at a price of $6.00, such
securities will be accounted for giving effect to its beneficial conversion
features. Under such accounting, the Company will record a $4.9 million charge
against additional paid-in capital to reflect the difference between the
conversion feature and the estimated fair value of the underlying common stock.
Although not reflected on the statement of operations, the beneficial conversion
charge will be reflected as a reduction to income and earnings per share
available for common stockholders.

F-17
<PAGE> 77
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. INCOME TAXES

The provision for income taxes is as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1996 1997 1998
---- ---- -----
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT TAXES:
Federal................................................... $ 82 $ -- $(155)
State..................................................... 16 10 (52)
---- ---- -----
Total current income tax provision (benefit)........... 98 10 (207)
---- ---- -----
DEFERRED TAXES:
Federal................................................... 78 249 (589)
State..................................................... 9 71 (104)
---- ---- -----
Total current income tax provision (benefit)........... 87 320 (693)
---- ---- -----
Total provision (benefit) for income taxes........... $185 $330 $(900)
==== ==== =====
</TABLE>

The reconciliation of the Company's income tax provision to the federal
statutory tax rate is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997 1998
---- ---- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision (benefit) at federal statutory tax rate
of 34%.................................................... $144 $321 $(7,324)
State income taxes, net..................................... 17 57 (34)
Subchapter S Corporation income............................. -- (72) (455)
Stock option revaluation.................................... -- -- 4,905
Acquisition costs........................................... -- -- 646
Increase in valuation allowance............................. -- -- 944
Other....................................................... 24 24 418
---- ---- -------
Income tax provision (benefit).............................. $185 $330 $ (900)
==== ==== =======
</TABLE>

F-18
<PAGE> 78
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax assets (liabilities) were comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997 1998
----- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS:
NOL carryforward.......................................... $ -- $ 107 $ 1,796
Revenue recognition....................................... 349 -- --
Vacation accrual.......................................... 35 49 81
Bad debt expense.......................................... 14 149 137
Depreciation.............................................. -- -- 176
Other accrued expenses.................................... -- -- 241
Revaluation of stock options.............................. -- -- 1,083
Other..................................................... 2 -- 37
----- ----- -------
Total gross deferred tax assets...................... 400 305 3,551
----- -----
Valuation allowance......................................... (1,083)
-------
Net deferred tax assets.............................. 2,468
-------
LIABILITIES:
Depreciation.............................................. (30) 5 --
Unbilled service revenue.................................. (396) (665) (1,654)
Subchapter S Corporation cash to accrual adjustment....... -- -- (479)
Other..................................................... (11) (2) --
----- ----- -------
Total gross deferred tax liabilities................. (437) (662) (2,133)
----- ----- -------
Net deferred tax (liability) asset................... $ (37) $(357) $ 335
===== ===== =======
</TABLE>

The Company paid $374,000, $196,000 and ($207,000) for income taxes for the
year ended December 31, 1996, 1997, and 1998, respectively.

At December 31, 1998, the Company has a $4.6 million net operating loss
carryforward and a $20,000 research and development tax credit carryforward both
expiring in 2018. The Company establishes valuation allowances in accordance
with the provisions of SFAS No. 109. The Company continually reviews the
adequacy of the valuation allowance.

12. RELATED PARTY TRANSACTIONS

In February 1997, the Company entered into a lease for office space in
Reston, VA. The lease commenced on July 1, 1997 and has a term of seven years.
Rent payments for the years ended December 31, 1997 and 1998 were approximately
$331,000 and $864,000, respectively, and increased at an annual rate of 3.0%.
The lessor is a company wholly-owned by a member of the Company's Board of
Directors and stockholder. In accordance with the lease agreement, the Company
must maintain a letter of credit in the amount of $131,000 as a security deposit
during the term of the lease. The Company's current letter of credit expires in
December 1999.

The Company has provided Internet professional services to two
stockholders. Revenue generated from one stockholder totalled $463,000,
$1,056,000 and $775,000 for the years ended December 31, 1996, 1997 and 1998,
respectively. The Company recorded receivable balances of $0 and $316,000 as of
December 31, 1997 and 1998, respectively. A second stockholder generated revenue
of $68,000 and $181,000 for the years ended December 31, 1997 and 1998,

F-19
<PAGE> 79
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

respectively. The Company recorded receivable balances of $19,000 and $1,000 as
of December 31, 1997 and 1998, respectively.

13. EMPLOYEE BENEFIT PLANS

PROFIT SHARING AND BONUS PLANS

In August 1996, the Company adopted a 401(k) defined contribution profit
sharing plan. The plan covers all full-time employees who are at least 21 years
of age. Participants may contribute up to 15.0% of pretax compensation, subject
to certain limitations. The Company may make discretionary annual profit sharing
contributions up to the total of each participant's annual contribution. The
Company has made no profit sharing contributions to date.

In January 1996, IBIS Consulting adopted a 401(k) defined contribution
profit sharing plan. The plan covers all full-time employees who are at least 21
years of age. Participants may contribute up to 15.0% of pretax compensation,
subject to certain limitations. The Company may make discretionary annual profit
sharing contributions up to 25.0% of each participant's annual contribution, up
to 6.0% of the respective participant's annual compensation. Company
contributions vest ratably over five years. No contributions were made in 1996
and 1997. The Company has made profit sharing contributions of $71,000 in 1998.

The Company recorded $1.0 million in bonuses due under the 1998 IBIS
Consulting plan. No bonus plan existed in 1997.

EMPLOYEE STOCK PURCHASE PLAN

In February 1999, the Company's Board of Directors authorized an Employee
Stock Purchase Plan ("ESPP"). The ESPP, which commences upon completion of an
initial public offering, provides substantially all full time employees an
opportunity to purchase shares of Proxicom Common Stock through payroll
deductions of up to 15.0% of eligible compensation, not to exceed $25,000
annually. Semi-annually, participant account balances will be used to purchase
stock at the lesser of 85.0% of the fair market value on the trading day before
the participation period starts or the trading day preceding the day on which
the participation period ends. A total of 1,000,000 shares are available for
purchase under the ESPP.

14. COMMITMENTS AND CONTINGENCIES

The Company leases certain office space in Virginia, California, New York,
and Illinois under non-cancelable operating leases expiring in various years
through 2005. Total rent expense for all operating leases amounted to
approximately $258,000, $796,000 and $2,574,000 in 1996, 1997, and 1998,
respectively. Future minimum lease payments under non-cancelable operating
leases as of December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
1999..................................................... $ 3,640
2000..................................................... 3,123
2001..................................................... 2,722
2002..................................................... 2,459
2003..................................................... 1,785
Thereafter............................................... 3,522
-------
Total............................................. $17,251
=======
</TABLE>

F-20
<PAGE> 80
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In March 1997 the Company entered into a lease for office space in New
York, NY ("Initial Lease") which was subsequently incorporated into the
September 1997 additional space agreement ("Amended Lease"). The Initial Lease
commenced July 1, 1997 and ends in August 2002 and has minimum annual lease
payments ranging from approximately $144,000 to approximately $160,000 over the
lease term. The Amended Lease approximately doubled the office space and
extended the initial lease term to seven years through March 2005. In accordance
with the Amended Lease, the Company is required to have a letter of credit as a
security deposit in the amount of $74,000 throughout the lease term. The current
letter of credit will expire in December 1999.

15. BASIC AND DILUTED EARNINGS PER COMMON SHARE

The Company implemented SFAS No. 128, Earnings per Share, in 1997, which
requires certain disclosures relating to the calculation of earnings per common
share. The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per common share computations for net income.

BASIC NET INCOME (LOSS) PER COMMON SHARE

SFAS No. 128 replaces primary earnings per share with basic net income per
share and excludes the effect of common stock equivalents when computing basic
net income per share.

DILUTED NET INCOME PER COMMON SHARE

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Net income (loss).......................................... $1,084 $2,693 $(20,642)
======= ======= ========
Adjustment of shares outstanding:
Weighted average shares of common stock outstanding...... 12,993 12,626 13,762
Shares of common stock issuable upon the assumed
conversion of preferred stock......................... 543 1,965 --
Incremental shares assumed exercised under common stock
options plans......................................... -- 1,742 --
------- ------- --------
Adjusted shares of common stock and common stock
equivalents for computation........................... 13,536 16,333 13,762
======= ======= ========
Diluted net income (loss) per common share................. $0.08 $0.16 $(1.50)
======= ======= ========
</TABLE>

F-21
<PAGE> 81
PROXICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SFAS No. 128 replaces fully diluted earnings per share with diluted net
income per share which reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.

16. PENDING INVESTMENT

In December 1998, Proxicom executed a letter of intent to make a cash
investment of approximately $360,000 in a recently formed joint venture entity
in Italy (the "Entity") created by Ericsson Telecommunicazioni SpA ("Ericsson").
Proxicom will own 19.9% of the common stock of the Entity proportionate to its
investment in relation to the total Entity capitalization. The Entity was formed
to deliver Internet professional services in Italy. It is anticipated that the
Entity will contract with Proxicom for certain consulting services, at arm's
length market rates on a time and materials basis. Also the Entity will utilize
the "Proxicom Process," Proxicom's proprietary, multi-phase methodology, which
Ericsson will transfer to the Entity for a fee. Proxicom will not participate in
the management or policy making of the business. Inasmuch as Proxicom will not
have the ability to influence significantly the entity or is operations,
Proxicom intends to account for its investment on the cost basis. Proxicom also
will have an option to buy an additional 20.0% share in the common stock of the
Entity, subject to certain conditions and restrictions. In March and April 1999,
Proxicom signed final agreements relating to this transaction.

F-22
<PAGE> 82

INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Supplemental Consolidated Balance Sheets.................... F-24
Supplemental Consolidated Statements of Operations.......... F-25
Supplemental Consolidated Statements of Changes in
Stockholders' Equity...................................... F-26
Supplemental Consolidated Statements of Cash Flows.......... F-27
Notes to Supplemental Consolidated Financial Statements..... F-28
</TABLE>

F-23
<PAGE> 83

PROXICOM, INC.

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(dollars in thousands)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------ DECEMBER 31,
1997 1998 1998
------- -------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,343 $ 2,586
Investments............................................... 1,101 278
Accounts receivable, net of allowance of $660 and $669,
respectively............................................ 7,855 9,893
Unbilled services......................................... 1,369 4,259
Prepaid income taxes...................................... 207 130
Prepaid expenses.......................................... 305 402
Other current assets...................................... 175 301
------- --------
Total current assets.................................... 13,355 17,849
Property and equipment, net................................. 2,678 2,944
Deferred tax assets and other............................... 284 1,758
------- --------
Total assets............................................ $16,317 $ 22,551
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lines of credit........................................... $ 287 $ 5,554
Trade accounts payable.................................... 1,249 662
Accrued compensation...................................... 1,404 3,779
Deferred revenue.......................................... 1,218 1,889
Deferred tax liabilities.................................. 616 1,423
Note payable.............................................. -- 1,400
Other accrued liabilities................................. 1,047 1,215
------- --------
Total current liabilities............................... 5,821 15,922
------- --------
Commitments and contingencies (Note 14)
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, $.01 par value;
2,641,347 shares authorized; 1,629,969 shares issued and
outstanding at December 31, 1996 and 1997; 1,629,969
shares issued and 1,222,469 shares outstanding at
December 31, 1998....................................... 16 12 --
Series B convertible preferred stock, $.01 par value;
359,712 shares authorized, issued and outstanding at
December 31, 1997 and 1998.............................. 4 4 --
Series C convertible preferred stock, $.01 par value;
419,302 shares authorized, issued and outstanding at
December 31, 1997 and 1998.............................. 4 4 --
Common stock, $.01 par value, 20,000,000 shares
authorized; 13,776,431 shares and 15,431,306 shares
issued at December 31, 1997 and 1998, respectively;
13,315,802 and 15,378,177 shares outstanding at December
31, 1997 and 1998, respectively......................... 138 154 174
Additional paid-in capital................................ 8,846 25,578 25,578
Retained earnings (deficit)............................... 3,315 (18,904) (18,904)
Comprehensive income...................................... 3 3 3
Treasury stock............................................ (1,830) (222) (222)
------- -------- -------
Total stockholders' equity.............................. 10,496 6,629 6,629
------- -------- -------
Total liabilities and stockholders' equity.............. $16,317 $ 22,551
======= ========
</TABLE>

The accompanying notes are an integral part of
these supplemental consolidated financial statements.
F-24
<PAGE> 84

PROXICOM, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Revenue.................................................. $13,372 $28,452 $ 44,006
Cost of revenue.......................................... 5,085 12,736 24,928
------- ------- --------
Gross profit............................................. 8,287 15,716 19,078
------- ------- --------
Operating expenses:
General and administrative............................. 5,746 10,180 16,397
Selling and marketing.................................. 670 1,710 2,919
Research and development............................... 404 961 692
Acquisition and merger costs........................... -- -- 2,886
Stock-based and other compensation..................... 8 44 18,308
------- ------- --------
Total............................................... 6,828 12,895 41,202
------- ------- --------
Income (loss) from operations............................ 1,459 2,821 (22,124)
Interest income (expense), net........................... 55 80 (121)
------- ------- --------
Income (loss) before income taxes........................ 1,514 2,901 (22,245)
Income tax provision (benefit)........................... 185 330 (900)
------- ------- --------
Net income (loss)........................................ $ 1,329 $ 2,571 $(21,345)
======= ======= ========
Basic net income (loss) per common share................. $ 0.10 $ 0.19 $ (1.46)
======= ======= ========
Diluted net income (loss) per common share............... $ 0.09 $ 0.15 $ (1.46)
======= ======= ========
Weighted average common shares outstanding............... 13,740 13,374 14,576
======= ======= ========
Weighted average common shares and common share
equivalents............................................ 14,310 17,128 14,576
======= ======= ========
Unaudited pro forma data (Note 3):
Basic net loss per common share........................ $ (1.29)
========
Diluted net loss per common share...................... $ (1.29)
========
Weighted average common shares outstanding............. 16,577
========
Weighted average common shares and common share
equivalents......................................... 16,577
========
</TABLE>

The accompanying notes are an integral part of
these supplemental consolidated financial statements.
F-25
<PAGE> 85

PROXICOM, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
UNREALIZED
GAIN
COMMON STOCK PREFERRED STOCK ADDITIONAL (LOSS) TREASURY STOCK RETAINED
------------------- ------------------ PAID-IN ON ------------------ EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL SECURITIES SHARES AMOUNT (DEFICIT)
---------- ------ --------- ------ ---------- ---------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................... 13,238,444 $133 -- $-- $ -- $-- -- $ -- $ 999
Issuance of preferred
Series A and warrants... -- -- 1,629,969 16 5,314 -- -- -- --
Capitalization of Square
Earth, Inc.............. 534,999 5 -- -- 17 -- -- -- (8)
Stock-based
compensation............ -- -- -- -- 31 -- -- -- --
Unearned stock-based
compensation............ -- -- -- -- (23) -- -- -- --
Treasury stock
acquired................ -- -- -- -- -- -- 100,917 (330) --
Comprehensive income
(loss).................. -- -- -- -- -- (4) -- -- --
Net income............... -- -- -- -- -- -- -- -- 1,329
Subchapter S Corporation
distributions........... -- -- -- -- -- -- -- -- (135)
---------- ---- --------- --- ------- --- -------- ------- --------
Balance at December 31,
1996.................... 13,773,443 138 1,629,969 16 5,339 (4) 100,917 (330) 2,185
Issuance of preferred
Series B................ -- -- 359,712 4 1,496 -- -- -- --
Exercise of stock options
and issuance of
restricted shares....... 2,988 -- -- -- -- -- -- -- --
Treasury stock
acquired................ -- -- -- -- -- -- 359,712 (1,500) --
Issuance of preferred
Series C................ -- -- 419,302 4 1,967 -- -- -- --
Stock-based
compensation............ -- -- -- -- 63 -- -- -- --
Unearned stock-based
compensation............ -- -- -- -- (19) -- -- -- --
Comprehensive income..... -- -- -- -- -- 7 -- -- --
Net income............... -- -- -- -- -- -- -- -- 2,571
Subchapter S Corporation
distributions........... -- -- -- -- -- -- -- -- (1,441)
---------- ---- --------- --- ------- --- -------- ------- --------
Balance at December 31,
1997.................... 13,776,431 138 2,408,983 24 8,846 3 460,629 (1,830) 3,315
Conversion of preferred
Series A................ -- -- (407,500) (4) (1,604) -- (407,500) 1,608 --
Exercise of stock options
and issuance of
restricted shares....... 158,381 1 -- -- 302 -- -- -- --
Subchapter S Corporation
distributions........... -- -- -- -- -- -- -- -- (874)
Stock-based
compensation............ 1,496,494 15 -- -- 18,531 -- -- -- --
Unearned stock-based
compensation............ -- -- -- -- (497) -- -- -- --
Net loss................. -- -- -- -- -- -- -- -- (21,345)
---------- ---- --------- --- ------- --- -------- ------- --------
Balance at December 31,
1998.................... 15,431,306 $154 2,001,483 $20 $25,578 $ 3 53,129 $ (222) $(18,904)
========== ==== ========= === ======= === ======== ======= ========

TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at December 31,
1995.................... $ 1,132
Issuance of preferred
Series A and warrants... 5,330
Capitalization of Square
Earth, Inc.............. 14
Stock-based
compensation............ 31
Unearned stock-based
compensation............ (23)
Treasury stock
acquired................ (330)
Comprehensive income
(loss).................. (4)
Net income............... 1,329
Subchapter S Corporation
distributions........... (135)
--------
Balance at December 31,
1996.................... 7,344
Issuance of preferred
Series B................ 1,500
Exercise of stock options
and issuance of
restricted shares....... --
Treasury stock
acquired................ (1,500)
Issuance of preferred
Series C................ 1,971
Stock-based
compensation............ 63
Unearned stock-based
compensation............ (19)
Comprehensive income..... 7
Net income............... 2,571
Subchapter S Corporation
distributions........... (1,441)
--------
Balance at December 31,
1997.................... 10,496
Conversion of preferred
Series A................ --
Exercise of stock options
and issuance of
restricted shares....... 303
Subchapter S Corporation
distributions........... (874)
Stock-based
compensation............ 18,546
Unearned stock-based
compensation............ (497)
Net loss................. (21,345)
--------
Balance at December 31,
1998.................... $ 6,629
========
</TABLE>

The accompanying notes are an integral part of
these supplemental consolidated financial statements.
F-26
<PAGE> 86

PROXICOM, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 1,329 $ 2,571 $ (21,345)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 397 904 1,516
Increase (decrease) in deferred income taxes........... 52 320 (667)
Provision for stock compensation....................... 8 264 17,555
Provision for doubtful accounts........................ 260 384 9
Common stock issued in exchange for services........... 166
Changes in assets and liabilities:
Increase in accounts receivable...................... (2,247) (5,483) (2,047)
Increase in unbilled services........................ (383) (649) (2,890)
(Increase) decrease in prepaid income taxes.......... (276) 77 77
Increase in prepaid expenses......................... (122) (175) (97)
Increase in other assets............................. (38) (52) (126)
Increase (decrease) in trade accounts payable........ 156 957 (587)
(Decrease) increase in accrued compensation.......... (201) 769 2,375
Increase in note payable............................. -- -- 1,400
Increase in deferred revenue......................... 499 719 671
Increase in other accrued liabilities................ 255 722 168
------- ------- ---------
Net cash (used in) provided by operating
activities...................................... (311) 1,328 (3,822)
------- ------- ---------
Cash flows from investing activities:
Purchases of property and equipment....................... (1,492) (2,079) (1,782)
Purchases of investments.................................. (2,285) (104) (390)
Sales of investments...................................... -- 1,288 1,213
------- ------- ---------
Net cash used in investing activities............. (3,777) (895) (959)
------- ------- ---------
Cash flows from financing activities:
Issuance of preferred stock and warrants, Series A........ 5,330 -- --
Issuance of preferred stock, Series B..................... -- 1,500 --
Issuance of preferred stock, Series C..................... -- 1,971 --
Issuance of common stock.................................. 22 -- --
Exercise of stock options................................. -- -- 631
Purchase of treasury stock................................ (330) (1,500) --
Borrowings under line of credit........................... 3,585 6,713 11,976
Payments under line of credit............................. (3,826) (6,493) (6,709)
Subchapter S Corporation distributions.................... (135) (1,441) (874)
Decrease in due to majority stockholder................... (200) -- --
------- ------- ---------
Net cash provided by financing activities......... 4,446 750 5,024
------- ------- ---------
Net increase in cash and cash equivalents................... 358 1,183 243
Cash and cash equivalents at beginning of period............ 802 1,160 2,343
------- ------- ---------
Cash and cash equivalents at end of period.................. $ 1,160 $ 2,343 $ 2,586
======= ======= =========
</TABLE>

The accompanying notes are an integral part of
these supplemental consolidated financial statements.
F-27
<PAGE> 87

PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

In August 1996, Proxima, Inc. ("Proxima"), a Maryland corporation
reincorporated as a Delaware corporation, through a merger transaction, changing
its name to Proxicom, Inc.

2. MERGERS

On March 26, 1999, Proxicom completed a merger with ad hoc Interactive,
Inc. ("Ad Hoc"), a Subchapter S Corporation incorporated during 1994, by
exchanging 829,771 shares of Proxicom's common stock for all the common stock of
Ad Hoc. Each share of Ad Hoc stock was exchanged for 9.955223 shares of Proxicom
common stock. In addition, outstanding rights to receive Ad Hoc stock were
exchanged for rights to receive Proxicom common stock (Note 9).

There were no transactions between Proxicom and Ad Hoc prior to the
combination. No material adjustments were made to conform to Proxicom's
accounting policies.

There were no transactions between Proxicom and IBIS Consulting prior to
the combination. No material adjustments were made to conform to Proxicom's
accounting policies.

There were no transactions between Proxicom and Square Earth prior to the
combination. No material adjustments were made to conform to Proxicom's
accounting policies.

F-28
<PAGE> 88
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stand-alone financial information is shown in the following table.

<TABLE>
<CAPTION>
SIX
YEAR ENDED MONTHS YEAR ENDED
DECEMBER 31, ENDED DECEMBER 31,
------------------- JUNE 30, ------------
1996 1997 1998 1998
-------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue
IBIS Consulting.......... $3,884 $10,170 $8,054 $*
Square Earth............. 593 1,403 * *
Ad Hoc................... 941 1,095 * 1,601
Net income (loss)
IBIS Consulting.......... $ 938 $ 2,078 $1,391 *
Square Earth............. (95) 2 * *
Ad Hoc................... 246 (122) * (702)
</TABLE>

- -------------------------
* Not applicable to reporting period.

The IBIS Consulting, Ad Hoc and Square Earth mergers constituted tax-free
reorganizations and have been accounted for as poolings of interests under
Accounting Principles Board Opinion No. 16, Business Combinations. Accordingly,
all prior period consolidated financial statements presented have been restated
to include the combined results of operations, financial position and cash flows
of IBIS Consulting, Ad Hoc and Square Earth as though they had been a part of
Proxicom since their inception.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

PRINCIPLES OF CONSOLIDATION

The accompanying supplemental consolidated financial statements include the
accounts and balances of Proxicom, IBIS Consulting, Square Earth, Ad Hoc and
Renaissance (hereafter collectively the "Company" or "Proxicom"). All
significant intercompany transactions and balances have been eliminated in
consolidation.

CASH AND CASH EQUIVALENTS

Highly liquid investments having original maturities of 90 days or less at
the date of acquisition are classified as cash equivalents. The carrying values
of cash equivalents approximate fair values.

F-29
<PAGE> 89
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Deferred revenue is recognized on fixed-price contracts to reflect billings
in excess of revenue recognized under the percentage-of-completion method.

Unbilled services on contracts are comprised of costs plus earnings in
excess of contractual billings on such contracts. Billings in excess of cost
plus earnings are classified as deferred revenue.

RESEARCH AND DEVELOPMENT EXPENSES FOR SOFTWARE PRODUCTS

PROPERTY AND EQUIPMENT

INVESTMENTS

INCOME TAXES

The provision for income taxes is determined in accordance with SFAS No.
109, Accounting for Income Taxes, which requires the use of the asset and
liability approach. Under this
F-30
<PAGE> 90
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approach, deferred taxes represent the expected future tax consequences of
temporary differences between the carrying amounts and tax bases of assets and
liabilities.

STOCK-BASED COMPENSATION

BASIC AND DILUTED NET INCOME PER COMMON SHARE

Basic net income per common share is based on the weighted average number
of shares of common stock outstanding during each year. Diluted net income per
common share is based on the weighted average number of shares of common stock
outstanding during each year, adjusted for the effect of common stock
equivalents arising from the assumed exercise of stock options, if dilutive. See
Note 15.

All per share amounts have been restated to reflect the re-incorporation
discussed at Note 1 and the mergers of IBIS Consulting, Ad Hoc and Square Earth
discussed at Note 2.

FAIR VALUE OF FINANCIAL INSTRUMENTS

CONCENTRATION OF CREDIT RISK

<TABLE>
<CAPTION>
ACCOUNTS
REVENUE RECEIVABLE
--------------------- -------------
YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------- -------------
1996 1997 1998 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Customer A....................................... 13.4% 22.9% 14.2% 19.9% 7.4%
Customer B....................................... * * 13.2 3.7 13.2
Customer C....................................... 13.6 * * * *
Customer D....................................... 12.6 * * * *
</TABLE>

- -------------------------
* Represents less than 10% of total.

F-31
<PAGE> 91
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS

PRO FORMA BALANCE SHEET, NET INCOME AND EARNINGS PER SHARE (UNAUDITED)

As discussed in Note 2, the Company merged with IBIS Consulting and Square
Earth during 1998, and Ad Hoc during 1999, all previously Subchapter S
Corporations. Pro forma net income (loss) assuming that IBIS Consulting, Ad Hoc
and Square Earth were taxable entities during the periods presented is as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
-------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before income taxes........................... $1,514 $2,901 $(22,245)
Pro forma income tax provision (benefit).................... 683 1,241 (900)
Pro forma net income (loss)................................. 831 1,660 (21,345)
</TABLE>

4. INVESTMENTS

The following is a summary of investments classified as current assets at
December 31, 1998 (in thousands):

F-32
<PAGE> 92
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The cost and fair value of available-for-sale securities by contractual
maturity are as follows (in thousands):

The Company realized gains from the sale of investments of $2,000 and
$9,000 for the years 1997 and 1998, respectively, and realized losses from the
sales of investments of $2,000 in 1998.

5. ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable......................................... $8,515 $10,562
Allowance for doubtful accounts............................. (660) (669)
------ -------
Net accounts receivable..................................... $7,855 $ 9,893
====== =======
</TABLE>

No accounts receivable at December 31, 1998 or 1997 were the result of
long-term contracts.

The Company wrote off doubtful accounts of $59,000, $71,000 and $959,000
for the years ended December 31, 1996, 1997 and 1998, respectively.

6. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment.......................................... $2,794 $3,635
Office and other equipment.................................. 550 729
Purchased software.......................................... 397 596
Leasehold improvements...................................... 345 934
Automobile.................................................. 26 --
------ ------
4,112 5,894
Less: Accumulated depreciation and amortization............. (1,434) (2,950)
------ ------
Total property and equipment, net........................... $2,678 $2,944
====== ======
</TABLE>

F-33
<PAGE> 93
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. LINES OF CREDIT

At December 31, 1997, the Company had a $2.0 million revolving line of
credit with a bank. Interest is payable monthly at the bank's prime rate plus
0.5% (9.0% at December 31, 1997). The line of credit is secured by substantially
all of the Company's assets, and includes various customary financial and other
covenants including maintenance of a minimum level of tangible net worth. No
borrowings were outstanding under the line of credit as of December 31, 1997.
There are no commitment fees under this line of credit.

Commitment fees of 0.25% paid on the unused line of credit during 1998 were
not material. There were no commitment fees under the previous lines of credit
for 1997 and 1998.

Interest expense was $33,000, $94,000 and $227,000 for the years ended
December 31, 1996, 1997 and 1998, respectively.

As of May 1998, Ad Hoc entered into a line of credit with a bank in the
amount of $100,000. The line expires in November 1999. This line of credit
replaced a previously existing $50,000 line of credit with the same bank.
Interest on this line is payable on a monthly basis at a fixed rate of 10.25%.
Advances under the line of credit are secured by substantially all assets of the
Ad Hoc. Borrowings of approximately $23,000 and $96,000 were outstanding under
the line of credit as of December 31, 1997 and 1998, respectively. Ad Hoc has an
additional $25,000 equipment line which was established in March 1998. Equipment
notes for the full amount of the line have been drawn with terms ranging from
three to five years at an interest rate of 13.5%. As of December 31, 1998,
approximately $22,000 remained outstanding under this equipment line. Interest
expense was $0, $136 and $11,000 for the years ended December 31, 1996, 1997 and
1998, respectively.
F-34
<PAGE> 94
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. NOTE PAYABLE

On August 10, 1998, the Company entered into a $1.4 million note payable
with an investment banking firm in connection with professional services for the
IBIS Consulting transaction. The note accrues interest at 7.0% per annum and
matures in the earlier of August 21, 1999 or upon completion of an initial
public offering. This unsecured note is subordinated only to the Company's
senior bank facilities.

9. STOCK OPTION PLANS

PROXICOM STOCK OPTION PLANS FOR EMPLOYEES AND NON-EMPLOYEES

IBIS CONSULTING

In January and August 1997, IBIS Consulting granted options to two key
employees to purchase 1,759,031 shares with an exercise price of $0.219 per
share. Options for 1,496,494 shares became exercisable upon grant, with the
remaining 262,537 shares vesting over a two-year period commencing January 1,
1999. Under the terms of the option agreement, prior to the completion of an
initial public offering or sale of IBIS Consulting, IBIS Consulting was required
to repurchase and the employee was required to sell the shares or vested options
upon termination of employment, based on a pre-determined formula. After
exercise, IBIS Consulting retained the right and obligation to reacquire the
shares based on the formula price upon termination of the employee prior to the
completion of an initial public offering or sale of IBIS Consulting.

The Company recognized compensation expense in 1997 and a liability related
to both these options and the underlying cash bonus arrangement in the amount of
$220,000.

F-35
<PAGE> 95
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SQUARE EARTH, INC.

IBIS CONSULTING STOCK-BASED AND OTHER COMPENSATION

AD HOC

During 1997 and 1998, Ad Hoc granted employees the right to receive 14,435
shares and 62,226 shares of common stock, respectively, at no cost on the first
or second anniversary of their employment start date, provided that they remain
full-time employees during such period. Ad Hoc recognized non-cash compensation
expense of $44,000 and $133,000 in 1997 and 1998, respectively, related to these
rights. $19,000 and $278,000 were recorded as unearned stock compensation as of
December 31, 1997 and 1998, respectively, which will be amortized over 1999 and
2000.

F-36
<PAGE> 96
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PROXICOM STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

ACCOUNTING FOR STOCK OPTIONS ISSUED TO EMPLOYEES AND NON-EMPLOYEE DIRECTORS

The Company accounts for its stock options and rights to receive stock
issued to employees and non-employee directors in accordance with APB 25 under
which compensation expense of $8,000, $264,000, and $17.3 million was recognized
for the options and rights to receive stock granted in 1996, 1997 and 1998,
respectively. The Company has provided additional pro forma disclosures as
required by SFAS No. 123, "Accounting for Stock-Based Compensation."

For disclosure purposes, the fair value of each stock option and right to
receive stock is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
stock options and rights to receive stock in 1996, 1997 and 1998: no annual
dividends, expected volatility of 0.0%, risk-free interest rate ranging from
5.1% to 6.1% and expected life of one to four years. The weighted-average fair
values of the stock options granted in 1996, 1997 and 1998 were $0.75, $3.18 and
$1.21, respectively. The weighted average fair values of the rights to receive
stock granted in 1996, 1997 and 1998 were $1.00, $3.76 and $6.39, respectively.

Under the above model, the total value of stock options and rights to
receive stock granted in 1996, 1997 and 1998 were $521,000, $8.9 million and
$2.8 million, respectively, which would be amortized on a pro forma basis over
the vesting period. Had the Company determined compensation cost for these plans
in accordance with SFAS No. 123, the Company's pro forma net income (loss) would
have been approximately $1.3 million, ($796,000) and ($7.2 million) in 1996,
1997 and 1998, respectively, and pro forma basic and diluted earnings per common
share would have been $0.09, ($0.06) and ($0.49) in 1996, 1997 and 1998,
respectively.

ACCOUNTING FOR STOCK OPTIONS ISSUED TO NON-EMPLOYEES

The Company accounts for its stock options granted to eligible
non-employees on the fair value method in accordance with SFAS No. 123. In
January 1998, Ad Hoc issued 34,843 shares of stock to a non-employee consultant
for services in lieu of cash. The Company recognized non-cash compensation
expense of $166,302 as general and administrative expenses in 1998 related to
this grant.

F-37
<PAGE> 97
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK OPTION ACTIVITY

The following tables summarize stock option activity for Proxicom and IBIS
Consulting option grants:

<TABLE>
<CAPTION>
PROXICOM IBIS CONSULTING
OPTIONS OUTSTANDING OPTIONS OUTSTANDING
------------------------- --------------------------
NUMBER OF NUMBER OF
SHARES OPTION PRICE SHARES OPTION PRICE
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
December 31, 1995
Grants........................... 652,750 $3.30 -- $ --
Exercised........................ -- -- -- --
Cancellations.................... -- -- -- --
--------- ----------
December 31, 1996................ 652,750 3.30 -- --
Grants........................... 756,324 4.25 2,015,096 0.24
Exercised........................ -- --
Cancellations.................... (161,550) 3.41 (256,065) .40
--------- ----------
December 31, 1997................ 1,247,524 3.86 1,759,031 0.22
Grants........................... 2,051,584 7.94 82,497 4.72
Exercised........................ (86,702) 3.49 (1,496,494) 0.22
Cancellations.................... (353,533) 5.75 -- --
--------- ----------
December 31, 1998................ 2,858,873 6.57 345,034 1.30
========= ==========
Options exercisable at:
December 31, 1998................ 365,030 3.73 304,183 0.83
December 31, 1997................ 132,115 3.30 1,496,494 0.22
December 31, 1996................ -- -- -- --
</TABLE>

The weighted-average exercise price for Proxicom options outstanding at
December 31, 1996, 1997 and 1998 were $3.30, $3.86 and $6.57, respectively and
exercise prices ranged from $3.30 to $4.78 at December 31, 1998. The
weighted-average exercise price for IBIS Consulting options at December 31,
1997, and 1998 were $0.22 and $1.30 and exercise prices ranged from $0.22 to
$4.72 at December 31, 1998. These options will expire if not exercised at
specific dates ranging from January 1998 to December 2008 and the
weighted-average remaining contractual life of the options outstanding was
approximately nine years.

F-38
<PAGE> 98
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes rights to receive stock of Ad Hoc:

<TABLE>
<CAPTION>
AD HOC
STOCK RIGHTS OUTSTANDING
-------------------------------
NUMBER OF SHARES OPTION PRICE
---------------- ------------
<S> <C> <C>
December 31, 1995.......................................... -- --
Grants..................................................... 31,362 --
Exercised.................................................. -- --
Cancellations.............................................. -- --
--------

December 31, 1996.......................................... 31,362 --
Grants..................................................... 14,435 --
Exercises.................................................. (2,988) --
Cancellations.............................................. -- --
--------

December 31, 1997.......................................... 42,809 --
Grants..................................................... 62,226 --
Exercises.................................................. (71,679) --
Cancellations.............................................. -- --
--------

December 31, 1998.......................................... 33,356
========
</TABLE>

10. CONVERTIBLE PREFERRED STOCK AND WARRANTS

F-39
<PAGE> 99
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Preferred Stock") at a price of $4.17 per share or approximately $1.5 million.
The Series B Preferred Stock has essentially the same rights and privileges as
the Series A Preferred Stock.

In January 1998, the Company issued 407,500 shares of treasury stock in
conjunction with the conversion of 407,500 shares of Series A Preferred Stock
into common stock.

In February 1999, the Company issued a total of 1,218,333 shares of Series
D convertible preferred stock (the "Series D Preferred Stock") at a price of
$6.00 per share or approximately $7.3 million. In connection with this
transaction, 758,667 shares of common stock were purchased by the investors from
selling stockholders in amounts proportionate to the investors participation in
the Series D Preferred Stock issuance. The Series D Preferred Stock has
essentially the same rights and privileges as the Series A, B and C Preferred
Stock. Because the Series D Preferred Stock was sold at a price of $6.00, it is
anticipated that such securities will be accounted for giving effect to its
beneficial conversion features. Under such accounting, the Company will record a
charge against additional paid-in capital to reflect the difference between the
conversion feature and the estimated fair value of the underlying common stock.
Although not reflected on the statement of operations, the beneficial conversion
charge will be reflected as a reduction to income and earnings per share
available for common stockholders.

11. INCOME TAXES

The provision for income taxes is as follows:

F-40
<PAGE> 100
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The reconciliation of the Company's income tax provision to the federal
statutory tax rate is as follows:

Deferred tax assets (liabilities) were comprised of the following:

The Company paid $374,000, $196,000 and ($207,000) for income taxes for the
year ended December 31, 1996, 1997, and 1998, respectively.

F-41
<PAGE> 101
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. RELATED PARTY TRANSACTIONS

13. EMPLOYEE BENEFIT PLANS

PROFIT SHARING AND BONUS PLANS

The Company recorded $1.0 million in bonuses due under the 1998 IBIS
Consulting plan. No bonus plan existed in 1997.

In December 1996, Ad Hoc adopted a 401(k) defined contribution profit
sharing plan. The plan covers all full-time employees who are at least 21 years
of age and have completed at least one year of employment with Ad Hoc.
Participants may contribute up to 15.0% of pretax compensation, subject to
certain limitations. Beginning in 1997 Ad Hoc may make discretionary annual
profit sharing contributions equal to 4.0% of each participant's annual
contribution, up to 6.0% of the respective participant's annual compensation.
For the years ended December 31, 1997 and 1998 Ad Hoc has contributed $500 and
$1,200 in profit sharing contributions, respectively.

EMPLOYEE STOCK PURCHASE PLAN

F-42
<PAGE> 102
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

exceed $25,000 annually. Semi-annually, participant account balances will be
used to purchase stock at the lesser of 85.0% of the fair market value on the
trading day before the participation period starts or the trading day preceding
the day on which the participation period ends. A total of 1,000,000 shares are
available for purchase under the ESPP.

14. COMMITMENTS AND CONTINGENCIES

The Company leases certain office space in Virginia, California, New York,
and Illinois under non-cancelable operating leases expiring in various years
through 2005. Total rent expense for all operating leases amounted to
approximately $303,000, $926,000 and $2,705,000 in 1996, 1997, and 1998,
respectively. Future minimum lease payments under non-cancelable operating
leases as of December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
1999..................................................... $ 3,789
2000..................................................... 3,170
2001..................................................... 2,724
2002..................................................... 2,459
2003..................................................... 1,785
Thereafter............................................... 3,522
-------
Total............................................. $17,449
=======
</TABLE>

15. BASIC AND DILUTED EARNINGS PER COMMON SHARE

BASIC NET INCOME (LOSS) PER COMMON SHARE

F-43
<PAGE> 103
PROXICOM, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SFAS No. 128 replaces primary earnings per share with basic net income per
share and excludes the effect of common stock equivalents when computing basic
net income per share.

DILUTED NET INCOME PER COMMON SHARE

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Net income (loss).......................................... $1,329 $2,571 $(21,345)
======= ======= ========
Adjustment of shares outstanding:
Weighted average shares of common stock outstanding...... 13,740 13,374 14,576
Shares of common stock issuable upon the assumed
conversion of preferred stock......................... 543 1,965 --
Incremental shares for rights to receive shares and
options assumed exercised under common stock options
plans................................................. 27 1,789 --
------- ------- --------
Adjusted shares of common stock and common stock
equivalents for computation........................... 14,310 17,128 14,576
======= ======= ========
Diluted net income (loss) per common share................. $0.09 $0.15 $(1.46)
======= ======= ========
</TABLE>

16. PENDING INVESTMENT

F-44
<PAGE> 104

[INSIDE BACK COVER PAGE]
BACK COVER GRAPHIC:

The graphic contains the logos and names of some of Proxicom's clients. The
upper half of the graphic contains the logos of the following corporations:

- Merrill Lynch & Co., Inc.

- Marriott International, Inc.

- Ritz Camera Centers, Inc.

- Owens Corning

- Amgen

- Mercedes-Benz Credit Corp.

- ZD Net

- American Electronics Association

- Pacific Gas and Electric Company

- Cox Interactive Media, Inc.

- Excite, Inc.

- SAAB Cars USA, Inc.

- Corning, Inc.

- Calphalon Corporation

The bottom half of the graphic contains the names of the following corporations:

- GE Plastics

- GAP, Inc.

- Harman International

- Hewlett-Packard Corporation

- Kemper Insurance Companies

- GE Capital Corporation

- ARAMCO Services Company

- Buckeye Pipeline Company L.P.

- Schlumberger N.V.

- Wyeth-Ayerst Laboratories

- Transcanada Pipelines Ltd.

- American International Group, Inc.

- Booz-Allen & Hamilton, Inc.

- Hoffmann-La Roche, Inc.

- McKessonHBOC

- Transport4

The lower right corner of the graphic contains Proxicom's logo.
<PAGE> 105

- ------------------------------------------------------
- ------------------------------------------------------
YOU MAY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NEITHER WE NOR ANY
OF THE UNDERWRITERS OR THE SELLING STOCKHOLDERS HAVE AUTHORIZED ANYONE TO
PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WHEN YOU
MAKE A DECISION ABOUT WHETHER TO INVEST IN OUR COMMON STOCK, YOU SHOULD NOT RELY
UPON ANY INFORMATION OTHER THAN THE INFORMATION IN THIS PROSPECTUS. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK MEANS THAT INFORMATION
CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF THIS PROSPECTUS. THIS
PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THESE
SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR
SOLICITATION IS UNLAWFUL.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 25
Management............................ 38
Certain Transactions.................. 44
Principal and Selling Stockholders.... 46
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 51
Underwriting.......................... 53
Legal Matters......................... 55
Experts............................... 55
Where You Can Find More Information... 55
Index to Financial Statements......... F-1
</TABLE>

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

DEALER PROSPECTUS DELIVERY OBLIGATION:

UNTIL MAY 14, 1999 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- ------------------------------------------------------
- ------------------------------------------------------
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4,500,000 SHARES

[PROXICOM LOGO]
PROXICOM(R)
COMMON STOCK
-------------------------

PROSPECTUS
-------------------------
BT ALEX. BROWN

PRUDENTIAL SECURITIES

THOMAS WEISEL PARTNERS LLC

FRIEDMAN BILLINGS RAMSEY

-------------------------
April 19, 1999

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