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Modem Media Inc – ‘S-1/A’ on 1/11/99

As of: Monday, 1/11/99 · Accession #: 1012870-99-77 · File #: 333-68057

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 1/11/99  Modem Media Inc                   S-1/A                  2:345K                                   Donnelley R R & S… 13/FA

Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-1/A       Amendment #3 to Form S-1                             105    591K 
 2: EX-23.2     Consent of Arthur Andersen LLP                         1      4K

S-1/A — Amendment #3 to Form S-1
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Additional Information Amortization of Goodwill Bear, Stearns & Co. Inc Business Capitalization Certain Information Class A common stock Common Stock Company Background Company Clients Competition Conversion Delaware Anti-takeover Law and Certain Charter and Bylaw Provisions Dependence on Key Personnel; Need to Recruit Qualified Personnel Description of Capital Stock Dilution Dividend Policy Employees Exhibits and Financial Statement Schedules Experts Gerald M. O'Connell Government Regulation Indemnification of Directors and Officers Index to Financial Statements Industry Background Intercompany Agreements Legal Matters Limitation of Liability and Indemnification Matters Limitation of Liability; Indemnification Liquidity and Capital Resources Management Management's Discussion and Analysis of Financial Condition and Results of Operations Modem Combination Modem Media . Poppe Tyson, Inc NationsBanc Montgomery Securities LLC Net Loss Notes to Consolidated Financial Statements Notes to Financial Statements Offering, The Office and General Operating results of TNC units held for transfer Other Expenses of Issuance and Distribution Over-allotment option Potential Impact of Privacy Concerns Principal Stockholders Pro forma Prospectus Summary PTI Strategic Interactive Marketing Operations Recent Sales of Unregistered Securities Relationship with TNC and Certain Transactions Report of Independent Public Accountants Revenues Risk Factors Robert C. Allen, II Salaries and Benefits Selected Financial Data Shares Eligible for Future Sale Steven C. Roberts Stock Plans The Offering Undertakings Underwriting Use of Proceeds Use of Technology 1997 Stock Option Plan
1	1st Page - Filing Submission
"	Modem Media . Poppe Tyson, Inc
"	Gerald M. O'Connell
2	Class A common stock
"	NationsBanc Montgomery Securities LLC
"	Bear, Stearns & Co. Inc
5	Prospectus Summary
7	The Offering
9	Risk Factors
12	Dependence on Key Personnel; Need to Recruit Qualified Personnel
14	Potential Impact of Privacy Concerns
16	Shares Eligible for Future Sale
17	Company Background
"	Certain Information
18	Use of Proceeds
"	Dividend Policy
19	Capitalization
20	Dilution
21	Selected Financial Data
22	Management's Discussion and Analysis of Financial Condition and Results of Operations
24	Revenues
"	Salaries and Benefits
"	Office and General
"	Amortization of Goodwill
28	Operating results of TNC units held for transfer
29	Liquidity and Capital Resources
32	Business
"	Industry Background
40	Company Clients
42	Use of Technology
43	Competition
44	Government Regulation
"	Employees
46	Management
48	Limitation of Liability and Indemnification Matters
50	Stock Plans
"	1997 Stock Option Plan
52	Relationship with TNC and Certain Transactions
"	Modem Combination
53	Intercompany Agreements
54	Principal Stockholders
"	Robert C. Allen, II
"	Steven C. Roberts
55	Description of Capital Stock
"	Common Stock
56	Conversion
"	Delaware Anti-takeover Law and Certain Charter and Bylaw Provisions
57	Limitation of Liability; Indemnification
61	Underwriting
"	Over-allotment option
63	Legal Matters
"	Experts
"	Additional Information
64	Index to Financial Statements
65	Report of Independent Public Accountants
66	Pro forma
70	Notes to Consolidated Financial Statements
76	Net Loss
90	Notes to Financial Statements
94	PTI Strategic Interactive Marketing Operations
101	Item 13. Other Expenses of Issuance and Distribution
"	Item 14. Indemnification of Directors and Officers
"	Item 15. Recent Sales of Unregistered Securities
102	Item 16. Exhibits and Financial Statement Schedules
103	Item 17. Undertakings

S-1/A 1st Page of 105 TOC ↑Top Previous Next ↓Bottom Just 1st
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 1999
REGISTRATION NO. 333-68057
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------
MODEM MEDIA . POPPE TYSON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7311 06-1464807
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)

MODEM MEDIA . POPPE TYSON, INC.
228 SAUGATUCK AVENUE
WESTPORT, CT 06880
(203) 341-5200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

GERALD M. O'CONNELL
CHIEF EXECUTIVE OFFICER
MODEM MEDIA . POPPE TYSON, INC.
228 SAUGATUCK AVENUE
WESTPORT, CT 06880
(203) 341-5200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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

COPIES TO:
ALAN K. AUSTIN, ESQ. ALAN DEAN, ESQ.
BRIAN C. ERB, ESQ. DAVIS POLK & WARDWELL
WILSON SONSINI GOODRICH & ROSATI 450 LEXINGTON AVENUE
PROFESSIONAL CORPORATION NEW YORK, NY 10017
650 PAGE MILL ROAD (212) 450-4000
PALO ALTO, CA 94304
(650) 493-9300
----------------

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

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: ______ [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: ______ [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]

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

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

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

S-1/A 2nd Page of 105 TOC 1st Previous Next ↓Bottom Just 2nd
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE +
+SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JANUARY 11, 1999

MODEM MEDIA . POPPE TYSON

2,600,000 SHARES

CLASS A COMMON STOCK

Modem Media . Poppe Tyson, Inc. is offering 2,600,000 shares of its Class A
Common Stock. This is Modem Media . Poppe Tyson, Inc.'s initial public
offering, and no public market currently exists for its shares. We have applied
to have the shares we are offering approved for quotation on the Nasdaq
National Market under the symbol "MMPT." We anticipate that the initial public
offering price will be between $11.00 and $13.00 per share.

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

INVESTING IN THE CLASS A COMMON STOCK INVOLVES RISKS.

SEE "RISK FACTORS" BEGINNING ON PAGE 8.

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

[Download Table]

PER SHARE TOTAL
--------- -----

Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to the Company......................................... $ $

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

Modem Media . Poppe Tyson, Inc. has granted the Underwriters a 30-day option
to purchase up to an additional 390,000 shares of Class A Common Stock to cover
over-allotments. BancBoston Robertson Stephens Inc. expects to deliver the
shares of Class A Common Stock to purchasers on , 1999.

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

BANCBOSTON ROBERTSON STEPHENS

NATIONSBANC MONTGOMERY SECURITIES LLC

BEAR, STEARNS & CO. INC.

The date of this Prospectus is , 1999

S-1/A 3rd Page of 105 TOC 1st Previous Next ↓Bottom Just 3rd
[GATEFOLD DEPICTING THE LOGOS OF MODEM MEDIA. POPPE TYSON CLIENTS, ALONG WITH A
NARRATIVE DESCRIPTION OF MODEM MEDIA. POPPE TYSON'S RELATIONSHIP WITH EACH
CLIENT.]

S-1/A 4th Page of 105 TOC 1st Previous Next ↓Bottom Just 4th
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF CLASS A COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND
SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF
THIS PROSPECTUS OR OF ANY SALE OF OUR CLASS A COMMON STOCK. THE COMBINATION OF
MODEM MEDIA ADVERTISING LIMITED PARTNERSHIP ("MODEM"), A PORTION OF THE
NORTHERN LIGHTS INTERACTIVE DIVISION ("NORTHERN LIGHTS INTERACTIVE") OF TN
TECHNOLOGIES, INC. ("TNTI") AND THE STRATEGIC INTERACTIVE MARKETING OPERATIONS
OF POPPE TYSON, INC. (THE "PTI STRATEGIC INTERACTIVE MARKETING OPERATIONS")
EFFECTIVE OCTOBER 1998 IS REFERRED TO IN THIS PROSPECTUS AS THE "COMBINATION."
IN NOVEMBER 1998, WE CHANGED THE NAME OF OUR COMPANY FROM TN TECHNOLOGIES INC.
TO MODEM MEDIA . POPPE TYSON, INC. UNLESS OTHERWISE INDICATED, ALL REFERENCES
IN THIS PROSPECTUS TO THE "COMPANY," "WE," "US" OR "OUR" ARE TO MODEM MEDIA .
POPPE TYSON, INC. AFTER THE COMBINATION AND INCLUDE THE HISTORICAL BUSINESS AND
OPERATIONS OF MODEM, NORTHERN LIGHTS INTERACTIVE AND THE PTI STRATEGIC
INTERACTIVE MARKETING OPERATIONS.

UNTIL , 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR CLASS A COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

[Download Table]

PAGE
----

Prospectus Summary....................................................... 4
Risk Factors............................................................. 8
Company Background....................................................... 16
Certain Information...................................................... 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 31
Management............................................................... 45
Relationship with TNC and Certain Transactions........................... 51
Principal Stockholders................................................... 53
Description of Capital Stock............................................. 54
Shares Eligible for Future Sale.......................................... 58
Underwriting............................................................. 60
Legal Matters............................................................ 62
Experts.................................................................. 62
Additional Information................................................... 62
Index to Financial Statements............................................ F-1

S-1/A 5th Page of 105 TOC 1st Previous Next ↓Bottom Just 5th
PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the Class A common stock being sold in
this offering and our financial statements and notes thereto appearing
elsewhere in this prospectus. Unless otherwise indicated, the information in
this Prospectus (i) assumes no exercise of the Underwriters' over-allotment
option, (ii) reflects a 0.95-for-1 reverse split of our outstanding shares of
Class A common stock and Class B common stock which will be effected
concurrently with this offering; and (iii) reflects an amendment of our
Certificate of Incorporation authorizing an aggregate of 39,351,376 shares of
Class A common stock and Class B common stock, which will take place
concurrently with this offering.

OVERVIEW

We have been a leading provider of digital interactive marketing solutions
since 1987. By developing marketing programs that incorporate advanced
communication technologies, we enable our clients to establish, retain and
manage one-to-one customer relationships. Our marketing programs include the
design and implementation of electronic business programs that enable our
clients to support and leverage their world-class brands through the Internet.
We combine our substantial expertise in strategic marketing, creative design
and digital technology to deliver on a worldwide basis a complete range of
digital interactive marketing services, including strategic consulting and
research, website design, e-business implementation (including electronic
commerce and electronic customer care services), interactive advertising and
promotions, and data collection and analysis. Our marketing programs are
designed to enable our clients to target narrowly-defined market segments,
provide our customers with detailed product and service information, sell
products and services and provide post-sale customer support electronically,
and engage in ongoing promotional and cross-selling activities. Our marketing
programs are delivered primarily through the Internet.

We focus on embedding our digital interactive marketing solutions into our
clients' organizations to promote long-term client relationships. We combine
our strategic interactive marketing knowledge with our technical expertise to
provide high impact, cost-effective digital interactive marketing and customer
management solutions. We use dedicated client service teams with interactive
marketing experience in strategic consulting, creative, media, technology and
production disciplines, led by experienced account directors, to provide our
integrated digital marketing communication services. Our proven processes and
methodologies for executing client work, developed over a decade, enable us to
undertake interactive projects, monitor progress and measure the return on our
clients' investment in interactive marketing campaigns. We incorporate client
feedback into successive strategic initiatives and programs to further improve
and build upon online customer relationships.

We focus on devising programs that can be integrally linked to our clients'
business functions. We work primarily with a select group of established
Fortune 500 clients with world class brands committed to interactive marketing,
as well as companies with new online business models. Our clients include
Amazon.com; AT&T; Citibank; Delta Air Lines; E*Trade; IBM; Intel; Intuit; JC
Penney; John Hancock; Sony and Unilever. We have also received numerous
industry awards for our interactive marketing campaigns websites, banner
advertisements and CD-ROMs, including the Zima.com campaign and website,
various AT&T sites and campaigns, the iVillage.com "About Work" campaign, the
Sony PlayStation campaign and the Diet Pepsi "Convert a Million" campaign. In
1998, we won the "Interactive Agency Of The Year" award from the Internet
Advertising Bureau, a trade association, and we are the only company to win two
consecutive "CASIE" awards for interactive marketing.

S-1/A 6th Page of 105 TOC 1st Previous Next ↓Bottom Just 6th
groups of users with specific interests and characteristics. These features
enable the development and delivery of customized and targeted marketing
programs and communications services that incorporate digital data and advanced
interactive features to inform, engage, entertain and facilitate commerce with
the target audience. The Internet also allows advertisers and direct marketers
to measure the effectiveness and response rates of advertisements and to track
the demographic characteristics of Internet users in real time. The interactive
nature of the Internet enables marketers to better understand potential
customers, and to change messages rapidly and cost-effectively in response to
customer interests and behavior. The unique capabilities of online advertising,
the growth in online traffic and the favorable demographics of Internet users
have led to a significant increase in online advertising. Jupiter
Communications estimates that total online advertising revenue in the United
States in 1997 was $1.1 billion and expects this amount to grow to $5 billion
in 2000.

Our objective is to be the leading provider of digital interactive marketing
solutions. Key elements of our strategy include: (i) developing and maintaining
long-term client relationships with a core group of clients; (ii) maintaining
our leadership position in digital interactive marketing through the continuing
development of new service offerings and rapid adoption of emerging
technologies; (iii) continuing to attract and retain superior professional
talent; and (iv) continuing to expand our global office network in order to
provide our clients with comprehensive global marketing solutions. We currently
serve more than 30 clients through our global network of seven offices in North
America, Europe and Asia. We had pro forma revenues in 1997 and for the nine
months ended September 30, 1998 of $29.4 million and $30.4 million,
respectively.

S-1/A 7th Page of 105 TOC 1st Previous Next ↓Bottom Just 7th
THE COMPANY

Our company was formed in October 1996 through the combination of certain
strategic interactive marketing units of True North Communications Inc. ("TNC")
with Modem Media Advertising Limited Partnership ("Modem"), a leading provider
of digital interactive marketing services founded in 1987. Effective October
1998, our company acquired certain strategic interactive marketing operations
(the "PTI Strategic Interactive Marketing Operations") of Poppe Tyson, Inc.
("PTI"), another subsidiary of TNC. PTI has provided digital interactive
marketing services to domestic and international clients since 1985 and was
acquired by TNC in December 1997. The PTI Strategic Interactive Marketing
Operations consist of PTI's strategic marketing operations in the United
Kingdom, Hong Kong and the U.S., and certain fixed assets.

After the offering, TNC will own all of the outstanding shares of our Class B
common stock and will control 84.9% of our voting power.

Our principal executive office is located at 228 Saugatuck Avenue, Westport,
Connecticut 06880, and our telephone number at that address is (203) 341-5200.
We maintain Web sites at www.modemmedia.poppetyson.com, www.modemmedia.com, and
www.poppe.com. Information contained on our websites should not be considered
to be a part of this prospectus.

THE OFFERING

[Download Table]

Class A common stock offered....................... 2,600,000 shares(1)
Common stock to be outstanding after this offering:
Class A common stock............................ 5,023,831 shares(1)(2)
Class B common stock............................ 5,648,624 shares(3)
----------
Total....................................... 10,672,455 shares(1)(2)(3)
==========
Over-allotment option.............................. 390,000 shares
Voting rights:
Class A common stock............................ One vote per share
Class B common stock............................ Five votes per share(3)
Use of proceeds.................................... We will receive net
proceeds from this
offering of approximately
$26.6 million. We will use
approximately $6.0 million
of the net proceeds to
repay indebtedness owed to
TNC, our parent company.
We intend to use the
remaining net proceeds for
working capital and
capital expenditures.
Dividend policy.................................... We do not intend to pay
dividends on our common
stock. We plan to retain
any earnings for use in
the operation of our
business and to fund
future growth.
Proposed Nasdaq National Market symbol............. MMPT

--------
(1) Unless otherwise specifically stated, the information throughout this
prospectus does not take into account the possible issuance of additional
shares of Class A common stock to the underwriters pursuant to their right
to purchase additional shares to cover over-allotments.

(2) Based on shares outstanding as of September 30, 1998. Excludes (i)
3,040,000 shares of Class A common stock that have been set aside for stock
options under our stock option plan, of which 1,890,542 have been granted
to our employees, and (ii) shares of Class A common stock that have
been set aside for purchase by employees under our employee stock purchase
plan.
(3) Holders of our Class B common stock can choose to convert their shares into
shares of Class A common stock on a one-for-one basis at any time. In
addition, the Class B common stock will be automatically converted into
Class A common stock in certain circumstances. See "Description of Capital
Stock--Common Stock--Conversion."

S-1/A 8th Page of 105 TOC 1st Previous Next ↓Bottom Just 8th
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

[Enlarge/Download Table]

ACTUAL PRO FORMA
---------------------------------------------------- ------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED NINE MONTHS ENDED
-------------------------------- ------------------ DECEMBER 31, SEPTEMBER 30,
1994 1995 1996 1997 1997 1998 1997 1998
----- ------- ------- ------- -------- -------- ------------ -----------------
(UNAUDITED) (UNAUDITED)

STATEMENTS OF OPERATIONS
DATA(1):
Revenues................ $ -- $ 438 $ 2,093 $25,497 $ 18,025 $ 30,397 $29,422 $30,397
Salaries and benefits
expense................ -- 308 1,322 15,894 11,187 20,793 19,244 20,793
Office and general
expense................ -- 215 712 9,038 6,162 10,309 12,217 10,309
Amortization of goodwill
expense................ -- -- -- 1,666 1,249 1,308 1,666 1,308
Operating results of TNC
units held for
transfer............... (326) 1,766 1,309 2,180 1,600 13 -- --
----- ------- ------- ------- -------- -------- ------- -------
Operating income
(loss)................. 326 (1,851) (1,250) (3,281) (2,173) (2,026) (3,705) (2,013)
Interest income
(expense), net......... -- -- -- (76) (62) (5) (121) (5)
----- ------- ------- ------- -------- -------- ------- -------
Income (loss) before
income taxes........... 326 (1,851) (1,250) (3,357) (2,235) (2,031) (3,826) (2,018)
Provision (benefit) for
income taxes........... 70 (873) (548) (248) (246) 57 66 (59)
----- ------- ------- ------- -------- -------- ------- -------
Net income (loss)....... $ 256 $ (978) $ (702) $(3,109) $ (1,989) $ (2,088) $(3,892) $(1,959)
===== ======= ======= ======= ======== ======== ======= =======
Basic and diluted net
income (loss) per
share.................. $0.03 $ (0.12) $ (0.09) $ (0.39) $ (0.25) $ (0.26) $ (.48) $ (.24)
===== ======= ======= ======= ======== ======== ======= =======

[Download Table]

SEPTEMBER 30, 1998
--------------------------
ACTUAL PRO FORMA(2)(3)(4)
------- ------------------
(UNAUDITED)

BALANCE SHEET DATA:
Cash................................................ $ 4,349 $24,925
Working capital (deficit)........................... 1,891 22,467
Total assets........................................ 68,182 98,525
Capital lease obligations, less current portion..... 507 507
Related party obligations, less current portion..... 11,275 --
Other long-term obligations......................... 24 24
Total stockholders' equity.......................... 36,802 78,420

-------
(1) The pro forma results of operations data for the Company assume that (i)
the combination of TNTI (including Northern Lights Interactive) with Modem,
(ii) the acquisition of the PTI Strategic Interactive Marketing Operations
and (iii) the disposition of the units to be transferred to TNC in
connection with the Combination (the "TNC Units Held for Transfer"), each
occurred on January 1, 1997. The pro forma results of operations of the
Company also include the results of the True North Units other than the TNC
Units Held for Transfer from the dates of their inception.

(2) The pro forma balance sheet data reflects certain adjustments related to
the Combination, including (a) the purchase of fixed assets of $1,624,000;
(b) the forgiveness of $5,275,000 of intercompany payables; (c) the sale to
TNC of the TNC Units Held for Transfer; and (d) the issuance of an
aggregate of 809,514 shares of our Class B Common Stock to TNC. All of the
above transactions have been recorded at historical costs.

(3) As adjusted to reflect the sale of the 2,600,000 shares of Class A Common
Stock offered hereby at an assumed initial public offering price of $12.00
per share, the midpoint of the estimated public offering price range set
forth on the cover page of this prospectus, and application of the net
proceeds therefrom (after deducting underwriting discounts and commissions,
estimated offering expenses and $6.0 million which will be used to pay
indebtedness due and payable to TNC upon consummation of this offering).
See "Management--Stock Plans," "Relationship with True North and Certain
Transactions," "Description of Capital Stock and "Use of Proceeds."

(4) As adjusted to reflect the additional purchase price of $15,587,000 payable
by TNC to the former Modem partners upon consummation of this initial
public offering.

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RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations. Our business, financial condition or results of operations could be
materially adversely affected by any of the following risks. The trading price
of our Class A common stock could decline due to any of these risks, and you
might lose all or part of your investment.

This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.

HISTORY OF OPERATING LOSSES; NO ASSURANCE OF PROFITABILITY

We have experienced operating losses as well as net losses, on a pro forma
basis, in substantially all of the quarters during the period from January 1,
1996 to September 30, 1998. Although we have experienced revenue growth in
recent periods, these growth rates may not be sustainable or indicative of
future operating results. In addition, we have incurred substantial costs to
expand and integrate our operations and we intend to continue to invest heavily
in ongoing expansion and integration efforts as well as for further
infrastructure development. As a result, we expect to continue to incur
operating losses through 1999 or beyond, and there can be no assurance that we
will achieve or sustain profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Our future operating results will depend on many factors, including:

. demand for our services;

. our clients' budgets for interactive marketing services;

. the size of the contracts we enter into with clients;

. our ability to maintain our client relationships and obtain assignments
from new clients;

. our success in attracting and retaining qualified personnel;

. the level of competition we face;

. our ability to successfully integrate our business units;

. our ability to accurately estimate our costs in fixed fee assignments;

. our ability to anticipate and respond to technological developments; and

. our ability to respond to competitive developments.

We may not succeed in addressing these factors, and the failure to do so
could have a material adverse effect on our future operating performance.

DEPENDENCE ON KEY CLIENTS; ABSENCE OF LONG-TERM CONTRACTS

Our five largest clients accounted for 56.8% and 54.8% of our revenues (on a
pro forma basis) for the fiscal year ended December 31, 1997 and for the nine
months ended September 30, 1998, respectively. AT&T accounted for 31.4% and
20.4% of our revenues (on a pro forma basis) for the fiscal year ended December
31, 1997 and for the nine months ended September 30, 1998, respectively. In
addition, Citibank accounted for 12.0% of our revenues (on a pro forma basis)
in the nine months ended September 30, 1998. There can be no assurance that we
will be able to maintain our historical rate of growth or our current level of
revenues derived from AT&T, Citibank or any other client in the future.

S-1/A 10th Page of 105 TOC 1st Previous Next ↓Bottom Just 10th
One element of our business strategy is to strengthen and maintain long-term
relationships with a select number of established Fortune 500 clients with
world-class brand name recognition. Nevertheless, our clients generally hire us
on an assignment basis rather than on a retainer basis. Once an assignment is
completed there can be no assurance that a client will engage us for further
services. As a result, a client that generates substantial revenue for us in
one period may not be a substantial source of revenue in a subsequent period.
In addition, our clients generally have the right to terminate their
relationships with us without penalty and with relatively short or no notice.
The termination of our business relationships with any of our significant
clients, including AT&T or Citibank, or a material reduction in the use of our
services by any of our significant clients, could adversely affect our future
financial performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Company Clients."

VARIABILITY OF OPERATING RESULTS; SEASONALITY; SUSCEPTIBILITY TO GENERAL
ECONOMIC CONDITIONS

Our operating results have fluctuated in the past, and may continue to
fluctuate in the future, as a result of a variety of factors, including the
timing of new projects, material reductions, cancellations or completions of
major projects, the loss of significant clients, the opening or closing of an
office, our relative mix of business, changes in our pricing strategies or
those of our competitors, employee utilization rates, changes in personnel and
other costs relating to the expansion of operations, and other factors that are
outside of our control. Our operating results could also be materially
adversely affected by increased competition in our markets. As a result of
these fluctuations, we believe that period-to-period comparisons of our
operating results cannot be relied upon as indicators of future performance. In
some quarters our operating results may fall below the expectations of
securities analysts and investors due to any of the factors described above. In
such event, the trading price of the Class A common stock would likely decline.

We experience some variation in operating results throughout the year which
results in part from the marketing communications spending patterns and
business cycles of our clients, and from marketing communications spending
patterns in general. Our revenues have historically been higher during the
second half of our fiscal year as our clients prepare marketing campaigns for
products and services launched in anticipation of fall trade shows and the
holiday season. We expect this variation in operating results to continue in
the future.

Our revenues and results of operations, like those of other marketing
communications companies, are also subject to fluctuations based on general
domestic and international economic conditions. If there were to be a general
economic downturn or a recession either domestically or abroad, our clients
might reduce their marketing budgets, which would lead to a reduction in the
level of our fees and commissions. If overall marketing expenditures declined,
we expect that marketers would focus their reduced budgets on traditional media
advertising at the expense of digital interactive marketing, in which case our
future operating performance could be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations" and "--Factors Affecting Operating
Results of the Company."

RISKS ASSOCIATED WITH INTEGRATION OF SEPARATE BUSINESSES

The Combination was completed effective October 1998 in order to combine
Modem, a portion of the Northern Lights Interactive division of TNTI ("Northern
Lights Interactive") and the PTI Strategic Interactive Marketing Operations.
Accordingly, we have only recently begun to operate as a combined entity. We
expect that the integration of our operations will continue to place a
significant burden on our management. Such integration is subject to various
risks and uncertainties, including: (i) the inability to effectively assimilate
the operations, services, technologies, personnel and cultures of the combining
entities; (ii) the potential disruption of our business; and (iii) the
impairment or loss of relationships with employees and clients. In addition, we
could be forced to incur significant unforeseen expenses in connection with
combining our businesses. If we fail to integrate our operations successfully
or on a timely basis, or if we incur such unforeseen expenses, our financial
performance could be materially and adversely effected.

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EXPOSURE TO FIXED-FEE ASSIGNMENTS

A significant majority of our revenues is derived from fixed-fee assignments.
If we fail to estimate costs accurately, control costs during performance of a
fixed-fee assignment, anticipate technical problems or obtain a fee adjustment
in the event costs are underestimated, our future financial performance could
be adversely affected. We recognize revenues from assignments based on our
estimate of the percentage of each assignment completed in a reporting period.
To the extent our estimates are inaccurate, the revenues and operating profits,
if any, reported for periods during which work on an assignment is ongoing may
not accurately reflect the final results of the assignment, which can only be
determined upon completion of the assignment. In such event, we would be
required to record an expense for such period equal to the amount by which our
revenues were previously overstated. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

CONTROL BY TRUE NORTH AND POTENTIAL CONFLICTS OF INTEREST

TNC owns, directly or indirectly, all of the shares of our Class B common
stock, each share of which entitles its holder to five votes on most
stockholder actions. As a result, TNC will have 84.9% of the combined voting
power of both classes of our common stock after this offering. The purchasers
of the shares of Class A common stock offered hereby will be entitled to one
vote per share and will have 7.8% of the combined voting power. After the
offering, TNC will have three representatives on our Board of Directors and
will have enough votes to elect all members of the Board of Directors. As a
result of its stock ownership after this offering, TNC will be in a position,
without the approval of our public stockholders, to take certain corporate
actions, such as amending our corporate documents, approving or defeating
mergers or takeover attempts, and determining the amount and timing of
dividends paid to itself, that could conflict with the interests of our public
stockholders. Currently, two of our five directors (Messrs. Seeley and
Theophilos) are also members of management of TNC and are compensated by TNC in
connection with their employment by TNC. In addition, one of our current
directors (Mr. Elliman) is a director of TNC and was selected by TNC. These
directors may have conflicts of interest in addressing business opportunities
and strategies in circumstances where our interests differ from those of TNC.
The Company has not adopted any formal plan or arrangement to address such
potential conflicts of interest. See "Relationship with True North and Certain
Transactions."

COMPETITIVE MARKETPLACE; LOW BARRIERS TO ENTRY

The market for our services is very competitive and is characterized by
pressures to incorporate new capabilities, accelerate job completion schedules
and reduce prices. We face competition from a number of sources, including
traditional advertising and marketing firms, project-oriented interactive
marketing firms and information technology service providers. Many traditional
advertising agencies have started to develop digital media and interactive
communications capabilities. Moreover, certain project-oriented interactive
marketing firms and information technology service providers provide Internet
consulting, corporate identity and packaging, production, advertising and Web
site design services, and are technologically proficient in the digital media
and interactive communications fields. In addition, in-house marketing and
information systems departments and graphic design companies compete with
certain portions of our business.

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

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additional competition from new market entrants. There can be no assurance that
existing or future competitors will not develop or offer digital interactive
marketing services and products that provide significant performance, price,
creative, technological or other advantages over our services, any of which
could have a material adverse effect on our future operating performance. See
"Business--Competition."

RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH

The expansion of our business and customer base has placed increased demands
on our management, operating systems, internal controls and financial and
physical resources. Our continued growth, if any, may strain existing
management and human resources in particular, affecting our ability to attract
and retain talented personnel. Furthermore, our operational, financial and
management information systems and controls may not be adequate to support the
continued growth of our operations. Consequently, we may be required to
increase expenditures to hire new employees, open new offices and invest in new
equipment or make other capital expenditures. In this regard, we are currently
in the process of installing a new financial accounting system. We have
expended approximately $800,000 to date, and intend to make additional capital
expenditures of approximately $800,000 in 1999, to complete this system. Any
failure to expand any of the foregoing areas in an efficient manner or to
successfully implement our new accounting system could adversely affect our
business. There also can be no assurance that we will be able to sustain the
rates of growth that we have experienced in the past.

DEPENDENCE ON KEY PERSONNEL; NEED TO RECRUIT QUALIFIED PERSONNEL

We rely, and will continue to rely, on our senior executive officers and
other key management personnel, including Gerald M. O'Connell, our Chief
Executive Officer, and Robert C. Allen, II, our President. We believe that our
future success will depend in large part upon our ability to attract and retain
additional highly skilled creative, technical, financial and strategic
marketing personnel. If any of our officers or key employees leave our company,
the relationships that they have with our clients could be lost, and we would
need to find employees who could develop new relationships. In addition, our
ability to generate revenues directly relates to our personnel, both in terms
of the number and expertise of the personnel we have available to work on our
projects and the mix of such personnel (i.e., full time or temporary employees
or contract service providers). As a result, if we fail to retain existing
employees or hire new employees when necessary our business, financial
condition and operating results could be materially and adversely affected. The
competition for employees at all levels of the digital interactive marketing
industry is intense and is increasing. If we do not succeed in attracting new
employees or retaining and motivating our current and future employees, our
business could suffer significantly. See "Business--Employees."

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

One part of our long-term strategy is to expand our operations in
international markets. To date we have provided only limited services
internationally to certain of our North American clients, and we have only
limited experience providing services internationally to non-U.S. companies. As
we expand our international operations, we will be subject to increased risks
associated with international operations, which may include foreign exchange
exposure or losses, currency translation adjustments, tariff regulations,
export license requirements, political and economic instability, imposition of
government controls, and imposition of withholding or other taxes on our
foreign income. Agreements may also be more difficult to enforce and
receivables more difficult to collect through a foreign country's legal system.
In addition, there can be no assurance that we will be able to successfully
market, sell and deliver our services in other countries.

CONFLICTS OF INTEREST IN MARKETING COMMUNICATIONS INDUSTRY

Conflicts of interest between clients are inherent in certain segments of the
marketing communications industry. We have in the past been, and may in the
future be, unable to pursue potential digital interactive marketing
opportunities because such opportunities would require us to provide services
to direct competitors

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of our existing clients. In addition, we risk alienating or straining
relationships with existing clients when we agree to provide services to even
indirect competitors of our existing clients. Furthermore, some of our clients
require us to agree not to provide our services to their competitors.
Prospective clients may choose also not to retain us for reasons of actual or
perceived conflicts of interest. See "Business--Competition."

UNCERTAINTIES OF DEVELOPING MARKET FOR DIGITAL INTERACTIVE MARKETING SOLUTIONS

The market for digital interactive marketing solutions has only recently
begun to develop, is evolving rapidly and is characterized by an increasing
number of market entrants. Our future growth is dependent on our ability to
create, develop and deploy digital interactive marketing solutions that are
accepted by our clients as an effective form of communication with their
targeted audiences. Demand for and market acceptance of recently introduced
services are subject to a high level of uncertainty and are dependent on a
number of factors, including the growth in consumer access to and acceptance of
new interactive technologies, such as the Internet, proprietary online services
and corporate intranets, and the development of technologies that facilitate
interactive communication between organizations and targeted audiences, as well
as our ability to anticipate such technologies and incorporate them into our
services in a timely fashion. Significant issues concerning the commercial use
of these technologies (including security, privacy, reliability, cost, ease of
use and quality of service) remain unresolved and may have a negative impact on
the growth of marketing activities that utilize these technologies. In
addition, no standards have yet been widely accepted for the measurement of the
effectiveness of interactive marketing, and there can be no assurance that such
standards will develop sufficiently to support interactive marketing as a
significant marketing medium. There can be no assurance that the market for
interactive marketing services will continue to grow, that demand for our
services will continue or that individual personal computer users in business
or at home will continue to use the Internet or other interactive media for
commerce and communication. If the market for digital interactive marketing
solutions develops more slowly than we expect, or if our services do not
continue to achieve market acceptance, our future operating performance could
be materially adversely affected. See "Business--Industry Background."

DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET AND THE WORLD WIDE WEB
INFRASTRUCTURE

Because we expect to derive substantially all of our revenues for the
foreseeable future from digital interactive marketing services, our future
success depends in part on the continued expansion of, and reliance of
consumers and businesses on, the Internet, and the continued development and
maintenance of a viable World Wide Web network infrastructure. The current
Internet infrastructure may not be able to support an increased number of users
or their increased bandwidth requirements, and, as a result, the performance or
reliability of the Internet may be adversely affected. The improvement of this
infrastructure will require timely development of products, such as high speed
modems and communications equipment, in order to continue to enhance the levels
of Internet access, speed and content available to an increased number of
users. Furthermore, the Internet has experienced certain outages and delays as
a result of damage to portions of its infrastructure. Such outages and delays,
including those resulting from Year 2000 problems, could adversely affect
websites and the level of traffic on the Internet. The effectiveness of the
Internet may also decline due to delays in the development or adoption of new
standards and protocols (for example, the next generation Internet protocol)
designed to support increased levels of activity. There can be no assurance
that the infrastructure, products or services necessary to maintain and expand
the Internet will be developed, or that the Internet will be a viable
commercial medium for advertisers.

RISKS ASSOCIATED WITH GOVERNMENT REGULATION

The marketing communications industry is subject to extensive government
regulation, both domestic and foreign, with respect to the truth in and
fairness of advertising. We must comply with Federal Trade Commission
regulations governing the marketing of products and services and similar state
regulations. In addition, there has been an increasing tendency in the United
States on the part of businesses to resort to the judicial system to challenge
comparative advertising of their competitors on the grounds that the
advertising is false and deceptive. There can be no assurance that we will not
be subject to claims against us or our clients by

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other companies or governmental agencies or that any such claims, regardless of
merit, would not have a material adverse effect on our future operating
performance.

Due to the increasing popularity and use of the Internet, a number of laws
and regulations may be adopted regarding pricing, acceptable content, taxation
and quality of products and services. Although there are currently few laws or
regulations directly governing access to or commerce on the Internet, any new
legislation could inhibit the growth in use of the Internet and decrease the
acceptance of the Internet as a communications and commercial medium. Certain
telephone carriers have also petitioned the government to regulate and impose
fees on Internet service providers and online service providers in a manner
similar to long distance telephone carriers. The adoption of any such laws or
regulations could affect the costs of communicating on the Internet and
adversely affect the growth in use of the Internet, which could in turn
decrease the demand for our services or otherwise have a material adverse
effect on our future operating performance. Furthermore, due to the global
nature of the Internet, governments of states or foreign countries may attempt
to regulate Internet transmissions or levy sales or other taxes relating to our
activities. Any of the foregoing developments could have a material adverse
effect on our future operating performance. See "Business--Government
Regulation."

POTENTIAL IMPACT OF PRIVACY CONCERNS

An important feature of the services we provide to our clients is the ability
to develop and maintain individual user profiles to measure the effectiveness
of digital marketing programs and to determine the nature of the content to be
provided to particular customers. Profile information is often captured when
consumers visit a site on the Internet and volunteer information in response to
questions or other forms of solicitation concerning their backgrounds,
interests and preferences. Profiles are augmented over time through the
collection and analysis of data, and are used by our clients to manage the
distribution and frequency as well as the content of advertising placement.
However, privacy concerns may cause consumers to resist providing the personal
data necessary to support this profiling capability. Moreover, even the
perception of privacy concerns, whether or not valid, may indirectly inhibit
market acceptance of the Internet as a means of commerce and marketing. In
addition, such concerns may be heightened by legislative or regulatory
requirements that mandate notification to Internet users that the data captured
on certain Internet sites may be used by marketing entities to unilaterally
address product promotion and advertising to that user. While we are not aware
of any such legislation or regulatory requirements in the United States,
certain other countries and political entities, such as the European Community,
have adopted such legislation or regulatory requirements, and no assurance can
be given that similar legislation or regulatory requirements will not be
adopted in the United States. If the privacy concerns of consumers are not
adequately addressed, our future operating performance could be materially and
adversely affected.

RAPID TECHNOLOGICAL CHANGE

The technologies used in digital interactive marketing are developing rapidly
and are characterized by evolving industry standards as well as frequent new
product and service introductions and enhancements. There can be no assurance
that the technologies we use and the expertise gained in those technologies
will continue to be applicable in the future. There can be no assurance that we
can correctly identify which technologies will achieve market acceptance, that
such new technologies will be made available to us or that such technologies
can be economically applied by us on a timely basis. The inability to identify
new and existing technologies and apply expertise in a timely manner to
subsequent projects and respond to both evolving demands of the marketplace and
competitive product and service offerings could have a material adverse effect
on our financial performance. See "Business--Use of Technology."

POTENTIAL LIABILITY TO CLIENTS

Many of our engagements involve the development, implementation and
maintenance of marketing programs that are critical to our clients' businesses.
Our failure or inability to meet a client's expectations in the performance of
services could injure our business reputation or result in a claim for
substantial damages

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against us regardless of our responsibility for such failure. In addition, the
marketing programs we provide for our clients may include confidential or
proprietary client information. Although we have implemented policies to
prevent such client information from being disclosed to unauthorized parties or
used inappropriately, any such unauthorized disclosure or use could result in a
claim against us for substantial damages. We attempt to limit contractually our
damages arising from negligent acts, errors, mistakes or omissions in rendering
our digital interactive marketing services. Nevertheless, contractual
provisions attempting to limit such damages may not be enforceable in all
instances or may otherwise fail to protect us from liability for damages.
Moreover, such coverage may not continue to be available on reasonable terms or
in sufficient amounts to cover one or more large claims. The successful
assertion against us of one or more large claims that are uninsured, exceed
available insurance coverage or result in changes to our insurance policies,
including premium increases or the imposition of a large deductible or
coinsurance requirements, could adversely affect our future operating
performance.

DEPENDENCE ON RELATIONSHIP WITH TRUE NORTH

We have historically depended on TNC for corporate administrative functions,
as well as for certain legal, accounting, financing, cash management, tax and
payroll administration, insurance, employee benefits administration and other
services. We have entered into agreements with TNC to continue certain of these
services after the offering. If we are no longer able to obtain these services
from TNC, we will be required to provide such services internally or find a
third-party provider of these services. There can be no assurance that, if
required, we will be able to secure the provision of these services on
acceptable terms. If we are unsuccessful in obtaining an acceptable provider of
any of these services upon termination of the transitional service agreements,
our future financial performance could be adversely affected.

We have also from time to time relied on TNC for client referrals or
cooperated with TNC in obtaining new clients. However, TNC is not required to
assist us in obtaining new clients or client referrals. There can be no
assurance that TNC will continue to assist us in obtaining new clients in the
future. If TNC stops assisting us in obtaining new clients, or if TNC provides
us with less help than in the past, our ability to obtain new clients could be
impaired and our future operating performance could be adversely affected.

YEAR 2000 COMPLIANCE

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. The
failure to correct any such programs or hardware could result in system
failures or miscalculations causing disruptions of our operations, including,
among other things, a temporary inability to process transactions, send
invoices or engage in similar normal business activities. Based on recent
assessments, we have determined that we will be required to modify or replace
some portions of our software so that those systems will properly utilize dates
beyond December 31, 1999. We plan to complete these modifications and
replacements prior to December 31, 1999. If such modifications and replacements
are not made, or are not completed on a timely basis, the Year 2000 Issue could
have a material impact on our future operating performance.

We frequently conduct transactions and perform services that interface
directly with systems of our clients. There is no guarantee that the systems of
our clients or other companies on which our systems rely will be timely
converted and will not have an adverse effect on our systems. Furthermore, our
suppliers or clients may experience material business disruptions that could
affect us as a result of the Year 2000 problem. Responses of third party
suppliers to our inquiries to date do not indicate that they expect, at this
time, to be non-compliant by the Year 2000 based on their progress to date.
However, the inability of a substantial number of our suppliers to complete
their Year 2000 compliance could cause significant disruptions in our ability
to provide services to our clients on a timely basis. Moreover, the inability
of a substantial number of our clients to complete their Year 2000 compliance
could cause them to reduce spending on interactive marketing programs. Either
event could have a material adverse effect on our future operating performance.

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SHARES ELIGIBLE FOR FUTURE SALE

After this offering, we will have outstanding 5,023,831 shares of Class A
common stock (5,413,831 shares if the underwriters exercise their option to
purchase additional shares of Class A common stock in the offering) and
5,648,624 shares of Class B common stock, and we will have reserved an
additional shares of Class A common stock for issuance pursuant to our
stock option and stock purchase plans. The federal securities laws impose
certain restrictions on the ability of stockholders to resell their shares. In
addition, TNC and its affiliates, our officers and directors and the holders of
options to purchase our Class A common stock have agreed that, for a period of
180 days from the date of this prospectus, they will not sell their shares. We
intend to register for resale the shares of Class A common stock reserved for
issuance under our stock option and stock purchase plans approximately 180 days
after the date of this prospectus. Accordingly, on , 1999, all of the
shares of our common stock held by TNC and our officers, directors and
optionees will be available for immediate resale, subject to certain volume
restrictions imposed on TNC and our officers and directors by the securities
laws. See "Shares Eligible for Future Sale."

ABSENCE OF PRIOR MARKET FOR THE SHARES; POSSIBLE VOLATILITY OF SHARE PRICE

Prior to this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations
between the underwriters and us. You may not be able to resell your shares at
or above the initial public offering price due to a number of factors,
including the following:

. actual or anticipated fluctuation in our operating results;

. changes in expectations as to our future financial performance or changes
in financial estimates of securities analysts;

. announcements of new marketing communications solutions or technological
innovations; and

. the operating and stock price performance of comparable companies.

In addition, the stock market in general, and the market for technology-
related stocks in particular, have experienced extreme volatility that often
has been unrelated to the operating performance of particular companies. These
broad market and industry fluctuations may adversely affect the trading price
of our Class A common stock, regardless of our actual operating performance.
You should read the "Underwriting" section for a more complete discussion of
the factors to be considered in determining the initial public offering price.

IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS

The initial public offering price is substantially higher than the net
tangible book value per share of the outstanding common stock immediately after
the offering. Accordingly, if you purchase Class A common stock in the
offering, you will incur immediate dilution of approximately $9.26 in the net
tangible book value per share of Class A common stock from the price you pay
for the Class A common stock.

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COMPANY BACKGROUND

The Company was incorporated in Delaware in October 1996 as TN Technologies
Inc. ("TNTI"). The Company changed its name to Modem Media . Poppe Tyson, Inc.
in November 1998. True North Communications Inc. ("TNC") formed the Company to
combine a portion of its Northern Lights Interactive division ("Northern Lights
Interactive") with Modem Media Advertising Limited Partnership ("Modem"), a
provider of digital interactive marketing services since 1987.

Effective October 1, 1998, the Company acquired certain strategic interactive
marketing operations (the "PTI Strategic Interactive Marketing Operations") of
Poppe Tyson, Inc. ("PTI"), another subsidiary of TNC. PTI was formed in
December 1985 as a subsidiary of Bozell, Jacobs, Kenyon & Eckhardt, Inc.
("Bozell"), and has provided digital interactive marketing services to domestic
and international clients since 1988. Bozell was acquired by TNC in December
1997. The PTI Strategic Interactive Marketing Operations consist of PTI's
strategic interactive marketing operations in the United Kingdom, Hong Kong and
the U.S., and certain fixed assets.

Upon consummation of the October 1, 1998 transactions, the Company's business
will consist of Modem, the PTI Strategic Interactive Marketing Operations and
Northern Lights Interactive.

Following this offering, TNC will own all of the outstanding shares of the
Company's Class B common stock and will control 84.9% of the voting power of
the Company. The Company and TNC have entered into certain agreements providing
for various interim and ongoing services and relationships between the two
companies, including an intercompany credit agreement, a tax matters agreement,
an administrative services agreement, a real estate sublease agreement and an
affiliation agreement with respect to certain client services in Brazil. See
"Risk Factors--Dependence on Relationship with TNC," "--Control by TNC" and
"Relationship with TNC and Certain Transactions."

CERTAIN INFORMATION

Modem Media . Poppe Tyson, Inc., Modem Media, Poppe.com, TN Technologies Inc.
and Northern Lights Interactive are trademarks or tradenames of the Company.
This prospectus also includes product names and other tradenames and trademarks
of the Company and of other organizations.

This prospectus includes statistical data regarding Internet usage and the
advertising and marketing industry which were obtained from industry
publications, including reports generated by International Data Corporation,
Jupiter Communications and Zenith Media. These industry publications generally
indicate that they have obtained information from sources believed to be
reliable, but do not guarantee the accuracy and completeness of such
information. While the Company believes these industry publications to be
reliable, the Company has not independently verified such data. The Company
also has not sought the consent of any of these organizations to refer to their
reports in this prospectus.

Unless otherwise specifically stated, the information in this prospectus does
not take into account the possible issuance of additional shares of Class A
common stock to the underwriters pursuant to their right to purchase additional
shares to cover over-allotments.

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USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Class A
common stock in this offering, after deducting estimated expenses of $2.4
million, all of which are payable by the Company, and underwriting discounts
and commissions, are estimated to be approximately $26.6 million (approximately
$30.9 million if the underwriters exercise their over-allotment option in
full), at an assumed initial public offering price of $12.00 per share. The
principal purposes of this offering are to repay certain indebtedness owed to
TNC, to obtain additional capital, to create a public market for the Company's
Class A common stock and to facilitate future access by the Company to public
securities markets.

The Company will use approximately $6.0 million of the net proceeds from this
offering to pay indebtedness owed to TNC. This indebtedness is due and payable
upon consummation of this offering and is non-interest bearing. See
"Relationship with TNC and Certain Transactions." The Company currently expects
to use the remaining $20.6 million of net proceeds for general corporate
purposes, including working capital and capital expenditures. A portion of the
net proceeds from this offering may also be used to acquire or invest in
complementary marketing communications companies, services, products or
technologies, or to invest in geographic expansion. Pending use of the net
proceeds for the above purposes, the Company intends to invest such funds in
short-term, interest-bearing, investment grade obligations or may advance a
portion of such funds to TNC under its current intercompany lending
arrangements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Relationship
with TNC and Certain Transactions--Intercompany Agreements."

DIVIDEND POLICY

The Company anticipates that it will retain any future earnings for use in
the expansion and operation of its business and does not anticipate paying any
cash dividends in the foreseeable future. Any determination to pay dividends in
the future will be at the discretion of the Company's Board of Directors and
will depend upon the Company's financial condition, results of operations and
capital requirements. See "Use of Proceeds" and "Relationship with TNC and
Certain Transactions."

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CAPITALIZATION

The following table sets forth the total capitalization of the Company at
September 30, 1998: (i) on an actual basis; and (ii) on a pro forma basis after
giving effect to the Combination, including (a) the purchase of fixed assets of
$1,624,000; (b) the forgiveness of $5,275,000 of intercompany payables; (c) the
sale to TNC of the TNC Units Held for Transfer; (d) the issuance of an
aggregate of 809,514 shares of Class B common stock to TNC; and (e) the
repayment of a $6,000,000 note payable to TNC; (f) the issuance and sale of
2,600,000 shares Class A common stock offered hereby by the Company at the
initial public offering price of $12.00 per share, the midpoint of the
estimated public offering price range set forth on the cover page of this
prospectus, after deducting underwriting discounts and commissions and
estimated offering expenses. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

[Download Table]

SEPTEMBER 30, 1998
-------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)

Intercompany loans payable................................. $ 11,275 $ --
Capital lease obligations, less current portion............ 507 507
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares autho-
rized, none issued and outstanding...................... -- --
Common stock, $0.001 par value; 39,351,376 shares of
Class A common stock and 5,648,624 shares of Class B
common stock authorized, 2,423,831 shares of Class A
common stock and 4,839,110 shares of Class B common
stock issued and outstanding, actual; 39,351,376 shares
of Class A common stock and 5,648,624 shares of Class B
common stock authorized, 5,023,831 shares of Class A
common stock and 5,648,624 shares of Class B common
stock issued and outstanding, pro forma................. 8 12
Paid-in capital.......................................... 47,273 88,887
Accumulated deficit...................................... (10,498) (10,498)
Accumulated other comprehensive income................... 19 19
-------- --------
Total stockholders' equity............................. 36,802 78,420
-------- --------
Total capitalization................................... $ 48,584 $ 78,927
======== ========

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DILUTION

The pro forma net tangible book value of the Company as of September 30, 1998
was $1.9 million or $0.24 per share of common stock. Net tangible book value
per share is determined by dividing the net tangible book value of the Company
(total tangible assets less total liabilities) by the number of shares of
common stock outstanding. After giving effect to the sale by the Company of the
2,600,000 shares of Class A common stock offered hereby (at an assumed initial
public offering price of $12.00 per share, the midpoint of the estimated public
offering price range set forth on the cover page of this prospectus, and after
deducting underwriting discounts and commissions and estimated offering
expenses), the Company's adjusted pro forma net tangible book value at
September 30, 1998 would have been approximately $29.2 million or $2.74 per
share. This represents an immediate increase in pro forma net tangible book
value to existing stockholders of $2.50 per share and an immediate dilution to
new investors of $9.26 per share. The following table illustrates the per share
dilution:

[Download Table]

Assumed initial public offering price per share of Class A common
stock........................................................... $12.00
Pro forma net tangible book value per share of common stock as of
September 30, 1998.............................................. $0.24
Increase in net tangible book value per share of common stock
attributable to new investors................................... 2.50
Pro forma net tangible book value per share of common stock after
the Offering.................................................... 2.74
------
Dilution per share of Class A common stock to new investors...... $ 9.26
======

The following table sets forth on a pro forma basis as of September 30, 1998
the difference between the number of shares of common stock purchased from the
Company, the total consideration paid, and the average price per share paid by
existing stockholders and by the new investors (at an assumed initial public
offering price of $12.00 per share):

[Download Table]

SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------

Existing stockholders...... 8,072,455 76% $32,747,000 51% $ 4.06
New investors.............. 2,600,000 24% $31,200,000 49% $12.00
---------- --- ----------- ---
Total.................... 10,672,455 100% $63,947,000 100%
========== === =========== ===

The foregoing table excludes an aggregate of 3,040,000 shares of Class A
common stock reserved for issuance pursuant to the Company's 1997 Stock Option
Plan and shares of Class A common stock reserved for issuance pursuant to
the Company's 1999 Employee Stock Purchase Plan. If such options are exercised,
new investors will incur additional dilution from the amount shown in the table
above. See "Management--Stock Plans" and "Description of Capital Stock."

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SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected financial data of the Company should be read in
conjunction with the financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein. The statement of operations data for the fiscal year
ended December 31, 1994 and the balance sheet data as of December 31, 1994 and
1995 are derived from financial statements of the Company that have been
audited by Arthur Andersen LLP, independent public accountants, which are not
included in this Prospectus. The statement of operations data for the fiscal
years ended December 31, 1995, 1996 and 1997 and the nine months ended
September 30, 1998 and the balance sheet data as of December 31, 1996 and 1997
and September 30, 1998 are derived from financial statements of the Company
that have been audited by Arthur Andersen LLP, independent public accountants,
and are included elsewhere in this Prospectus. The statement of operations data
for the nine months ended September 30, 1997 are derived from the unaudited
financial statements of the Company that are not included herein. The unaudited
nine month selected financial data reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results of the interim periods. The
operating results for the nine months ended September 30, 1997 and 1998 are not
necessarily indicative of the results to be expected for any other interim
period or any other future fiscal year. The historical results are not
necessarily indicative of the results of operations to be expected in the
future, and the results of operations for current interim periods are not
necessarily indicative of results to be expected for the entire year. In
addition, as a result of the Combination, the Company believes that the
historical results of operations may not be indicative of the results of
operations to be expected in the future. Accordingly, the Company has included
pro forma results of operations data under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which management
believes may be useful to investors in evaluating the performance of the
Company on an ongoing basis.

[Enlarge/Download Table]

ACTUAL PRO FORMA
---------------------------------------------------- -----------------------------
NINE
MONTHS
NINE MONTHS ENDED YEAR ENDED ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
-------------------------------- ------------------ ------------ ----------------
1994 1995 1996 1997 1997 1998 1997 1997 1998
----- ------- ------- ------- -------- -------- ------------ ------- -------

STATEMENTS OF OPERATIONS
DATA:
Revenues................ $ -- $ 438 $ 2,093 $25,497 $ 18,025 $ 30,397 $29,422 $20,799 $30,397
Salaries and benefits
expense................ -- 308 1,322 15,894 11,187 20,793 19,244 13,793 20,793
Office and general
expense................ -- 215 712 9,038 6,162 10,309 12,217 8,176 10,309
Amortization of goodwill
expense................ -- -- -- 1,666 1,249 1,308 1,666 1,249 1,308
Operating Results of TNC
Units Held for
Transfer............... (326) 1,766 1,309 2,180 1,600 13 -- -- --
----- ------- ------- ------- -------- -------- ------- ------- -------
Operating income
(loss)................. 326 (1,851) (1,250) (3,281) (2,173) (2,026) (3,705) (2,419) (2,013)
Interest income
(expense), net......... -- -- -- (76) (62) (5) (121) (84) (5)
----- ------- ------- ------- -------- -------- ------- ------- -------
Income (loss) before
income taxes........... 326 (1,851) (1,250) (3,357) (2,235) (2,031) (3,826) (2,503) (2,018)
Provision (benefit) for
income taxes........... 70 (873) (548) (248) (246) 57 66 114 (59)
----- ------- ------- ------- -------- -------- ------- ------- -------
Net income (loss)....... $ 256 $ (978) $ (702) $(3,109) $ (1,989) $ (2,088) $(3,892) $(2,617) $(1,959)
===== ======= ======= ======= ======== ======== ======= ======= =======
Basic and diluted net
income (loss) per
share.................. $0.03 $ (0.12) $ (0.09) $ (0.39) $ (0.25) $ (0.26) $ (0.48) $ (0.32) $ (0.24)
===== ======= ======= ======= ======== ======== ======= ======= =======

[Download Table]

DECEMBER 31,
------------------------ SEPTEMBER 30,
1994 1995 1996 1997 1998
---- ---- ------ ------ -------------

BALANCE SHEET DATA:
Cash................................... $-- $-- $2,726 $7,056 $4,349
Working capital........................ -- 548 3,428 3,269 1,891
Total assets........................... 256 753 54,022 59,024 68,182
Capital lease obligations, less current
portion............................... -- -- 193 472 507
Related party obligations, less current
portion............................... -- 620 6,000 9,346 11,275
Other long-term obligations............ -- -- 55 41 24
Total stockholders' (deficit) equity... 256 (846) 40,493 35,618 36,802

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

This prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
prospectus.

OVERVIEW

The Company derives substantially all of its revenues from fees for digital
interactive marketing services rendered to a select number of Fortune 500
companies and emerging companies with online business models. The Company's
digital interactive marketing services include strategic consulting and
research, strategy development and planning, customer management platform
development, and program measurement and analysis. A majority of the Company's
revenues are derived from fixed-fee assignments. The Company recognizes
revenues as services are rendered. The Company reassesses its estimated costs
on each project on a monthly basis and losses are accrued, on a project-by-
project basis, to the extent costs incurred and anticipated costs to complete
projects exceed anticipated billings. Provisions for losses on uncompleted
contracts are recognized in the period in which such losses are determined.

Clients generally hire the Company on an engagement basis rather than a
retainer basis. Once a project is completed, there can be no assurance that a
client will engage the Company for future services. As a result, a client that
generates substantial revenue for the Company in one period may not be a
substantial source of revenue in a subsequent period. In addition, the
Company's clients generally have the right to terminate their relationships
with the Company without penalty and with relatively short or no notice. The
termination of the Company's business relationships with any of its significant
clients or a material reduction in the use of the Company's services by any
such clients, could adversely affect the Company's business, financial
condition and results of operations. The Company's five largest clients
accounted for 56.8% and 54.8% of revenues (on a pro forma basis) for the year
ended December 31, 1997 and the nine months ended September 30, 1998,
respectively. AT&T accounted for 31.4% and 20.4% of the Company's revenues (on
a pro forma basis) for the year ended December 31, 1997 and the nine months
ended September 30, 1998, respectively. In addition, Citibank accounted for
12.0% of the Company's revenues (on a pro forma basis) for the nine months
ended September 30, 1998.

Salaries and benefits represent the majority of the Company's operating
expenses. These expenses include salaries, employee benefits, incentive
compensation and other payroll-related costs. Office and general is comprised
of office rent and utilities, depreciation, amortization of software,
professional and consulting fees, travel, telephone and other related expenses.

The Company has experienced operating losses as well as net losses (on both a
historical and pro forma basis, as defined below), in substantially all of the
quarters in the period January 1, 1996 through September 30, 1998. Although the
Company has experienced revenue growth in recent periods, these growth rates
may not be sustainable or indicative of future operating results. In addition,
the Company has incurred substantial costs to expand and integrate its
operations and intends to continue to invest heavily in ongoing expansion and
integration efforts as well as infrastructure development. As a result, the
Company expects to continue to incur operating losses through 1999 or beyond.
There can be no assurance that the Company will achieve or sustain
profitability.

The Company was formed by True North Communications, Inc. ("TNC") in October
1996 to combine certain of its digital marketing operations, including a
portion of its Northern Lights Interactive division, (the "True North Units"),
with Modem. Modem was formed in 1987 by certain of the current executive
officers of the Company. In October 1998, the PTI Strategic Interactive
Marketing Operations were combined with the Company in exchange for certain of
the True North Units (the "TNC Units Held for Transfer") and 809,514 shares of
Class B common stock. This transaction occurred among companies under common
control, and,

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accordingly, has been recorded as of December 31, 1997 (the date of TNC's
acquisition of the PTI Strategic Interactive Marketing Operations) at
historical costs. Poppe Tyson, Inc. was formed in December 1985 as a subsidiary
of Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"), which was acquired by
TNC in December 1997 in a business combination accounted for under the pooling-
of-interests method. See "Company Background," "Certain Transactions" and Notes
1, 3 and 15 of Notes to Consolidated Financial Statements of Modem Media .
Poppe Tyson, Inc. and Subsidiaries.

The results of operations for the Company include the results of Modem, the
True North Units, including the TNC Units Held for Transfer, and the PTI
Strategic Interactive Marketing Operations from their respective dates of
acquisition by TNC. The results of operations of the TNC Units Held for
Transfer are presented as Operating Results of TNC Units Held for Transfer in
the Company's consolidated financial statements included elsewhere in this
prospectus. The financial statements of (i) Modem as of and for the years ended
December 31, 1995 and 1996 and (ii) the PTI Strategic Interactive Marketing
Operations as of and for the years ended December 31, 1996 and 1997 are
included herein as the financial statements of the predecessors to the Company.

PRO FORMA RESULTS OF OPERATIONS

The following table sets forth certain pro forma statements of operations
data of the Company for the years ended December 31, 1995, 1996 and 1997 and
for the nine months ended September 30, 1997 and 1998. The pro forma results of
operations data of the Company presented below assume that (i) the combination
of the Company and Modem, (ii) the acquisition of the PTI Strategic Interactive
Marketing Operations and (iii) the disposition of the TNC Units Held for
Transfer each occurred on January 1, 1995. The pro forma results of operations
of the Company also include the results of the True North Units, other than the
TNC Units Held for Transfer (the "Retained True North Units"), from the dates
of their inception. Management believes that the pro forma statements of
operations data may be useful to investors in evaluating the financial
performance of the Company on an ongoing basis. Such pro forma data may not,
however, be indicative of the results of operations of the Company that
actually would have occurred had the transactions reflected in the pro forma
results occurred at the beginning of the periods presented, or of the results
of operations that may be obtained by the Company in the future.

[Download Table]

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ ------------------
1995 1996 1997 1997 1998
------- ------- ------- -------- --------
(UNAUDITED, IN THOUSANDS)

Revenues......................... $12,156 $20,321 $29,422 $ 20,799 $ 30,397
Salaries and benefits............ 5,334 14,050 19,244 13,793 20,793
Office and general............... 2,955 6,569 12,217 8,176 10,309
Amortization of goodwill......... 1,666 1,666 1,666 1,249 1,308
------- ------- ------- -------- --------
Operating profit (loss).......... 2,201 (1,964) (3,705) (2,419) (2,013)
Interest income (expense), net... 8 16 (121) (84) (5)
Provision (benefit) for taxes.... 1,626 68 66 114 (59)
------- ------- ------- -------- --------
Net income (loss)................ $ 583 $(2,016) $(3,892) $ (2,617) $ (1,959)
======= ======= ======= ======== ========

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The following table sets forth certain statements of operations data of the
Company as a percentage of total revenues on a pro forma basis, as defined, for
the periods indicated:

[Download Table]

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------------
1995 1996 1997 1997 1998
----- ----- ----- -------- --------
(UNAUDITED)

Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0%
Salaries and benefits... 43.9 69.2 65.4 66.3 68.4
Office and general...... 24.3 32.3 41.5 39.3 33.9
Amortization of
goodwill............... 13.7 8.2 5.7 6.0 4.3
----- ----- ----- -------- --------
Operating profit
(loss)................. 18.1 (9.7) (12.6) (11.6) (6.6)
Interest income
(expense), net......... 0.1 0.1 (0.4) (0.4) --
Provision (benefit) for
taxes.................. 13.4 0.3 0.2 0.6 (0.2)
----- ----- ----- -------- --------
Net income (loss)....... 4.8% (9.9)% (13.2)% (12.6)% (6.4)%
===== ===== ===== ======== ========

Pro Forma Nine Months Ended September 30, 1997 Compared to Pro Forma Nine
Months Ended September 30, 1998

Revenues. Pro forma revenues increased $9.6 million, or 46.2%, from $20.8
million for the nine months ended September 30, 1997 to $30.4 million for the
nine months ended September 30, 1998. Pro forma revenues increased primarily as
a result of increased services provided to existing clients, as well as the
addition of new clients.

Salaries and Benefits. Pro forma salaries and benefits increased $7.0
million, or 50.7%, from $13.8 million for the nine months ended September 30,
1997 to $20.8 million for the nine months ended September 30, 1998. Pro forma
salaries and benefits represented 66.3% and 68.4% of pro forma revenues for the
nine months ended September 30, 1997 and 1998, respectively. Both the dollar
and percentage increases in pro forma salaries and benefits were attributable
to a company-wide increase in headcount to better manage the growth of its
business, service clients and actively pursue new client business.

Office and General. Pro forma office and general increased $2.1 million, or
25.6%, from $8.2 million for the nine months ended September 30, 1997 to $10.3
million for the nine months ended September 30, 1998. Pro forma office and
general represented 39.3% and 33.9% of pro forma revenues in the nine months
ended September 30, 1997 and 1998, respectively. The dollar increase in pro
forma office and general was due primarily to increased occupancy and office
support expenses incurred in connection with increases in headcount. The
decrease of office and general as a percentage of pro forma revenue is due
primarily to higher percentage growth rates in revenue.

Amortization of Goodwill. Pro forma amortization of goodwill increased by
$0.1 million, or 8.3%, from $1.2 million for the nine months ended September
30, 1997 to $1.3 million for the nine months ended September 30, 1998 as a
result of a $3.3 million additional purchase price paid for Modem in May 1998.
Goodwill resulted from the combination of the Company with Modem in December
1996 (the "Modem Combination") and is being amortized by the Company over a 20-
year period. In connection with the Modem Combination, TNC is obligated to pay
the former owners of Modem an aggregate of up to $18.6 million as additional
consideration upon consummation of an initial public offering. Such amount will
result in additional amortization of goodwill by the Company of up to $0.3
million per quarter over 18 years (the remainder of the initial 20-year
goodwill amortization period).

Income Taxes. The Company had a provision for income taxes of $0.1 million on
a pro forma pre-tax loss of $2.5 million for the nine months ended September
30, 1997, as compared to a benefit for income taxes of $0.1 million on a pro
forma pre-tax loss of $2.0 million for the nine months ended September 30,
1998. The

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effective income tax rate was 4.6% on a pro forma basis for the nine months
ended September 30, 1997 compared to an effective income tax benefit rate of
2.9% on a pro forma basis for the nine months ended September 30, 1998. The
effective tax rates differ from the federal statutory rate primarily due to the
effect of non-deductible goodwill amortization and losses of foreign
subsidiaries on which the Company did not recognize a tax benefit.

Pro Forma Year Ended December 31, 1996 Compared to Pro Forma Year Ended
December 31, 1997

Revenues. Pro forma revenues increased by $9.1 million, or 44.8%, from $20.3
million for the year ended December 31, 1996 to $29.4 million for the year
ended December 31, 1997. The increase in pro forma revenues between 1996 and
1997 resulted principally from increased services provided to existing clients,
and, to a lesser extent, the addition of new clients. The opening of new
offices in the United Kingdom and Hong Kong during the fourth quarter of 1996
and first quarter of 1997, respectively, also contributed to the increase.

Salaries and Benefits. Pro forma salaries and benefits increased $5.1
million, or 36.2%, from $14.1 million for the year ended December 31, 1996 to
$19.2 million for the year ended December 31, 1997. As a percentage of
revenues, pro forma salaries and benefits decreased from 69.2% for the year
ended December 31, 1996 to 65.4% for the year ended December 31, 1997. The
dollar increase in pro forma salaries and benefits was due primarily to
company-wide increases in headcount to support new business and the
establishment of two international offices. The decrease of pro forma salaries
and benefits as a percentage of pro forma revenue is attributable primarily to
higher percentage growth rates in revenue.

Office and General. Pro forma office and general increased $5.6 million, or
84.8%, from $6.6 million in 1996 to $12.2 million in 1997. As a percentage of
revenues, pro forma office and general was 32.3% and 41.5% in 1996 and 1997,
respectively. Both the dollar and percentage increases were related to
continued infrastructure commitments to expand operations, the opening of new
offices in the United Kingdom and Hong Kong during the fourth quarter of 1996
and the first quarter of 1997, respectively, and the establishment of a $0.6
million reserve for the relocation of the Company's main office.

Amortization of Goodwill. Pro forma amortization of goodwill remained
constant at $1.7 million in 1996 and 1997. Goodwill resulted from the Modem
Combination and is being amortized over a 20-year period.

Income Taxes. The Company's pro forma provision for income taxes remained
constant at $0.1 million on pro forma pre-tax losses of $2.0 million and $3.8
million in 1996 and 1997, respectively. The effective pro forma income tax
rates were 3.5% in 1996 and 1.7% in 1997. These rates differ from the federal
statutory rate primarily due to the effect of non-deductible goodwill
amortization and losses of foreign subsidiaries on which the Company did not
recognize a tax benefit.

Pro Forma Year Ended December 31, 1995 Compared to Pro Forma Year Ended
December 31, 1996

Revenues. Pro forma revenues increased by $8.1 million, or 66.4%, from $12.2
million in the year ended December 31, 1995 to $20.3 million in the year ended
December 31, 1996. The increase in pro forma revenues between 1995 and 1996
resulted principally from increased services provided to existing clients, and,
to a lesser extent, the addition of new clients.

Salaries and Benefits. Pro forma salaries and benefits increased $8.8
million, or 166.0%, from $5.3 million for the year ended December 31, 1995 to
$14.1 million for the year ended December 31, 1996. As a percentage of
revenues, pro forma salaries and benefits increased from 43.9% for the year
ended December 31, 1995 to 69.2% for the year ended December 31, 1996. Both
dollar and percentage increases in pro forma salaries and benefits were due
primarily to Company-wide increases in headcount to support new business and
establish new offices, as well as a $3.0 million non-recurring, non-cash
compensation charge related to the grant of options to purchase partnership
interests in Modem.

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Office and General. Pro forma office and general increased $3.6 million, or
120.0%, from $3.0 million in 1995 to $6.6 million in 1996. As a percentage of
revenues, pro forma office and general was 24.3% and 32.3% in 1995 and 1996,
respectively. Both the dollar and percentage increases were due to increases in
the size of the Company's operations and infrastructure commitments, as well as
the establishment of new offices, at higher percentage growth rates than
revenues.

Amortization of Goodwill. Pro forma amortization of goodwill remained
constant at $1.7 million in 1995 and 1996. Goodwill resulted from the Modem
Combination and is being amortized over a 20-year period.

Income Taxes. The Company had a provision of $1.6 million on pro forma pre-
tax income of $2.2 million for 1995, as compared to a provision of $0.1 million
on a pro forma pre-tax loss of $2.0 million for 1996. The effective income tax
rate was 73.6% on a pro forma basis for 1995 as compared to 3.5% in 1996. These
rates differ from the federal statutory rate primarily due to the effect of
non-deductible goodwill amortization and, in 1996, the non-deductible losses of
foreign subsidiaries on which the Company did not recognize a tax benefit.

PRO FORMA QUARTERLY RESULTS OF OPERATIONS

The following table presents the Company's revenues on a pro forma basis for
each of the eleven most recent quarters ending September 30, 1998. This data is
based on the unaudited quarterly consolidated financial statements of the
Company and have been prepared by the Company on the same basis as the pro
forma results of operations data presented above. This data includes all
adjustments that the Company considers necessary for a fair presentation
thereof.

[Enlarge/Download Table]

1996 1997 1998
------------------------------------- ------------------------------------- ----------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
--------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
(UNAUDITED, IN THOUSANDS)

Revenues........ $3,882 $4,408 $5,322 $6,709 $5,785 $6,811 $8,203 $8,623 $9,016 $10,451 $10,930
====== ====== ====== ====== ====== ====== ====== ====== ====== ======= =======

The Company's revenues have historically been higher during the second half
of each year as its clients prepare marketing campaigns for products and
services launched in anticipation of fall trade shows and the holiday season.
During the first quarter of the year, the Company has historically experienced
revenue declines from the fourth quarter of the preceding year as clients
reestablish their annual marketing and advertising budgets. The Company expects
this variation in revenue to continue in the future.

The Company's operating results have fluctuated in the past, and may continue
to fluctuate in the future, as a result of a variety of factors, including the
timing of new projects, material reductions, cancellations or completions of
major projects, the loss of significant clients, the opening or closing of an
office, the Company's relative mix of business, changes in the Company's
pricing strategies or those of its competitors, employee utilization rates,
changes in personnel and other factors that are outside of the Company's
control. In addition, the Company has experienced some variation in operating
results throughout the year that have resulted in part from the marketing
communications spending patterns and business cycles of its clients, and from
marketing communications spending patterns in general. As a result, period-to-
period comparisons of the Company's operating results cannot be relied upon as
indicators of future performance.

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HISTORICAL RESULTS OF OPERATIONS

Overview

The following table sets forth certain items from the Company's statements of
operations data included elsewhere in this prospectus.

[Download Table]

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------
1995 1996 1997 1997 1998
------ ------ ------- ----------- -------
(IN THOUSANDS)
(UNAUDITED)

Revenues.................... $ 438 $2,093 $25,497 $18,025 $30,397
Salaries and benefits....... 308 1,322 15,894 11,187 20,793
Office and general.......... 215 712 9,038 6,162 10,309
Amortization of goodwill.... -- -- 1,666 1,249 1,308
Operating results of TNC
Units Held for Transfer.... 1,766 1,309 2,180 1,600 13
------ ------ ------- ------- -------
Operating loss.............. (1,851) (1,250) (3,281) (2,173) (2,026)
Interest income (expense),
net........................ -- -- (76) (62) (5)
(Benefit) provision for
taxes...................... (873) (548) (248) (246) 57
------ ------ ------- ------- -------
Net loss.................... $ (978) $ (702) $(3,109) $(1,989) $(2,088)
====== ====== ======= ======= =======

The following table sets forth certain items from the Company's statements of
operations data as a percentage of total revenues for the periods indicated:

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------
1995 1996 1997 1997 1998
------ ------ ------- ----------- -------
(UNAUDITED)

Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0%
Salaries and benefits....... 70.3 63.2 62.3 62.1 68.4
Office and general.......... 49.1 34.0 35.5 34.2 33.9
Amortization of goodwill.... -- -- 6.5 6.9 4.3
Operating results of TNC
Units Held for Transfer.... 403.2 62.5 8.6 8.9 0.1
------ ------ ------- ------- -------
Operating loss.............. (422.6) (59.7) (12.9) (12.1) (6.7)
Interest income (expense),
net........................ -- -- (0.3) (0.3) --
(Benefit) provision for
taxes...................... (199.3) (26.2) (1.0) (1.4) 0.2
------ ------ ------- ------- -------
Net loss.................... (223.3)% (33.5)% (12.2)% (11.0)% (6.9)%
====== ====== ======= ======= =======

Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1998

Revenues. Revenues increased $12.4 million, or 68.9%, from $18.0 million for
the nine months ended September 30, 1997 to $30.4 million for the nine months
ended September 30, 1998. Revenues increased $4.8 million, or 26.7%, due to the
addition of the revenues of PTI Strategic Interactive Marketing Operations as a
result of the Combination, and also as a result of increased services provided
to existing clients and the addition of new clients.

Salaries and Benefits. Salaries and benefits increased $9.6 million, or
85.7%, from $11.2 million for the nine months ended September 30, 1997 to $20.8
million for the nine months ended September 30, 1998. Salaries and benefits
represented 62.1% and 68.4% of revenues in the nine months ended September 30,
1997 and 1998, respectively. The dollar and percentage increases in salaries
and benefits are attributable to a company-wide increase in headcount,
partially as a result of the Combination.

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Office and General. Office and general increased $4.1 million, or 66.1%, from
$6.2 million for the nine months ended September 30, 1997 to $10.3 million for
the nine months ended September 30, 1998. Office and general represented 34.2%
and 33.9% of revenues for the nine months ended September 30, 1997 and 1998,
respectively. The dollar increase in office and general was due primarily to
the addition of PTI Strategic Interactive Marketing Operations office and
general as a result of the Combination ($2.3 million, or 37.1%), as well as
increased occupancy and office support incurred in connection with increases in
headcount. The decrease in office and general as a percentage of revenue is due
primarily to a higher rate of revenue growth than the rate of growth in office
and general.

Amortization of Goodwill. Amortization of goodwill increased by $0.1 million,
or 8.3%, from $1.2 million for the nine months ended September 30, 1997 to $1.3
million for the nine months ended September 30, 1998 as a result of a $3.3
million additional purchase price paid in May 1998 in accordance with the
purchase agreement. Goodwill resulted from the Modem Combination and is being
amortized over a 20-year period. In connection with the Modem Combination, TNC
is obligated to pay the former owners of Modem an aggregate of up to $18.6
million as additional consideration upon consummation of an initial public
offering. Such amount will result in additional amortization of goodwill of up
to $0.3 million per quarter over 18 years (the remainder of the initial 20-year
goodwill amortization period).

Operating Results of TNC Units Held For Transfer. The operating loss of the
TNC Units Held for Transfer decreased $1.6 million or 100.0%, from an operating
loss of $1.6 million during the nine months ended September 30, 1997 to nearly
breakeven during the nine months ended September 30, 1998 principally due to
the closure of an office and overhead reductions at other locations.

Income Taxes. The Company had a benefit for income taxes of $0.2 million on
pre-tax losses of $2.2 million for the nine months ended September 30, 1997, as
compared to a provision for income taxes of $0.1 million on a pre-tax loss of
$2.0 million for the nine months ended September 30, 1998. The effective income
tax benefit rate was 11.0% for the nine months ended September 30, 1997 and the
effective income tax rate was 2.8% for the nine months ended September 30,
1998. The effective tax rates differ from the federal statutory rate primarily
due to the effect of non-deductible goodwill amortization, the tax effects of
the TNC Units Held for Transfer, and, in 1998, losses of foreign subsidiaries
on which the Company did not recognize a tax benefit.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1997

Revenues. Revenues increased by $23.4 million from $2.1 million in the year
ended December 31, 1996 to $25.5 million in the year ended December 31, 1997.
The increase in revenues between 1996 and 1997 resulted principally from the
Modem Combination, which was accounted for under the purchase method.

Salaries and Benefits. Salaries and benefits increased $14.6 million from
$1.3 million in 1996 to $15.9 million in 1997. As a percentage of revenues,
salaries and benefits decreased from 63.2% in 1996 to 62.3% in 1997. The
overall increase in salaries and benefits was primarily due to the addition of
Modem salaries and benefits as a result of the Modem Combination. The decrease
in salaries and benefits as a percentage of revenue was due primarily to higher
percentage revenue growth rates compared to salaries and benefits growth rates.

Office and General. Office and general increased $8.3 million from $0.7
million in 1996 to $9.0 million in 1997. As a percentage of revenues, office
and general was 34.0% and 35.5% in 1996 and 1997, respectively. The overall
increase in office and general was the addition of Modem office and general as
a result of the Modem Combination.

Amortization of Goodwill. Amortization of goodwill increased from zero in
1996 to $1.7 million in 1997. Goodwill resulted from the Modem Combination and
is being amortized over a 20-year period.

Operating Results of TNC Units Held For Transfer. The operating loss of TNC
Units Held for Transfer increased $0.9 million, or 69.2%, from $1.3 million in
1996 to $2.2 million in 1997.

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Income Taxes. The Company's benefit for income taxes decreased by $0.3
million, from a benefit of $0.5 million on pre-tax losses of $1.3 million in
1996 to a benefit of $0.2 million on pre-tax losses of $3.4 million in 1997.
The effective income tax benefit rate was 43.8% in 1996 and 7.4% in 1997. These
rates differ from the federal statutory rate primarily due to the effect of
non-deductible goodwill amortization.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1996

Revenues. Revenues increased by $1.7 million from $0.4 million for the year
ended December 31, 1995 to $2.1 million for the year ended December 31, 1996.
The increase resulted principally from revenue growth in the Retained True
North Units, in addition to revenues from operations in Canada.

Salaries and Benefits. Salaries and benefits increased $1.0 million from $0.3
million in 1995 to $1.3 million in 1996. As a percentage of revenues, salaries
and benefits represented 70.3% and 63.2% in 1995 and 1996, respectively. The
dollar increase in salaries and benefits were due primarily to company-wide
increases in headcount. The percentage decrease was due primarily to a higher
rate of revenue growth than the rate of growth in salaries and benefits.

Office and General. Office and general increased $0.5 million from $0.2
million in 1995 to $0.7 million in 1996. As a percentage of revenues, office
and general was 49.1% and 34.0% in 1995 and 1996, respectively. The principal
reason for the dollar increase was increased costs to support office revenue,
and the principal reason for the decrease as a percentage of revenue was a
higher rate of revenue growth than the rate of growth in office and general.

Operating Results of TNC Units Held For Transfer. The operating loss of TNC
Units Held for Transfer decreased $0.5 million, or 27.8%, from $1.8 million in
1995 to $1.3 million in 1996.

Income Taxes. The Company's benefit for income taxes decreased by $0.4
million, or 44.4%, from $0.9 million on pre-tax losses of $1.9 million in 1995,
to $0.5 million on pre-tax losses of $1.3 million in 1996. The effective income
tax benefit rate was 47.2% in 1995 and the effective income tax rate was 43.8%
in 1996. These rates differ from the federal statutory rate primarily due to
the effect of non-deductible goodwill amortization.

LIQUIDITY AND CAPITAL RESOURCES

The Company historically has financed its operations primarily from funds
generated from operations and borrowings from TNC. At September 30, 1998, the
Company had a non-interest bearing intercompany note payable to TNC of $6.0
million. The Company will use approximately $6.0 million of the net proceeds of
this offering to repay amounts owed to TNC. Pursuant to certain agreements
between TNC and its lenders, the Company is subject to certain limitations on
indebtedness. Such limitations could adversely affect the Company's ability to
secure debt financing in the future.

Net cash (used in) provided by operating activities was $(0.3) million,
$(3.7) million and $6.4 million for the years ended December 31, 1995, 1996 and
1997, respectively, and $4.2 million and $0.3 million for the nine months ended
September 30, 1997 and 1998, respectively. The investment in working capital
was partially offset by depreciation expense and goodwill amortization, which
totaled $2.9 million for the year ended December 31, 1997, and $2.1 million and
$2.5 million for the nine months ended September 30, 1997 and 1998,
respectively.

Net cash of $2.6 million was provided by investing activities for the year
ended December 31, 1996 due to the acquisition of Modem's cash via the Modem
Media Combination. Net cash (used in) investing activities was $(1.2) million
for the year ended December 31, 1997, and $(0.9) million and $(2.6) million for
the nine months ended September 30, 1997 and 1998, respectively. Investing
activities reflect capital expenditures to purchase and install enterprise
software in 1998, and to purchase other computer software, computer hardware,
furniture and office equipment in all periods.

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Net cash provided by (used in) financing activities was $0.3 million, $3.8
million, and $(0.9) million for the years ended December 31, 1995, 1996 and
1997, respectively, and $(1.9) million and $(0.4) million for the nine months
ended September 30, 1997 and 1998, respectively. The primary source of cash
flows from financing activities was borrowings from TNC of $0.5 million, $5.4
million, $0.7 million for the years ended December 31, 1995, 1996 and 1997,
respectively.

The Company's short-term capital commitments include payments of
approximately $0.8 million in 1999 to complete a new financial accounting
system, as well as lease payments aggregating approximately $3.4 million in
1999. In addition, in September 1998, the Company executed a letter of intent
relating to an investment of up to $5.0 million in a company that provides
media placement on the Internet. The long-term capital needs of the Company
will depend on numerous factors, including the rates at which the Company is
able to obtain new business from clients and expand its personnel and
infrastructure to accommodate growth, as well as the rate at which it chooses
to invest in new technologies. The Company has various ongoing needs for
capital, including working capital for operations, project development costs
and capital expenditures to maintain and expand its operations.

Capital Resources. In August 1998, TNC extended a credit facility to the
Company allowing for revolving borrowings in the amount of up to $3.0 million
to be outstanding at any given time. The credit facility with TNC expires two
years from the date of completion of this offering, or sooner upon the
occurrence of certain events. See "Relationship with True North and Certain
Transactions--Intercompany Agreements."

The Company believes that the net proceeds from this offering (estimated to
be $26.6 million), together with funds available from operations, if any, will
be sufficient to meet the capital needs of the Company for at least the next
twelve months. A portion of the net proceeds from this offering may also be
used to acquire or invest in complementary marketing communications companies,
services, products or technologies, or to invest in geographic expansion. The
Company has no agreements or commitments with respect to any such transactions.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software for embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. The failure to correct any such programs or hardware could result in
system failures or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities. The Company
intends to replace certain of its accounting and information processing systems
in 1999. As a result, the Company believes that its internal computer systems
will properly utilize dates beyond December 31, 1999. However, if such
replacement is not made, or is not completed on a timely basis, the Year 2000
issue could have a material impact on the operations of the Company.

The Company regularly conducts transactions and performs services that
interface directly with systems of its clients. There can be no assurance that
the systems of other companies on which the Company's systems rely will be
converted timely or that any failure to convert such systems will not have an
adverse effect on the Company's systems. Furthermore, there can be no assurance
that the Company's suppliers will not experience material business disruptions
as a result of the Year 2000 issue that could affect the Company. The inability
of a substantial number of third parties to complete their Year 2000 resolution
process could materially impact the Company. Moreover, the inability of a
substantial number of the Company's clients to complete their Year 2000
compliance could cause them to reduce spending on interactive marketing
programs. Either event could have a material adverse effect on our future
operating performance.

The Company has not established contingency plans in case of failure of its
information technology systems since it expects to have its material systems in
place by the second quarter of 1999. In connection with the Company's
assessment of third party readiness in early 1999 the Company will evaluate the
necessity of

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contingency plans based on the level of uncertainty regarding such compliance.
In the event the Company's clients, intermediaries or vendors do not expect to
be Year 2000 compliant, the Company's contingency plan may include replacing
such intermediaries or vendors or conducting the particular operation itself.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Segment Disclosures. In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 131,
Disclosure About Segments of an Enterprise and Related Information. SFAS No.
131 establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. The statement also establishes standards
for related disclosure about products and services, geographic areas and major
customers. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997, but is not required to be applied to interim financial
statements in the initial year of adoption. Therefore, the Company will adopt
the new requirements retroactively in its annual consolidated financial
statements for the year ended December 31, 1998. The adoption of SFAS No. 131
will not affect the Company's results of operations or financial position.

Derivative Instruments. In June 1998, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The Company currently believes that there will
be no impact from SFAS No. 133 on the Company's earnings.

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BUSINESS

The following Business section contains forward-looking statements, which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this prospectus.

OVERVIEW

The Company has been a leading provider of digital interactive marketing
solutions since 1987. By developing marketing programs that incorporate
advanced communication technologies, the Company enables its clients to
establish, retain and manage customer relationships. Marketing programs offered
by the Company include the design and implementation of electronic business
programs that enable its clients to support and leverage their world-class
brands through the Internet. The Company combines its substantial expertise in
strategic marketing, creative design and digital technology to deliver on a
worldwide basis a complete range of digital interactive marketing services,
including strategic consulting and research, website design, e-business
implementation (including electronic commerce and electronic customer care
services), interactive advertising and promotions, and data collection and
analysis. The Company's marketing programs are designed to enable its clients
to target narrowly-defined market segments, provide their customers with
detailed product and service information, sell products and services and
provide post-sale customer support electronically, and engage in ongoing
promotional and cross-selling activities. Marketing programs developed by the
Company are delivered primarily through the Internet, but also through other
digital channels such as corporate intranets, proprietary online services, CD-
ROMs and interactive kiosks. The Company has received numerous industry awards
for its interactive marketing campaigns, websites, banner advertisements and
CD-ROMs, including the Zima.com campaign and website, various AT&T websites and
campaigns, the iVillage.com "About Work" campaign, the Sony PlayStation
campaign and the Diet Pepsi "Convert a Million" campaign. In 1998, the Company
won the "Interactive Agency Of The Year" award from the Internet Advertising
Bureau, a trade association, and the Company is the only company to win two
consecutive "CASIE" awards for interactive marketing.

The Company focuses on promoting long-term client relationships by devising
programs that can be integrally linked to its clients' business functions. The
Company believes that interactive technologies, which provide its clients with
the ability to establish highly specific, direct communications with their
customers, are becoming an increasingly important component of successful
marketing strategies. Accordingly, the Company works primarily with a select
group of established Fortune 500 clients with world class brands committed to
interactive marketing, as well as companies with new online business models.
The Company's clients include Amazon.com; AT&T; Citibank; Delta Air Lines;
E*Trade; IBM; Intel; Intuit; JC Penney; John Hancock; Sony and Unilever.

The Company's predecessor, Modem, was founded more than ten years ago by
pioneers in interactive marketing and electronic commerce. The founders of
Modem started delivering interactive electronic commerce applications in 1988,
thereby creating the first interactive marketing communications company. The
Company combines Modem with a portion of TNC's Northern Lights Interactive
division and the strategic interactive marketing operations of PTI. The Company
believes it continues to benefit from its relationship with TNC, the sixth
largest advertising agency holding company in the world, through access to
TNC's client base. The TNC network of companies includes Bozell, Jacobs, Kenyon
& Eckhardt and FCB Worldwide. The Company currently serves more than 30 clients
through its global network of seven offices in North America, Europe and Asia.
The Company had pro forma revenues in 1997 and for the nine months ended
September 30, 1998 of $29.4 million and $30.4 million, respectively.

INDUSTRY BACKGROUND

The Company believes that the emergence of the Internet has stimulated demand
for high quality, cost effective digital interactive marketing solutions. The
Company believes there are a number of trends that are currently shaping the
marketing communications needs of its clients. These trends include the
following:

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Growth of the Internet and Demand for Digital Media

The Internet has experienced unprecedented growth in recent years and this
growth is expected to continue. According to International Data Corporation
("IDC"), the number of Internet users worldwide will grow from an estimated 100
million in 1998 to an estimated 320 million in 2002. Several factors have
contributed to the growth of the Internet, its increasing value to users and
its adoption as a vehicle for commerce, including (i) the large and growing
installed base of personal computers in homes and businesses; (ii) improvements
in network infrastructure and bandwidth, which have produced increases in
performance levels and speed; (iii) easy, low-cost access to the Internet; (iv)
global awareness of the Internet among consumer and business users; and (v) the
rapidly expanding availability of online content and commerce.

The acceptance of the Internet as a global communications medium has driven
demand for digital content and services which can be accessed online. Digital
services can be easily developed, updated, manipulated and distributed either
broadly or to targeted audiences. The rapid development of the Internet and
other technologies that facilitate these services is having a profound impact
on the development and delivery of customer acquisition, retention, and loyalty
solutions and on the conduct of commerce.

Rapid Growth of E-Business and Internet Advertising

The Internet is dramatically affecting the methods by which consumers and
businesses are evaluating and buying goods and services, and by which
businesses are providing customer service. The Internet provides online
merchants with the ability to reach a global audience and to operate with
minimal infrastructure, reduced overhead and greater economies of scale, while
providing consumers with a broad selection, increased pricing power and
unparalleled convenience. As a result, the volume of business transacted on the
Internet is growing. IDC estimates that business to consumer commerce on the
Internet will grow from approximately $5 billion in 1997 to approximately $95
billion in 2002 and business to business commerce on the Internet will grow
from approximately $7 billion in 1997 to approximately $331 billion in 2002.

The Internet is an important medium for advertisers due to its interactive
nature, global reach and rapidly growing audience, as well as the expected
increase in online commerce. Unlike advertising on traditional mass media, the
Internet gives marketers the potential to target advertisements to broad
audiences or to selected groups of users with specific interests and
characteristics. These features enable the development and delivery of
customized and targeted marketing programs and communications services that
incorporate digital data and advanced interactive features to inform, engage,
entertain and facilitate commerce with the target audience. The Internet also
allows advertisers and direct marketers to measure the effectiveness and
response rates of advertisements and to track the demographic characteristics
of Internet users in real time. The interactive nature of the Internet enables
marketers to better understand potential customers, and to change messages
rapidly and cost effectively in response to customer interests and behavior.
The unique capabilities of online advertising, the growth in online traffic and
the favorable demographics of Internet users have led to a significant increase
in online advertising. Jupiter Communications estimates that total online
advertising revenue in the United States in 1997 was $1.1 billion and expects
this amount to grow to $5 billion in 2000.

Increased Emphasis on Consistent Global Marketing for World-Class Brands

Recognition of the importance of building brands and conducting commerce on a
global basis has produced significant growth in demand for comprehensive global
interactive marketing and communication services by large corporate clients. As
companies expand their operations throughout the world, they seek to extend the
strength of their domestic brands. Critical to this strategy is the ability to
execute a consistent brand development and customer management program on a
worldwide basis while at the same time responding to regional or local demands
or tastes. The Internet's worldwide reach provides a cost-effective medium for
implementing one-to-one, interactive global marketing programs. Consequently,
companies are increasingly seeking digital interactive marketing advisors with
strategic marketing expertise and global full-service capabilities to develop
coordinated, interactive global marketing programs. Zenith Media, a media
research and planning firm, estimates that worldwide advertising expenditures
will increase from $183.2 billion in 1986 to

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$469.3 billion in 2000, and that the percentage of advertising outside North
America will increase from 44.0% of total worldwide advertising expenditures in
1986 to 56.6% in 2000.

Need for Specialized Full Service Resources to Provide Digital Interactive
Marketing Solutions for World-Class Brands

The Company believes that successful interactive marketing programs will
generate new customer relationships for its clients and significantly increase
the value of their brands. Current industry trends have resulted in heightened
demand for digitally developed and distributed marketing communications
services and solutions. Interactive digital marketing programs help companies
to improve their customer relationships by permitting the effective and
immediate distribution of relevant services and information, providing instant
and measurable feedback, and facilitating interaction between companies and
their customers. This information can be used by marketers to quickly improve
the effectiveness of brand marketing programs or to modify channel management,
products and services.

While the Internet offers numerous opportunities, global marketers face a
number of significant challenges in realizing the potential of the Internet as
a marketing channel. As businesses increase their use of the Internet, they
seek solutions and technologies that will allow them to deliver highly-targeted
messages, receive real-time feedback, benefit from business efficiencies and
capitalize on other potential advantages of online advertising and marketing.
Businesses seeking such comprehensive solutions have generally turned to three
sources: conventional advertising and marketing firms, project-oriented
interactive marketing firms and information technology service providers.
Generally, traditional advertising and marketing firms lack the extensive
technical skills and full service capabilities required to produce and
implement the increasingly complex solutions demanded by clients today.
Project-oriented interactive marketing firms lack the strategic account
management capabilities, full service architecture and global network of
offices required to establish long-term global relationships with clients.
Furthermore, information technology service providers lack the creative and
marketing skills required to deliver unique and compelling content. Management
believes that increasing demand for digital interactive marketing services,
combined with the inability of most of today's marketing firms and information
technology service providers to supply the full range of skills required to
effectively deliver such services, provides the Company with significant market
opportunities and positions it for future growth.

THE MODEM MEDIA . POPPE TYSON SOLUTION

Modem Media . Poppe Tyson is a leading full-service digital interactive
marketing company that creates new ways for its global clients to use
innovative digital content and technologies to support and leverage their world
class brands. The Company combines its expertise in strategic marketing,
technology and digital design and production to develop comprehensive digital
interactive marketing solutions for its clients on a worldwide basis. The
Company's tailored marketing solutions are designed to deliver innovative
digital customer relationship programs, establish ongoing communications and
services with targeted customers, and provide prompt feedback on the overall
effectiveness of interactive marketing campaigns. The Company's solutions offer
clients the following benefits:

Long-Term Strategic Marketing Relationships. The Company deploys marketing
professionals responsible for individual client relationships, who focus on
developing interactive marketing solutions for companies seeking to build
global brand equity. In developing strategic solutions, the Company works
closely with the senior management of its clients to devise programs that can
be integrally linked to a client's business functions. By embedding its
programs into a client's overall marketing strategy, the Company believes it
effectively positions itself to offer ongoing value-added services to
continuously supplement and enhance existing solutions and thereby cultivate
long-term client relationships. The Company's methodology in devising a digital
interactive marketing solution consists of: (i) an initial assessment of the
client's overall objective; (ii) the pursuit of this objective through a
combination of Web site design, e-business implementation and advertising and
promotions; and (iii) the monitoring and analysis of the effectiveness of these
implemented

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programs to continuously enhance and improve the overall marketing strategy.
The Company believes that this methodology has a proven track record of
delivering value to clients and is an important factor in helping clients
develop and manage customer relationships and build brand equity.

Full Service Offering Framework. The Company offers comprehensive services
for clients seeking to create innovative marketing and customer management
programs incorporating advanced digital media and communications technologies.
The Company offers its clients a wide range of digital interactive marketing
services such as strategic consulting and research, web-site design, e-business
implementation (including electronic commerce and electronic customer care
services), interactive advertising and promotions and data collection and
analysis. By offering these services the Company has positioned itself to
develop and manage all aspects of a client's interactive marketing strategy and
implement needed programs on an ongoing basis.

Superior Design and Execution Capabilities. The Company believes its
substantial capabilities in marketing strategy, its interactive media
expertise, its creative excellence and its leading edge technical design and
production skills provide it with significant competitive advantages. In
particular, the Company attempts to provide, and has received numerous awards
for, creative and technology solutions that meet or exceed the highest
standards of service in the industry. In order to maintain high levels of
creativity and quality, the Company places great importance on recruiting and
retaining talented employees. In addition to its design capabilities, the
Company believes that its innovative use of sophisticated technology has
enabled it to provide superior marketing communications services. The Company's
development staff continues to design tools and applications to provide leading
edge marketing communication services quickly and efficiently. The Company has
built its industry-leading position through a "legacy of firsts" in the digital
interactive marketplace, including the pioneering of Internet advertising; the
development of online research and data analysis capabilities; the
implementation of inbound e-mail programs, Java-enabled Web banner ads and
instant win promotions online; the development of customized targeted marketing
programs; and the development of customer relationship management programs.

Extensive Global Network. The Company provides its services through a network
of offices and professional staff in North America, Europe and Asia which can
be deployed to effectively create and support a client's worldwide interactive
marketing campaigns. In addition, the Company aggregates and preserves its best
practices, technologies and creative work from each engagement to consistently
leverage and apply the capabilities and experiences of the entire Modem Media .
Poppe Tyson organization. Through its network of local offices, the Company
believes it can implement global marketing campaigns that articulate consistent
brand images while at the same time addressing local and regional marketing
demands or tastes.

STRATEGY

The Company's objective is to be the leading provider of digital interactive
marketing solutions. The key elements of the Company's strategy include the
following:

Develop and Maintain Long-Term Client Relationships. The Company has been
able to use its comprehensive approach to digital interactive marketing
solutions as an effective tool in forming its client relationships. The Company
provides a wide range of interactive marketing solutions to a core group of
clients rather than providing a limited number of services to an extensive
client base. As part of this strategy, the Company's account professionals
pursue close relationships with each client's senior management. For example,
the Company's relationship with JC Penney began in 1988. The Company's
relationship with AT&T began in 1992 and has expanded to its current status
with the Company acting as AT&T's interactive agency of record since 1995. The
Company has also developed ongoing, long-term relationships with Citibank,
Delta Airlines, IBM, and John Hancock, among other companies. The Company
intends to continue to leverage its experience and expertise to continue to
build long-term client relationships.

Maintain Leadership Position in Digital Interactive Marketing. Since its
founding, the Company has linked and leveraged its full service interactive
marketing solutions with leading edge technology expertise to provide value-
added interactive marketing solutions to its clients. The Company intends to
maintain its leadership

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position in digital interactive marketing through the continuing development of
new service offerings, the establishment of strategic relationships with
leading technology companies to improve and expand service offerings, and the
rapid adoption of emerging technologies, including Internet tools, data
management solutions and customization technologies. The Company believes that
its leadership position provides it with a competitive advantage in the
emerging digital interactive marketing industry.

Continue to Attract and Retain Superior Professional Talent. The Company
believes that its corporate culture is particularly attractive to professionals
seeking to use leading-edge technology to develop digital interactive marketing
solutions. The Company places a premium on innovation, and encourages its
employees to apply their creativity in the conception, design and
implementation of marketing programs for its clients. The Company recognizes
that to be a leading digital interactive marketing organization, it must
continue to recruit and, more importantly, retain qualified and experienced
professionals with both creative and technological skills, which are currently
in high demand. As part of this strategy, the Company has implemented several
programs including an aggressive recruiting campaign, competitive compensation
packages, a company-wide incentive stock option plan, an internal employee
referral program, and an extensive in-house training program.

Continue to Expand Global Office Network. The Company believes that existing
and new clients will increasingly demand international marketing services to
help manage customer relationships and build global brand equity. In
anticipation of this demand, the Company is continuing to build its network of
offices. The Company believes that in the emerging market for providing digital
interactive marketing solutions, rapidly building a critical mass of strategic,
technical and creative talent will provide the Company with a substantial
competitive advantage. The Company believes that by expanding its geographic
presence, particularly in Europe and Asia, it will be better positioned to
provide its clients with comprehensive interactive global marketing solutions.

SERVICES

The Company focuses on embedding its digital interactive marketing solutions
into its clients' organizations to promote long-term client relationships. The
Company combines its strategic interactive marketing knowledge with its
technical expertise to provide high impact, cost-effective digital interactive
marketing and customer management solutions. The Company uses dedicated client
service teams with interactive marketing experience in strategic consulting,
creative, media, technology and production disciplines, led by experienced
account directors, to provide its integrated digital marketing communication
services. The Company's proven processes and methodologies for executing client
work, developed over a decade, enable it to undertake interactive projects,
monitor progress and measure the return on its clients' investment in
interactive marketing campaigns. The Company incorporates client feedback into
successive strategic initiatives and programs to further improve and build upon
online customer relationships.

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Client initiatives are guided by the Company's strategic account management
team through a four-point service framework that includes strategic consulting
and research, strategy development and planning, interactive marketing program
execution, and continuous program measurement and data analysis, as illustrated
below:

[FLOW CHART DEPICTING STRATEGIC ACCOUNT MANAGEMENT.]

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Strategic Consulting and Research. The Company provides clients with
diagnostic analysis to guide their enterprise-wide interactive marketing
efforts. Services include custom research, on-line marketing research, and
strategic consulting. These services are aimed at: (i) identifying and
prioritizing interactive opportunities to strengthen customer relationships;
(ii) creating strategies to position and brand products in order to create a
competitive advantage; and (iii) reducing marketing communication costs through
the creative application of interactive technologies. In addition, a rigorous
methodology is used to evaluate current customers reached by the Internet. The
Company's strategic business consultants and research professionals prepare
clients to develop interactive communication programs that effectively and
efficiently connect the clients' customers to their products, services, market
position and brand equity.

Strategy Development and Planning. The Company works with clients to define
interactive marketing strategies and plans, and seeks to identify concepts that
will maximize these strategies. In formulating detailed program plans, the
Company incorporates innovative marketing concepts and leading-edge technology
to architect integrated marketing solutions for its clients. The concepts and
plans articulated by the Company provide the basis for the development of
interactive marketing program across website, banner advertising and e-mail
channels.

Interactive Marketing Program Development. Based on the interactive strategy
and concepts, the Company works with clients to jointly design specific
solutions, determine roles and responsibilities for development work, and
define the use and flow of data in creating interactive marketing programs
enhanced with website, banner and e-mail distribution channels. The Company
assembles a development team consisting of account, creative, production and
media professionals to service clients and execute programs. The team then
helps define the components for the solutions and the required data from client
systems, and performs the required systems integration to architect and build
the solutions. The Company's programs may incorporate advertising and promotion
services, and are often enabled for e-business (e-commerce, e-care and other
value added utilities). The Company designs, develops, creates, maintains and
updates the various components of each solution as required, consistent with
the client's interactive strategy on a global basis. The Company believes that
the key to successful interactive marketing is the incorporation of a
participatory experience through services and utilities that seamlessly
integrate the brand into the three platform channels (website, banner
advertising and e-mail) that occupy the majority of the client's customers time
on line.

Program Measurement and Data Analysis. The Company's data specialists
collect, manage and analyze data that results from interactions between
clients' marketing programs and their customers. Through usage and yield
analysis of traffic and sales transactions, the Company is able to gather
valuable insights into the effectiveness of digital marketing communication
programs as well as the segmentation of customer profiles. This acquired
knowledge of customer behavior and transaction patterns enables the Company to
further devise, design and implement targeted marketing programs aimed at
increasingly efficient customer acquisition, retention and cross-selling.

Continuous Program Improvement. Through strategic marketing initiatives and
ongoing programs for its clients, the Company has positioned itself to gain
insights into its clients' businesses. The Company uses the information it
collects in performing program measurement and data analysis to help its
clients improve their customer management programs and channels, continuously
improve the effectiveness of their digital interactive marketing programs, and
adapt and deploy these programs globally. The Company believes that its
continuous program improvement builds the foundation for recurring client
business.

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The Company is committed to establishing and maintaining high-quality
creative and technical standards for its digital interactive marketing
services. The Company has earned the following awards for its digital
interactive solutions:

[Download Table]

AWARD CLIENT/PROJECT YEAR
----------------------- ------------------------------------------- ----------

AMA Spire Award Keystone Fishing Hotline 1992

Direct Marketing Diet Pepsi "Convert a Million" campaign 1993
Association (DMA) Gold
Echo Award

American Advertising Zima.com 1995; 1996
Award (ADDY)
AT&T Olympic Games Connection Website 1997
Intel Rich advertising campaign 1998
John Hancock Silhouettes campaign 1998
iVillage "About Work" campaign 1998

Coalition for AT&T "Intermercial" campaign 1996
Advertising Supported
Information and
Entertainment (CASIE)
AT&T Olympic Games Website 1996
Zima.com 1996
John Hancock Website 1997

Mar.com--Best WWW AT&T Olympic Games Connection Website 1997
Marketing Campaign
--Best CD Rom/Floppy AT&T Worldnet CD Rom 1997
Disk-Based Ad
--Best Banner Series iVillage "About Work" campaign 1997

New York 1-800-CALL-ATT 1997
Festivals/Interactive
Multimedia Competition

One Show Bronze Pencil John Hancock Silhouettes campaign 1998

Cannes Cyberlions Finalist Certificate for AT&T Catalog 1998
Finalist Certificate for Intel "Reebok-RIA" 1998
Sony Playstation 1998

The One Show Rugby Football Union 1998
Sony PlayStation 1998

Adweek Top Ten -- 1995, 1996
Interactive Agencies

Channel 7 Top 100 -- 1996, 1997
Agencies

AdAge Top Three -- 1997
Interactive Agencies

IAB Agency of the Year -- 1998
Award

Momentum Awards "Turbo -- 1998
Agency of the Year"

Red Herring Top Five -- 1998
Interactive Agencies

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COMPANY CLIENTS

The Company's clients consist primarily of organizations whose businesses are
impacted by rapidly changing digital media and interactive communications
technologies, and range from Fortune 500 companies with world-class brands to
companies with new online business models. The Company's services for these
clients include strategic marketing assignments as well as global digital
interactive marketing and sales programs combining various platforms and
services. The Company's five largest clients accounted for 56.8% and 54.8% of
the Company's revenues (on a pro forma basis) for the fiscal year ended
December 31, 1997 and the nine months ended September 30, 1998, respectively.
AT&T accounted for 31.4% and 20.4% of the Company's revenues (on a pro forma
basis) for the fiscal year ended December 31, 1997 and for the nine months
ended September 30, 1998, respectively. Citibank accounted for 12.0% of the
Company's revenues (on a pro forma basis) for the nine months ended September
30, 1998.

The following is a list of certain of the Company's clients and their
industries:

COMMUNICATIONS SERVICES
AT&T BancBoston Robertson Stephens
Citibank
COMPUTER HARDWARE E*Trade
IBM Intuit
Intel John Hancock
US Postal Service
CONSUMER PRODUCTS/RETAIL Women.com
Amazon.com
JC Penney TRAVEL
Kodak Alamo
SC Johnson Delta Airlines
Sony
Unilever

The Company generally performs multiple projects for clients under fixed-fee
contracts. Although the Company's clients ordinarily hire the Company on an
assignment basis rather than on a retainer basis, a number of the Company's
long-term relationships have evolved into annual retainer relationships. This
reduces the risk that a client from whom the Company generates substantial
revenue in one period may not be a substantial source of revenue in a
subsequent period. The Company's retained clients may require certain
exclusivity arrangements, whereby the Company may be limited in its ability to
provide services to companies who may be competitors of the Company's clients.
In addition, the Company's clients generally have the right to terminate their
relationships with the Company without penalty and on relatively short or no
notice. Once an assignment is completed there can be no assurance that a client
will engage the Company for further services. For example, the Company provides
services to AT&T and Citibank pursuant to one-year, renewable contracts. AT&T
or Citibank may terminate its agreement with the Company upon 90 days' prior
written notice to the Company. While the Company is not aware of plans by any
of its significant clients to terminate their use of the Company's services,
the termination of the Company's business relationship with any of its
significant clients, including AT&T or Citibank, or a material reduction in the
use of the Company's services by a significant client could have a material
adverse effect on the Company's business, financial condition or results of
operations.

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CLIENT CASE STUDIES

The following client case studies illustrate marketing solutions developed by
the Company for certain of its key clients.

AT&T

AT&T is one of the world's largest providers of communications services,
including voice, data and video telecommunications, to large and small
businesses, consumers and government entities. AT&T has long viewed the
Internet as an essential strategic channel to build its brand awareness, and in
particular has been very focused on coordinating its branding efforts among
advertising channels to preserve the integrity of its brand and present a
consistent image. AT&T hired the Company in 1992 due in part to the Company's
full service architecture and its strategic approach to using the Internet in
the context of AT&T's overall branding strategy. The Company believes that as a
result of its initiatives, AT&T is one of the largest advertisers on the
Internet today.

AT&T selected the Company as its interactive agency of record in 1995 based
on its belief that a long-term relationship with one interactive marketing firm
would produce the best interactive marketing programs. The Company's primary
responsibilities for AT&T have included creation and management of interactive
advertising and marketing campaigns, brand positioning, creative standards
development, media planning and buying, research and competitive analysis. The
Company's responsibilities extend through several of AT&T's business units. The
Company's relationship with AT&T has included such projects as developing an
electronic toll-free directory in 1992, providing strategic consulting for
interactive television market research in 1993, developing several fax-on-
demand systems for AT&T's Business Marketing Unit in 1994, contributing to a
market strategy for AT&T WorldNet Service launched in 1995 and establishing
AT&T's Centennial Olympic Games Web site, CD-ROM and "intermercial" campaign in
1996. In addition, the Company launched the online catalogue for AT&T's
consumer and small business markets in 1997, and created a branding program for
AT&T during the 1998 Nagano Olympics where an ad server network was used for
the first time to execute a ground breaking sequential targeted advertising
initiative based on prior user activity along with community based electronic
trading card rooms. The Company believes that AT&T has experienced increased
brand awareness, improved client acquisition and retention and increased sales
as a result of the Company's marketing programs.

JC Penney

JC Penney is one of the largest retailers in the United States. JC Penney
first hired the Company in 1988, seeking to ensure that its catalog customers
had an online alternative to purchase its retail products. Management believes
that JC Penney was looking in particular for a marketing firm that had
experience with online marketing and commerce, and hired the Company in part
because of its innovative work in establishing GE's online store, GEnie, and
its experience in establishing Prodigy's online commerce offering.

The goal of the Company's initial project was to build an online brand image
for JC Penney and ultimately draw shoppers to the site. In the process, the
Company had to create a new reporting system for the digital channel and create
a solution that could be integrated with JC Penney's legacy systems. The
Company's work included the creation of proprietary demand tracking systems and
tools, and the formation of a technology development partnership with JC Penney
Information Systems that co-developed custom integration solutions and a
targeted media plan that evolved into a number of affiliated programs. The
Company also created a multi-faceted Internet platform that allowed for
personalization, custom shopping, easy searching, gift reminder services, and
the ability to request catalogs online. Since its initial assignment, the
Company has provided JC Penney with consulting on corporate strategy, Internet-
related business, and organizational and operational design, performed
marketing analysis of site traffic and sales tracking, created a distributed
store revenue sharing program, established media partnerships, and carried out
online merchandising, marketing and sales programs.

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John Hancock

John Hancock, a diversified financial services and insurance provider, offers
a variety of financial products ranging from life insurance, annuities, and
mutual funds to long-term care insurance coverage to both consumers and
businesses worldwide. In late 1996, John Hancock wanted to take advantage of
the Internet as a new channel of distribution directed at high income, well
educated consumers, and to modernize its brand image. John Hancock was facing
new competition due to deregulation in the financial services industry, as well
as decreasing interest in insurance products in favor of investments such as
mutual funds. John Hancock hired the Company in 1997 to accomplish the
following objectives: (i) reposition John Hancock as a balanced provider of
both insurance and investment products and services; (ii) generate qualified
leads for Hancock's agent/broker force; (iii) establish the Internet as a new
channel for selling products via e-commerce; and (iv) modernize John Hancock's
brand image.

The Company developed an interactive marketing strategy designed to educate
the consumer about financial planning for major life events, and emphasizing
John Hancock's image as a trusted advisor. The solution was "Portrait
Planning," a powerful Web-based approach for step-by-step financial planning
that aided users in planning for the future. By answering a series of simple
questions, users could begin planning for a number of significant life events,
such as the purchase of a house, retirement, or a child's education. The
marketing program built awareness of John Hancock's products, bonded consumers
to the John Hancock brand, and created a database of potential clients. In
order to better target "Portrait Planning," the Company devised its innovative
"Silhouettes Campaign," which used targeted banner ads to introduce "Portrait
Planning" to a more focused audience and thereby produce quantifiable results.
By tracking consumer responses to its online campaigns for John Hancock, the
Company was able to create an extensive database of potential clients with many
of their financial needs outlined. The Company believes that the Internet has
had now become one of Hancock's principal sources of new customers.
Furthermore, the Company has been advised by John Hancock that new customers
gained through the Internet have generally purchased large and comprehensive
insurance and annuity products and generate higher average fees for John
Hancock than customers gained from any other direct or indirect channel.

STRATEGIC RELATIONSHIPS

The Company has entered into several strategic relationships with other
companies whose products or services are included as part of the interactive
marketing solutions that the Company delivers to its clients. The Company seeks
to identify strategic partners whose products or services complement the
Company's program offerings and enable clients to engage in more effective
digital interactive marketing. As part of its strategic relationships, the
Company participates in the development and specification of its partners' new
and existing product and service offerings in order to enhance their utility
for the Company's clients.

USE OF TECHNOLOGY

The Company's background in developing e-commerce solutions for on-line
services, the skills of its technology professionals and its legacy of firsts
have helped the Company to utilize technology to further the business and
marketing objectives of its client base. The Company utilizes technology to
implement its clients' interactive marketing efforts and to help its clients
manage their customer relationships.

The Company makes extensive use of third-party tools and packaged
applications, as well as a variety of outsourced technology platforms, as part
of the solutions it engineers for its clients. The Company has utilized third-
party and outsourced technology in order to perform several essential business
and marketing functions for its clients, including credit card processing, ad
serving, e-mail management, data warehousing, order fulfillment and data
processing. Utilizing third-party and outsourced technology greatly reduces the
cost of the solutions the Company provides for its clients, while increasing
their scalability as well as the speed with which the Company can bring them to
market. The Company intends to continue incorporating advanced third-party and
outsourced technologies into its service offerings as the interactive marketing
needs of its clients evolve.

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MANAGEMENT INFORMATION SYSTEMS

The Company is currently implementing various aspects of its global service
delivery infrastructure. The primary elements include an upgraded, fully
integrated Oracle-based financial and project management system. The Company
believes that these systems will enhance its ability to manage its engagements
and monitor the utilization of its professional staff. In addition, the Company
is in the process of installing a secure global network which provides access
to the Company's proprietary corporate memory application, which management
believes will significantly improve consistent handling of clients and business
development efforts globally. The above, coupled with the Company's existing
proprietary process for service delivery across the Company, will further
improve client and business management globally.

COMPETITION

The market for the Company's services is very competitive and characterized
by pressures to incorporate new capabilities, accelerate job completion
schedules and reduce prices. The principal factors upon which the Company
competes are service, creative quality, technological and new media expertise
and price. The Company faces competition from a number of sources, including
conventional advertising and marketing firms, project-oriented interactive
marketing firms and information technology service providers. In addition, many
advertising agencies have started to develop internally, or enter into business
relationships to develop or acquire, new digital media and interactive
communications capabilities. The Company also competes with interactive
marketing communications companies that provide services (such as corporate
identity and packaging, production, advertising services or Web site design)
and are technologically proficient in the digital media and interactive
communications fields. In addition, production houses, software developers,
inhouse marketing and information systems departments of companies, interactive
entertainment companies and graphic design companies compete with certain
portions of the Company's business.

Certain of the Company's competitors or potential competitors have longer
operating histories, longer client relationships and greater financial,
management, technology, development, sales, marketing and other resources than
the Company. Competition depends to a large extent on the clients' perception
of the quality and creativity as well as the technical proficiency of digital
interactive marketing products and services offered. The Company also competes
on the basis of price and the ability to serve clients on a broad geographic
basis. In order to compete successfully in each of these areas, the Company
must have access to adequate financial resources. Moreover, clients frequently
wish to have different products represented by different marketing companies.
To the extent the Company loses clients to its competitors because of
dissatisfaction with its services, or if its reputation is adversely impacted
for any other reason, its future financial performance could be materially
adversely affected.

There are relatively low barriers to entry in the digital interactive
marketing industry, primarily because it is a service industry that requires
minimal capital expenditures of new entrants. The Company expects that it will
face additional competition from new market entrants. There can be no assurance
that existing or future competitors will not develop or offer digital
interactive marketing services and products that provide significant
performance, price, creative or other advantages over those offered by the
Company, which could have a material adverse effect on the Company's business,
financial condition or results of operations.

INTELLECTUAL PROPERTY

The Company's ability to anticipate and rapidly adapt its services to
capitalize on emerging technologies is important to establishing and
maintaining a technology leadership position. There can be no assurance that
the Company will correctly identify which technologies will achieve market
acceptance, that such new technologies will be made available to the Company or
that such technologies can be economically applied by the Company on a timely
basis. Despite the Company's efforts to control access to its proprietary
information, it may be possible for a third party to copy or otherwise obtain
and use the Company's proprietary information

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or technologies without authorization, or to develop similar or superior
services or technologies independently. In addition, effective copyright, trade
secret and patent protection may be unavailable or limited in certain foreign
countries. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a
material adverse effect on the Company's business, financial condition or
results of operations.

GOVERNMENT REGULATION

The marketing communications industry is subject to extensive government
regulation, both domestic and foreign, with respect to the truth in and
fairness of advertising. The Company must comply with Federal Trade Commission
regulations with respect to the marketing of products and services and similar
state regulations. In addition, there has had been an increasing tendency in
the United States on the part of businesses to resort to the judicial system to
challenge comparative advertising of their competitors on the grounds that the
advertising is false and deceptive. There can be no assurance that the Company
will not be subject to claims made against it or its clients by other companies
or governmental agencies or that any such claims, regardless of merit, would
not have a material adverse effect on the Company's business, financial
condition or results of operations.

Due to the increasing popularity and use of the Internet, a number of laws
and regulations may be adopted regarding user privacy, pricing, acceptable
content, taxation and quality of products and services. Although there are
currently few laws or regulations directly governing access to or commerce on
the Internet, any new legislation could inhibit the growth in use of the
Internet and decrease the acceptance of the Internet as a communications and
commercial medium. Certain telephone carriers have also petitioned the
government to regulate and impose fees on Internet service providers and online
service providers in a manner similar to long distance telephone carriers. The
adoption of any such laws or regulations could affect the costs of
communicating on the Internet and adversely affect the growth in use of the
Internet, which could in turn decrease the demand for the Company's services or
otherwise have a material adverse effect on the Company's business, results of
operations and financial condition. Furthermore, due to the global nature of
the Internet, governments of states or foreign countries may attempt to
regulate Internet transmissions or levy sales or other taxes relating to our
activities. Any of the foregoing developments could have a material adverse
effect on the Company's future operating performance.

Concerns about privacy on the Internet may be heightened by legislative or
regulatory requirements that mandate notification to Internet users that the
data captured on certain Internet sites may be used by marketing entities to
unilaterally address product promotion and advertising to that user. While the
Company is not aware of any such legislation or regulatory requirements in the
United States, certain other countries and political entities, such as the
European Community, have adopted such legislation or regulatory requirements,
and no assurance can be given that similar legislation or regulatory
requirements will not be adopted in the United States. If the privacy concerns
of consumers are not adequately addressed, the Company's future operating
performance could be materially adversely affected. See "Risk Factors--Risks
Associated with Government Regulations," and "--Potential Impact of Privacy
Concerns."

EMPLOYEES

In order to maintain high levels of creativity and quality, the Company
places great importance on recruiting and retaining talented employees. As of
September 30, 1998, the Company had approximately 400 full-time employees. The
Company also hires temporary employees and contract service providers as
necessary. None of the Company's employees is represented by a labor union, and
the Company considers its employee relations to be good.

The Company's success will depend to a significant degree on the continuing
contributions of members of its senior management, including Gerald M.
O'Connell, its Chief Executive Officer, and Robert C. Allen, II, its

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President, and its key account management, marketing, creative and technology
development personnel, as well as its ability to attract and retain highly
skilled personnel in all job categories. Competition for qualified personnel in
the digital interactive marketing industry is intense. The Company has at times
experienced, and continues to experience, difficulty in recruiting sufficient
numbers of qualified personnel. Although certain members of the Company's
senior management have entered into employment agreements with the Company
which contain non-competition provisions, there can be no assurance that any of
these executives will not voluntarily terminate their employment with the
Company. The loss of the services of any senior management or other key
employee or the inability to attract and retain additional personnel as
required could adversely affect the Company's business, financial condition or
results of operations. If one or more of the Company's key employees resign
from the Company to join a competitor or to form a competing company, the loss
of such personnel could have a material adverse effect on the Company's
business, financial condition or results of operations. In addition, the loss
of existing or potential clients as the result of the loss of any key employee
to a competitor or otherwise could have a material adverse effect on the
Company's business, financial condition or results of operations. In the event
of the loss of any key personnel there can be no assurance that the Company
would be able to prevent the unauthorized disclosure or use of its technical
knowledge, practices, procedures or client lists. See "Risk Factors--Dependence
on Key Personnel; Need to Recruit Qualified Personnel."

FACILITIES

The Company's headquarters are located in two facilities in Westport,
Connecticut and use approximately 40,000 square feet of total leased office
space. The leases expire in January of 1999 and July 31, 2000, respectively. To
combine its existing operations, the Company has secured a lease for a 54,300
square foot facility for occupancy in January 1999. The Company has an option
in 2000 to enter into a 10-year lease for an additional 25,000 square feet in
this facility. The Company maintains additional offices in New York, Chicago,
San Francisco, Toronto, Hong Kong and London.

The Company believes that its current facilities, along with facilities
currently subject to negotiation, will be adequate to meet the Company's
requirements for the foreseeable future. There can be no assurance that the
Company will be successful in obtaining additional space, if required, or if
such space is obtained that it will be on terms acceptable to the Company.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company as of the date of this
prospectus.

[Download Table]

NAME AGE POSITION(S)
---- --- -----------

Gerald M. O'Connell (1)............. 37 Chief Executive Officer and Director
Douglas C. Ahlers................... 38 Executive Vice President
Robert C. Allen, II................. 31 President and Director
Steven C. Roberts................... 37 Chief Financial Officer
Donald M. Elliman, Jr. (1).......... 53 Director
Donald L. Seeley (1)................ 54 Director
Theodore J. Theophilos.............. 47 Director

--------
(1) Member of Public Offering Committee.

Gerald M. O'Connell has served as Chief Executive Officer and a director of
the Company since November 1998. From October 1996 to November 1998, Mr.
O'Connell was President and Chief Operating Officer and a director of the
Company. From 1987 to October 1996, Mr. O'Connell was a Managing Partner of
Modem, which he co-founded in 1987. From 1986 to 1987, Mr. O'Connell was
Product Manager of CUC International, a consumer services company, where he was
responsible for Comp-u-Mall--an electronic shopping mall. Mr. O'Connell
received a B.A. in English and history from Middlebury College. Mr. O'Connell
is a director of the Direct Marketing Association.

Douglas C. Ahlers has served as Executive Vice President of the Company since
November 1998. From October 1996 to November 1998, Mr. Ahlers was President of
the Relationship Technology Group, a division of the Company, and a director of
the Company. From 1987 to October 1996, Mr. Ahlers was a Managing Partner of
Modem, which he co-founded in 1987. From 1983 to 1987, Mr. Ahlers served as
Manager of Product Development of CUC International, a consumer services
company. Mr. Ahlers received a B.A. in sociology and theater from the
University of Rhode Island and an M.J. in journalism and communications from
Louisiana State University.

Robert C. Allen, II has served as President and a director of the Company
since November 1998. From October 1996 to November 1998, Mr. Allen was
President of the Company's Modem Media division and a director of the Company.
From 1992 to October 1996, Mr. Allen served as a Managing Partner of Modem
Media. From 1989 to 1992, Mr. Allen was the Director of Business Development at
Modem Media. Mr. Allen received a B.A. in English from Gettysburg College.

Steven C. Roberts has served as Chief Financial Officer of the Company since
August 1998. From January 1997 to August 1998, Mr. Roberts served in various
capacities with the Company, most recently as Vice President, Finance and
International Operations. From 1990 to January 1997, Mr. Roberts held various
management positions at a number of subsidiaries of United Technologies. From
1984 to 1989, Mr. Roberts served as Second Vice President of Corporate Finance
at Continental Bank. Mr. Roberts holds a B.A. in Economics from Middlebury
College and an M.B.A. in Finance and Production from the University of Chicago.

Donald L. Seeley has been a director of the Company since November 1998 and
has been Executive Vice President, Chief Financial Officer, of True North since
1997. From 1993 to 1997, Mr. Seeley was Chief Executive Officer of the
Alexander Consulting Group. From 1988 to 1993, Mr. Seeley was Senior Vice
President of Alexander & Alexander Services Inc., the parent company of the
Alexander Consulting Group. From 1986 to 1988, Mr Seeley was Vice President and
Treasurer of United Airlines. Mr. Seeley holds a B.S. in accounting and an
M.B.A. from the University of Colorado at Boulder, and is a Chartered Financial
Analyst.

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Theodore J. Theophilos has been a director of the Company since November 1998
and has been Executive Vice President, Corporate General Counsel, of True North
since 1996. From 1995 to 1996, Mr. Theophilos was Senior Vice President and
General Counsel of A.C. Nielsen Company, and from 1986 to 1995 was a partner of
Sidley & Austin (a law firm). Mr. Theophilos holds a B.A. and an M.A. from
Northwestern University and a J.D. from the University of Chicago.

Donald M. Elliman, Jr. has served as a director of the Company since November
1998, as a director of TNC since May 1998 and as a director of Bozell since
1991. Mr. Elliman is currently an Executive Vice President and director of Time
Inc. Mr. Elliman was the President of Sports Illustrated from September 1992
through January 1998 and has held various senior sales/marketing and publishing
positions with Time Inc. since 1967.

Messrs. O'Connell and Allen were elected to the Board of Directors of the
Company pursuant to an agreement with TNC entered into in connection with the
formation of the Company in December 1996. The Company and TNC agreed in 1996
to cause each of Messrs. O'Connell, Ahlers and Allen to be elected to the
Company's Board of Directors as long as each serves as an executive officer of
the Company and until their collective ownership of the Company's Class A
common stock falls below certain levels. See "Description of Capital Stock--
Delaware Anti-takeover Law and Certain Charter and Bylaw Provisions."

Each officer serves at the discretion of the Company's Board of Directors.
There are no family relationships among any of the directors or officers of the
Company.

The Company's Board of Directors currently has two vacancies, which the
Company's Bylaws authorize the Board of Directors to fill. The Board of
Directors intends to appoint two persons who are not officers or employees of
the Company or TNC to the Board of Directors within 90 days of the date of this
prospectus and is required to do so to maintain the Company's listing on the
Nasdaq National Market. If the Company does not add such independent directors
within 90 days following the offering, the Company could be delisted from the
Nasdaq National Market, which could have an adverse effect on the liquidity and
price of the Class A common stock.

DIRECTOR COMPENSATION

Effective upon consummation of the offering, Company directors who are not
also employees of the Company or TNC will be paid an annual retainer of
$10,000. Directors who are also employees of the Company or TNC will not
receive any additional compensation for serving on the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board of Directors has a Public Offering Committee, which acts
in place of the Board on matters related to this offering. Such matters
include, without limitation, negotiation with the underwriters for the purpose
of determining the terms and pricing of the offering. The Public Offering
Committee consists of Messrs. O'Connell, Seeley and Elliman. Members of the
Public Offering Committee are elected by the Board and serve for one-year
terms.

The Company intends to establish an Audit Committee within 90 days following
this offering composed of at least two directors, which is required to maintain
the Company's listing on the Nasdaq National Market. No member of the Audit
Committee will be an employee of the Company or True North or a director of
True North. The Audit Committee will report to the Board regarding the
appointment of the independent public accountants of the Company, the scope and
fees of prospective annual audits and the results thereof, compliance with the
Company's accounting and financial policies and management's procedures and
policies relative to the adequacy of the Company's internal accounting
controls.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No interlocking relationship exists between the Company's Board of Directors
and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. The Delaware General
Corporation Law ("DGCL") provides that a corporation's certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director for monetary damages for breach of his or her fiduciary
duties as a director, except for liability for: (i) any breach of the duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL; or (iv) any transaction
from which the director derives an improper personal benefit. See "Description
of Capital Stock--Limitation of Liability; Indemnification."

The Company's Bylaws provide that the Company shall indemnify its directors
and officers and may indemnify its employees and agents to the fullest extent
permitted by Delaware law. See "Description of Capital Stock--Limitation of
Liability; Indemnification."

The Company has entered into agreements to indemnify its directors and
officers in addition to the indemnification provided for in its Certificate of
Incorporation and Bylaws. Under these agreements, the Company is obligated,
among other things, to indemnify its directors and officers for certain
expenses (including attorneys' fees), judgments, fines and settlement amounts
incurred by any such person in any action or proceeding, including any action
by or in the right of the Company, arising out of such person's services as a
director or officer of the Company, any subsidiary of the Company or any other
company or enterprise to which the person provides services at the request of
the Company. The Company believes that these provisions and agreements are
necessary to attract and retain qualified individuals to serve as directors and
officers.

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

EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS

The following table sets forth information concerning the compensation
received for services rendered to the Company during fiscal 1997 by its current
Chief Executive Officer and each of the three most highly-compensated persons
who were executive officers of the Company during the year ended December 31,
1997 and whose total compensation in fiscal 1997 equaled or exceeded $100,000
(the "Named Executive Officers"):

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SUMMARY COMPENSATION TABLE

[Download Table]

LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
---------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
--------------------------- -------- ------- ------------ ------------

Gerald M. O'Connell(1)
Chief Executive Officer............. $300,000 $60,000 38,000 $ --

Douglas C. Ahlers(2)
Vice Chairman, Technology........... 300,000 60,000 38,000 --

Robert C. Allen, II(3)
President........................... 300,000 60,000 38,000 --

Steven C. Roberts(4)
Chief Financial Officer............. 147,470 28,000 24,614 67,235

--------
(1) Mr. O'Connell served as President and Chief Operating Officer of the
Company during fiscal 1997.
(2) Mr. Ahlers served as President, Relationship Technology Group, of the
Company during fiscal 1997.
(3) Mr. Allen served as President, Modem Media, of the Company during fiscal
1997.
(4) Mr. Roberts served in various capacities with the Company during fiscal
1997, most recently as Vice President, Operations. All other compensation
for Mr. Roberts represents reimbursement for relocation expenses paid by
the Company in connection with his employment.

The following table sets forth information as to options granted to the Named
Executive Officers during the year ended December 31, 1997.

OPTION GRANTS IN FISCAL 1997

[Enlarge/Download Table]

POTENTIAL
PERCENT REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL
SECURITIES OPTIONS RATE OF STOCK
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM (3)
GRANTED(1) IN FISCAL PRICE PER EXPIRATION -----------------
NAME (#) YEAR SHARE (2) DATE 5% 10%
---- ---------- ---------- --------- ---------- -------- --------

Gerald M. O'Connell..... 38,000 5.5% $11.58 3/26/07 $276,714 $701,247
Douglas C. Ahlers....... 38,000 5.5 11.58 3/26/07 276,714 701,247
Robert C. Allen, II..... 38,000 5.5 11.58 3/26/07 276,714 701,247
Steven C. Roberts....... 10,364 1.5 11.58 1/2/07 75,469 191,248
14,250 2.1 11.58 3/26/07 103,768 262,968

--------
(1) These options to purchase shares of Class A common stock were granted under
the Stock Option Plan and provide that the options vest as to 20% of the
underlying common stock on the date of grant and as to an additional 20%
per year thereafter.
(2) Options were granted at an exercise price equal to 100% of the fair market
value of the Company's Class A common stock on the date of grant, as
determined by the Board of Directors.
(3) This column shows the hypothetical gains or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full ten-year term of the options. The assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission (the "Commission") and do not represent the Company's estimate
or projection of future common stock prices.

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The following table sets forth information with respect to unexercised
options held by the Named Executive Officers as of December 31, 1997. No
options were exercised by the Named Executive Officers during fiscal 1997.

AGGREGATE STOCK OPTION EXERCISES IN FISCAL 1997
AND FISCAL YEAR-END VALUES

[Download Table]

NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
DECEMBER 31, 1997 AT DECEMBER 31, 1997(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------

Gerald M. O'Connell......... 15,200 22,800 $ -- $ --
Douglas C. Ahlers........... 15,200 22,800 -- --
Robert C. Allen, II......... 15,200 22,800 -- --
Steven C. Roberts........... 17,100 20,468 -- --

--------
(1) Calculated by determining the difference between the exercise price and the
deemed fair market value of the securities underlying the options at
December 31, 1997.

In December 1996, the Company entered into five-year employment agreements
with each of Messrs. O'Connell, Ahlers and Allen providing for an initial
annual base salary of $300,000 each, subject to increases at the discretion of
the Company's Board of Directors. Messrs. O'Connell, Ahlers and Allen currently
receive base salaries of $300,000 each. Pursuant to the employment agreements,
if the Company terminates any executive's employment without cause, the
executive is entitled to receive severance benefits equal to salary plus profit
sharing for a period equal to the lesser of three years after such termination
or the time remaining in the initial term of employment. In addition, each of
Messrs. O'Connell, Ahlers and Allen has agreed to certain confidentiality,
noncompetition and nonsolicitation provisions.

In December 1996, the Company entered into an employment agreement with Mr.
Roberts providing for an initial annual base salary of $150,000. Mr. Roberts
currently receives a base salary of $174,000. Pursuant to the employment
agreement, if the Company terminates Mr. Roberts' employment without cause, he
is entitled to receive severance benefits equal to one year's salary. In
addition, Mr. Roberts has agreed to certain confidentiality, noncompetition and
nonsolicitation provisions.

STOCK PLANS

1997 Stock Option Plan

The Company has established a stock option plan (the "Stock Option Plan")
pursuant to which a total of 3,040,000 shares of Class A common stock have been
reserved for issuance to provide additional incentive to its employees,
officers, directors and consultants. Pursuant to the Stock Option Plan, the
Company may grant incentive stock options, nonstatutory stock options and stock
purchase rights to the Company's employees, officers, directors and
consultants. The Board of Directors, or a committee to whom the Board has
delegated authority (the "Plan Administrator"), selects the employees,
officers, directors and consultants to whom options and stock purchase rights
are granted (provided that incentive stock options may only be granted to
employees of the Company, and, as described below, outside directors receive
automatic grants of options), interprets and adopts rules for the operation of
the Stock Option Plan and specifies other terms of such options and stock
purchase rights. As of September 30, 1998, options to purchase an aggregate of
968,170 shares of Class A common stock have been granted, at a weighted average
exercise price of $7.74 per share.

Subject to the terms and conditions of the Stock Option Plan, the terms and
conditions of each individual option grant will be evidenced by an agreement
("Agreement") between the Company and the optionee. Options granted under the
Stock Option Plan (other than to outside directors) vest as determined by the
Plan Administrator and as set forth in the relevant Agreement. The term of a
stock option under the Stock Option Plan will be stated in the relevant
Agreement, provided that the maximum term of an incentive stock option is

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ten years (unless the optionee at the time of grant has voting power over more
than 10% of the Company's capital stock outstanding, in which case the maximum
term is five years). If an optionee terminates his or her service with the
Company, the optionee generally may exercise only those options vested as of
the date of termination of service and, unless otherwise specified in the
relevant Agreement, must effect such exercise within three months of
termination of service for any reason other than death or disability and one
year after termination due to death or disability. The exercise price of
incentive stock options granted under the Stock Option Plan must be at least
equal to the fair market value of the Class A common stock of the Company on
the date of grant. The exercise price of stock options granted to an optionee
who owns stock possessing more than 10% of the voting power of the Company's
outstanding capital stock must equal at least 110% of the fair market value of
the Class A common stock on the date of grant. Payment of the exercise price
may be made by such methods as determined by the Plan Administrator (which in
the case of an incentive stock option shall be set out in the relevant
Agreement) and may include cash, check, a promissory note or shares of the
Company's Class A common stock valued at the fair market value on the date of
exercise, or certain other methods of payment.

Terms of any stock purchase rights granted under the Stock Option Plan shall
be determined by the Plan Administrator at the time such rights are issued.
Upon the voluntary or involuntary termination of a purchaser's service with the
Company, the Company shall have an option to repurchase his or her shares at
the original price paid by the purchaser, unless the Plan Administrator
determines otherwise.

In the event the Company is acquired or merges into or with another entity or
transfers or otherwise disposes of all or substantially all of its assets, then
each outstanding option and stock purchase right shall automatically vest and
become fully exercisable unless the successor entity assumes such option or
stock purchase right or replaces it with a comparable option or right.

1999 Employee Stock Purchase Plan

Concurrently with the offering, the Company intends to establish an Employee
Stock Purchase Plan (the "Purchase Plan") under which a total of shares of
Class A common stock will be made available for sale. The Purchase Plan, which
is intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended, will be
administered by the Board of Directors or by a committee appointed by the
Board. Employees are eligible to participate if they are customarily employed
by the Company or a subsidiary of the Company designated by the Board for at
least 20 hours per week and for more than five months in any calendar year. The
Purchase Plan permits eligible employees to purchase Class A common stock
through payroll deductions, which may not exceed 15% of an employee's
compensation, subject to certain limitations. The Purchase Plan will be
implemented in a series of consecutive, overlapping offering periods, each of
approximately 24 months in duration. Offering periods will begin on the first
trading day on or after and of every other year and terminate on
the last trading day in the period 24 months later. However, the first offering
period shall be the period of approximately months commencing on the date
upon which the registration statement of which this prospectus is a part is
declared effective by the Commission and terminating on the last trading day in
the period ending , 2001. Each participant will be granted an option on
the first day of the six-month purchase period and such option will be
automatically exercised on the last date of each offering period. The purchase
price of each share of Class A common stock under the Purchase Plan will be
equal to 85% of the lesser of the fair market value per share of Class A common
stock on the start date of that offering period or on the date of purchase.
Employees may modify or end their participation in the offering at any time
during the offering period subject to the Purchase Plan's procedures and the
Board's discretion to enact changes; participation ends automatically on
termination of employment with the Company. The Purchase Plan will terminate in
2009 unless sooner terminated by the Company's Board of Directors.

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RELATIONSHIP WITH TNC AND CERTAIN TRANSACTIONS

RELATIONSHIP WITH TNC

Upon completion of the offering, TNC will own approximately 52.9% of the
common stock outstanding (51.1% if the Underwriters' over-allotment option is
exercised in full), representing 84.9% (83.9% if the Underwriter's over-
allotment option is exercised in full) of the total voting power of the
Company. As long as TNC controls a majority of the voting power of the Company,
it will be able, acting alone, to (i) elect at least a majority of the Board of
Directors of the Company; (ii) amend the Company's Certificate of Incorporation
or effect a merger, sale of assets or other major corporate transaction; (iii)
defeat any non-negotiated takeover attempt; (iv) determine the amount and
timing of dividends paid to itself and to holders of Class A common stock; and
(v) otherwise control the management and operations of the Company and the
outcome of virtually all matters submitted for a stockholder vote.

Currently, two of the five directors of the Company (Messrs. Seeley and
Theophilos) are also members of management of TNC, and are compensated by TNC
in connection with their employment by TNC. In addition, one of the other
current directors of the Company (Mr. Elliman) is a director of TNC and was
selected by TNC. These directors may have conflicts of interest in addressing
certain business opportunities and strategies in circumstances where the
Company's and TNC's interests differ. The Company has not adopted any formal
plan or arrangement to address such potential conflicts of interest.

MODEM COMBINATION

In December 1996, TNC, through TNTI, acquired approximately 49% of the
limited partnership interests in Modem and 49% of the shares of capital stock
of Modem Media, Inc., the general partner of Modem, from Gerald M. O'Connell,
Douglas C. Ahlers, Robert C. Allen, II and Kraft Enterprises LTD (the "Limited
Partners"), in exchange for $25.0 million of common stock of TNC plus, upon
consummation of an initial public offering of the Company and/or certain other
events, an additional $4.0 million of common stock of TNC and up to $19.0
million cash to be paid by TNC. Following the acquisition, TNC converted all of
its interests in Modem into 2,662,008 shares of Class A common stock of the
Company. In addition, the Limited Partners converted all of their partnership
interests in Modem and all of their shares of capital stock of Modem Media,
Inc. into an aggregate of 2,415,646 shares of Class A common stock of the
Company. Following that transaction, TNC sold to the Company certain digital
interactive marketing assets, including substantially all of the assets and
properties of Northern Lights Interactive, R/GA Interactive and Cf2GS, as well
as TNC's technology development operations, in exchange for (i) the issuance to
TNC of 2,177,102 shares of Class B common stock of the Company and (ii) the
assumption by the Company of certain liabilities. TNC also exchanged all of its
shares of Class A common stock for an equal number of shares of Class B common
stock of the Company.

THE OCTOBER 1998 COMBINATION AND RELATED TRANSACTIONS

Effective October 1, 1998, the following transactions were consummated:

. PTI formed a wholly-owned subsidiary ("PTI Operations Holding Company"),
and contributed the PTI Strategic Interactive Marketing Operations to PTI
Operations Holding Company.

. PTI declared a dividend of all the outstanding capital stock of PTI
Operations Holding Company to Bozell, which in turn declared a dividend
of all the outstanding capital stock of PTI Operations Holding Company to
TNC, so that PTI Operations Holding Company became a direct, wholly-owned
subsidiary of TNC.

. PTI Operations Holding Company was merged with and into the Company, with
the Company succeeding to all the business and operations of PTI
Operations Holding Company, in exchange for the issuance of 1,666,288
shares of Class B common stock of the Company to TNC.

. Assets related to R/GA Interactive, Cf2GS and the technology development
operations of the Company, originally contributed by TNC to the Company
in connection with the Modem Combination, were returned by the Company to
TNC and its affiliates in exchange for 856,774 shares of Class B common
stock of the Company previously held by TNC and its affiliates.

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INTERCOMPANY AGREEMENTS

In the normal course of business, the Company and TNC have from time-to-time
entered into various business transactions and agreements, and the Company and
TNC may enter into additional transactions in the future. The following is a
summary of each of the material agreements that the Company and TNC have
entered into in connection with the Combination. Such summaries are qualified
in their entirety by those agreements, which are filed as exhibits to the
registration statement of which this prospectus is a part.

Administrative Services Agreement. Under an Administrative Services
Agreement, TNC will provide various administrative functions and other services
to the Company, including tax preparation, insurance, treasury, corporate
support, legal, and debt and lease guarantees. During the period in which TNC
performs administrative functions for the Company, expenses associated with
such functions will be charged to the Company based on rates and estimates set
forth on schedules attached to the Administrative Service Agreement. The
Company may terminate this agreement at any time upon 90 days' prior written
notice, and TNC may terminate the agreement 12 months following the
Combination, but must give 180 days' written notice of such intent to
terminate.

Intercompany Credit Arrangements. The Company and TNC are parties to certain
intercompany credit agreements. In August 1998, TNC extended a credit facility
to the Company allowing for revolving borrowings in the amount of up to $3.0
million to be outstanding at any given time at an interest rate equal to TNC's
cost of borrowings, plus two percent. The credit facility with TNC expires two
years from the date of completion of the initial public offering, or sooner
upon the occurrence of certain events. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources." The Company provides advances to TNC from time to time upon
TNC's request and at the Company's discretion. Such advances are due on demand
and bear interest at 5.75% per annum. At September 30, 1998, an aggregate of
$2.5 million was outstanding under such advances.

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

Brazil Affiliation Agreement. The Company has entered into an agreement with
Bozell pursuant to which Bozell has agreed, for a period of three years, to
provide services to the Company's clients through its office in Sao Paolo,
Brazil as requested by the Company. In return, the Company has granted a
license to Bozell to operate its office in Brazil under the name "Modem Media .
Poppe Tyson, Inc." during the same period.

Tax Matters Agreement. In connection with the transactions consummated
effective October 1, 1998, the Company and TNC entered into an agreement
providing for certain unitary state tax sharing arrangements.

Parent Company Guarantees. Commencing on July 1, 1998, TNC has guaranteed
payment on behalf of the Company under certain operating and other leases at a
fee of 0.5% of the amount guaranteed.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including
a majority of the independent and disinterested directors of the Board, and
will be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of September 30, 1998 and
as adjusted to reflect the sale of shares of Class A common stock by the
Company offered hereby, by (i) each person or entity who is known by the
Company to beneficially own five percent or more of the outstanding shares of
either class of common stock of the Company, (ii) each director, (iii) each
executive officer and (iv) all directors and executive officers of the Company
as a group.

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CLASS B COMMON
CLASS A COMMON STOCK COMMON STOCK STOCK
--------------------------------- ------------ --------------------
PERCENT OF TOTAL
PERCENT OF OWNERSHIP VOTING POWER
--------------------------------- --------------------
SHARES SHARES
BENEFICIALLY BEFORE AFTER BENEFICIALLY BEFORE AFTER
NAME OWNED(1) OFFERING OFFERING(2) OWNED(1) OFFERING OFFERING(2)
---- ------------ -------- ----------- ------------ -------- -----------

True North
Communications
Inc.(3)................ -- -- % -- % 5,648,624 92.1% 84.9%
101 East Erie Street
Chicago, Illinois 60611

Gerald M. O'Connell
(4)(5)................. 1,071,173 43.9 21.3% -- 3.5 3.2%
Douglas C. Ahlers
(4)(5)................. 1,071,174 43.9 21.3% -- 3.5 3.2%

Robert C. Allen, II
(4)(5)................. 291,289 11.9 5.8% -- * *

Steven C. Roberts
(4)(6)................. 17,100 * * -- * *

Donald M. Elliman, Jr.
(7).................... -- -- -- 5,648,624 92.1 84.9%

Donald L. Seeley (8).... -- -- -- 5,648,624 92.1 84.9%

Theodore J. Theophilos
(9).................... -- -- -- 5,648,624 92.1 84.9%

All directors and
executive officers as a
group (seven
persons)(10)........... 2,450,736 98.6 48.2% 5,648,624 99.9 92.1%

--------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Class A
common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of September 30, 1998 are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person. Except
as indicated in the footnotes to this table and pursuant to applicable
community property laws, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name.
(2) Assumes no exercise of the underwriters' over-allotment option.
(3) Includes shares of Class B common stock held by various wholly-owned
subsidiaries of TNC.
(4) The address of each of Messrs. O'Connell, Ahlers, Allen and Roberts is c/o
Modem Media . Poppe Tyson, Inc., 228 Saugatuck Avenue, Westport,
Connecticut 06880.

(5) Includes 15,200 shares of Class A common stock subject to options which are
exercisable within 60 days of September 30, 1998.

(6) Includes 17,100 shares of Class A common stock subject to options which are
exercisable within 60 days of September 30, 1998.

(7) Includes 5,648,624 shares of Class B common stock beneficially owned by TNC
and its wholly-owned subsidiaries. Mr. Elliman disclaims beneficial
ownership of such shares.

(8) Includes 5,648,624 shares of Class B common stock beneficially owned by TNC
and its wholly-owned subsidiaries. Mr. Seeley disclaims beneficial
ownership of such shares.

(9) Includes 5,648,624 shares of Class B common stock beneficially owned by TNC
and its wholly-owned subsidiaries. Mr. Theophilos disclaims beneficial
ownership of such shares.

(10) Includes an aggregate of 62,700 shares of Class A common stock subject to
options held by directors and executive officers of the Company, which are
exercisable within 60 days of September 30, 1998.

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DESCRIPTION OF CAPITAL STOCK

Pursuant to the Company's Certificate of Incorporation, the Company has
authority to issue an aggregate of 50,000,000 shares of capital stock,
consisting of 39,351,376 shares of Class A common stock, par value $0.001 per
share, 5,648,624 shares of Class B common stock, par value $0.001 per share,
and 5,000,000 shares of preferred stock, par value $0.001 per share.

Set forth below is a description of the common stock and the preferred stock
that may be issued under the Company's Certificate of Incorporation.

COMMON STOCK

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

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

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

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

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

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

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Conversion. The shares of Class A common stock are not convertible.

Each share of Class B common stock is convertible into one share of Class A
common stock at any time and from time to time at the option of the holder.
Each share of Class B common stock will automatically convert into one share of
Class A common stock upon the sale or transfer of such share of Class B common
stock to any person other than a nominee of its holder (without a change in
beneficial ownership) or any parent corporation or wholly-owned subsidiary of
such holder. The holders of Class B common stock shall have, upon conversion of
their shares of Class B common stock into shares of Class A common stock, one
vote per share of Class A common stock held.

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

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

Other Provisions. The holders of the Class A common stock and Class B common
stock are not entitled to preemptive rights. There are no redemption provisions
or sinking fund provisions applicable to the Class A common stock or the Class
B common stock.

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

PREFERRED STOCK

Upon consummation of the offering, 5,000,000 shares of undesignated preferred
stock will be authorized, and no shares will be outstanding. The Company's
Board of Directors has the authority to issue preferred stock in one or more
series and to establish the rights, preferences, privileges and restrictions
granted to or imposed on any unissued shares of preferred stock and to fix the
number of shares constituting any series and the designations of such series,
without any further vote or action by the stockholders. The Company's Board of
Directors will have the authority, without approval of the stockholders, to
issue preferred stock that has voting and conversion rights superior to the
common stock, which may affect the voting power of the holders of Class A
common stock and could have the effect of delaying, deferring or preventing a
change in control of the Company. The Company currently has no plans to issue
any shares of preferred stock.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"), an anti-takeover law. In general, the
statute prohibits a publicly-held Delaware corporation from engaging in a
business combination with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes a merger, asset sale or
other transaction

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resulting in a financial benefit to the stockholder. For purposes of Section
203, an "interested stockholder" is defined to include any person that is (i)
the owner of 15% or more of the outstanding voting stock of the corporation,
(ii) an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation, at any time within
three years immediately prior to the relevant date, and (iii) an affiliate or
associate of the persons described in the foregoing clauses (i) or (ii). Under
certain circumstances, Section 203 of the DGCL makes it more difficult for an
"interested stockholder" to effect various business combinations with a
corporation for a three-year period, although stockholders may, by adopting an
amendment to the corporation's certificate of incorporation or bylaws, elect
for the corporation not to be governed by Section 203, effective 12 months
after adoption. Neither the Company's Certificate of Incorporation nor the
Bylaws exempt the Company from the restrictions imposed under Section 203 of
the DGCL. It is anticipated that the provisions of Section 203 of the DGCL may
encourage companies interested in acquiring the Company to negotiate in advance
with the Board of Directors of the Company because the stockholder approval
requirement would be avoided if a majority of the directors then in office
approve either the business combination or the transaction that results in the
stockholder becoming an interested stockholder.

Annual meetings of stockholders shall be held to elect the Board of Directors
of the Company and transact such other business as may be properly brought
before the meeting. Special meetings of stockholders may be called by the
Chairman or the Chief Executive Officer or by a majority of the Board. The
Company's Certificate of Incorporation and Bylaws provide that any action
required or permitted to be taken by the stockholders of the Company may be
effected at a duly called annual or special meeting of the stockholders or may
be taken by a consent in writing by stockholders.

The Company's Certificate of Incorporation may be amended with the approval
of a majority of the Board and the holders of a majority of the Company's
outstanding voting securities.

The number of directors shall be fixed by resolution of the Board. The size
of the Board is currently fixed at seven members. The directors shall be
elected at the annual meeting of the stockholders, except for filling
vacancies. Directors may be removed with the approval of the holders of a
majority of the Company's voting power present and entitled to vote at a
meeting of stockholders. Vacancies and newly-created directorships resulting
from any increase in the number of directors may be filled by a majority of the
directors then in office (although less than a quorum of the full board), a
sole remaining director, or the holders of a majority of the voting power
present and entitled to vote at a meeting of stockholders. In connection with
the combination of TNTI and Modem in December 1996 (the "Modem Combination"),
the Company and TNC agreed to cause the election of the following individuals
to the Board of Directors, subject to certain conditions: (i) each of Messrs.
O'Connell, Ahlers and Allen, so long as they collectively own at least 61% of
the aggregate amount of Class A common stock they received pursuant to the
Modem Combination; (ii) Mr. O'Connell and either Mr. Ahlers or Mr. Allen, so
long as Messrs. O'Connell, Ahlers and Allen collectively own at least 45% of
the aggregate amount of the Class A common stock they received pursuant to the
Modem Combination, and (iii) Mr. O'Connell, so long as Messrs. O'Connell,
Ahlers and Allen collectively own at least 30% of the aggregate amount of Class
A common stock they received pursuant to the Modem Combination.

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

LIMITATION OF LIABILITY; INDEMNIFICATION

The Company's Certificate of Incorporation contains certain provisions
permitted under the DGCL relating to the liability of directors. These
provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in certain circumstances
involving certain wrongful acts, including (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director derives an improper personal

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

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Class A common stock is First
Chicago Trust Company of New York.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Company's
common stock. The Company cannot predict the effect, if any, that sales of
shares of the Class A common stock to the public or the availability of shares
for sale to the public will have on the market price of the Class A common
stock prevailing from time to time. Nevertheless, sales of a significant number
of shares of Class A common stock in the public market, or the perception that
such sales may occur, could adversely affect the prevailing market price of the
Class A common stock.

Upon consummation of this offering, the Company will have 5,023,831 shares of
Class A common stock outstanding (5,413,831 shares if the underwriters' over-
allotment is exercised in full) and 5,648,624 shares of Class B common stock
outstanding. Of the shares outstanding after the offering, the 2,600,000 shares
of Class A common stock sold in the offering will be freely tradeable without
restriction under the Securities Act of 1933, as amended (the "Securities
Act"), except for any such shares which may be acquired by an "affiliate" of
the Company, which shares will be subject to the volume limitations of Rule 144
under the Securities Act. As defined in Rule 144, an "affiliate" of an issuer
is a person who, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such issuer.
Substantially all of the remaining 2,423,831 shares of Class A common stock and
all of the 5,648,624 shares of Class B common stock outstanding will be
"restricted securities" (as that phrase is defined in Rule 144) and may not be
resold in the absence of registration under the Securities Act or pursuant to
an exemption from such registration, including the exemption provided by Rule
144 under the Securities Act. Each share of Class B common stock will
automatically convert into one share of Class A common stock upon the sale or
transfer of such share of Class B common stock to any person other than a
nominee of its holder (without a change in beneficial ownership) or any parent
corporation or wholly-owned subsidiary of such holder.

Subject to the foregoing and to the lock-up agreements described below, under
Rule 144 as currently in effect, beginning 180 days after the date of this
prospectus, holders of restricted securities will be entitled to sell a number
of shares of common stock within any three-month period equal to the greater of
1% of the then outstanding shares of the common stock (approximately 106,725
shares immediately after the offering) or the average weekly reported volume of
trading of the common stock on the Nasdaq National Market during the four
calendar weeks preceding such sale, provided that certain manner of sale and
notice requirements and requirements as to the availability of current public
information concerning the Company are satisfied.

Immediately after the offering, there will be options to purchase
approximately 1,890,542 shares of Class A common stock outstanding. Subject to
the provisions of the lock-up agreements described below, holders of these
options may rely on the resale provisions of Rule 701 under the Securities Act,
which permits nonaffiliates to sell shares without having to comply with the
current public information, holding period, volume limitation or notice
provisions of Rule 144 and permits affiliates to sell their shares without
having to comply with the holding period provision of Rule 144, in each case
beginning 90 days after the consummation of this offering. In addition,
immediately after this offering, the Company intends to file a registration
statement on Form S-8 covering all options granted under the 1997 Stock Plan.
Shares of Class A common stock registered under such registration statement
will, subject to Rule 144 volume limitations applicable to affiliates, be
available for sale in the open market, unless such shares are subject to
vesting restrictions with the Company or the lock-up agreements described
below. See "Management--Stock Plans--1997 Stock Option Plan."

Notwithstanding the foregoing, in connection with this offering, each of the
Company, TNC and its affiliates, and the Company's directors and officers has
agreed that, without the prior written consent of BancBoston Robertson Stephens
Inc. on behalf of the underwriters, during the period ending 180 days after the
date of this prospectus, he, she or it will not directly or indirectly:

. offer to sell, contract to sell, or otherwise sell, dispose of, loan,
pledge, or grant any right with respect to, any shares of common stock or
any securities convertible into or exchangeable for shares of common
stock (whether such shares or any such securities are then owned by such
person or are thereafter acquired directly from the Company).

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The above 180-day restriction does not apply to the following:

. the sale to the underwriters of the shares of common stock under the
underwriting agreement (as described below);

. the issuance of common stock upon the exercise of outstanding options; or

. the issuance of options under existing stock option and incentive plans,
provided such options do not vest prior to the expiration of the 180-day
period referenced above. See "Underwriting."

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UNDERWRITING

The Underwriters named below (the "Underwriters"), acting through their
representatives, BancBoston Robertson Stephens Inc., NationsBanc Montgomery
Securities LLC and Bear, Stearns & Co. Inc. (the "Representatives"), have
severally agreed with the Company, subject to the terms and conditions of the
underwriting agreement, to purchase from the Company the number of shares of
Class A common stock set forth opposite their names below. The Underwriters are
committed to purchase and pay for all such shares if any are purchased.

[Download Table]

NUMBER OF
UNDERWRITER SHARES
----------- ---------

BancBoston Robertson Stephens Inc...............................
NationsBanc Montgomery Securities LLC...........................
Bear, Stearns & Co. Inc.........................................
---------
Total......................................................... 2,600,000
=========

The Representatives have advised the Company that the Underwriters propose to
offer the shares of Class A common stock to the public at the public offering
price set forth on the cover page of this prospectus and to certain dealers at
such price less a concession of not in excess of $ per share, of which
$ may be reallowed to other dealers. After this offering, the public
offering price, concession, and reallowance to dealers may be reduced by the
Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this prospectus. The
Class A common stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any
order in whole or in part.

The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

Over-Allotment Option. The Company has granted to the Underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 390,000 additional shares of Class A common stock at the same
price per share as the Company will receive for the 2,600,000 shares that the
Underwriters have agreed to purchase. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage of such additional shares that the
number of shares of Class A common stock to be purchased by it shown in the
above table represents as a percentage of the 2,600,000 shares offered hereby.
If purchased, such additional shares will be sold by the Underwriters on the
same terms as those on which the 2,600,000 shares are being sold. The Company
will be obligated, pursuant to the option, to sell shares to the extent the
option is exercised. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the shares of Class A
common stock offered hereby. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $35.9 million, $5.0 million and $30.9 million, respectively.

Directed Share Program. At the request of the Company, the Underwriters have
reserved up to shares of Class A common stock to be issued by the Company
and offered hereby for sale, at the initial public offering price, to
directors, officers, employees, business associates and related persons of the
Company. The number of shares of Class A common stock available for sale to the
general public will be reduced to the extent such individuals purchase such
reserved shares. Any reserved shares which are not so purchased will be offered
by the underwriters to the general public on the same basis as the other shares
offered hereby.

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Indemnity. The underwriting agreement contains covenants of indemnity among
the Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.

Lock-Up Agreements. Each officer and director of the Company and certain
other holders of shares of common stock have agreed, during the period ending
180 days after the date of this prospectus ("the lock-up period"), subject to
certain exceptions, not to offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
common stock or any options or warrants to purchase any shares of common stock,
or any securities convertible into or exchangeable for shares of common stock
owned as of the date of this Prospectus or thereafter acquired directly by such
holders or with respect to which they have the power of disposition, without
the prior written consent of BancBoston Robertson Stephens Inc. However,
BancBoston Robertson Stephens Inc. may, in its sole discretion and at any time
without notice, release all or any portion of securities subject to the lock-up
agreement. There are no existing agreements between the Representatives and any
of the Company's stockholders providing consent to the sale of shares prior to
the expiration of the lock-up period.

Future Sales. In addition, the Company has agreed that during the lock-up
period the Company will not, without the prior written consent of BancBoston
Robertson Stephens Inc., subject to certain exceptions, (i) consent to the
disposition of any shares held by stockholders subject to lock-up agreements
prior to the expiration of the lock-up period or (ii) issue, sell, contract to
sell, or otherwise dispose of, any shares of common stock, any options to
purchase any shares of common stock or any securities convertible into,
exercisable for or exchangeable for shares of common stock other than the
Company's sale of shares in this offering, the issuance of common stock upon
the exercise of outstanding options, and the issuance of options under existing
stock option and incentive plans provided such options do not vest prior to the
expiration of the lock-up period. See "Shares Eligible for Future Sale."

Listing. Application has been made to have the Class A common stock approved
for quotation on the Nasdaq National Market under the symbol "MMPT."

No Prior Public Market. Prior to this offering, there has been no public
market for the Company's common stock. Consequently, the public offering price
for the Class A common stock offered by this prospectus will be determined
through negotiations among the Company and the Representatives. Among the
factors to be considered in such negotiations are prevailing market conditions,
certain financial information of the Company, market valuations of other
companies that the Company and the Representatives believe to be comparable to
the Company, estimates of the business potential of the Company, the present
state of the Company's development and other factors deemed relevant.

Stabilization. The Representatives have advised the Company that, pursuant to
Regulation M under the Securities Act, certain persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the Class A common
stock at a level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of Class A common stock on
behalf of the Underwriters for the purpose of fixing or maintaining the price
of the Class A common stock. A "syndicate covering transaction" is the bid for
or the purchase of Class A common stock on behalf of the Underwriters to reduce
a short position incurred by the Underwriters in connection with this offering.
A "penalty bid" is an arrangement permitting the Representatives to reclaim the
selling concession otherwise accruing to an Underwriter or syndicate member in
connection with this offering if the Class A common stock originally sold by
such Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such Underwriter or syndicate member. The Representatives have advised the
Company that such transactions may be effected on the Nasdaq National Market or
otherwise and, if commenced, may be discontinued at any time.

S-1/A 63rd Page of 105 TOC 1st Previous Next ↓Bottom Just 63rd
LEGAL MATTERS

The validity of the shares of Class A common stock offered hereby will be
passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California, and for the underwriters by Davis Polk &
Wardwell, New York, New York.

EXPERTS

The audited financial statements and schedules included in this prospectus
and elsewhere in the registration statement have been audited by Arthur
Andersen LLP, independent public accounts, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form S-
1 (the "Registration Statement") under the Securities Act with respect to the
shares of Class A common stock offered hereby. This prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. Certain items are omitted in accordance with the rules
and regulations of the Commission. For further information with respect to the
Company and the Class A common stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and, in each
instance that a copy of such contract or other document has been filed as an
exhibit to the Registration Statement, reference is made to the exhibit filed,
each such statement being qualified in all respects by such reference. A copy
of the Registration Statement, and the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices located at the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the Registration Statement may be obtained from such offices upon the payment
of the fees prescribed by the Commission. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the site is http://www.sec.gov.

S-1/A 64th Page of 105 TOC 1st Previous Next ↓Bottom Just 64th
INDEX TO FINANCIAL STATEMENTS

[Download Table]

PAGE
----

Modem Media . Poppe Tyson, Inc. and Subsidiaries
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 and
September 30, 1998..................................................... F-3
Consolidated Statements of Operations for the years ended December 31,
1995, 1996 and 1997 and the nine months ended September 30, 1997
(unaudited) and 1998................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1995, 1996 and 1997 and the nine months ended
September 30, 1998..................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997 and the nine months ended September 30, 1997
(unaudited) and 1998................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Modem Media Advertising Limited Partnership
Report of Independent Public Accountants................................ F-22
Balance Sheets as of December 31, 1995 and 1996......................... F-23
Statements of Income for the years ended December 31, 1995 and 1996..... F-24
Statements of Partners' Capital for the years ended December 31, 1995
and 1996............................................................... F-25
Statements of Cash Flows for the years ended December 31, 1995 and
1996................................................................... F-26
Notes to Financial Statements........................................... F-27
PTI Strategic Interactive Marketing Operations
Report of Independent Public Accountants................................ F-30
Balance Sheets as of December 31, 1996 and 1997......................... F-31
Statements of Operations for the years ended December 31, 1996 and
1997................................................................... F-32
Statements of Changes in Equity (Deficit) for the years ended December
31, 1996 and 1997...................................................... F-33
Statements of Cash Flows for the years ended December 31, 1996 and
1997................................................................... F-34
Notes to Financial Statements........................................... F-35

F-1

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After the reorganization transaction discussed in Note 1 to Modem Media . Poppe
Tyson, Inc.'s consolidated financial statements is effected, we expect to be in
a position to render the following audit report.

ARTHUR ANDERSEN LLP
Stamford, Connecticut
November 16, 1998

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Modem Media . Poppe Tyson, Inc.:

We have audited the accompanying consolidated balance sheets of Modem Media .
Poppe Tyson, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1996 and 1997 and September 30, 1998, and the related consolidated statements
of operations, changes in stockholders' equity and cash flows for the years
ended December 31, 1995, 1996 and 1997 and the nine months ended September 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Modem Media . Poppe Tyson,
Inc. and subsidiaries as of December 31, 1996 and 1997 and September 30, 1998,
and the results of their operations and their cash flows for the years ended
December 31, 1995, 1996 and 1997 and the nine months ended September 30, 1998,
in conformity with generally accepted accounting principles.

F-2

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MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

[Download Table]

PRO FORMA
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998 1998
------------ ------------ ------------- -------------
(UNAUDITED)
(SEE NOTE 15)

ASSETS
Current Assets:
Cash................... $ 2,726,000 $ 7,056,000 $ 4,349,000 $ 4,349,000
Accounts receivable,
net of bad debt
reserve of $408,000,
$452,000 and
$578,000,
respectively.......... 6,586,000 7,414,000 11,650,000 11,650,000
Unbilled revenues...... 590,000 1,044,000 987,000 987,000
Unbilled charges....... 650,000 658,000 563,000 563,000
Deferred taxes......... 3,000 303,000 699,000 699,000
Prepaid expenses and
other current
assets................ 154,000 341,000 717,000 717,000
TNC note receivable.... -- -- 2,500,000 2,500,000
------------ ------------ ------------ ------------
Total current
assets.............. 10,709,000 16,816,000 21,465,000 21,465,000
Property and Equipment:
Leasehold
improvements.......... 111,000 239,000 288,000 694,000
Computers and
software.............. 1,316,000 2,240,000 4,343,000 5,078,000
Furniture and other.... 419,000 1,480,000 2,350,000 2,833,000
------------ ------------ ------------ ------------
Total property and
equipment........... 1,846,000 3,959,000 6,981,000 8,605,000
Less: accumulated
depreciation and
amortization.......... (19,000) (1,134,000) (2,454,000) (2,454,000)
------------ ------------ ------------ ------------
Total property and
equipment, net...... 1,827,000 2,825,000 4,527,000 6,151,000
Other Assets:
Goodwill, net of
accumulated
amortization of $0,
$1,666,000 and
$2,974,000,
respectively.......... 32,161,000 31,645,000 33,600,000 33,600,000
Net assets of TNC
Units Held for
Transfer.............. 9,291,000 7,573,000 7,444,000 --
Deferred taxes......... -- 84,000 179,000 179,000
Other assets,
including deferred
offering costs........ 34,000 81,000 967,000 967,000
------------ ------------ ------------ ------------
Total other assets... 41,486,000 39,383,000 42,190,000 34,746,000
------------ ------------ ------------ ------------
Total assets......... $ 54,022,000 $ 59,024,000 $ 68,182,000 $ 62,362,000
============ ============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable....... $ 1,656,000 $ 1,101,000 $ 2,764,000 $ 2,764,000
Pre-billed media....... 1,343,000 3,886,000 3,546,000 3,546,000
Advance billings....... 1,393,000 2,163,000 1,224,000 1,224,000
Deferred revenues...... 174,000 1,616,000 3,066,000 3,066,000
Income taxes payable... 174,000 549,000 661,000 661,000
Current portion of
long-term lease
obligations........... 76,000 342,000 449,000 449,000
Accrued expenses....... 690,000 1,494,000 3,401,000 3,401,000
Due to TNC............. -- 729,000 1,212,000 7,212,000
Due to former Modem
partners.............. 1,564,000 -- -- --
Other current
liabilities........... 211,000 1,667,000 3,251,000 3,251,000
------------ ------------ ------------ ------------
Total current
liabilities......... 7,281,000 13,547,000 19,574,000 25,574,000
Noncurrent Liabilities:
Due to Bozell, non-
interest bearing...... -- 3,346,000 5,275,000 --
Note payable to TNC,
non-interest
bearing............... 6,000,000 6,000,000 6,000,000 --
Deferred taxes......... 29,000 -- -- --
Capital lease
obligations, less
current portion....... 193,000 472,000 507,000 507,000
Other liabilities...... 26,000 41,000 24,000 24,000
Commitments and
contingencies..........
Stockholders' Equity:
Common stock, Class A,
$.001 par value--
39,351,376 shares
authorized, 2,423,831
issued and
outstanding........... 3,000 3,000 3,000 3,000
Common stock, Class B,
$.001 par value--
5,648,624 shares
authorized, 4,839,110
issued and
outstanding........... 5,000 5,000 5,000 6,000
Preferred stock, $.001
par value--5,000,000
shares authorized,
none issued and
outstanding........... -- -- -- --
Paid-in capital........ 43,588,000 44,828,000 47,273,000 46,727,000
Accumulated deficit.... (3,103,000) (9,192,000) (10,498,000) (10,498,000)
Accumulated other
comprehensive
income................ -- (26,000) 19,000 19,000
------------ ------------ ------------ ------------
Total stockholders'
equity.............. 40,493,000 35,618,000 36,802,000 36,257,000
------------ ------------ ------------ ------------
Total liabilities and
stockholders'
equity.............. $ 54,022,000 $ 59,024,000 $ 68,182,000 $ 62,362,000
============ ============ ============ ============

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

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MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

[Enlarge/Download Table]

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)

Revenues................ $ 438,000 $ 2,093,000 $25,497,000 $18,025,000 $30,397,000
Costs and Expenses:
Salaries and
benefits............. 308,000 1,322,000 15,894,000 11,187,000 20,793,000
Office and general.... 215,000 712,000 9,038,000 6,162,000 10,309,000
Amortization of
goodwill............. -- -- 1,666,000 1,249,000 1,308,000
Operating results of
TNC Units Held for
Transfer............. 1,766,000 1,309,000 2,180,000 1,600,000 13,000
----------- ----------- ----------- ----------- -----------
Total costs and
expenses........... 2,289,000 3,343,000 28,778,000 20,198,000 32,423,000
Operating Loss.......... (1,851,000) (1,250,000) (3,281,000) (2,173,000) (2,026,000)
Interest Expense, Net... -- -- (76,000) (62,000) (5,000)
----------- ----------- ----------- ----------- -----------
Loss before Income
Taxes.................. (1,851,000) (1,250,000) (3,357,000) (2,235,000) (2,031,000)
(Benefit) Provision for
Income Taxes........... (873,000) (548,000) (248,000) (246,000) 57,000
----------- ----------- ----------- ----------- -----------
Net Loss................ $ (978,000) $ (702,000) $(3,109,000) $(1,989,000) $(2,088,000)
=========== =========== =========== =========== ===========
Pro forma basic and
diluted net loss per
share.................. $ (0.12) $ (0.09) $ (0.39) $ (0.25) $ (0.26)
=========== =========== =========== =========== ===========
Pro forma weighted-
average number of
common shares
outstanding............ 8,072,000 8,072,000 8,072,000 8,072,000 8,072,000
=========== =========== =========== =========== ===========

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

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MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

[Enlarge/Download Table]

COMMON STOCK ACCUMULATED
------------- ACCUMULATED OTHER TOTAL
CLASS CLASS PAID-IN EARNINGS/ COMPREHENSIVE STOCKHOLDERS'
A B CAPITAL (DEFICIT) INCOME EQUITY
------ ------ ----------- ------------ ------------- -------------

Balance as of December
31, 1994............... $ -- $ -- $ -- $ 256,000 $ -- $ 256,000
Comprehensive income:
Net loss.............. -- -- -- (978,000) -- (978,000)
-----------
Total comprehensive
income............. (978,000)
Dividends............... -- -- -- (124,000) -- (124,000)
------ ------ ----------- ------------ -------- -----------
Balance as of December
31, 1995............... -- -- -- (846,000) -- (846,000)
Comprehensive income:
Net loss.............. -- -- -- (702,000) -- (702,000)
-----------
Total comprehensive
income............. (702,000)
Acquisition of Modem.... 3,000 5,000 35,134,000 -- -- 35,142,000
Forgiveness of
intercompany
borrowings............. -- -- 8,454,000 -- -- 8,454,000
Dividends............... -- -- -- (1,555,000) -- (1,555,000)
------ ------ ----------- ------------ -------- -----------
Balance as of December
31, 1996............... 3,000 5,000 43,588,000 (3,103,000) -- 40,493,000
Comprehensive income:
Net loss.............. -- -- -- (3,109,000) -- (3,109,000)
Foreign currency
translation
adjustment........... -- -- -- -- 8,000 8,000
-----------
Total comprehensive
income............. (3,101,000)
-----------
Acquisition of PTI
Strategic Interactive
Marketing Operations... (2,980,000) (34,000) (3,014,000)
Payment to former Modem
partners............... -- -- 1,150,000 -- -- 1,150,000
Other, net.............. -- -- 90,000 -- -- 90,000
------ ------ ----------- ------------ -------- -----------
Balance as of December
31, 1997............... 3,000 5,000 44,828,000 (9,192,000) (26,000) 35,618,000
Comprehensive income:
Net loss.............. -- -- -- (2,088,000) -- (2,088,000)
Foreign currency
translation
adjustment........... -- -- -- -- 45,000 45,000
-----------
Total comprehensive
income............. (2,043,000)
-----------
Payment to former Modem
partners............... -- -- 3,263,000 -- -- 3,263,000
Other, net.............. -- -- (818,000) 782,000 -- (36,000)
------ ------ ----------- ------------ -------- -----------
Balance as of September
30, 1998............... $3,000 $5,000 $47,273,000 $(10,498,000) $ 19,000 $36,802,000
====== ====== =========== ============ ======== ===========

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

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MODEM MEDIA, POPPE TYSON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Enlarge/Download Table]

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------------- --------------------------
1995 1996 1997 1997 1998
---------- ----------- ------------ ------------ ------------
(UNAUDITED)

Cash flows from
operating activities:
Net loss............... $ (978,000) $ (702,000) $ (3,109,000) $ (1,989,000) $ (2,088,000)
Adjustments to
reconcile net loss to
net cash (used in)
provided by operating
activities:
Depreciation.......... 4,000 15,000 1,189,000 827,000 1,165,000
Amortization of
goodwill............. -- -- 1,666,000 1,249,000 1,308,000
Provision for doubtful
accounts............. -- -- 517,000 150,000 251,000
Loss on disposal of
equipment............ -- -- 98,000 -- 155,000
Changes in assets and
liabilities:
Accounts receivable.. (606,000) (1,692,000) (568,000) 1,206,000 (4,487,000)
Unbilled revenues.... -- (76,000) (454,000) (582,000) 57,000
Unbilled charges..... (123,000) (52,000) 38,000 (350,000) 95,000
Prepaid expenses and
other current
assets.............. -- -- (125,000) (174,000) (376,000)
Accounts payable and
other current
liabilities......... 129,000 (347,000) 535,000 436,000 3,247,000
Pre-billed media..... -- -- 2,543,000 (1,343,000) (340,000)
Advance billings..... -- 428,000 770,000 (1,110,000) (939,000)
Deferred revenues.... 89,000 (76,000) 1,442,000 3,620,000 1,450,000
Income taxes
payable............. (37,000) 210,000 375,000 424,000 112,000
Accrued expenses..... -- 378,000 196,000 840,000 1,907,000
Deferred taxes....... -- (135,000) (413,000) (99,000) (491,000)
Other, net........... -- 1,000 (22,000) 47,000 (896,000)
Net assets of TNC
Units Held for
Transfer............ 1,215,000 (1,635,000) 1,718,000 1,090,000 129,000
---------- ----------- ------------ ------------ ------------
Net cash (used in)
provided by
operating
activities......... (307,000) (3,683,000) 6,396,000 4,242,000 259,000
Cash flows from
investing activities:
Purchase of property
and equipment......... (27,000) (139,000) (1,324,000) (923,000) (2,591,000)
Cash of acquired
companies............. -- 2,723,000 147,000 -- --
---------- ----------- ------------ ------------ ------------
Net cash (used in)
provided by
investing
activities......... (27,000) 2,584,000 (1,177,000) (923,000) (2,591,000)
Cash flows from
financing activities:
Funding from parent
company............... 458,000 5,380,000 729,000 (332,000) (88,000)
Dividends paid to TNC.. (124,000) (1,555,000) -- -- --
Distributions to former
Modem partners........ -- -- (1,564,000) (1,564,000) --
Principal payments made
under capital lease
obligations........... -- -- (143,000) (96,000) (289,000)
Other, net............. -- -- 89,000 88,000 2,000
---------- ----------- ------------ ------------ ------------
Net cash provided by
(used in) financing
activities......... 334,000 3,825,000 (889,000) (1,904,000) (375,000)
---------- ----------- ------------ ------------ ------------
Net increase (decrease)
in cash................ -- 2,726,000 4,330,000 1,415,000 (2,707,000)
Cash, at beginning of
period................. -- -- 2,726,000 2,726,000 7,056,000
---------- ----------- ------------ ------------ ------------
Cash, at end of period.. $ -- $ 2,726,000 $ 7,056,000 $ 4,141,000 $ 4,349,000
========== =========== ============ ============ ============

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

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MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Modem Media . Poppe Tyson, Inc. ("MMPT" or the "Company") was formed by True
North Communications Inc. ("TNC") in 1996 to combine certain of TNC's strategic
interactive marketing and web site design and maintenance units with Modem
Media Advertising Limited Partnership ("Modem") in a business combination
accounted for under the purchase method (see Note 3). Accordingly, Modem has
been reflected in the MMPT financial statements since December 31, 1996. Modem
is a predecessor entity of MMPT, and its financial statements as of and for the
years ended December 31, 1995 and 1996 are included elsewhere in the
registration statement. The Company's name was changed from TN Technologies
Inc. to Modem Media . Poppe Tyson, Inc. in November 1998.

Effective October 1, 1998, the Company acquired the strategic interactive
marketing operations of Poppe Tyson Inc. (the "PTI Strategic Interactive
Marketing Operations") from TNC in exchange for certain of the Company's
subsidiaries and operations (the "TNC Units Held for Transfer") and an
aggregate of 809,514 shares of Class B common stock (the "Combination") (see
Note 15). The PTI Strategic Interactive Marketing Operations consist of the
strategic interactive marketing operations of Poppe Tyson Inc. ("PTI") in the
United Kingdom, Hong Kong and the U.S., and certain fixed assets. The
historical financial results of the PTI Strategic Interactive Marketing
Operations have been prepared on a carved-out basis, and are included in the
Consolidated Financial Statements of the Company from December 31, 1997, the
date of the merger of Bozell with TNC. All adjustments necessary for the fair
presentation of the consolidated financial statements related to the PTI
Strategic Interactive Marketing Operations are reflected herein. The
accumulated deficit arising from the operating results of the PTI Strategic
Interactive Marketing Operations is reflected as a reduction in paid-in capital
in the accompanying consolidated balance sheets at September 30, 1998. The PTI
Strategic Interactive Marketing Operations are a predecessor entity of the
Company, and their financial statements as of and for the years ended December
31, 1996 and 1997 are included elsewhere in the registration statement.

PTI was formed in December 1985 as a subsidiary of Bozell, Jacobs, Kenyon &
Eckhardt, Inc. ("Bozell"), which was acquired by TNC in December 1997 in a
business combination accounted for under the pooling-of-interests method. PTI
includes the strategic interactive marketing operations and website production
and maintenance businesses of Bozell.

Prior to undertaking the Combination, Company and TNC management agreed that
the value of the TNC Units Held for Transfer would be optimized under TNC
management, as the strategic focus of the underlying businesses would not be
complementary to the Company. TNC and the Company have analyzed the future cash
flows of the TNC Units Held for Transfer and believe the investment is fully
realizable at this time. Because the Combination occurred among TNC and
majority-owned, controlled subsidiaries, the transaction has been recorded at
historical cost as of December 31, 1997, the date upon which the Company and
the PTI Strategic Interactive Marketing Operations came under common control.

In contemplation of the Combination effected as of October 1, 1998, the net
assets of the TNC Units Held for Transfer have been presented as one line on
the face of the historical balance sheets in a manner similar to that of assets
held for sale. Similarly, the pre-tax results of the TNC Units Held for
Transfer have been presented as one line in the historical statements of
operations.

Summarized financial data of the TNC Units Held for Transfer are as follows:

[Enlarge/Download Table]

Revenues................ $11,001,000 $18,401,000 $16,766,000 $12,598,000 $10,140,000
Costs and expenses...... 12,766,000 19,663,000 18,652,000 14,125,000 10,019,000
Loss before income
taxes.................. (1,766,000) (1,309,000) (2,180,000) (1,600,000) (13,000)
Net loss................ (930,000) (751,000) (1,718,000) (1,096,000) (129,000)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

[Download Table]

DECEMBER 31,
----------------------- SEPTEMBER 30,
1996 1997 1998
----------- ----------- -------------
(UNAUDITED)

Current assets......................... $ 7,590,000 $10,378,000 $10,089,000
Goodwill, net.......................... 6,212,000 5,893,000 5,686,000
Total assets........................... 18,255,000 19,845,000 19,444,000
Current liabilities.................... 6,881,000 4,119,000 5,251,000
Total liabilities...................... 8,964,000 12,272,000 12,000,000
Net assets............................. 9,291,000 7,573,000 7,444,000

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations--The Company has been a leading provider of digital
interactive marketing solutions since 1987. By developing marketing programs
that incorporate advanced communications technologies, the Company enables its
clients to establish, retain and manage customer relationships. The Company's
marketing programs include the design and implementation of electronic business
programs that enable its clients to support and leverage their world class
brands. The Company combines its substantial expertise in strategic marketing,
creative design and digital technology to deliver, on a worldwide basis, a
complete range of digital interactive marketing services, including strategic
consulting and research, e-business implementation (including electronic
commerce and electronic consumer care services), interactive advertising and
promotions, and data collection analysis. The Company's marketing programs are
designed to enable its clients to target narrowly-defined market segments,
provide their customers with detailed product and service information, sell
products and services and provide post-sale customer support electronically,
and offer ongoing marketing programs. Marketing programs developed by the
Company are delivered primarily through the Internet. The Company has
operations in the United States, Canada, Hong Kong and the United Kingdom.

The Company is in the process of completing an initial public offering and,
as such, is subject to certain risk factors including: history of operating
losses; variability of operating results; dependence on key clients; and
integration of separate businesses. All of these risk factors are described in
detail under "Risk Factors."

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

Interim Financial Statements--The consolidated balances as of and for the
nine months ended September 30, 1997 are unaudited. The unaudited consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of its operating results. The operating results for the nine
months ended September 30, 1997 and 1998 are not necessarily indicative of the
results to be expected for any other interim period or any future fiscal year.

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

Revenue Recognition and Billing--A majority of the Company's revenues are
derived from fixed-fee contracts. Revenues are recognized as services are
rendered. Unbilled revenues represent labor costs incurred and estimated
earnings in excess of billings. Unbilled charges represent production and other
client reimbursable out-of-pocket costs in excess of billings. Revenue is
reported net of such reimbursable costs. Pre-billed media represents amounts
billed to customers for media placement in advance of the advertisements being
placed. Advanced billings represent billings of production and other client
reimbursable out-of-pocket

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

costs in excess of those incurred. Amounts billed to clients in excess of
revenues recognized to date are classified as deferred revenues. Provisions for
estimated losses on uncompleted projects are made in the period in which such
losses are determinable.

Business Concentrations and Credit Risk--The Company's services have been
provided to a limited number of clients located worldwide in a variety of
industries. The Company had revenues from five clients during the year ended
December 31, 1997 and the nine months ended September 30, 1997 and 1998 that
accounted for 65.5%, 64.9% and 54.8% of total revenues, respectively. No one
client accounted for more than 10% of revenues during the years ended December
31, 1995 or 1996.

The Company is subject to a concentration of credit risk with respect to its
accounts receivable. One customer accounted for 28.4% and 16.4% of accounts
receivable as of December 31, 1996 and 1997, respectively, and two customers
accounted for 38.9% of accounts receivable as of September 30, 1998.

Property and Equipment--Property and equipment are stated at cost and are
depreciated, principally using the straight-line method, over their estimated
useful lives of three to five years for computers and software, and five to
twelve years for furniture and other. Purchased software and third-party costs
incurred to develop software for internal use are capitalized and amortized
principally over three years. Leasehold improvements are amortized over the
lesser of their estimated useful lives or the remaining lease term. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of, the Company reviews its recorded property and equipment for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable and provides currently for
any identified impairments. In conjunction with the transactions that occurred
effective October 1, 1998 (see Note 1), the Company performed a physical
inventory of property and equipment at certain international locations. As a
result of such inventory, the Company recorded a non-cash impairment loss of
$154,000 during the third quarter of 1998.

Income Taxes--Modem and TNC have certain tax-sharing arrangements that are
described in Note 10. The Company accounts for income taxes under the liability
method in accordance with SFAS No. 109, Accounting for Income Taxes. In
accordance with such standard, the provision for income taxes includes deferred
income taxes resulting from items reported in different periods for income tax
and financial statement purposes. Deferred tax assets and liabilities represent
the expected future tax consequences of the differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. The effects of changes in tax rates on deferred tax
assets and liabilities are recognized in the period that includes the enactment
date.

Goodwill--Goodwill represents acquisition costs in excess of the fair value
of tangible net assets of purchased subsidiaries and is amortized using the
straight-line method over 20 years. Carrying values are periodically reviewed
for impairment and adjusted, if necessary, based upon current facts and
circumstances and management's estimates of undiscounted future cash flows from
the related businesses.

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

Pro Forma Net Loss Per Share--In accordance with SFAS No. 128, Earnings Per
Share, pro forma basic net loss per share is computed using the weighted-
average number of common shares of MMPT outstanding upon consummation of the
transaction with TNC effective as of October 1, 1998 (see Note 1). On ,
the Company's Board of Directors approved a 0.95-for-1 reverse split of the
Company's outstanding common stock. Accordingly, all historical weighted-
average share and per-share amounts have been restated to reflect the reverse
stock split. Net loss per share has been presented on a pro forma basis as if
8,072,000 shares of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

common stock of the Company had been outstanding during all periods presented.
Pro forma diluted net loss per share gives effect to all potential dilutive
securities that were outstanding during the period. The Company had a net loss
for all periods presented herein; therefore, none of the options outstanding
during each of the periods presented were included in the computations of pro
forma diluted loss per share as they were antidilutive. See Note 6 for the
details of options outstanding.

Proposed Public Offering--In connection with its contemplated initial public
offering of securities, the Company has incurred approximately $750,000 in
offering-related costs that are being deferred until the consummation of the
offering, at which time they will be charged against paid-in capital. If the
offering is not consummated, the deferred costs will be expensed.

Foreign Currency Translation--The Company's financial statements were
prepared in accordance with the requirements of SFAS No. 52, Foreign Currency
Translation. Under this method, net foreign currency transaction gains (losses)
are included in the accompanying consolidated statements of operations. Such
gains (losses) were immaterial for the years ended December 31, 1996 and 1997
and the nine months ended September 30, 1997 and 1998. The Company had no
foreign currency transaction gains (losses) during the year ended December 31,
1995.

Comprehensive Income--The Company reflects its comprehensive income, such as
unrealized gains or losses on the Company's foreign currency translation
adjustments, as a separate component of stockholders' equity as required by
SFAS No. 130, Reporting Comprehensive Income. There were no other items of
comprehensive income during these periods.

Recently Issued Accounting Standard--In June 1997, the Financial Accounting
Standards Board issued SFAS No. 131, Disclosure About Segments of an Enterprise
and Related Information. SFAS No. 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. The
statement also establishes standards for related disclosure about products and
services, geographic areas, and major customers. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997, but, it is not required to be
applied to interim financial statements in the initial year of adoption.
Therefore, the Company will adopt the new requirements retroactively in its
annual consolidated financial statements for the year ended December 31, 1998.
The Company currently believes that it operates in one segment and that the
adoption of SFAS No. 131 will not materially affect the Company's current
disclosure of geographic information (see Note 11).

3. ACQUISITIONS

On December 31, 1996, TNC, through the Company, acquired a 64% interest in
Modem for $32,590,000. The consideration was comprised of $24,387,000 in common
stock of TNC and a 36% interest in certain operations of the Company valued at
$8,203,000 by independent appraisal experts. In addition, TNC is obligated to
make cash payments of up to $19,000,000 (reduced by the payments discussed
below) and issue $4,000,000 in shares of TNC common stock to the former owners
of Modem upon completion of an initial public offering of common stock and/or
certain other events. TNC contributed its interests in Modem to the Company in
exchange for shares of Class B common stock. The remaining interests in Modem
were contributed by its former owners to the Company in exchange for shares of
Class A common stock. The above transactions resulted in TNC holding 4,839,110
shares of Class B common stock of the Company and the former owners of Modem
holding 2,415,646 shares of Class A common stock of the Company at December 31,
1996. Assets acquired, liabilities assumed and intercompany indebtedness
forgiven by TNC in this transaction were $42,300,000, $7,158,000 and
$8,454,000, respectively, and are reflected in the accompanying consolidated
balance sheets. The difference between the initial purchase price and the fair
value of assets acquired of approximately $32,161,000, excluding costs of the
transaction, has been allocated to goodwill by the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Additional payments made will be allocated to the cost in excess of the fair
value of tangible net assets acquired and amortized by the Company over the
remaining life of the assets. The acquisition agreement also requires
additional payments contingent on future earnings to be made in the event that
an initial public offering has not occurred, which payments thereby reduce the
aforementioned $19,000,000 obligation. Pursuant to the agreement, payments
aggregating $1,150,000 and $3,263,000 were made to the former owners in
February 1997 and May 1998, respectively, resulting in a corresponding increase
in goodwill.

Effective October 1, 1998, the Company purchased the PTI Strategic
Interactive Marketing Operations in exchange for the TNC Units Held for
Transfer and 809,514 shares of stock of the Company (see Note 1). The PTI
Strategic Interactive Marketing Operations consist of the strategic interactive
marketing operations of PTI in the United Kingdom, Hong Kong and the U.S., and
certain fixed assets. Assets acquired and liabilities assumed by the Company in
this transaction were $1,565,000 and $4,579,000, respectively, and are
reflected in the accompanying consolidated balance sheets as of December 31,
1997, the date upon which the Company and the PTI Strategic Interactive
Marketing Operations came under common control.

The following information reflects pro forma statements of operations data
for the years ended December 31, 1995, 1996, and 1997 assuming the acquisitions
of Modem and the PTI Strategic Interactive Marketing Operations were
consummated on January 1, 1995 (see Note 1).

[Enlarge/Download Table]

PTI STRATEGIC
INTERACTIVE
THE MARKETING PRO FORMA
COMPANY MODEM OPERATIONS ADJUSTMENTS COMBINED
----------- ----------- ------------- ----------- -----------

YEAR ENDED DECEMBER 31,
1995
Revenues................ $ 438,000 $11,718,000 $ -- $ -- $12,156,000
(Loss) income before
income taxes........... (1,851,000) 3,960,000 -- (1,666,000) 443,000
Net (loss) income....... (978,000) 3,960,000 -- (3,329,000) (347,000)
Basic net loss per
common share........... (.04)
YEAR ENDED DECEMBER 31,
1996
Revenues................ $ 2,093,000 $18,102,000 $ 126,000 $ -- $20,321,000
(Loss) income before
income taxes........... (1,250,000) 137,000 (480,000) (1,666,000) (3,259,000)
Net (loss) income....... (702,000) 137,000 (480,000) (1,723,000) (2,768,000)
Basic net loss per
common share........... (.34)
YEAR ENDED DECEMBER 31,
1997
Revenues................ $25,497,000 $ -- $ 3,925,000 $ -- $29,422,000
Loss before income
taxes.................. (3,357,000) -- (2,648,000) -- (6,005,000)
Net loss................ (3,109,000) -- (2,500,000) -- (5,609,000)
Basic net loss per
common share........... (.70)

The pro forma adjustments above reflect the annual amortization expense on
approximately $33,000,000 in goodwill, over a useful life of 20 years, that
would have resulted from the acquisition of Modem were it to have occurred on
January 1, 1995 and the tax provision that would have been recorded on the
earnings of Modem had it ceased existing as a limited partnership as of such
date.

4. DEBT

Restrictions on Indebtedness--Pursuant to certain agreements between TNC and
its lenders, the Company is subject to certain limitations on indebtedness.
Such limitations could adversely affect the Company's ability to secure debt
financing in the future.

Lines of Credit--In June 1997, Modem increased its bank line of credit from
$1,000,000 to $2,000,000 and the facility subsequently expired in June 1998. No
borrowings were outstanding under this line of credit as of the balance sheet
dates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Interest Expense--The Company incurred interest expense on all borrowings,
including those from related parties, of $0, $0 and $119,000 for the years
ended December 31, 1995, 1996 and 1997, and $76,000 and $117,000 for the nine
months ended September 30, 1997 and 1998, respectively. Related party interest
expense in the respective totals above are $0, $0, $46,000, $24,000 and
$32,000.

5. EQUITY

Pursuant to the Company's Amended and Restated Certificate of Incorporation
(see Note 15), the Company has authority to issue an aggregate of 50,000,000
shares of capital stock, consisting of 39,351,376 shares of Class A common
stock, par value $.001 per share, 5,648,624 shares of Class B common stock, par
value $.001 per share, and 5,000,000 shares of undesignated preferred stock,
par value $.001 per share.

Common Stock--The shares of Class A common stock and Class B common stock are
identical in all respects, except for voting rights and certain conversion
rights. Each share of Class A common stock outstanding is entitled to one vote
on all matters submitted to a vote of the Company's stockholders, including the
election of directors, and each share of Class B common stock entitles the
holder to five votes on each such matter. TNC owns, directly or indirectly, all
of the outstanding shares of Class B common stock. Except as required by
applicable law, holders of Class A common stock and Class B common stock vote
together as a single class on all matters submitted to a vote of the
stockholders of the Company. There is no cumulative voting in the election of
directors.

The shares of Class A common stock are not convertible. The shares of Class B
common stock are convertible into shares of Class A common stock, in whole or
in part, at any time at the option of the holder, into an equal number of
shares of Class A common stock. Each share of Class B common stock will also
automatically convert into one share of Class A common stock upon the sale or
transfer of such share of Class B common stock to any person other than a
nominee of such holder (without a change in beneficial ownership) or any parent
corporation or wholly-owned subsidiary of such holder. The holders of Class B
common stock shall have, upon conversion of their shares of Class B common
stock into shares of Class A common stock, one vote per share of Class A common
stock held on all matters submitted to a vote of the Company's stockholders.

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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

6. STOCK-BASED COMPENSATION PLAN

The Company has established various stock option plans for its officers,
directors, key employees and consultants. Options to purchase 345,244 shares of
Class A common stock that vested immediately and expire on September 30, 2006
were issued under the Modem Media Advertising Limited Partnership 1996 Option
Plan at an exercise price of $0.64 per share. The TN Technologies, Inc. 1997
Stock Option Plan provides for up to 1,140,000 shares of Class A common stock
to be issued at an exercise price of at least 100% of the fair market value of
the stock on the date of grant as determined by the Board of Directors. On
December 11, 1998, the number of shares authorized to be optioned under the
plan was increased to 3,040,000 (see Note 15). These options expire ten years
after the date of grant with 20% vesting on the date of grant and the remainder
vesting at an additional 20% on each anniversary thereof.

The Company utilizes the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, and applies APB No. 25 and related
interpretations in accounting for its stock option plan. Under APB No. 25,
because the exercise prices of the Company's employee stock options are equal
to the market prices of the underlying Company stock on the date of grant, no
compensation expense is recognized. If compensation expense for stock options
awarded under the Company's plans had been determined consistent with SFAS No.
123, the Company's net loss and net loss per share would have been reduced to
the following pro forma amounts:

[Download Table]

DECEMBER 31,
---------------------- SEPTEMBER 30,
1996 1997 1998
--------- ----------- -------------

Net loss:
As reported......................... $(702,000) $(3,109,000) $(2,088,000)
Pro forma (709,000) (4,077,000) (2,602,000)
Basic and diluted loss per share:
As reported......................... $ (0.09) $ (0.39) $ (0.26)
Pro forma........................... (0.09) (0.51) (0.32)

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

The following is a summary of the activity under the Company's stock option
plans for each annual period presented:

[Download Table]

DECEMBER 31,
---------------------------------
1996 1997
---------------- ----------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------- -------- ------- --------

Outstanding at the beginning of the
year.................................... -- $ -- 355,608 $ 0.96
Granted.................................. 355,608 0.96 694,187 11.58
Exercised................................ -- -- 7,714 11.58
Forfeited................................ -- -- 73,861 11.37
------- -------
Outstanding at the end of the year....... 355,608 968,220
------- -------
Exercisable at the end of the year....... 347,317 472,924
------- -------
Weighted average fair value of options
granted................................. $8.28 $ 8.37
===== ======

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following is a summary of the activity under the Company's stock option
plans for the nine months ended September 30, 1998:

[Download Table]

WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------- --------

Outstanding at the beginning of the period.................. 968,220 $ 7.69
Granted..................................................... 66,171 11.58
Exercised................................................... 3,703 0.64
Forfeited................................................... 62,518 11.58
-------
Outstanding at the end of the period........................ 968,170
=======
Exercisable at the end of the period........................ 574,911
=======
Weighted average fair value of options granted.............. $10.54
======

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

[Download Table]

NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- ----------------
1996 1997 1997 1998
-------- ------- ------- --------

Risk-free interest rate.................... 6.44% 6.75% 6.79% 5.15%
Expected life.............................. 10 years 9 years 9 years 10 years
Expected volatility........................ -- 52.77% 52.57% 98.99%
Expected dividend yield.................... -- -- -- --

The following table summarizes information regarding the Company's stock
options outstanding and exercisable as of September 30, 1998:

[Download Table]

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------- --------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICE SHARES LIFE PRICE SHARES PRICE
-------------- ------- ----------- -------- --------- ----------

$0.64...................... 340,128 8 years $ 0.64 340,128 $ 0.64
$11.58..................... 628,042 9 years $ 11.58 234,783 $ 11.58

7. RELATED PARTY TRANSACTIONS

Administrative Services Agreement. Under an Administrative Services
Agreement, TNC will provide various administrative functions and other services
to the Company, including tax preparation, insurance, treasury, corporate
support, legal, and debt and lease guarantees. During the period in which TNC
performs administrative functions for the Company, expenses associated with
such functions will be charged to the Company based on rates and estimates set
forth on schedules attached to the Administrative Services Agreement. The
Company may terminate this agreement at any time upon 90 days' prior written
notice, and TNC may terminate the agreement 12 months following the
Combination, but must give 180 days' written notice of such intent to
terminate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Intercompany Credit Arrangements. The Company and TNC are parties to certain
intercompany credit agreements. In August 1998, TNC extended a credit facility
to the Company allowing for revolving borrowings in the amount of up to $3.0
million to be outstanding at any given time. The credit facility with TNC
expires two years from the date of completion of the initial public offering,
or sooner upon the occurrence of certain events. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources." The Company has agreed to provide advances to TNC from time
to time upon TNC's request and subject to the Company's discretion. Such
advances are due on demand and bear interest at 5.75% per annum. At September
30, 1998, an aggregate of $2.5 million was outstanding under such advances.

Parent Company Allocations--TNC charges each of its operating units for
general corporate expenses incurred at the parent company level, including
costs to administer certain employee benefit plans (see also Note 8); legal,
accounting and treasury services; use of office facilities; and other services
for certain operations. The amount of the charge is primarily based on its
budgeted revenue. These charges amounted to approximately $0, $262,000 and
$291,000 for the years ended December 31, 1995, 1996 and 1997, respectively,
and approximately $229,000 and $308,000 for the nine months ended September 30,
1997 and 1998, respectively, and are included in office and general expenses in
the consolidated statements of operations. TNC ceased charging allocations to
the Company as of June 30, 1998, as the Company has taken on responsibility for
the majority of the functions that generate the aforementioned corporate
expenses. The Company expects that it may incur increased expenses associated
with being a public company.

Parent Company Guarantees--Commencing on July 1, 1998, TNC has guaranteed
payment on behalf of the Company under certain operating and other leases at a
fee of 0.5% of the amount guaranteed.

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

TNC Note Receivable--On May 26, 1998, the Company entered into an agreement
to loan up to $3,000,000 to TNC under a demand note facility. The Company
receives payments from TNC under such facility from time to time, as requested.
The loan bears interest at 5.75% per annum, payable quarterly, unless the
parties agree upon other arrangements. The principal amount outstanding under
the facility is due and payable at termination of the agreement, which may be
effected at either party's sole discretion upon one business day's written
notice. The outstanding balance under this facility is $2,500,000 as of
September 30, 1998 and is reflected as TNC Note Receivable in the accompanying
consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Due from/to Bozell--Amounts remitted to, and borrowed from, Bozell to fund
operations are non-interest bearing. Amounts owed to Bozell as of the date of
the reorganization will be contributed to paid-in capital. Accordingly, the
balances outstanding as of December 31, 1997 and September 30, 1998 have been
reflected as noncurrent liabilities in the accompanying consolidated balance
sheets.

Due to TNC--On December 31, 1996, the Company entered into a one-year
agreement with TNC, whereby TNC provided the Company with a credit facility.
The agreement has been extended indefinitely beyond the initial one-year term
by mutual consent and under the terms outlined hereafter. The Company receives
advances from TNC under the facility from time to time, as requested. Prior to
1998, outstanding borrowings bore interest at LIBOR plus .75%, which was due
monthly. All accrued interest is due and payable upon termination of the
agreement. In 1998, TNC ceased charging interest to the Company under this
facility. The outstanding balances at December 31, 1997 and September 30, 1998
were $6,659,000 and $7,152,000, respectively, including $5,930,000 and
$5,940,000 included in the net assets of the TNC Units Held for Transfer as of
such dates, respectively. Future payments under this facility will be made at
the option of the Company or on demand. At December 31, 1997 and September 30,
1998, $729,000 and $1,212,000, respectively, are reflected as Due to TNC in the
accompanying consolidated balance sheets.

Due to Former Modem Partners--In December 1996, prior to the acquisition by
TNC, the partners of Modem declared a distribution of $1,564,000, which was
paid in cash on January 2, 1997.

Note Payable to TNC--On December 31, 1996, TNC capitalized intercompany
payables of $8,454,000 from the Company to TNC into equity, including
$6,394,000 recorded in the balance sheets of the TNC Units Held for Transfer.
The remaining $6,000,000 intercompany payables became a noncurrent obligation,
payable by the Company upon completion of an initial public offering.

8. EMPLOYEE BENEFIT PLANS

The Company maintains a profit-sharing plan with a 401(k) feature for the
benefit of its eligible employees. There is no minimum length of service
required to participate in the plan and employees of the Company are eligible
to begin participation on designated quarterly enrollment dates provided that
they have reached 21 years of age. The Company makes annual matching and/or
profit-sharing contributions to the plan at its discretion. In addition,
certain employees of the Company have participated in other similar defined
contribution plans. Such employees subsequently became participants of the
aforementioned profit-sharing plan. Aggregate cost of contributions made by the
Company to all employee benefit plans were $0, $0 and $40,000 during the years
ended December 31, 1995, 1996 and 1997, respectively, and $31,000 and $156,000
during the nine months ended September 30, 1997 and 1998, respectively.

The Company intends to adopt a 1999 Employee Stock Purchase Plan effective
upon the completion of its initial public offering.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

Information Systems--In April 1998, the Company entered into a contract for
the replacement of its financial accounting systems. The cost of such systems,
which will be capitalized and amortized over five years, will be approximately
$1,600,000, of which $800,000 has been incurred as of September 30, 1998. The
project's completion is expected during the second quarter of 1999.

Lease Obligations--The Company leases its office facilities and certain
equipment under both operating and capital leases, the expirations of which
extend through 2008. Future minimum lease payments under noncancellable leases
with lease terms in excess of one year as of December 31, 1997 and September
30, 1998, are as follows:

[Download Table]

DECEMBER 31, SEPTEMBER 30,
1997 1998
--------------------- -----------------------
CAPITAL OPERATING CAPITAL OPERATING
--------- ---------- ---------- -----------

1998......................... $ 390,000 $1,560,000 $ 101,000 $ 461,000
1999......................... 328,000 1,660,000 437,000 2,916,000
2000......................... 140,000 1,328,000 252,000 2,584,000
2001......................... 68,000 976,000 140,000 2,232,000
2002......................... 42,000 386,000 117,000 1,641,000
Thereafter................... -- -- 36,000 7,450,000
--------- ---------- ---------- -----------
968,000 1,083,000
$5,910,000 $17,284,000
========== ===========
Less: amount representing
interest.................... (154,000) (127,000)
--------- ----------
$ 814,000 $ 956,000
========= ==========

Rent expense, including rent expense resulting from leases with related
parties (see Note 7), was $0, $117,000 and $1,131,000 for the years ended
December 31, 1995, 1996 and 1997, respectively, and $770,000 and $1,649,000 for
the nine months ended September 30, 1997 and 1998, respectively. The Company
incurred a non-cash charge of $570,000 during the year ended December 31, 1997
in connection with the termination of a lease for office space that is included
in office and general expenses in the accompanying consolidated statements of
operations.

Employment Agreements--In December 1996, the Company entered into five-year
employment agreements with certain senior executives providing for aggregate
initial base salaries of approximately $1,100,000, subject to increases at the
discretion of the Company's Board of Directors. Pursuant to the agreements, if
the Company terminates any executive's employment without cause, the executive
is entitled to receive severance benefits for a predetermined period.

Other--In September 1998, the Company executed a letter of intent relating to
an investment of up to $5 million in a company that provides media placement on
the Internet.

10. INCOME TAXES

The Company and its predecessor entities operated under tax-sharing
arrangements with their former parents. The PTI Strategic Interactive Marketing
Operations are, and until October 1, 1998, the effective date of the
Combination, will continue to be, for federal income tax purposes, included in
the consolidated group of which TNC is the common parent. The PTI Strategic
Interactive Marketing Operations' federal taxable income and loss through
October 1, 1998 will be included in such group's consolidated tax return filed
by TNC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Prior to 1997, the Company was included in the consolidated federal and state
tax returns of TNC. The settlement of tax provisions or benefits with TNC
occurred in the subsequent year after TNC filed its related consolidated tax
returns. Income taxes receivable or payable therefore represent amounts due
from or to TNC. In 1997, the Company filed a stand-alone consolidated federal
tax return. The Company is currently a party to a tax sharing arrangement
whereby the Company provides for and pays or receives certain state taxes.

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

[Enlarge/Download Table]

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------

Domestic................ $ (85,000) $ 75,000 $ (1,258,000) $ (687,000) $ (1,608,000)
International........... -- (16,000) 81,000 52,000 (410,000)
TNC Units Held for
Transfer............... (1,766,000) (1,309,000) (2,180,000) (1,600,000) (13,000)
------------ ------------ ------------ ------------ ------------
$ (1,851,000) $ (1,250,000) $ (3,357,000) $ (2,235,000) $ (2,031,000)
============ ============ ============ ============ ============

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

Current (benefit)
provision:
Federal............... $ (453,000) $ (399,000) $ 250,000 $ 318,000 $ 307,000
Foreign............... -- (7,000) 40,000 25,000 71,000
State................. (425,000) (466,000) 68,000 21,000 170,000
------------ ------------ ------------ ------------ ------------
(878,000) (872,000) 358,000 364,000 548,000
------------ ------------ ------------ ------------ ------------
Deferred provision
(benefit):
Federal............... 5,000 196,000 (458,000) (462,000) (365,000)
Foreign............... -- 2,000 (2,000) (2,000) (16,000)
State................. -- 126,000 (146,000) (146,000) (110,000)
------------ ------------ ------------ ------------ ------------
5,000 324,000 (606,000) (610,000) (491,000)
------------ ------------ ------------ ------------ ------------
Total (benefit) provi-
sion................... $ (873,000) $ (548,000) $ (248,000) $ (246,000) $ 57,000
============ ============ ============ ============ ============

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

[Download Table]

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------- ------------------
1995 1996 1997 1997 1998
---- ---- ----- -------- --------

Statutory federal tax rate......... 35.0% 35.0% 35.0% 35.0% 35.0%
State taxes, net of federal
benefit........................... 14.9 17.7 1.5 3.6 (1.9)
Impact of foreign operations....... -- -- (2.8) (3.3) (9.8)
Goodwill amortization.............. -- (7.4) (20.7) (23.4) (26.1)
Other.............................. (2.7) (1.5) (5.6) (0.9) --
---- ---- ----- -------- --------
Effective rate................... 47.2% 43.8% 7.4% 11.0% (2.8)%
==== ==== ===== ======== ========

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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

[Download Table]

DECEMBER 31,
--------------------- SEPTEMBER 30,
1996 1997 1998
---------- --------- -------------

Current assets (liabilities):
Accrued compensation................ $ 3,000 $ 51,000 $ 476,000
Bad debt reserve.................... -- 13,000 72,000
Lease reserve....................... -- 239,000 151,000
---------- --------- ---------
3,000 303,000 699,000
TNC Units Held for Transfer......... 33,000 16,000 16,000
---------- --------- ---------
36,000 319,000 715,000
---------- --------- ---------
Noncurrent (liabilities) assets:
Accelerated amortization............ (27,000) 108,000 109,000
Other............................... (2,000) (24,000) 70,000
---------- --------- ---------
(29,000) 84,000 179,000
TNC Units Held for Transfer......... (336,000) (126,000) (126,000)
---------- --------- ---------
(365,000) (42,000) 53,000
---------- --------- ---------
Net deferred tax (liabilities) and
assets............................... $ (329,000) $ 277,000 $ 768,000
========== ========= =========

Management of the Company believes that the deferred tax assets are fully
realizable through future operations, therefore no valuation allowance has been
provided.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. GEOGRAPHIC INFORMATION

Information about the Company's operations in different geographic regions as
of and for the years ended December 31, 1995, 1996 and 1997, and as of and for
the nine months ended September 30, 1997 and 1998, is as follows:

[Enlarge/Download Table]

DECEMBER 31, SEPTEMBER 30,
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------

Revenues:
Domestic.............. $ 438,000 $ 1,967,000 $ 25,008,000 $ 17,708,000 $ 26,752,000
International......... -- 126,000 489,000 317,000 3,645,000
------------ ------------ ------------ ------------ ------------
$ 438,000 $ 2,093,000 $ 25,497,000 $ 18,025,000 $ 30,397,000
============ ============ ============ ============ ============
(Loss) income before
(benefit)
provision for income
taxes:
Domestic.............. $ (85,000) $ 75,000 $ (1,258,000) $ (687,000) $ (1,608,000)
International......... -- (16,000) 81,000 52,000 (410,000)
TNC Units Held for
Transfer............. (1,766,000) (1,309,000) (2,180,000) (1,600,000) (13,000)
------------ ------------ ------------ ------------ ------------
$ (1,851,000) $ (1,250,000) $ (3,357,000) $ (2,235,000) $ (2,031,000)
============ ============ ============ ============ ============
Net (loss) income:
Domestic.............. $ (48,000) $ 60,000 $ (1,434,000) $ (922,000) $ (1,494,000)
International......... -- (11,000) 43,000 29,000 (465,000)
TNC Units Held for
Transfer............. (930,000) (751,000) (1,718,000) (1,096,000) (129,000)
------------ ------------ ------------ ------------ ------------
$ (978,000) $ (702,000) $ (3,109,000) $ (1,989,000) $ (2,088,000)
============ ============ ============ ============ ============
Identifiable assets:
Domestic.............. $ 44,657,000 $ 49,641,000 $ 57,429,000
International......... 74,000 1,810,000 3,309,000
TNC Units Held for
Transfer............. 9,291,000 7,573,000 7,444,000
------------ ------------ ------------
$ 54,022,000 $ 59,024,000 $ 68,182,000
============ ============ ============

12. ASSETS UNDER CAPITAL LEASES

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

[Download Table]

DECEMBER 31,
------------------- SEPTEMBER 30,
1996 1997 1998
-------- --------- -------------

Computers and software.................. $ 12,000 $ 343,000 $ 387,000
Furniture and other..................... 305,000 779,000 1,152,000
-------- --------- ----------
317,000 1,122,000 1,539,000
Less: accumulated depreciation and
amortization........................... (81,000) (272,000) (491,000)
-------- --------- ----------
Total assets under capital leases..... $236,000 $ 850,000 $1,048,000
======== ========= ==========

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

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MODEM MEDIA . POPPE TYSON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. SUPPLEMENTAL CASH FLOW DATA

[Download Table]

YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------------- -----------------
1995 1996 1997 1997 1998
-------- ------- -------- -------- --------

Interest paid................... $ -- $ -- $119,000 $ 79,000 $127,000
Taxes paid (refunded)........... $(37,000) $15,000 $256,000 $322,000 $689,000

14. BAD DEBT RESERVE

The bad debt reserve and related activity is as follows:

[Download Table]

WRITE-
BALANCE AT PROVISION FOR OFFS, BALANCE AT
BEGINNING DOUBTFUL NET OF END OF
OF PERIOD ACCOUNTS RECOVERIES OTHER PERIOD
---------- ------------- ---------- -------- ----------

Year Ended December 31,
1996................... $ -- $ -- $ -- $408,000 $408,000
Year Ended December 31,
1997................... $408,000 $517,000 $(489,000) $ 16,000 $452,000
Nine Months Ended
September 30, 1998..... $452,000 $251,000 $(125,000) $ -- $578,000

"Other" represents the bad debt reserve balances acquired in the acquisitions
of Modem in 1996 and the PTI Strategic Interactive Marketing Operations in
1997.

15. SUBSEQUENT EVENTS

On , 1998, the Company signed a definitive agreement with TNC to purchase
the PTI Strategic Interactive Marketing Operations effective October 1, 1998 in
exchange for the net assets of the TNC Units Held for Transfer and 809,514
shares of common stock of the Company.

On November 25, 1998, the Company authorized its management to proceed with
an initial public offering of its Class A common stock.

On December 11, 1998, the Company's Board of Directors approved a proposal to
increase the number of shares of Class A common stock reserved for issuance
under the TN Technologies, Inc. 1997 Stock Option Plan from 1,140,000 to
3,040,000. Immediately thereafter, the Company granted options to purchase an
aggregate of 903,506 shares of its Class A Common Stock with an exercise price
of $11.05 per share to employees under such plan.

On , the Company's Board of Directors approved an amendment to the
Company's Certificate of Incorporation to provide for the authorization of an
aggregate of 39,351,376 shares of Class A common stock and 5,648,624 shares of
Class B common stock and a 0.95-for-1 reverse split of both classes the
Company's outstanding common stock. Accordingly, all historical share and per-
share amounts have been restated to reflect the changes in authorized shares
and the reverse stock split.

The unaudited pro forma consolidated balance sheet at September 30, 1998
reflects certain adjustments related to the Combination, including: (a) the
purchase of fixed assets of $1,624,000; (b) the forgiveness of $5,275,000 of
intercompany payables; (c) the sale to TNC of the TNC Units Held for Transfer;
(d) the issuance of an aggregate of 809,514 shares of Class B common stock to
TNC; and (e) the reclassification of a $6,000,000 note payable to TNC to
current liabilities in conjunction with this offering. All of the above
transactions have been recorded at historical costs.

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To True North Communications Inc.:

We have audited the accompanying balance sheets of Modem Media Advertising
Limited Partnership (a Connecticut limited partnership) as of December 31, 1995
and 1996, and the related statements of income, partners' capital and cash
flows for each of the two years in the period ended December 31, 1996. These
financial statements are the responsibility of the management of Modem Media
Advertising Limited Partnership. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

ARTHUR ANDERSEN LLP

Stamford, Connecticut
March 6, 1997

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MODEM MEDIA ADVERTISING LIMITED PARTNERSHIP

BALANCE SHEETS

[Download Table]

DECEMBER 31,
----------------------
1995 1996
---------- ----------

ASSETS
Current Assets:
Cash.................................................. $ 184,000 $2,586,000
Accounts receivable, net of bad debt reserve of
$262,000 and $408,000, respectively.................. 4,933,000 4,287,000
Unbilled revenues..................................... 316,000 514,000
Unbilled charges...................................... 759,000 475,000
Prepaid expenses and other current assets............. 22,000 125,000
---------- ----------
Total current assets.................................. 6,214,000 7,987,000
Property and Equipment:
Leasehold improvements................................ 84,000 144,000
Computers and software................................ 1,104,000 1,957,000
Furniture and other................................... 330,000 576,000
---------- ----------
Total property and equipment.......................... 1,518,000 2,677,000
Less: accumulated depreciation and amortization....... (312,000) (998,000)
---------- ----------
Total property and equipment, net..................... 1,206,000 1,679,000
Other Assets........................................... 43,000 33,000
---------- ----------
Total assets.......................................... $7,463,000 $9,699,000
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable...................................... $2,551,000 $1,576,000
Pre-billed media...................................... 211,000 1,343,000
Advance billings...................................... 32,000 965,000
Deferred revenues..................................... 110,000 161,000
Current portion of capital lease obligations.......... 82,000 76,000
Accrued compensation.................................. 320,000 313,000
Bank overdrafts....................................... 157,000 --
Due to partners....................................... -- 1,564,000
Other current liabilities............................. 52,000 506,000
---------- ----------
Total current liabilities............................. 3,515,000 6,504,000
Noncurrent Liabilities:
Capital lease obligations, less current portion....... 186,000 193,000
Other liabilities..................................... -- 26,000
Partners' Capital:
General partner's interest............................ 2,029,000 3,031,000
Limited partners' interest............................ 1,733,000 (55,000)
---------- ----------
Total partners' capital............................... 3,762,000 2,976,000
---------- ----------
Total liabilities and partners' capital............... $7,463,000 $9,699,000
========== ==========

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

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MODEM MEDIA ADVERTISING LIMITED PARTNERSHIP

STATEMENTS OF INCOME

[Download Table]

YEAR ENDED
DECEMBER 31,
------------------------
1995 1996
----------- -----------

Revenues.................... $11,718,000 $18,102,000
Costs and Expenses:
Salaries and benefits..... 4,397,000 8,252,000
Guaranteed payments to
partners................. 629,000 1,003,000
Office and general........ 2,740,000 5,680,000
Expense related to
issuance of partnership
options.................. -- 3,045,000
----------- -----------
Total operating
expenses............... 7,766,000 17,980,000
Operating Income............ 3,952,000 122,000
Interest income........... 20,000 44,000
Interest expense.......... (12,000) (29,000)
----------- -----------
Net Income.................. $ 3,960,000 $ 137,000
=========== ===========

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

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MODEM MEDIA ADVERTISING LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS' CAPITAL

[Download Table]

GENERAL LIMITED TOTAL
PARTNER'S PARTNERS' PARTNERS'
INTEREST INTEREST CAPITAL
---------- ---------- ----------

Partners' Capital, December 31, 1994........ $1,051,000 $ 276,000 $1,327,000
Net income................................ 2,020,000 1,940,000 3,960,000
Distributions............................. (1,042,000) (483,000) (1,525,000)
---------- ---------- ----------
Partners' Capital, December 31, 1995........ 2,029,000 1,733,000 3,762,000
Net income................................ 70,000 67,000 137,000
Distributions............................. (2,113,000) (1,855,000) (3,968,000)
Issuance of partnership options........... 3,045,000 -- 3,045,000
---------- ---------- ----------
Partners' Capital, December 31, 1996........ $3,031,000 $ (55,000) $2,976,000
========== ========== ==========

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

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MODEM MEDIA ADVERTISING LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

[Download Table]

YEAR ENDED
DECEMBER 31,
------------------------
1995 1996
----------- -----------

Cash flows from operating activities:
Net income.......................................... $ 3,960,000 $ 137,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 253,000 686,000
Provision for doubtful accounts.................... 258,000 394,000
Expense related to issuance of partnership
options........................................... -- 3,045,000
Changes in assets and liabilities:
Accounts receivable............................... (4,302,000) 252,000
Unbilled revenues................................. (183,000) (198,000)
Unbilled charges.................................. (238,000) 284,000
Prepaid expenses and other current assets......... (7,000) (103,000)
Accounts payable and other current liabilities.... 2,498,000 (521,000)
Pre-billed media.................................. 211,000 1,132,000
Advance billings.................................. 32,000 933,000
Deferred revenues................................. 7,000 51,000
Accrued compensation.............................. -- (7,000)
Other, net........................................ (12,000) 36,000
----------- -----------
Net cash provided by operating activities........ 2,477,000 6,121,000
Cash flows from investing activities:
Purchase of property and equipment.................. (894,000) (952,000)
----------- -----------
Net cash used in investing activities............ (894,000) (952,000)
Cash flows from financing activities:
Bank overdrafts..................................... 158,000 (157,000)
Principal payments made under capital lease
obligations........................................ (34,000) (206,000)
Partners' distributions, net........................ (1,525,000) (2,404,000)
----------- -----------
Net cash used in financing activities............ (1,401,000) (2,767,000)
----------- -----------
Net increase in cash................................. 182,000 2,402,000
Cash, at beginning of period......................... 2,000 184,000
----------- -----------
Cash, at end of period............................... $ 184,000 $ 2,586,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............ $ 13,000 $ 29,000
=========== ===========

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

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MODEM MEDIA ADVERTISING LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of business--Modem Media Advertising Limited Partnership
("Modem"), a Connecticut limited partnership, was founded as Interactive
Response Media, a Connecticut general partnership, in 1987. In June 1993,
Interactive Response Media reorganized as a Connecticut limited partnership and
changed its name to Modem Media Advertising Limited Partnership. Modem is a
technology-based marketing communications firm that provides interactive
marketing solutions to its customers.

Effective December 31, 1996, True North Communications Inc. ("TNC") acquired
a 64% interest in Modem directly from the partners. TNC contributed its
ownership in Modem and certain other businesses to its subsidiary, TN
Technologies Inc. ("TNTI"), now named Modem Media . Poppe Tyson, Inc. These
transactions are further described in Note 3 to the consolidated financial
statements of Modem Media . Poppe Tyson, Inc. appearing elsewhere in this
registration statement.

Revenue Recognition--Revenues are recognized as services are rendered.
Unbilled revenues represent labor costs incurred and estimated earnings in
excess of billings. Unbilled charges represent production and other client
reimbursable out-of-pocket costs in excess of billings. Revenue is reported net
of such reimbursable costs. Pre-billed media represents amounts billed to
customers for media placement in advance of the advertisements being placed.
Advanced billings represent billings of production and other client
reimbursable out-of-pocket costs in excess of those incurred. Amounts billed to
clients in excess of revenues recognized to date are classified as deferred
revenues. Provisions for estimated losses on uncompleted projects are made in
the period in which such losses are determinable.

Business Concentration--Modem's services have been provided to a limited
number of customers located in the United States in a variety of industries.
One customer accounted for approximately 78% of Modem's revenues during each of
the years ended December 31, 1995 and 1996.

Property and equipment--Property and equipment are stated at cost and are
depreciated, principally using the straight-line method, over their estimated
useful lives of three years for computers and software, and five to seven years
for furniture and other. Leasehold improvements are amortized over the lesser
of their estimated useful lives or the remaining lease term. Modem reviews its
recorded fixed assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable and provides currently for any identified impairments.

Income taxes--Modem is a limited partnership pursuant to the provisions of
the Internal Revenue and Connecticut State Tax Codes. Consequently, any federal
and state income taxes applicable to Modem's income are payable directly by its
partners. Taxable income to the partners, computed on a modified cash basis,
was $1,537,000 and $5,105,000 for the years ended December 31, 1995 and 1996,
respectively, as compared to pre-tax book income of $3,960,000 and $137,000 for
the identical periods.

Fair value of financial instruments--The carrying value of Modem's current
assets and current liabilities approximate their fair values due to the short
maturities of these financial instruments.

Reclassifications--Certain prior year amounts have been reclassified to
conform to current year presentation. These changes had no impact on previously
reported results of operations or partners' capital.

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MODEM MEDIA ADVERTISING LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. BAD DEBT RESERVE

Modem's bad debt reserve and related activity is as follows:

[Download Table]

WRITE-
BALANCE AT PROVISION FOR OFFS, BALANCE AT
BEGINNING DOUBTFUL NET OF END OF
OF PERIOD ACCOUNTS RECOVERIES PERIOD
---------- ------------- ---------- ----------

Year Ended December 31,
1995..................... $ 21,000 $258,000 $ (17,000) $262,000
Year Ended December 31,
1996..................... $262,000 $394,000 $(248,000) $408,000

3. LEASE COMMITMENTS

Modem leases office space in Westport and Norwalk, Connecticut and equipment
under capital and operating leases expiring in various years through 2001. Rent
expense related to operating leases totaled $296,000 and $494,000 for the years
ended December 31, 1995 and 1996, respectively.

Minimum future lease payments under noncancelable capital and operating
leases with lease terms in excess of one year as of December 31, 1996 are as
follows:

[Download Table]

DECEMBER 31, 1996
--------------------
CAPITAL OPERATING
-------- ----------

1997................................................... $ 94,000 $ 547,000
1998................................................... 74,000 524,000
1999................................................... 74,000 500,000
2000................................................... 55,000 291,000
2001................................................... 9,000 --
Thereafter............................................. -- --
-------- ----------
306,000 $1,862,000
==========
Less: amount representing interest................... (37,000)
--------
$269,000
========

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

[Download Table]

DECEMBER 31,
------------------
1995 1996
-------- --------

Computers and software................................... $ 55,000 $ 12,000
Furniture and other...................................... 247,000 263,000
-------- --------
302,000 275,000
Less: accumulated depreciation and amortization.......... (44,000) (81,000)
-------- --------
Total assets under capital leases........................ $258,000 $194,000
======== ========

Modem's obligations under the lease for office space in Westport, Connecticut
were guaranteed as of December 31, 1996 by a $160,000 standby letter of credit
secured by accounts receivable and other assets. In April 1996, the Company
obtained an additional $100,000 standby letter of credit to guarantee certain
vendor payables.

Modem entered into two sublease agreements relative to the Norwalk,
Connecticut locations in October 1995 and May 1996. Total revenues to be
received in future years pursuant to these sublease agreements, which will
offset Modem's obligation, approximate $58,000 at December 31, 1996.

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MODEM MEDIA ADVERTISING LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

4. RETIREMENT BENEFIT PLAN

Since January 1, 1994, Modem has maintained a profit-sharing plan with a
401(k) feature for the benefit of eligible employees. No minimum length of
service is required to participate in the plan and employees of the Company are
eligible to begin participation on designated quarterly enrollment dates
provided that they have reached 21 years of age. Modem made discretionary
matching contributions of $60,000 and $74,000 during the years ended December
31, 1995 and 1996, respectively.

5. LINE OF CREDIT

At December 31, 1996, the Company had a $1,000,000 bank line of credit
secured by accounts receivable and other assets. No borrowings were outstanding
under such line of credit as of the balance sheet date.

6. TRANSACTIONS WITH PARTNERS

Partner Compensation--Modem's partners are also employees of Modem and their
compensation is included in the accompanying statements of income as
"Guaranteed payments to partners." Distributions of Modem's net income to the
partners are included in the financial statements as "Distributions."

Due to Partners--In December 1996, the partners of Modem declared a
distribution of $1,564,000, which was paid in cash on January 2, 1997.

7. 1996 OPTION PLAN

In October 1996, Modem established the Modem Media Advertising Limited
Partnership 1996 Option Plan and granted fully vested options to certain
employees to purchase interests in Modem. These options resulted in a pre-tax,
one-time, non-cash charge against income in the fourth quarter of 1996 of
$3,045,000.

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To True North Communications Inc.:

We have audited the accompanying balance sheets of PTI Strategic Interactive
Marketing Operations as of December 31, 1996 and 1997, and the related
statements of operations, changes in equity (deficit) and cash flows for each
of the two years in the period ended December 31, 1997. These financial
statements are the responsibility of the management of PTI Strategic
Interactive Marketing Operations. Our responsibility is to express an opinion
on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PTI Strategic Interactive
Marketing Operations as of December 31, 1996 and 1997, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Stamford, Connecticut
November 16, 1998

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PTI STRATEGIC INTERACTIVE MARKETING OPERATIONS

BALANCE SHEETS

[Download Table]

DECEMBER 31,
----------------------
1996 1997
--------- -----------

ASSETS
Current Assets:
Cash................................................. $ 332,000 $ 147,000
Accounts receivable, net of bad debt reserve of $0
and $16,000, respectively........................... 137,000 777,000
Unbilled charges..................................... -- 46,000
Prepaid expenses and other current assets............ 21,000 60,000
--------- -----------
Total current assets............................. 490,000 1,030,000
Property and Equipment:
Leasehold improvements............................... -- 7,000
Furniture, computers and software.................... 24,000 693,000
--------- -----------
Total property and equipment..................... 24,000 700,000
Less: accumulated depreciation and amortization...... (3,000) (168,000)
--------- -----------
Total property and equipment, net................ 21,000 532,000
Other Assets........................................... 5,000 3,000
--------- -----------
Total assets..................................... $ 516,000 $ 1,565,000
========= ===========
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts payable..................................... $ 72,000 $ 366,000
Current portion of capital lease obligations......... -- 139,000
Accrued liabilities.................................. 233,000 608,000
--------- -----------
Total current liabilities........................ 305,000 1,113,000
Noncurrent Liabilities:
Due to Bozell, non-interest bearing.................. 724,000 3,346,000
Capital lease obligations, less current portion...... -- 120,000
Equity (Deficit):
Accumulated deficit.................................. (480,000) (2,980,000)
Accumulated other comprehensive income............... (33,000) (34,000)
--------- -----------
Total equity (deficit)........................... (513,000) (3,014,000)
--------- -----------
Total liabilities and equity (deficit)........... $ 516,000 $ 1,565,000
========= ===========

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

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PTI STRATEGIC INTERACTIVE MARKETING OPERATIONS

STATEMENTS OF OPERATIONS

[Download Table]

YEAR ENDED
DECEMBER 31,
------------------------
1996 1997
---------- ------------

Revenues............................................. $ 126,000 $ 3,925,000
Costs and Expenses:
Salaries and benefits.............................. 429,000 3,350,000
Office and general................................. 177,000 3,177,000
---------- ------------
Total costs and expenses......................... 606,000 6,527,000
Operating Loss....................................... (480,000) (2,602,000)
Interest Expense, Net................................ -- (46,000)
---------- ------------
Loss before Income Taxes............................. (480,000) (2,648,000)
Benefit for Income Taxes............................. -- (148,000)
---------- ------------
Net Loss............................................. $ (480,000) $ (2,500,000)
========== ============

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

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PTI STRATEGIC INTERACTIVE MARKETING OPERATIONS

STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

[Download Table]

ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE TOTAL
DEFICIT INCOME EQUITY (DEFICIT)
------------ ------------- ----------------

Balance as of December 31, 1995... $ -- $ -- $ --
Comprehensive income:
Net loss.......................... (480,000) -- (480,000)
Foreign currency translation
adjustment..................... -- (33,000) (33,000)
------------
Total comprehensive income.... (513,000)
------------ --------- ------------
Balance as of December 31, 1996... (480,000) (33,000) (513,000)
Comprehensive income:
Net loss........................ (2,500,000) -- (2,500,000)
Foreign currency translation
adjustment..................... -- (1,000) (1,000)
------------
Total comprehensive income.... (2,501,000)
------------ --------- ------------
Balance as of December 31, 1997... $ (2,980,000) $ (34,000) $ (3,014,000)
============ ========= ============

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

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PTI STRATEGIC INTERACTIVE MARKETING OPERATIONS

STATEMENTS OF CASH FLOWS

[Download Table]

YEAR ENDED
DECEMBER 31,
------------------------
1996 1997
---------- ------------

Cash flows from operating activities:
Net loss............................................ $ (480,000) $ (2,500,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization..................... 3,000 165,000
Provision for doubtful accounts................... -- 16,000
Changes in assets and liabilities:
Accounts receivable.............................. (137,000) (656,000)
Unbilled charges................................. -- (46,000)
Prepaid expenses and other current assets........ (21,000) (39,000)
Accounts payable................................. 72,000 294,000
Accrued liabilities.............................. 233,000 375,000
Other, net....................................... (38,000) 1,000
---------- ------------
Net cash used in operating activities........... (368,000) (2,390,000)
Cash flows from investing activities:
Purchase of property and equipment.................. (24,000) (289,000)
---------- ------------
Net cash used in investing activities........... (24,000) (289,000)
Cash flows from financing activities:
Funding from parent company......................... 724,000 2,622,000
Principal payments made under capital lease
obligations........................................ -- (128,000)
---------- ------------
Net cash provided by financing activities....... 724,000 2,494,000
---------- ------------
Net increase (decrease) in cash...................... 332,000 (185,000)
Cash, at beginning of period......................... -- 332,000
---------- ------------
Cash, at end of period............................... $ 332,000 $ 147,000
========== ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............ $ -- $ 46,000
========== ============

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

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PTI STRATEGIC INTERACTIVE MARKETING OPERATIONS

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of business--Poppe Tyson, Inc. ("PTI") was formed in December
1985 as a subsidiary of Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"),
which was acquired by True North Communications Inc ("TNC") in December 1997 in
a business combination accounted for under the pooling-of-interests method. PTI
includes the strategic interactive marketing operations and web site production
and maintenance businesses of Bozell.

The strategic interactive marketing operations of PTI (the "PTI Strategic
Interactive Marketing Operations" or the "Company") consist of the PTI's
strategic interactive marketing operations in the United Kingdom, Hong Kong and
the U.S., and certain fixed assets. The operations in the United Kingdom
commenced operations in the fourth quarter of 1996 and the operations in Hong
Kong and the United States commenced in 1997.

Effective October 1, 1998, the PTI Strategic Interactive Marketing Operations
were purchased by Modem Media . Poppe Tyson, Inc. ("MMPT"), formerly TN
Technologies, Inc. This transaction is further discussed in Notes 1 and 3 to
the consolidated financial statements of MMPT appearing elsewhere in this
registration statement.

Revenue Recognition--Revenues are recognized as services are rendered.
Unbilled charges represent production and other client reimbursable out-of-
pocket costs in excess of billings. Revenue is reported net of such
reimbursable costs. Amounts billed to clients in excess of revenues recognized
to date are classified as deferred revenues. Provisions for estimated losses on
uncompleted projects are made in the period in which such losses are
determinable.

Business Concentration and Credit Risk--The Company's services have been
provided to a limited number of clients in a variety of industries. One
customer accounted for approximately 42.4% of the Company's revenues during the
year ended December 31, 1997.

Four customers accounted for the entire accounts receivable balance as of
December 31, 1996 and two customers accounted for 34.7% of accounts receivable
as of December 31, 1997.

Property and equipment--Property and equipment are stated at cost and are
depreciated, principally using the straight-line method, over their estimated
useful lives of three years for computers and software, and five to seven years
for furniture and other. Leasehold improvements are amortized over the lesser
of their estimated useful lives or the remaining lease term. The Company
reviews its recorded fixed assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable and provides currently for any identified impairments.

Income taxes--The Company and Bozell have certain tax-sharing arrangements as
described in Note 4. The Company accounts for income taxes under the liability
method in accordance with SFAS No. 109, Accounting for Income Taxes. In
accordance with such standard, the provision for income taxes includes deferred
income taxes resulting from items reported in different periods for income tax
and financial statement purposes. Deferred tax assets and liabilities represent
the expected future tax consequences of the differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. The effects of changes in tax rates on deferred tax
assets and liabilities are recognized in the period that includes the enactment
date.

F-35

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PTI STRATEGIC INTERACTIVE MARKETING OPERATIONS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Fair value of financial instruments--The carrying value of the Company's
current assets and current liabilities approximate their fair values due to the
short maturities of these financial instruments.

2. LEASE COMMITMENTS

The Company leases office space in the United Kingdom and Hong Kong and
equipment under capital and operating leases expiring in various years through
2002. Rent expense related to operating leases totaled $35,000 and $231,000 for
the years ended December 31, 1996 and 1997, respectively.

Minimum future lease payments under noncancellable capital and operating
leases with lease terms in excess of one year as of December 31, 1997 are as
follows:

[Download Table]

CAPITAL OPERATING
-------- ---------

1998..................................................... $185,000 $287,000
1999..................................................... 143,000 253,000
2000..................................................... 15,000 125,000
2001..................................................... -- 125,000
2002..................................................... -- 32,000
Thereafter............................................... -- --
-------- --------
343,000 $822,000
========
Less: amount representing interest..................... (84,000)
--------
$259,000
========

Assets under capital leases are included in the 1997 balance sheet as
follows:

[Download Table]

Furniture, computers and software.................................. $387,000
Less: accumulated depreciation and amortization.................... (55,000)
--------
Total assets under capital leases................................ $332,000
========

3. RELATED PARTY TRANSACTIONS

Due to Bozell--Amounts remitted to, and borrowed from, Bozell to fund
operations are non-interest bearing. Amounts owed to Bozell as of the effective
date of the sale of the Company to MMPT (see Note 1) will be contributed to
paid-in capital. Accordingly, the balances outstanding as of December 31, 1996
and 1997 have been reflected as noncurrent liabilities in the accompanying
balance sheets.

Parent Company Allocations--Bozell charges each of its operating units for
general corporate expenses incurred at the parent company level, including
costs to administer certain employee benefit plans; legal, accounting and
treasury services; use of office facilities; and other services for certain
operations. These charges amounted to approximately $0 and $115,000 for the
years ended December 31, 1996 and 1997, respectively, and are included in
office and general expenses in the statements of operations.

F-36

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PTI STRATEGIC INTERACTIVE MARKETING OPERATIONS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

4. INCOME TAXES

The Company operates under a tax sharing agreement with its parent, Bozell,
and until October 1, 1998, the effective date of the sale of the Company to
MMPT will continue to be, for federal income tax purposes, included in Bozell's
consolidated returns.

The components of loss before income taxes are as follows:

[Download Table]

YEAR ENDED
DECEMBER 31,
------------------------
1996 1997
---------- ------------

Domestic........................................... $ -- $ (352,000)
International...................................... (480,000) (2,296,000)
---------- ------------
$ (480,000) $ (2,648,000)
========== ============

The benefit for income taxes consists of the following:

YEAR ENDED
DECEMBER 31,
------------------------
1996 1997
---------- ------------

Current benefit:
Federal.......................................... $ -- $ (110,000)
Foreign.......................................... -- --
State............................................ -- (38,000)
---------- ------------
Total benefit...................................... $ -- $ (148,000)
========== ============

The Company's effective income tax rates and the U.S. statutory rate of 35.0%
differ principally because the Company has not recognized tax benefits on the
losses of its international operations.

5. SUBSEQUENT EVENTS

Effective October 1, 1998, the PTI Strategic Interactive Marketing Operations
were purchased by MMPT, formerly TN Technologies, Inc. This transaction is
further discussed in Notes 1 and 3 to the consolidated financial statements of
MMPT appearing elsewhere in this registration statement.

F-37

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of Class A common stock being registered. All amounts are
estimates except the SEC registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.

[Download Table]

AMOUNT TO
BE PAID
-----------

SEC registration fee............................................ $ 12,510
NASD filing fee................................................. 5,000
Nasdaq National Market listing fee.............................. 81,625
Printing and engraving expenses................................. 450,000
Legal fees and expenses......................................... 450,000
Accounting fees and expenses.................................... 1,314,000
Blue Sky qualification fees and expenses........................ 5,000
Transfer agent and registrar fees............................... 10,000
Miscellaneous fees.............................................. 112,000
-----------
Total......................................................... $ 2,440,135
===========

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Thirteenth of the Registrant's Certificate of Incorporation (Exhibit
3.1 hereto) and Article VI of the Registrant's Bylaws (Exhibit 3.2 hereto)
provide for mandatory indemnification of its directors and officers, and
permissible indemnification of employees and other agents, to the maximum
extent permitted by the Delaware General Corporation Law. In addition, the
Registrant intends to enter into Indemnification Agreements (Exhibit 10.8
hereto) with its officers and directors. Reference is also made to Section of
the Underwriting Agreement contained in Exhibit 1.1 hereto, which provides for
the indemnification of officers and directors of the Registrant against certain
liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

From the Registrant's inception through November 27, 1998, the Registrant has
sold the following securities:

(1) In December 1996, the Registrant issued an aggregate of 2,415,646 shares of
its Class A common stock to Gerald M. O'Connell, Douglas C. Ahlers, Robert
C. Allen, II and Kraft Enterprises LTD, the limited partners of Modem Media
Advertising Limited Partnership ("Modem") and Messrs. O'Connell and Ahlers,
the stockholders of Modem Media, Inc., the general partner of Modem, in
exchange for a portion of their respective limited and general partnership
interests in Modem and all of the capital stock of Modem Media Inc.

(2) In December 1996, the Registrant issued 2,662,008 shares of its Class A
common stock to True North Communications Inc. ("TNC") in exchange for all
of its limited and general partnership interests in Modem.

(3) In December 1996, the Registrant issued 4,839,110 shares of its Class B
common stock to TNC in connection with the transfer and assignment to the
Registrant of substantially all of the assets and properties of TNC's
existing digital marketing communications business (representing 2,177,102
shares of the Registrant's Class A Common Stock) and the exchange of the
Registrant's Class A Common Stock held by TNC for Class B Common Stock.

II-1

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(4) From its inception through November 27, 1998, the Registrant has issued
shares of Class A common stock upon the exercise of options as follows:

[Download Table]

EXERCISE PRICE
NUMBER OF SHARES PER SHARE
---------------- --------------

471 $ 0.64
8,489 $ 11.58

The issuances of the securities described in (1) through (3) above were
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of such Act as transactions by an issuer not involving any public
offering. All of the securities were acquired by the recipients for investment
and with no view toward the resale or distribution thereof. In each instance,
the recipient was an employee of the Company or a sophisticated investor, the
offer and sales were made without any public solicitation and the stock
certificates bear restrictive legends. No underwriter was involved in the
transactions and no commissions were paid. All recipients had adequate access,
through their relationships with the Registrant, to information about the
Registrant. The sales of the Securities described in (4) above were deemed to
be exempt from registration under the Securities Act in reliance on Rule 701
under such Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

[Download Table]

EXHIBIT NO. DESCRIPTION
----------- -----------

II-2

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[Download Table]

EXHIBIT NO. DESCRIPTION
----------- -----------

10.6(a)+ Covenant Not to Compete or Solicit Business between Registrant and
Gerald M. O'Connell, dated as of December 31, 1996.
10.6(b)+ Covenant Not to Compete or Solicit Business between Registrant and
Douglas C. Ahlers, dated as of December 31, 1996.
10.6(c)+ Covenant Not to Compete or Solicit Business between Registrant and
Robert C. Allen, II, dated as of December 31, 1996.
10.7(a)+ Letter Agreement between Registrant and Steven C. Roberts dated
December 2, 1996.
10.7(b)+ Noncompetition, Confidentiality and Proprietary Rights Agreement
between Steven C. Roberts and the Registrant.
10.8++ Form of Indemnification Agreement.
10.9* 1997 Stock Option Plan, as amended.
10.10* 1999 Employee Stock Purchase Plan.
21.1++ List of subsidiaries.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants.
24.1+ Power of Attorney.
27.1+ Financial Data Schedule.

--------
* To be filed by amendment.

+ Previously filed.

(b) FINANCIAL STATEMENT SCHEDULES

Not applicable.

ITEM 17. UNDERTAKINGS

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

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

The undersigned Registrant hereby undertakes that:

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

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

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SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS HAD DULY CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT ON FORM
S-1 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN THE CITY OF WESTPORT, STATE OF CONNECTICUT, ON THIS 11TH DAY OF JANUARY,
1999.

Modem Media . Poppe Tyson, Inc.

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

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED:

[Download Table]

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Gerald M. O'Connell Chief Executive Officer January 11, 1999
______________________________________ and Director
GERALD M. O'CONNELL (Principal Executive
Officer)

Steven C. Roberts* Chief Financial Officer January 11, 1999
______________________________________ (Principal Financial and
STEVEN C. ROBERTS Accounting Officer)

Robert C. Allen, II* Director January 11, 1999
______________________________________
ROBERT C. ALLEN, II

Donald M. Elliman, Jr.* Director January 11, 1999
______________________________________
DONALD M. ELLIMAN, JR.

Donald L. Seeley* Director January 11, 1999
______________________________________
DONALD L. SEELEY

Theodore J. Theophilos* Director January 11, 1999
______________________________________
THEODORE J. THEOPHILOS

*By: /s/ Gerald M. O'Connell
---------------------------------
GERALD M. O'CONNELL
Attorney-in-fact

II-4

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EXHIBIT INDEX

[Download Table]

EXHIBIT NO. DESCRIPTION
----------- -----------

1.1* Form of Underwriting Agreement.
3.1(a)+ Certificate of Incorporation of Registrant, as amended.
3.1(b)+ Form of Amended and Restated Certificate of Incorporation of
Registrant to be effective upon consummation of the offering.
3.2(a)+ Bylaws of Registrant, as amended.
3.2(b)* Form of Bylaws of Registrant to be effective upon consummation of
the offering.
4.1* Form of Registrant's Class A common stock certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, regarding legality of the securities being issued.
10.1(a)* Form of Administrative Services Agreement between Registrant and
True North Communications Inc.
10.1(b)* Form of Intercompany Credit Agreement between the Registrant and
True North Communications Inc.
10.1(c)* Form of Tax Matters Agreement between the Registrant and True
North Communications Inc.
10.2* Intercompany Demand Note dated November 24, 1998 issued by True
North Communications Inc. to the Registrant.
10.3* Form of Affiliation Agreement between the Registrant and Modem
Media . Poppe Tyson do Brasil Ltda.
10.4* Sublease Modification Agreement between the Registrant and Bozell,
Jacobs, Kenyon & Eckhardt, Inc., dated August 1, 1998.
10.5(a)* Employment Agreement between Registrant and Gerald M. O'Connell,
dated as of January 1, 1997.
10.5(b)* Employment Agreement between Registrant and Douglas C. Ahlers,
dated as of January 1, 1997.
10.5(c)* Employment Agreement between Registrant and Robert C. Allen, II,
dated as of January 1, 1997.
10.6(a)+ Covenant Not to Compete or Solicit Business between Registrant and
Gerald M. O'Connell, dated as of December 31, 1996.
10.6(b)+ Covenant Not to Compete or Solicit Business between Registrant and
Douglas C. Ahlers, dated as of December 31, 1996.
10.6(c)+ Covenant Not to Compete or Solicit Business between Registrant and
Robert C. Allen, II, dated as of December 31, 1996.
10.7(a)+ Letter Agreement between Registrant and Steven C. Roberts dated
December 2, 1996.
10.7(b)+ Noncompetition, Confidentiality and Proprietary Rights Agreement
between Steven C. Roberts and the Registrant.
10.8+ Form of Indemnification Agreement.
10.9* 1997 Stock Option Plan, as amended.
10.10* 1999 Employee Stock Purchase Plan.
21.1+ List of subsidiaries.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants.
24.1+ Power of Attorney (included on page II-4).
27.1+ Financial Data Schedule.

--------
*To be filed by amendment.

+Previously filed.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘S-1/A’ Filing	Date	First	Last	Other Filings

	9/30/06	76
	7/31/00	45
	12/31/99	15	30	10-K405
	6/15/99	31
Filed on:	1/11/99	1	104
	12/31/98	31	73	10-K
	12/11/98	76	84
	11/27/98	101	102	S-1
	11/25/98	84
	11/24/98	102	105
	11/16/98	65	93
	10/1/98	17	100
	9/30/98	6	84
	8/1/98	102	105
	7/1/98	53	78
	6/30/98	78
	5/26/98	78
	12/31/97	9	99
	12/15/97	31	73
	9/30/97	21	83
	3/6/97	85
	1/2/97	79	92
	1/1/97	8	105
	12/31/96	21	105
	12/2/96	103	105
	1/1/96	9	22
	12/31/95	21	96
	1/1/95	23	74
	12/31/94	21	88
	1/1/94	92
				List all Filings

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Filing Submission 0001012870-99-000077 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Modem Media Inc – ‘S-1/A’ on 1/11/99

As of: Monday, 1/11/99 · Accession #: 1012870-99-77 · File #: 333-68057

Previous ‘S-1’: ‘S-1/A’ on 12/23/98 · Next: ‘S-1/A’ on 1/13/99 · Latest: ‘S-1/A’ on 2/4/99

Pre-Effective Amendment to Registration Statement (General Form) — Form S-1Filing Table of Contents

S-1/A — Amendment #3 to Form S-1Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents

S-1/A — Amendment #3 to Form S-1
Document Table of Contents