NETGRAVITY INC, S-1/A, 1998-05-15

NETGRAVITY INC
S-1/A, 1998-05-15
PREPACKAGED SOFTWARE

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1998

REGISTRATION NO. 333-51007
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2
TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NETGRAVITY, INC.

(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7372 77-0410283
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>

NETGRAVITY, INC.
1700 S. AMPHLETT BLVD., SUITE 350
SAN MATEO, CA 94402
(650) 655-4777
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------

JOHN W. DANNER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NETGRAVITY, INC.
1700 S. AMPHLETT BLVD., SUITE 350
SAN MATEO, CA 94402
(650) 655-4777
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------

COPIES TO:

LARRY W. SONSINI, ESQ. SCOTT C. DETTMER, ESQ.
JAMES N. STRAWBRIDGE, ESQ. CARLA S. NEWELL, ESQ.
JON C. GONZALES, ESQ. WILLIAM E. GROWNEY, JR., ESQ.
CHRISTOPHER G. NICHOLSON, ESQ. KIRIL DOBROVOLSKY, ESQ.
WILSON SONSINI GOODRICH & ROSATI GUNDERSON DETTMER STOUGH VILLENEUVE
PROFESSIONAL CORPORATION FRANKLIN & HACHIGIAN, LLP
650 PAGE MILL ROAD 155 CONSTITUTION AVE.
PALO ALTO, CA 94304 MENLO PARK, CA 94025
(650) 493-9300 (650) 321-2400

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

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

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 this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

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SUBJECT TO COMPLETION, DATED MAY 15, 1998

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

3,000,000 SHARES
COMMON STOCK

All of the 3,000,000 shares of Common Stock offered hereby are being sold by
NetGravity, Inc. ("NetGravity" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $9.00 and
$11.00 per share. See "Underwriting" for information relating to the method of
determining the initial public offering price. The Company has applied to have
the Common Stock approved for quotation on the Nasdaq National Market under the
symbol "NETG."

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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-----------------

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

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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................. $ $ $
Total(3).................................. $ $ $
</TABLE>

(1) The Company and certain of the Company's stockholders (the "Selling
Stockholders") have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses of the offering payable by the Company, estimated
at $1,300,000.

(3) The Company and the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to an additional 250,000 and 200,000 shares of
Common Stock, respectively, solely to cover over-allotments, if any. See
"Principal and Selling Stockholders" and "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Stockholders will
be $ , $ , $ and $ , respectively. See
"Underwriting."

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The 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. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1998.

BANCAMERICA ROBERTSON STEPHENS

NATIONSBANC MONTGOMERY SECURITIES LLC

FIRST ALBANY CORPORATION

THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
EDGAR COLORWORK DESCRIPTIONS:

INSIDE FRONT COVER OF PROSPECTUS:

TITLE: Software solutions for online advertising and direct marketing

INTRO PARAGRAPH: NetGravity is the leading provider of mission-critical
online advertising and direct marketing software solutions. At the core of
NetGravity's is its AdServer product family, which is designed to enable
customers to improve response rates by targeting advertisements to
individual users and to increase efficiency by automating certain
advertising and direct marketing business processes. These features are
designed to enhance customers' ability to generate revenue from sales of
advertising space and from direct marketing campaigns.

GRAPHIC DEPICTING FUNCTIONS OF ADSERVER

CAPTION 1:

1) MANAGE AND SCHEDULE ADVERTISING AND DIRECT MARKETING OFFERS. NetGravity
solutions analyze historical data, forecast advertising inventory
capacities and deliver up-to-date availability reports.

CAPTION 2:

2) DELIVER THE RIGHT MESSAGE TO THE RIGHT PERSON. AdServer is designed to
enhance customers' ability to generate revenue through capabilities such
as targeting advertisements to individual users and groups of users.

CAPTION 3:

3) TEST, TRACK AND FINE-TUNE MESSAGES. Report-generating functions reveal
important information about how an online advertisement, group of
advertisements or direct marketing message is performing.

INSIDE GATEFOLD:

TITLE: NetGravity helps businesses build online relationships with
consumers.

INTRO PARAGRAPH:

The competitive nature of the global marketplace requires merchants to
continually seek out and obtain new customers while preserving their
relationships with current customers. To help build these relationships
online, NetGravity markets and supports three solutions, AdServer
Enterprise, AdServer Network and AdCenter, designed to support the needs of
companies in the online advertising and direct marketing industry.

NetGravity's solutions, together with its broad range of professional
services and support capabilities, are designed to enhance the effectiveness
and efficiency of the entire online advertising and direct marketing supply
chain: merchants (vendors of products and services), advertising agencies,
and content publishers (including advertising networks).

UPPER RIGHT-HAND CORNER CAPTIONS:
- Manage and schedule advertising and direct marketing offers.
- Deliver the right message to the right person.
- Test, track and fine-tune messages.

GRAPHIC INTRO: How NetGravity AdServer solutions can be used to facilitate
Internet business.

GRAPHIC DEPICTING ADSERVER'S ROLE IN ONLINE ADVERTISING AND DIRECT MARKETING

CAPTIONS 1-7:

1) An individual consumer surfs the Web.

2) The consumer encounters a site that piques interest.

3) A targeted advertisement is delivered to the consumer in real-time by
NetGravity AdServer.

4) The consumer clicks on the advertisement.

5) By means of a link, the consumer is sent to the merchant's site.

6) NetGravity AdServer delivers a targeted direct marketing offer to the
consumer.

7) NetGravity AdServer assists the merchant in collecting data for
future use.

INSIDE BACK COVER OF PROSPECTUS:

TITLE: A Few of Our Customers

INTRO PARAGRAPH:

NetGravity provides mission-critical online advertising and direct marketing
software solutions for merchants, advertising agencies and content
publishers.

CONTENT: 10 branded logos above a textual list of ~ 100 customer names.

Company logos for this sheet:

Netscape Communications

J. Walter Thompson

CNN Interactive

Time Inc. New Media

WhoWhere?

E*TRADE

Real Cities (Knight-Ridder New Media)

ONSALE

Virgin Net

@Home Network

NetGravity is a trademark of NetGravity, Inc. This Prospectus also contains
additional trademarks and tradenames of NetGravity and of other companies.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, BY ANY SELLING STOCKHOLDER OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

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TABLE OF CONTENTS

<TABLE>
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PAGE
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<S> <C>
Summary................................................................... 4
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 21
Dividend Policy........................................................... 21
Capitalization............................................................ 22
Dilution.................................................................. 23
Selected Consolidated Financial Data...................................... 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 25
Business.................................................................. 36
Management................................................................ 53
Certain Transactions...................................................... 64
Principal and Selling Stockholders........................................ 67
Description of Capital Stock.............................................. 69
Shares Eligible for Future Sale........................................... 72
Underwriting.............................................................. 74
Legal Matters............................................................. 76
Experts................................................................... 76
Additional Information.................................................... 76
Index to Consolidated Financial Statements................................ F-1
</TABLE>

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

The Company was incorporated in Delaware in September 1995. The Company's
principal executive offices are located at 1700 S. Amphlett Blvd., Suite 350,
San Mateo, California 94402 and its telephone number at that address is (650)
655-4777.

3
<PAGE>
SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS
SHOULD CONSIDER CAREFULLY THE INFORMATION DISCUSSED UNDER "RISK FACTORS." THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS
THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS AND THE
TIMING OF CERTAIN EVENTS 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.

THE COMPANY

NetGravity is the leading provider of online advertising and direct
marketing software solutions. A pioneer in the online advertising management
software market, the Company believes that it was the first company to provide
such commercial software to major online content publishers and has recently
expanded into the market for online direct marketing software solutions. The
Company develops, markets and supports its mission-critical AdServer family of
software products which, together with its full range of professional services
and support capabilities, are designed to enhance the effectiveness and
efficiency of each constituent in the online advertising and direct marketing
supply chain: merchants (vendors of products and services), advertising agencies
and content publishers (including advertising networks). The Company markets and
sells its products and services primarily through its field sales and telesales
organizations and maintains sales and support operations in North America,
Europe and Asia Pacific. To date, the Company has sold its software and services
to over 225 customers, including 37 of the content publishers listed in CMR's
Interwatch (formerly Jupiter's AdSpend) list of the top 100 revenue-generating
online content publishers for the eight months ended August 31, 1997. The
Company's customers include @Home Network, CNN Interactive, E*TRADE, J. Walter
Thompson, Netscape Communications, ONSALE, Real Cities (Knight-Ridder New
Media), Time Inc. New Media, Virgin Net and WhoWhere?.

The dramatic growth of the Internet in recent years has led, and continues
to lead, merchants, advertising agencies and content publishers to devote
increasing resources toward developing and improving their utilization of the
Internet as a medium for advertising and direct marketing. The Web provides
advertisers with the opportunity to cost-effectively reach global audiences and
to target their advertising based on consumers' demographic characteristics,
specific interests and geographic location. IDC has estimated that online
advertising spending in the United States would increase from $551 million in
1997 to $4.0 billion in 2001. Similarly, the Internet has the potential to
enable direct marketers to increase response rates and reduce
cost-per-transaction by targeting and delivering direct marketing campaigns to
consumers based on their specific demographics, characteristics and interests.
Jupiter Communications estimates that expenditures on online direct marketing
were $86.0 million in 1997 and will exceed $1.3 billion in 2002.

As merchants, advertising agencies and content publishers increase their
online presence, they require comprehensive, reliable and scalable software
solutions to allow them to effectively and efficiently leverage the power of the
Internet for advertising and direct marketing. To address this need, the
NetGravity AdServer family of software products is designed to enable customers
to increase their revenue from online advertising and direct marketing by
improving response rates through consumer targeting and to enable customers to
reduce their administrative expenses by automating certain advertising and
direct marketing business processes. In addition, as the Company's software
delivers advertisements, it gathers consumer viewing and response data. This
data is retained by the Company's customers and can be used to more precisely
target future advertisements. NetGravity's solutions, which include AdServer
Enterprise, AdServer Network and the AdCenter service, are designed to be
extensible and robust systems for deploying advertising and direct marketing
management solutions on the Internet. The NetGravity AdServer family of software
products utilizes a common fault-tolerant, scalable architecture for real-time
delivery of targeted advertisements, a management system for tracking
advertising inventory and a customizable reporting and analysis system allowing
AdServer users to better understand their customers.

To complement its software solutions, the Company offers worldwide
consulting, technical support and training to its customers through its
professional services organization. To help customers develop strong online
advertising and direct marketing businesses, the Company has built a consulting
organization capable of offering technical and business expertise to implement
customer solutions. These services consist of implementation, system extension
and migration services as well as other advanced services. The Company also
provides its customers with an extensive array of ongoing support services,
including software updates, telephone support and product and Internet
advertising education.

The Company's objective is to extend its leadership position in the online
advertising and direct marketing industry by establishing AdServer as the
standard customer acquisition and retention solution for online merchants,
advertising agencies and content publishers. The Company is seeking to meet its
objective by extending its leadership in online advertising solutions,
establishing leadership in online direct marketing solutions, maximizing
customer value, enabling efficient advertising buying on the Internet, expanding
and leveraging alliances with key business and technology partners and expanding
its international presence.

4
<PAGE>
THE OFFERING

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<S> <C>
Common Stock offered by the Company............... 3,000,000 shares

Common Stock to be outstanding after the
Offering........................................ 13,257,210 shares(1)

Use of Proceeds................................... For repayment of certain indebtedness, working
capital and general corporate purposes. See
"Use of Proceeds."

Proposed Nasdaq National Market symbol............ NETG
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31, 1998
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<S> <C> <C>
ACTUAL AS ADJUSTED(3)
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BALANCE SHEET DATA:
Cash and cash equivalents.......................................................................... $ 6,318 $ 31,173
Working capital.................................................................................... 2,682 28,676
Total assets....................................................................................... 11,832 36,687
Notes payable...................................................................................... 1,745 --
Stockholders' equity............................................................................... 3,559 30,159
</TABLE>

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(1) Based on shares outstanding as of April 30, 1998. Excludes, as of April 30,
1998, (i) 1,723,441 shares of Common Stock issuable upon exercise of options
outstanding under the Company's 1995 Stock Option Plan at a weighted average
exercise price of $1.83 per share and 241,639 shares of Common Stock
reserved for future issuance thereunder and (ii) 27,650 shares of Common
Stock issuable upon exercise of outstanding warrants at a weighted average
exercise price of $0.22 per share. Also excludes an aggregate of 2,400,000
shares of Common Stock reserved for future issuance after April 30, 1998
under the Company's 1998 Stock Plan, 1998 Employee Stock Purchase Plan and
1998 Director Option Plan. See "Management--Employee Benefit Plans" and Note
5 of Notes to Consolidated Financial Statements.

(2) See Note 1 of Notes to Consolidated Financial Statements for the
determination of shares used in computing basic and diluted net loss per
share.

(3) Adjusted to reflect the sale of 3,000,000 shares of Common Stock by the
Company at the assumed initial public offering price of $10.00 per share
(after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company) and the application of the
estimated net proceeds therefrom.

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

EXCEPT AS OTHERWISE INDICATED HEREIN, ALL INFORMATION IN THIS PROSPECTUS
ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. SEE
"PRINCIPAL AND SELLING STOCKHOLDERS" AND "UNDERWRITING." EXCEPT AS OTHERWISE
NOTED, ALL INFORMATION IN THIS PROSPECTUS (I) HAS BEEN ADJUSTED TO GIVE EFFECT
TO A 1-FOR-2.2 REVERSE SPLIT OF THE COMPANY'S COMMON STOCK, WHICH HAS BEEN
APPROVED BY THE COMPANY'S BOARD OF DIRECTORS AND STOCKHOLDERS, TO BE EFFECTED
PRIOR TO THE DATE OF THIS PROSPECTUS, (II) REFLECTS THE CONVERSION OF ALL
OUTSTANDING SHARES OF PREFERRED STOCK IMMEDIATELY PRIOR TO THE CLOSING OF THE
OFFERING AND (III) REFLECTS THE FILING OF AN AMENDMENT TO THE COMPANY'S AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION WHICH, AMONG OTHER THINGS, WILL
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK TO 50,000,000 AND WILL
AUTHORIZE 5,000,000 SHARES OF UNDESIGNATED PREFERRED STOCK. SEE "DESCRIPTION OF
CAPITAL STOCK" AND NOTE 5 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. UNLESS
OTHERWISE INDICATED, REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR TO
"NETGRAVITY" REFER TO NETGRAVITY, INC., A DELAWARE CORPORATION, TOGETHER WITH
ITS WHOLLY-OWNED SUBSIDIARIES, NETGRAVITY EUROPE LIMITED AND NETGRAVITY ASIA
PACIFIC K.K.

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING SHARES OF THE COMMON STOCK OFFERED HEREBY.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND
ELSEWHERE IN THIS PROSPECTUS.

LIMITED OPERATING HISTORY; HISTORY OF LOSSES; ANTICIPATED CONTINUED LOSSES

The Company was incorporated in September 1995 and therefore has a limited
operating history upon which an evaluation of the Company and its prospects can
be based. The Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving
markets, such as the markets for online advertising and direct marketing
solutions. To address these risks, the Company must, among other things,
effectively develop new relationships and maintain existing relationships with
its customers, business and technology partners and other third parties, develop
and upgrade its technology, improve its technical support and service, respond
to competitive developments, implement and improve operational, financial and
managerial information systems and attract, retain and motivate qualified
personnel. There can be no assurance that the Company will succeed in addressing
such risks, and the failure to do so could have a material adverse effect on the
Company's business, results of operations or financial condition. Additionally,
the limited operating history of the Company makes the prediction of future
operating results difficult or impossible, and there can be no assurance that
the Company's revenues will increase or even continue at their current level or
that the Company will achieve or maintain profitability or generate cash from
operations in future periods. Since inception, the Company has incurred
significant operating and net losses and, as of March 31, 1998, had an
accumulated deficit of $14.5 million. The Company anticipates that its operating
expenses will increase substantially in the foreseeable future as it exploits
new market opportunities for its products and services, funds greater levels of
research and development, increases its sales and marketing operations, develops
new distribution channels, improves its operational and financial systems and
broadens its customer support capabilities. Accordingly, the Company expects to
incur additional losses and continued negative cash flow from operations for the
foreseeable future, and such losses are anticipated to increase significantly
from current levels, which in turn will increase the Company's accumulated
deficit. Additionally, although the Company has experienced revenue growth in
recent periods, due to the Company's limited operating history, such results are
not necessarily meaningful and should not be relied upon as an indication of
future performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY; POSSIBLE
PRICE EROSION

As a result of the Company's limited operating history, the Company does not
have relevant historical financial data for a significant number of periods on
which to base planned operating expenses. Accordingly, the Company's expense
levels are based in part on the Company's expectations as to future revenues.
Since the Company's expenses are to a large extent fixed in the short term, the
Company may be unable to, or may elect not to, adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Therefore, any
significant shortfall in revenues in relation to the Company's expectations
would have an immediate material adverse effect on the Company's business,
results of operations and financial condition and net losses in a given quarter
would be even greater than expected.

6
<PAGE>
transactions, (vii) the sales and implementation cycles of the Company's
customers, (viii) the addition or loss of customers, (ix) the mix between
software licenses, software upgrades and consulting and support revenues, (x)
the mix between domestic and international revenues, (xi) the amount of
advertising budgets committed to online advertising and direct marketing
activities by the Company's current and prospective customers, (xii) price
changes or changes in pricing models by the Company or its competitors, (xiii)
the mix of distribution channels through which the Company's products are sold,
(xiv) increasing complexity of the Company's products resulting in higher costs
to develop and maintain, which may not be recouped by increased prices, (xv) the
loss of key employees and the time required to train new hires, particularly
sales, consulting and customer support personnel, (xvi) the ability to penetrate
markets outside of North America, (xvii) the incurrence of costs relating to
possible acquisitions of technology or businesses, (xviii) seasonality related
to slower European sales in the third quarter and a shorter implementation
period in the fourth quarter, (xix) the amount and timing of capital
expenditures and other costs relating to the expansion of the Company's
operations, and (xx) general economic conditions.

Historically, a significant portion of the Company's revenue for a given
quarter has been recognized in the last month of that quarter, and the Company
expects this trend to continue. In particular, because the Company's revenue
recognition policy requires that the implementation of AdServer be substantially
completed before recognition of software license revenue, any delay in the
implementation of the Company's products at the end of a quarter could
materially adversely affect operating results for that quarter. The Company's
revenues are also likely to fluctuate due to factors that impact prospective
customers of the Company's products. Expenditures by these customers tend to
vary in cycles that reflect overall economic conditions and budgeting and buying
patterns. The Company's business could be materially adversely affected by a
decline in the economic prospects of its customers or the economy generally,
which could alter current or prospective customers' spending priorities or
budget cycles or extend the Company's sales cycle with respect to certain
customers. In addition, the Company plans to increase its operating expenses to
exploit new market opportunities for its products and services, fund greater
levels of research and development, increase its sales and marketing operations,
develop new distribution channels, improve its operational and financial systems
and broaden its customer support capabilities. To the extent that such expenses
precede or do not correspond with increased revenues, the Company's business,
results of operations or financial condition could be materially adversely
affected and net losses in a given quarter would be even greater than expected.

Since the markets for online advertising and direct marketing are in the
early stages of development, there can be no assurance that the Company's model
for pricing of its products and services will remain an acceptable pricing
model. If pricing or gross margins on the Company's products and services
decline because a new pricing model develops or the Company's competitors offer
products and services at lower prices than the Company, the Company's business,
results of operations or financial condition could be materially adversely
effected. The terms of the Company's agreement with its customers typically
contain a perpetual license, a one-year renewable subscription for product
upgrades and a one-year renewable support agreement. If the Company's customers
do not renew their subscription and support agreements, the Company's business,
results of operations and financial condition would be materially adversely
effected.

Due to all of the foregoing factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Furthermore it is possible that in some future quarters the Company's results of
operations may fall below the expectations of securities analysts and investors.
In such event, the trading price of the Company's Common Stock will likely be
materially and adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Quarterly Results of Operations."

RISKS ASSOCIATED WITH EMERGING MARKETS

The market for online advertising and direct marketing has only recently
begun to develop, is rapidly evolving and is characterized by an increasing
number of market entrants. As is typical in the case of a new and rapidly
evolving industry, demand and market acceptance for recently introduced products
and services are subject to a high level of uncertainty. Since the Company
expects to derive substantially all of its revenues in the foreseeable

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future from sales of its online advertising and direct marketing software
solutions, the Company is highly dependent on the continued use of the Internet
for information, entertainment and other purposes and, in particular, on the
increased use of the Internet as an advertising and direct marketing medium.

ONLINE ADVERTISING. The Internet as an advertising medium has not been
available for a sufficient period of time to gauge its effectiveness as compared
with traditional advertising media (such as print, television and radio). Many
advertisers have limited or no experience using the Internet as an advertising
medium, have not devoted a significant portion of their advertising expenditures
to online advertising and may not find online advertising to be effective for
promoting their products and services relative to advertising using traditional
media. The adoption of online advertising, particularly by those entities that
have historically relied upon traditional media for advertising, requires the
acceptance of a new way of conducting business and exchanging information.
Advertisers that have historically relied on traditional media for advertising
may be particularly reluctant or slow to adopt online advertising. In addition,
most of the Company's current and potential Web publisher customers have limited
or no experience in generating revenues from the sale of advertising space on
their Web sites. Further, advertisers and advertising agencies that have
invested substantial resources in traditional methods of advertising may be
reluctant to reallocate their media buying resources to online advertising. The
Internet must therefore compete for a share of advertisers' total advertising
budgets with traditional advertising media. Additionally, there are no widely
accepted standards for the measurement of the effectiveness of online
advertising, and there can be no assurance that such standards will develop
sufficiently to support online advertising as a significant advertising medium.
To the extent that the Internet is perceived to be a limited or ineffective
advertising medium, advertisers may be reluctant to devote a significant portion
of their advertising budget to online advertising, which could limit the growth
of online advertising and would have a material adverse effect on the Company's
business, results of operations and financial condition. Because initial growth
of online advertising was driven by a limited number of early adopters, there
can be no assurance that the market for online advertising will continue to
emerge or become sustainable. To the extent the market does not attain
widespread acceptance or develops more slowly than expected, the Company's
business, results of operations or financial condition could be materially and
adversely affected.

Further, there can be no assurance that advertisers will determine that
banner advertising, the delivery method which currently comprises substantially
all of the advertising delivered via the Company's products, is an effective or
attractive advertising medium, and there can be no assurance that the Company
will effectively transition to any other forms of online advertising should they
develop and achieve market acceptance. Moreover, "filter" software programs that
limit or prevent advertising from being delivered to a Web user's computer are
available. Widespread adoption of such filter software by users could have a
material adverse effect upon the commercial viability of online advertising,
which would have a material adverse effect on the Company's business, results of
operations and financial condition.

Additionally, if the outsourced service model increases in popularity for
the Company's targeted markets, the Company will be required to devote
additional resources to keep its own outsourcing solution competitive. Any
failure by the Company to successfully design, develop and market an advanced
outsourced solution under such circumstances would have a material adverse
effect on the Company's business, results of operations and financial condition.

ONLINE DIRECT MARKETING. Adoption of online direct marketing, particularly
by those entities that have historically relied upon traditional means of direct
marketing (such as telemarketing and direct mail), requires the broad acceptance
of a new and substantially different approach to direct marketing. As with
online advertising and other new markets, intensive marketing and sales efforts
may be necessary to educate prospective customers regarding the uses and
benefits of the Company's products and services in order to generate demand for
the Company's solutions. Enterprises that have already invested substantial
resources in other methods of conducting business may be reluctant or slow to
adopt a new approach that may replace, limit or compete with their existing
systems. In addition, since online direct marketing is emerging as a new and
distinct market apart from online advertising, potential adoptees of online
direct marketing solutions will increasingly demand functionality tailored to
their specific requirements.

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Additionally, online direct marketers may delay adoption of any direct
marketing solutions offered by the Company until the market for online
advertising has reached a broader level of acceptance. Although AdServer's
largely advertising-oriented features can be deployed for online direct
marketing, the Company has not yet developed products with the custom features
required by online direct marketers and there can be no assurance that the
Company will develop any such products, or if such products are developed, that
they will achieve a satisfactory level of market acceptance.

NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE

The market in which the Company competes is characterized by: rapidly
changing technology; evolving industry standards; frequent new product and
service announcements, introductions and enhancements; and changing customer
demands. These market characteristics are exacerbated by the emerging nature of
the Web, in general, and online advertising and direct marketing in particular.
Accordingly, the Company is dependent upon its ability to adapt to rapidly
changing technologies, its ability to adapt its solutions to meet evolving
industry standards and its ability to continually improve the performance,
features and reliability of its solutions in response to both changing customer
demands and competitive product and service offerings. The failure of the
Company to successfully adapt to such changes in a timely manner could have a
material adverse effect on the Company's business, results of operations or
financial condition.

If the Company is unable, for technological or other reasons, to develop on
a timely basis the next release of AdServer or other new software products,
enhancements to existing products or corrections to errors or defects or
performance problems in products, or if such new products or enhancements do not
achieve a significant degree of market acceptance or if such products, in order
to be released on a timely basis, contain material defects or errors or
performance problems, the Company's business, results of operations and
financial condition would be materially adversely affected. In addition, there
can be no assurance that the introduction or announcement of new product
offerings by the Company or one or more of its competitors will not cause
customers to decline or defer licensing of existing Company products. Any
decline or deferral of purchases could have a material adverse effect on the
Company's business, results of operations or financial condition. Further, if
the Company's current or future products do not meet the scalability
requirements of its customers due to vastly increased use of the Internet, the
Company would have to incur substantial expenditures and resources to address
such issue, and there can be no assurance that the Company would be successful
in scaling the capabilities of its products to such level.

Although the Company sells products to each of the constituents in the
online advertising and direct marketing supply chain (merchants, advertising
agencies and content publishers), it does not currently offer products
automating the online advertising purchasing process among such constituents. If
demand for a comprehensive solution develops and the Company fails to develop
such a solution on a timely basis, or at all, it could have a material adverse
effect on the Company's business, results of operations or financial condition.
In addition, as more customers demand online advertising and direct marketing
solutions, the Company must tailor its products to the specific requirements of
both online advertisers and direct marketers and provide a solution for
supplying demographic and behavioral data. Specifically, the online direct
marketing market will require more narrowly targeted advertisements than the
online advertising market and will be even more reliant on demographic data than
the online advertising market. Although AdServer's largely advertising-oriented
features can be used for online direct marketing, the Company has not yet
developed products with the custom features required by online direct marketers.
If the Company does not develop a satisfactory product to address the online
direct marketing market, future growth of the Company could be impaired, and the
Company could lose customers to competitors with more comprehensive solutions.
The occurrence of any such event could have a material adverse effect on the
Company's business, results of operations or financial condition. See "--Risks
Associated with Emerging Markets" and "Business--Competition."

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particularly Microsoft and Sun, by vendors of relational database software,
particularly Oracle and Microsoft, and browsers, particularly Netscape and
Microsoft could materially adversely impact the Company's business, results of
operations or financial condition. See "Business--Technology."

COMPETITION

The market for online advertising and direct marketing is relatively new,
intensely competitive, rapidly evolving and subject to rapid technological
change. The Company expects competition to continue to increase both from
existing competitors and new market entrants. There are no substantial barriers
to entry in these markets, and the Company believes that its ability to compete
is dependent upon many factors within and beyond its control, including the
timing and market acceptance of new solutions and enhancements to existing
solutions developed by the Company and its competitors, customer service and
support, sales and marketing efforts and the ease of use, performance, features,
price and reliability of the Company's solutions.

Historically, participants in the online advertising and direct marketing
supply chain have used internally developed systems to manage their own online
advertising and direct marketing functions. However, the Company believes that
its primary competition will increasingly come from vendors that provide online
advertising and direct marketing software or service solutions. In the online
advertising market, the Company competes directly with DoubleClick, CMG (through
its Engage/Accipiter unit) and Excite (through its MatchLogic unit), and a
variety of other online advertising service providers. Some of these companies
(such as DoubleClick) have adopted a business model focused on outsourcing of
advertising and direct marketing management. If this model increases in
popularity for the Company's targeted markets, the Company will be required to
devote additional resources to keep its own outsourcing solution competitive.
Any failure by the Company to successfully design, develop and market an
advanced outsourced solution under such circumstances would have a material
adverse effect on the Company's business, results of operations and financial
condition. In the online direct marketing market, the Company expects to face
indirect competition from the vendors of electronic commerce systems, including
BroadVision, Interworld and Open Market, among others. Additionally, providers
of electronic commerce could build online direct marketing solutions that would
obviate the need for any current or future products of the Company targeted to
the online direct marketing industry. The Company also encounters competition
from Netscape and Microsoft, which build or bundle advertising management
products with their Internet commerce solutions. Both Netscape and Microsoft
have significantly greater resources than the Company, and due to their control
of the browser market, if either of them were to offer online advertising and
direct marketing management solutions with features comparable to those offered
by the Company, there can be no assurance that the Company would be able to
compete effectively against any such product offerings.

Many of the Company's current and potential competitors have longer
operating histories and significantly greater financial, technical, marketing
and other resources than the Company and thus may be able to respond more
quickly to new or changing opportunities, technologies and customer
requirements. Also, many current and potential competitors have greater name
recognition, more extensive customer bases and larger proprietary consumer
databases that could be leveraged, thereby gaining market share to the Company's
detriment. Such competitors may be able to undertake more extensive promotional
activities, adopt more aggressive pricing policies, or offer more attractive
terms to purchasers than the Company. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to enhance their products. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share.

Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any one of which could have a material adverse
effect on the Company's business, results of operations or financial condition.
There can be no assurance that the Company will be able to compete successfully
against existing or potential competitors or that competitive pressures will not
have a material adverse effect on the Company's business, results of operations
or financial condition.

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DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL QUALIFIED PERSONNEL

The Company is dependent, to a significant extent, upon members of senior
management, product development personnel, the Company's sales and marketing and
customer support staff, and other key employees. Given the Company's early stage
of development, the loss of one or more key employees could have a material
adverse effect on the business, results of operations or financial condition of
the Company. The Company does not have employment agreements with its executive
officers requiring their service for any particular term and does not carry key
person life insurance covering such persons. In addition, the Company is
dependent upon its ability to attract, hire, train and retain a substantial
number of highly skilled technical, managerial, finance, sales and marketing and
support personnel, especially experienced consulting and customer support
personnel. The Company must also recruit, and plans to recruit, senior
executives with industry expertise in online advertising and direct marketing.
Competition for personnel in the Company's industry is very intense, and the
Company has at times experienced and continues to experience difficulty in
recruiting qualified personnel, and there can be no assurance that the Company
will be successful at attracting, hiring, training or retaining such personnel.
The failure of the Company to attract, hire, train or retain such personnel
could have a material adverse effect on the Company's business, results of
operations or financial condition.

In addition, the Company plans to expand its sales and marketing and
customer support organizations both domestically and internationally. Based on
the Company's experience, it takes at least six months, if not longer, for a
salesperson to become fully productive. There can be no assurance that the
Company will be successful in increasing the productivity of its sales
personnel, and the failure to do so could have a material adverse effect on the
Company's business, results of operations or financial condition. Additionally,
as the Company continues to expand internationally, it will require the services
of individuals in the countries in which it conducts operations. The Company has
had limited experience hiring foreign personnel. There can be no assurance that
the Company will be successful in attracting, hiring, training and retaining
such foreign personnel, and the failure to do so could have a material adverse
effect on the Company's business, results of operations or financial condition.
See "Business-- Professional Services."

MANAGEMENT OF GROWTH; RISKS OF POTENTIAL FUTURE ACQUISITIONS

The Company has recently experienced a period of rapid growth and expansion
that has placed and continues to place a significant strain upon the Company's
management, systems and resources. The Company has grown from 10 employees as of
December 31, 1995 to 94 employees as of March 31, 1998 and currently plans to
expand its staff both domestically and internationally. See "--Dependence on Key
Personnel; Need for Additional Qualified Personnel." The Company's ability to
compete effectively and manage future growth, if any, will require the Company
to continue to implement and improve operational, financial and management
information systems on a timely basis and to attract, hire, train and retain
additional technical, managerial, finance, sales and marketing and support
personnel. Any failure to implement and improve the Company's operational,
financial and management systems or to attract, hire, train or retain employees
could have a material adverse effect on the Company's business, results of
operations or financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Employees."

As part of its growth strategy, the Company may in the future pursue
acquisitions of product lines, technologies or businesses. Future acquisitions
by the Company may result in the use of significant amounts of cash, potentially
dilutive issuances of equity securities, incurrence of debt, or amortization
expenses related to goodwill and other intangible assets, any of which could
materially adversely affect the Company's business, results of operations or
financial condition. In addition, acquisitions involve numerous risks, including
difficulties in the assimilation of the operations, technologies, products and
personnel of the acquired company, the diversion of management's attention from
other business concerns, risks of entering markets in which the Company has no
or limited direct prior experience, and the potential loss of key employees of
the acquired company. From time to time, the Company has engaged in discussions
with third parties concerning potential acquisitions of product lines,

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technologies and businesses. However, there are currently no active
negotiations, commitments or agreements with respect to any such acquisition. In
the event that such an acquisition does occur, however, there can be no
assurance that the Company's business, results of operations or financial
condition will not be materially adversely effected.

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

A significant component of the Company's strategy is to aggressively expand
its international operations and international sales and marketing efforts.
Through its two subsidiaries, NetGravity Europe Limited and NetGravity Asia
Pacific K.K., the Company has recently commenced operations in a number of
markets in Europe and Asia Pacific. International revenues comprised
approximately 7.7% of the Company's total revenues in 1997 and are expected to
comprise a significant portion of the Company's total revenues in 1998. Although
the Company believes that localized versions of its products will be extremely
important for the Company to achieve any significant international growth, to
date, the Company has not developed localized versions of its products (which
will likely involve a significant amount of the Company's resources) and has
limited experience in marketing, selling and distributing its products and
services internationally. Additionally, international markets for online
advertising and direct marketing are in earlier stages of development than in
the United States, and there can be no assurance that the market for, and use,
of online advertising and direct marketing in international markets will be
significant in the future. Factors that may further account for slower growth in
the online advertising and direct marketing markets in Europe and Asia include:
slower growth in the number of individuals using the Internet internationally;
privacy concerns; a lower rate of advertising spending internationally than in
the United States; and a greater reluctance internationally to use the Internet
for advertising and direct marketing. Further, any future success of the Company
in selling its products and services internationally may be conditioned on the
Company delivering improved versions of its products (including localized
versions of its products) and having additional international personnel
available for service and support. Due to all of the foregoing, there can be no
assurance that the Company will be able to successfully market, sell and deliver
its products and services in these markets. In addition, there are certain risks
and challenges inherent in doing business in international markets, such as
difficulties in collecting accounts receivable and longer collection periods,
multiple and continual changes in regulatory requirements, conflicting
regulatory requirements (for example, Germany has imposed laws limiting the use
of "cookies," and there can be no assurance that other countries will not also
place limitations on the use of "cookies"), potentially adverse tax
consequences, export restrictions, export controls relating to encryption
technology, tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, political instability, fluctuations in currency
exchange rates, seasonal reductions in business activity during the summer
months in Europe and certain other parts of the world, and the impact of local
economic conditions and practices, any of which could have a material adverse
effect on the success of the Company's international operations and,
consequently, on the Company's business, results of operations or financial
condition.

The Company currently invoices its European customers in local currencies
and its customers in Asia Pacific in U.S. currency. The Company expects to
eventually invoice all of its international customers in local currencies.
Although the Company pays certain of the expenses of its European operations in
local currencies, the Company has not engaged in foreign currency hedging
activities, and international revenues are currently subject to currency
exchange fluctuation rates. To the extent that international revenues increase
as a percentage of total revenues in the future, foreign currency fluctuation
exposure may also increase. Additionally, recent weakness in many of the Asian
economies as well as weakness in the Japanese yen may result in the Company's
products being too expensive for customers in Japan and other countries in Asia
Pacific resulting in decreased sales and profitability in such countries. There
can be no assurance that one or more of the factors discussed above will not
have a material adverse effect on the Company's future international operations
and, consequently, on the Company's business, results of operations or financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Strategy."

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LENGTHY SALES AND IMPLEMENTATION CYCLES

Sales of the Company's software products generally require the Company to
engage in a lengthy sales effort, including significant education of prospective
customers regarding the use and benefits of the Company's products. As a result,
the sales cycle for the Company's products is long, currently averaging
approximately four months. In particular, the sales cycle for the Company's
online direct marketing solutions is likely to be comparatively longer than the
sales cycle for the online advertising solutions, since online direct marketing
is less established and will require more education of the Company's potential
customers. In addition, the implementation of the Company's products often
involves a significant commitment of resources by customers and/or the Company's
consultants over an extended period of time. The Company's sales and customer
implementation cycles are subject to a number of potential delays. These include
delays related to product defects or errors as well as delays over which the
Company has little or no control, including customers' budgetary constraints,
internal acceptance reviews and the complexity of customers' online advertising
or direct marketing needs. To the extent the use of the Internet becomes a more
widely accepted means of conducting advertising campaigns and targeting
potential customers, the Company believes that the average sales size of its
transactions may increase. An increase in the average sales size of transactions
would also likely result in a longer sales cycle as the license of the Company's
software products becomes more of an enterprise-wide decision by prospective
customers requiring a significant commitment of resources. Delays due to lengthy
sales cycles or delays in customer deployment of a product could have a material
adverse effect on the Company's business, results of operations or financial
condition. For example, due to errors contained in early versions of AdServer
3.0 and the complexity involved in its implementation, deployment of the product
required a significant amount of time and resources on the part of the Company
and its customers. Partly as a result, the Company's license revenue declined in
the fourth quarter of 1997 from the prior quarter due to the delay in revenue
recognition and greater than anticipated utilization of the Company's personnel
and other resources in deploying such products. See "--Potential Fluctuations in
Quarterly Operating Results; Seasonality; Possible Price Erosion," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Sales and Marketing."

PRODUCT CONCENTRATION

To date, the Company has generated all of its revenues from the license and
related upgrade, consulting and support of its AdServer family of software
products. The Company believes that its current AdServer family of software
products and software products in development, together with the related
consulting and support services, will continue to account for substantially all
of its revenues for the foreseeable future. The Company's future financial
performance is dependent, in significant part, upon the successful development,
introduction and customer acceptance of new and enhanced versions of AdServer
and of new products and services that the Company may develop. There can be no
assurance that the Company will be successful in upgrading and continuing to
market AdServer or that the Company will successfully develop new products and
services or that any new product or service will achieve market acceptance.
Consequently, factors affecting the pricing of and demand for AdServer, such as
competition, technological changes, failure of the market for online advertising
and direct marketing solutions to develop as the Company anticipates or lack of
customer acceptance of AdServer could have a material adverse effect on the
Company's business, results of operations or financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET

The Company's future success is largely dependent upon the widespread
acceptance and continued use of the Internet as an advertising and direct
marketing medium. The Internet may not be accepted as a viable commercial medium
for a number of reasons, including potentially inadequate development of the
necessary network infrastructure, failure of enabling technologies to be
developed in a timely manner or insufficient commercial support of online
advertising and direct marketing. To the extent that the Internet continues to
experience an increase in users, an increase in frequency of use or an increase
in the bandwidth requirements of users, there can be no assurance that the
Internet infrastructure will be able to support the demands placed upon it. In
addition, the

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Internet could lose its viability as a commercial medium due to the delays in
the development or adoption of new standards and protocols required to handle
increased levels of Internet activity, or due to increased government
regulation. Changes in, or insufficient availability of, telecommunications
services to support the Internet also could result in slower response times and
could adversely affect use of the Internet generally. If use of the Internet
does not continue to grow or grows more slowly than expected, or if the Internet
infrastructure, standards, protocols or complementary products, services or
facilities do not effectively support any growth that may occur, the Company's
business, results of operations and financial condition would be materially
adversely affected. See "Business--Industry Background." Even if the required
infrastructure, standards, protocols or complementary products, services or
facilities are developed, there can be no assurance that the Company will not be
required to incur substantial expenditures in order to adapt its solutions to
changing or emerging technologies. The occurrence of any such event could have a
material adverse effect on the Company's business, results of operations or
financial condition. Moreover, critical issues concerning the commercial use and
government regulation of the Internet (including security, cost, ease of use and
access, intellectual property ownership and other legal liability issues) remain
unresolved and could materially and adversely impact both the growth of the
Internet and the Company's business, results of operations or financial
condition.

RELIANCE ON THIRD PARTIES AND THIRD PARTY SOFTWARE PLATFORMS

The Company's products are designed to operate on a variety of hardware and
software platforms employed by its customers in their networks. The Company must
continually modify and enhance its products to keep pace with changes in
hardware and software platforms and database technology. As a result,
uncertainties related to the timing and nature of new product announcements,
introductions or modifications by vendors of operating systems, particularly
Microsoft and Sun, by vendors of relational database management software,
particularly Oracle and Microsoft, and by vendors of browsers, particularly
Netscape and Microsoft, could materially adversely impact the Company's
business, results of operations or financial condition. The failure of the
Company's products to operate effectively across the various existing and
evolving versions of hardware and software platforms and database environments
employed by customers could have a material adverse effect on the Company's
business, results of operations or financial condition. The Company also relies
upon the licensing of certain software from third parties, including database
access technology and other tools from Rogue Wave, and there can be no assurance
that the Company's third-party technology licenses will continue to be available
to the Company on commercially reasonable terms, if at all. The loss or
inability to maintain any of these technology licenses could result in delays in
the sale of the Company's products and services until equivalent technology, if
available, is identified, licensed, and integrated, which could have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Business--Product Development."

In order for the Company to provide adequate demographic data (which is
essential for more narrowly targeted advertising and direct marketing) for its
customers without their own demographic data or without access to their
demographic data, the Company will need to partner with companies offering such
demographic data. The failure of the Company to form such partnerships could
have a material adverse effect on the business, results of operations or
financial condition of the Company.

EVOLVING DISTRIBUTION CHANNELS

The Company has historically sold its products and services primarily
through its field sales and telesales organization, but its future success will
depend in part upon its ability to increase sales of its products through
Internet systems integrators, Web hosting organizations and value added
resellers (collectively, "Resellers"). The Company expects that any material
increase in sales through Resellers as a percentage of total revenues will
adversely affect the Company's gross margins due to discounts offered to
Resellers. Another potential adverse consequence of the Company's focus on
increasing sales through Resellers is the diversion of management resources and
attention from field sales and telesales, which could adversely affect field
sales and telesales revenue. Moreover, there can be no assurance that the
Company will be able to attract and retain Resellers that will be able to market
the products effectively, particularly due to the sophisticated nature of the
Company's products, and that will

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be qualified to provide timely and cost-effective customer support and service.
In the event that a Reseller provides inadequate support and service to the
Company's customers, the Company's future revenues could be negatively impacted
and the Company's reputation could be seriously damaged. The occurrence of any
of such events could have a material adverse effect on the Company's business,
results of operations or financial condition. See "Business--Marketing
Alliances."

PRIVACY CONCERNS; DEPENDENCE ON COOKIES FOR AD TARGETING; SECURITY

The Company's software uses "cookies" to deliver targeted advertising, to
help compile demographic information, and to limit the frequency with which an
advertisement is shown to the user. Cookies are bits of information keyed to a
specific server, file pathway or directory location that are stored on a user's
hard drive and passed to a Web site's server through the user's browser
software. Cookies are placed on the user's hard drive without the user's
knowledge or consent. Due to privacy concerns, some Internet commentators,
advocates and governmental bodies have suggested that the use of cookies be
limited or eliminated. In addition, certain currently available Internet
browsers allow a user to delete cookies or prevent cookies from being stored on
the user's hard drive. Germany has imposed laws limiting the use of cookies, and
there can be no assurance that other countries will not also place limitations
on the use of cookies. See "--Risks Associated with International Expansion."
Any significant reduction or limitation in the use of cookies would likely
require the Company to switch to other technology allowing the gathering of
information for ad targeting. Switching to other technology could require
significant reengineering time and resources, and there can be no assurance that
the Company would be able to switch to such technology on a timely basis, if at
all. The failure to do so could have a material adverse effect on the Company's
business, results of operations or financial condition.

The Company has included basic security features in certain of its products
that are intended to protect the privacy and integrity of customer data.
However, in the Company's AdServer product, passwords for certain operations are
not encrypted and therefore are susceptible to hacker interception, break-ins
and disruption. Such computer break-ins and other disruptions may jeopardize the
security of information stored in and transmitted through the computer systems
of the Company's customers. Alleviating problems caused by third parties may
require significant expenditures of capital and resources by the Company which
may have a material adverse effect on the Company's business, results of
operations or financial condition. Additionally, as e-commerce becomes more
prevalent (and consequently the focus of the Company's development of direct
marketing products), security concerns will become of increasing concern to
consumers and the Company's customers. If not addressed, these security concerns
could limit or slow the development of e-commerce and, consequently, the
development of online direct marketing. If the Company does not add sufficient
security features to future product releases, the Company's products may not
achieve an acceptable level of market acceptance, or if purchased by customers,
may result in liability for damages. The occurrence of any of the foregoing
could have a material adverse effect on the Company's business, results of
operations or financial condition.

RISK OF PRODUCT DEFECTS; PRODUCT LIABILITY

Software products as complex as AdServer frequently contain errors or
defects or performance problems, especially when first introduced or when new
versions or enhancements are released. Despite extensive product testing by the
Company prior to introduction, the Company's products have in the past contained
software errors that were discovered after commercial introduction. For example,
AdServer 3.0, although functional when released, had a number of software errors
that affected the product's performance, reliability and compatibility with
certain operating environments. As a result of such errors, the Company had to
allocate significant customer support resources to addressing such errors. There
can be no assurance that, despite testing by the Company and by current and
potential customers, serious defects and errors or performance problems will not
be found in new versions or enhancements of the Company's current products after
commencement of commercial shipments. Any future software defects or errors or
performance problems discovered after delivery of the Company's products could
result in the re-allocation of valuable resources away from customer service and
product development or lost revenues or delays in customer acceptance of the
Company's products and would be detrimental to the Company's

15
<PAGE>

market reputation, which, in each case, could have a material adverse effect on
the Company's business, results of operations or financial condition. The
Company's customers and potential customers may be particularly sensitive to any
such software defects or errors or performance problems given that a failure of
a Web site's advertising management and delivery system often immediately and
directly results in lost or reduced advertising revenue during such failure. See
"Business--Product Development."

Since the Company's products are used by its customers for advertising
management, errors or defects or performance problems in the Company's products,
misuse of the Company's products or other potential problems within or out of
the Company's control that may arise from the use of the Company's products
could result in financial or other damages to the Company's customers. Such
customers could seek damages from the Company for any such losses, which, if
successful, could have a material adverse effect on the Company's business,
results of operations or financial condition. Additionally, although the
Company's license agreements with its customers typically contain provisions
designed to limit the Company's exposure to potential claims as well as any
liabilities arising from such claims, such provisions may not effectively
protect the Company against such claims and the liability and costs associated
therewith as a result of existing or future federal, state or local laws or
ordinances or unfavorable judicial decisions. Although the Company has not
experienced any product liability claims to date, there can be no assurance that
the Company will not be subject to such claims in the future. Because the
Company's software products are used in business-critical applications, a
successful product liability claim brought against the Company could have a
material adverse effect on the Company's business, results of operations or
financial condition. Moreover, defending such a suit, regardless of its merits,
could entail substantial expense and require the time and attention of key
management personnel, either of which could have a material adverse effect on
the Company's business, results of operations or financial condition.

DEPENDENCE ON PROPRIETARY RIGHTS; RISK OF INFRINGEMENT

The Company's success and ability to compete are dependent in part upon its
proprietary technology. The Company relies on trademark, trade secret and
copyright law to protect its technology. Legal standards relating to the
validity, enforceability and scope of protection of certain proprietary rights
in Internet-related industries are uncertain and still evolving, and no
assurance can be given as to the future viability or value of any proprietary
rights of the Company or other companies within the industry. Furthermore, the
Company believes that factors such as the technological and creative skills of
its personnel, new product developments, product enhancements, name recognition
and reliable product maintenance are more essential to establishing and
maintaining its technology leadership position than the legal protection of its
technology. There can be no assurance that others will not develop technologies
that are similar or superior to the Company's technology.

The Company generally provides its products to end users under nonexclusive,
nontransferable licenses during the term of the agreement, which is usually in
perpetuity. Under the general terms and conditions of the Company's standard
license agreements, the licensed software may be used pursuant to NetGravity's
published licensing practices. The source code for the Company's proprietary
software is protected both as a trade secret and as a copyrighted work. In
addition, some of the Company's agreements with its customers contain provisions
requiring release of source code for limited, non-exclusive use by the customer
in the event that the Company ceases to do business or the Company fails to
support its products. This release of source code may increase the likelihood of
misappropriation by third parties. The Company's policy is to enter into
confidentiality and intellectual property assignment agreements with its
employees, consultants, and vendors and generally to control access to and
distribution of its software, documentation, and other proprietary information.
Notwithstanding these precautions, it may be possible for a third party to copy
or otherwise obtain and use the Company's software or other proprietary
information without authorization or to develop similar software independently.
Policing unauthorized use of the Company's products is difficult, particularly
because the global nature of the Internet makes it difficult to control the
ultimate destination or security of software or other data transmitted. The laws
of other countries may afford the Company little or no effective protection of
its intellectual property. There can be no assurance that the steps taken by the
Company will prevent misappropriation of its technology or that agreements
entered into for that purpose will be enforceable. In addition, litigation may
be necessary in the future to enforce the Company's intellectual

16
<PAGE>
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, whether successful or
unsuccessful, could result in substantial costs and diversions of resources,
either of which could have a material adverse effect on the Company's business,
results of operations or financial condition.

Although the Company believes that its products do not infringe the
proprietary rights of third parties, there can be no assurance that the
Company's products or business activities will not infringe upon the patent or
other proprietary rights of others, or that other parties will not assert or
prosecute infringement or invalidity claims (or claims for indemnification
resulting from infringement claims) against the Company or that any such
assertions or prosecutions will not materially adversely affect the Company's
business, results of operations or financial condition. From time to time the
Company has been, and expects to continue to be, subject to claims in the
ordinary course of its business, including claims of alleged infringement of the
copyrights, trade secrets and other intellectual property rights of third
parties by the Company. Although such claims have not resulted in litigation or
had a material adverse effect on the Company's business, results of operations
or financial condition, such claims and any resultant litigation, should they
occur, could subject the Company to significant liability for damages and could
result in invalidation of the Company's proprietary rights and, even if not
meritorious, could be time-consuming and expensive to defend, and could result
in the diversion of management time and attention, any of which could have a
material adverse effect on the Company's business, results of operations or
financial condition. If any such claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party's
intellectual property rights. There can be no assurance, however, that under
such circumstances, a license would be available on reasonable terms or at all.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

Due to concerns arising in connection with the increasing popularity and use
of the Web, a number of laws and regulations may be adopted covering issues such
as user privacy, pricing, characteristics, acceptable content, taxation and
quality of products and services. Such legislation could dampen the growth in
use of the Web generally and decrease the acceptance of the Web as a
communications and commercial medium, which could have a material adverse effect
on the Company's business, results of operations or financial condition. In
addition, because the growing popularity and use of the Web has burdened the
existing telecommunications infrastructure, many areas with high Web use have
begun to experience interruptions in phone service. Certain local telephone
carriers have petitioned governmental bodies to regulate Internet service
providers ("ISPs") and online service providers ("OSPs") in a manner similar to
long distance telephone carriers and to impose access fees on ISPs and OSPs. If
any of these petitions or the relief sought therein is granted, the costs of
communicating on the Web could increase substantially, potentially adversely
affecting the growth in use of the Web which could in turn decrease the demand
for the Company's products or otherwise have a material adverse effect on the
Company's business, results of operations or financial condition. Further, due
to the global nature of the Web, it is possible that multiple federal, states or
foreign jurisdictions might attempt to concurrently and inconsistently regulate
the transmissions of the Company or its customers or levy sales or other taxes
relating to the Company's activities. There can be no assurance that violations
of local laws will not be alleged or charged by state or foreign governments,
that the Company might not unintentionally violate such laws or that such laws
will not be modified, or new laws enacted, in the future. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, libel and personal privacy is uncertain. Any of the foregoing
developments could have a material adverse effect on the Company's business,
results of operations or financial condition. See "Privacy Concerns; Dependence
on Cookies for Ad Targeting; Security."

YEAR 2000 COMPLIANCE

17
<PAGE>

Significant uncertainty exists in the software industry concerning the potential
effects associated with such compliance issues. A number of date code fields in
the user interface portion of the Company's AdServer products are currently
programmed to accept only two digit entries and, as a result, the Company's
AdServer family of software products is not yet fully Year 2000 compliant. While
the Company believes that date code fields in other components of its products
are Year 2000 compliant, there can be no assurance that all or any of such date
code fields are Year 2000 compliant. The Company is currently taking steps to
make the date code fields in the user interface portion of its AdServer products
Year 2000 compliant, which action the Company intends to complete by the end of
June 1998. However, there can be no assurance that the Company will be
successful in making its products fully Year 2000 compliant by the end of June
1998 or thereafter or that the actual internal and external personnel and
resources required to achieve such compliance will not materially exceed the
Company's current estimates. Any failure by the Company to make its products
Year 2000 compliant could result in a decrease in sales of the Company's
products, deferral of revenue recognition on contracts in which the Company has
warranted (or may in the future warrant) compliance with Year 2000 requirements,
an increase in the allocation of resources to address Year 2000 problems of the
Company's customers without additional revenue commensurate with such dedication
of resources, or an increase in litigation costs relating to losses suffered by
the Company's customers due to such Year 2000 problems. In addition, the Company
believes that the purchasing patterns of customers and potential customers may
be impacted by Year 2000 issues. Further, many companies are expending
significant resources to correct or patch their current software systems. These
expenditures of funds may result in reduced funds available to purchase software
products such as those offered by the Company. The occurrence of any of such
events could have a material adverse effect on the Company's business, results
of operations or financial condition.

As of March 31, 1998, in compliance with SOP 97-2, the Company had deferred
approximately $128,000 of otherwise recognizable revenue from contracts in which
the Company has warranted that its products will be made Year 2000 compliant,
and the Company will not be able to recognize any such deferred revenue until it
meets its warranty obligations. In addition, if additional deferred revenue from
contracts containing such warranty obligations becomes otherwise recognizable
before the Company's products are made Year 2000 compliant, such additional
revenue would also continue to be deferred until such warranty obligations are
met. The occurrence of any such extended deferral could have a material adverse
effect on the Company's business, results of operations or financial condition.
Finally, the Company has conducted a preliminary review of its internal computer
systems to identify the systems that could be affected by the Year 2000 issue
and to develop a plan to resolve the issue. Based on this preliminary review,
the Company has determined that certain of its software systems are not
currently Year 2000 compliant, and that certain of its computer hardware may not
be able to be made Year 2000 compliant. If the higher incremental costs of
making such software and hardware Year 2000 compliant exceed the Company's
preliminary estimates, the Company's business results of operations or financial
condition could be materially adversely effected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview" and
Note 1 of Notes to Consolidated Financial Statements.

UNCERTAIN NEED AND AVAILABILITY OF ADDITIONAL FUNDING

Although the Company believes that, following the offering, its cash
reserves and cash flows from operations will be adequate to fund the Company's
operations for at least the next 12 months, there can be no assurance that such
sources will be adequate or that additional funds will not be required either
during or after such 12 month period. No assurance can be given that additional
financing will be available or that, if available, it will be available on terms
favorable to the Company or its stockholders. If additional funds are raised
through the issuance of equity securities, the percentage ownership of the then
current stockholders of the Company will be reduced and such equity securities
may have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. If adequate funds are not available to satisfy either
short or long-term capital requirements, the Company may be required to limit
its operations significantly. The Company's capital requirements are dependent
upon many factors, including, but not limited to, the rate at which the Company
develops and introduces its products, the market acceptance and competitive
position of such products, the level of promotion and advertising required to

18
<PAGE>
market such products and attain a competitive position in the marketplace, and
the response of competitors to the Company's products. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Capital
Stock--Preferred Stock."

CONTROL BY EXISTING STOCKHOLDERS

Immediately after the closing of this offering, 52.1% of the outstanding
Common Stock (50.5% if the Underwriter's over-allotment option is exercised in
full) will be beneficially owned by the directors and executive officers of the
Company, together with certain entities affiliated with them. As a result, these
stockholders, if acting together, will be able to control substantially all
matters requiring approval by the stockholders of the Company, including the
election of all directors and approval of significant corporate transactions.
See "Principal and Selling Stockholders."

ANTITAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS, BYLAWS AND DELAWARE LAW

Pursuant to the terms of the Company's Amended and Restated Certificate of
Incorporation, as amended, the Board of Directors has the authority to issue up
to 5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the Company's stockholders. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future (including, but not limited to, preferences by the Preferred Stock
with respect to the payment of dividends and upon liquidation, dissolution or
winding up). The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. The Company
has no present plans to issue shares of Preferred Stock. Further, certain
provisions of the Company's Amended and Restated Certificate of Incorporation,
as amended, and of the Amended and Restated Bylaws and of Delaware law could
delay or make difficult a merger, tender offer or proxy contest involving the
Company. See "Description of Capital Stock--Preferred Stock" and "--Antitakeover
Effects of Provisions of Certificate of Incorporation, Bylaws and Delaware Law."

Section 203 of the General Corporation Law of the State of Delaware, which
is applicable to the Company, prohibits certain business combinations with
certain stockholders for a period of three years after they acquire 15% or more
of the outstanding voting stock of a corporation. See "Description of Capital
Stock--Effect of Delaware Antitakeover Statute."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of significant amounts of Common Stock in the public market after the
offering or the perception that such sales will occur could materially and
adversely affect the market price of the Common Stock or the future ability of
the Company to raise capital through an offering of its equity securities. Of
the 13,257,210 shares of Common Stock to be outstanding upon the closing of the
offering, the 3,000,000 shares offered hereby will be eligible for immediate
sale in the public market without restriction unless the shares are purchased by
"affiliates" of the Company within the meaning of Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). The remaining
10,257,210 shares of Common Stock held by existing stockholders upon the closing
of the offering are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 promulgated under the Securities Act. The Company's
directors and officers and certain of its stockholders have agreed that they
will not sell, directly or indirectly, any Common Stock without the prior
consent of the representatives of the Underwriters for a period of 180 days from
the date of this Prospectus. Subject to these lock-up agreements and the
provisions of Rules 144, 144(k) and 701, additional shares will be available for
sale in the public market (subject in the case of shares held by affiliates to
compliance with certain volume restrictions) as follows: (i) 139,174 shares will
be eligible for sale prior to 180 days after the date of this Prospectus, (ii)
7,509,289 shares will be eligible for sale upon the expiration of lock-up
agreements 180 days after the date of this Prospectus and (iii) thereafter,
2,608,747 shares will be eligible for sale (in some cases, subject

19
<PAGE>

to volume limitations) from time to time after the one-year holding period
required by Rule 144 has elapsed. In addition, there are outstanding options to
purchase 1,723,441 shares of Common Stock which will be eligible for sale in the
public market from time to time subject to vesting and the expiration of lock-up
agreements. In addition, certain stockholders, representing approximately
9,305,070 shares of Common Stock, and certain optionholders, with respect to an
aggregate of 114 shares of Common Stock issuable upon the exercise of stock
options, have the right, subject to certain conditions, to include their shares
in future registration statements relating to the Company's securities and/or to
cause the Company to register certain shares of Common Stock owned by them.

After the date of this Prospectus, the Company intends to file a Form S-8
registration statement under the Securities Act to register all shares of Common
Stock issuable under the Company's 1995 Stock Option Plan, 1998 Stock Plan, 1998
Employee Stock Purchase Plan and 1998 Directors' Option Plan. Such registration
statement is expected to become effective immediately upon filing, and shares
covered by that registration statement will thereupon be eligible for sale in
the public markets, subject to certain lock-up agreements and, in the case of
affiliates of the Company, Rule 144 volume limitations. See
"Management--Employee Benefit Plans," "Description of Capital
Stock--Registration Rights of Certain Holders," "Shares Eligible for Future
Sale" and "Underwriting."

NO PRIOR PUBLIC MARKET; POSSIBLE STOCK PRICE VOLATILITY

Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after this offering. The initial
public offering price will be determined by negotiations among the Company and
the representatives of the Underwriters based on several factors and may not be
indicative of the future market price of the Common Stock after this offering.
The market price of the Company's Common Stock is likely to be highly volatile
and may be subject to significant fluctuations in response to actual or
anticipated variations in quarterly operating results and other factors, such as
announcements of technological innovations, new products or new contracts by the
Company or its competitors, conditions and trends in the software and other
technology industries, adoption of new accounting standards affecting the
software industry, changes in earning estimates or recommendations by securities
analysts, general market conditions or other events. In addition, the stock
market has also experienced extreme volatility that has particularly affected
the market prices of equity securities of many high technology companies and
that has often been unrelated or disproportionate to the operating performance
of such companies. Broad market fluctuations, as well as economic conditions
generally and in the software industry specifically, may result in a substantial
decline in the market price of the Company's Common Stock. There can be no
assurance that the market price for the Company's Common Stock will not decline
below the initial public offering price. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought against that company. There can
be no assurance that such litigation will not occur in the future with respect
to the Company. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which could have a material
adverse effect upon the Company's business, operating results or financial
condition. See "Underwriting."

DILUTION; DIVIDEND POLICY

Investors participating in this offering will incur immediate and
substantial dilution of net tangible book value per share of $7.73 from the
initial public offering price and may incur additional dilution upon the
exercise of outstanding stock options. See "Dilution."

The Company has never paid or declared any cash dividends on the Common
Stock or other securities and intends to retain any future earnings to finance
the development and expansion of its business. The Company does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future.
Additionally, the Company's debt facilities contain covenants that restrict the
Company's ability to pay cash dividends. See "Dividend Policy."

20
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby are estimated to be approximately $26,600,000
(approximately $28,925,000 if the Underwriters' over-allotment option is
exercised in full) assuming an initial public offering price of $10.00 per share
and after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company.

The primary purposes of this offering are to create a public market for the
Common Stock, to facilitate future access to public markets and to obtain
additional working capital. The Company expects to use the net proceeds of this
offering for working capital and other general corporate purposes, including the
repayment of outstanding notes payable which totaled $1,745,000 at March 31,
1998. See Note 3 of Notes to Consolidated Financial Statements. A portion of the
net proceeds may also be used for the acquisition of businesses, products and
technologies that are complementary to those of the Company. The Company has no
present plans, agreements or commitments and is not currently engaged in any
negotiations with respect to any such transactions. Pending such uses, the net
proceeds of this offering will be invested in investment-grade, interest-bearing
securities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

In the event that the Underwriters' over-allotment option is exercised, the
Company will not receive any proceeds from the sale of the shares of Common
Stock offered by the Selling Stockholders.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its capital stock.
The Company currently expects to retain future earnings, if any, for use in the
operation and expansion of its business and does not anticipate paying any cash
dividends in the foreseeable future. The Company's debt facilities contain
restrictive covenants that limit the Company's ability to pay cash dividends or
make stock repurchases without the prior written consent of the lender. See
Notes 3 and 5 of Notes to Consolidated Financial Statements.

21
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1998, (i) on an actual basis, (ii) on a pro forma basis to reflect (A) the
filing of an amendment to the Company's Amended and Restated Certificate of
Incorporation to provide for authorized capital stock of 50,000,000 shares of
Common Stock and 5,000,000 shares of undesignated Preferred Stock and (B) the
conversion of all outstanding shares of Preferred Stock into 6,219,566 shares of
Common Stock immediately prior to the closing of this offering, and (iii) on
such pro forma basis as adjusted to reflect the sale by the Company of 3,000,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $10.00 per share and the application by the Company of the estimated
net proceeds therefrom, after deducting estimated underwriting discounts and
commissions and estimated offering expenses. See "Use of Proceeds." The
capitalization information set forth in the table below is qualified by the more
detailed Consolidated Financial Statements and Notes thereto included elsewhere
in this Prospectus and should be read in conjunction with such Consolidated
Financial Statements and Notes.

<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................................... $ 6,318 $ 6,318 $ 31,173
---------- ----------- -----------
---------- ----------- -----------
Notes payable, less current portion......................................... 606 606 --
Stockholder's equity (1):
Convertible preferred stock, $0.001 par value; 26,540,194 shares
authorized; 12,600,525 shares issued and outstanding, actual; 5,000,000
shares authorized, no shares issued and outstanding, pro forma and pro
forma as adjusted........................................................ 13 -- --
Common stock, $0.001 par value; 35,000,000 shares authorized, 4,042,295
shares issued and outstanding, actual; 50,000,000 shares authorized,
10,261,861 shares outstanding, pro forma; 50,000,000 shares authorized,
13,261,861 shares issued and outstanding, pro forma as adjusted.......... 4 10 13
Additional paid-in capital.................................................. 19,859 19,866 46,463
Deferred stock compensation................................................. (1,813) (1,813) (1,813)
Accumulated deficit......................................................... (14,504) (14,504) (14,504)
---------- ----------- -----------
Total stockholders' equity.............................................. 3,559 3,559 30,159
---------- ----------- -----------
Total capitalization.................................................. $ 4,165 $ 4,165 $ 30,159
---------- ----------- -----------
---------- ----------- -----------
</TABLE>

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

(1) Excludes as of March 31, 1998: (i) 1,304,029 shares of Common Stock issuable
upon exercise of options outstanding under the Company's 1995 Stock Option
Plan at a weighted average exercise price of $0.27 per share and 383,928
shares of Common Stock reserved for future issuance thereunder and (ii)
27,650 shares of Common Stock issuable upon exercise of outstanding warrants
at a weighted average exercise price of $0.22 per share. Does not include:
(i) 419,412 shares of Common Stock issuable upon exercise of outstanding
options granted under the Company's 1995 Stock Option Plan in April 1998 and
(ii) an aggregate of 2,400,000 shares of Common Stock reserved for future
issuance after March 31, 1998 under the Company's 1998 Stock Plan, 1998
Employee Stock Purchase Plan and 1998 Director Option Plan. See
"Management--Employee Benefit Plans" and Note 5 of Notes to Consolidated
Financial Statements.

22
<PAGE>
DILUTION

The pro forma net tangible book value of the Company as of March 31, 1998,
after giving effect to the conversion of all outstanding shares of Preferred
Stock into Common Stock, was $3,559,000 or $0.35 per share of Common Stock. Pro
forma net tangible book value per share represents the Company's total tangible
assets less total liabilities, divided by the number of outstanding shares of
Common Stock on a pro forma basis. After giving effect to the sale of 3,000,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $10.00 per share and the application by the Company of
the estimated net proceeds therefrom, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses, the Company's pro
forma net tangible book value at March 31, 1998 would have been $30,159,000 or
$2.27 per share of Common Stock. This represents an immediate increase in pro
forma net tangible book value of $1.92 per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $7.73 per share to
new investors purchasing shares of Common Stock in this offering. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $ 10.00
Pro forma net tangible book value per share as of March 31, 1998........... $ 0.35
Increase in pro forma net tangible book value per share attributable to new
investors................................................................. 1.92
---------
Pro forma net tangible book value per share after offering................... 2.27
---------
Dilution per share to new investors.......................................... $ 7.73
---------
---------
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1998,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and by new investors purchasing shares in this offering
(at an assumed initial public offering price of $10.00 per share and before
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company).

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........................... 10,261,861 77.4% $ 18,173,115 37.7% $ 1.77
New investors...................................... 3,000,000 22.6 $ 30,000,000 62.3 10.00
------------ ----- ------------- -----
Total.......................................... 13,261,861 100.0% $ 48,173,115 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>

The foregoing computations assume no exercise of the Underwriters'
over-allotment option or of any outstanding stock options after March 31, 1998.
As of March 31, 1998, there were (i) 1,304,029 shares of Common Stock issuable
upon exercise of options outstanding under the Company's 1995 Stock Option Plan
at a weighted average exercise price of $0.27 per share and 383,928 shares of
Common Stock reserved for future issuance thereunder and (ii) 27,650 shares of
Common Stock issuable upon exercise of outstanding warrants at a weighted
average exercise price of $0.22 per share. In addition, the foregoing
computations do not include 419,412 shares of Common Stock issuable upon
exercise of outstanding options granted under the Company's 1995 Stock Option
Plan in April 1998 and an aggregate of 2,400,000 shares of Common Stock reserved
for future issuance after March 31, 1998 under the Company's 1998 Stock Plan,
1998 Employee Stock Purchase Plan and 1998 Director Option Plan. To the extent
that any shares are issued upon exercise of options, warrants or rights that are
presently outstanding or to be granted in the future, or reserved for future
issuance under the Company's stock plans, there will be further dilution to new
investors. See "Management--Employee Benefit Plans" and Note 5 of Notes to
Consolidated Financial Statements.

- ---------

(1) If the Underwriters' over-allotment option is exercised in full, sales by
the Selling Stockholders in this offering will reduce the number of shares
of Common Stock held by existing stockholders to 10,061,861 or approximately
74.5% of the total shares of Common Stock outstanding after this offering
and will increase the number of shares held by new investors to 3,450,000 or
approximately 25.5% of the total shares of Common Stock outstanding after
this offering. See "Principal and Selling Stockholders."

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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below for the period from
September 5, 1995 (inception) through December 31, 1995 and for, and as of the
end of, each of the years in the two-year period ended December 31, 1997, are
derived from the consolidated financial statements of NetGravity, Inc. and its
subsidiary, which consolidated financial statements have been audited by KPMG
Peat Marwick LLP, independent certified public accountants, and are included
elsewhere in this Prospectus. The consolidated balance sheet data as of December
31, 1995 is derived from audited consolidated financial statements of the
Company that are not included herein. The consolidated statements of operations
data for the three-month periods ended March 31, 1997 and 1998 and the
consolidated balance sheet data at March 31, 1998 are derived from unaudited
consolidated financial statements included elsewhere in this Prospectus. In the
opinion of management, the unaudited consolidated financial statements have been
prepared on the same basis as the audited consolidated financial statements and
contain all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the Company's results of operations for
such periods and financial condition at such dates. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for the full year or future periods. The selected
consolidated financial data set forth below is qualified in its entirety by, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER THREE MONTHS ENDED
SEPTEMBER 5, 1995 31, MARCH 31,
(INCEPTION) TO -------------------- --------------------
DECEMBER 31, 1995 1996 1997 1997 1998
----------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses................................... $ -- $ 1,262 2,901 $ 710 $ 775
Software upgrades................................... -- 107 1,123 185 402
Consulting and support.............................. -- 570 2,334 458 826
------- --------- --------- --------- ---------
Total revenues.................................... -- 1,939 6,358 1,353 2,003
------- --------- --------- --------- ---------
Cost of revenues:
Cost of software licenses........................... -- -- 76 7 15
Cost of consulting and support...................... -- 702 2,496 240 1,158
------- --------- --------- --------- ---------
Total cost of revenues............................ -- 702 2,572 247 1,173
------- --------- --------- --------- ---------
Gross profit...................................... -- 1,237 3,786 1,106 830
Operating costs and expenses:
Research and development............................ 39 1,764 3,033 678 996
Selling and marketing............................... 21 2,839 6,073 1,341 1,956
General and adminstrative........................... 131 1,315 1,552 241 708
------- --------- --------- --------- ---------
Total operating costs and expenses................ 191 5,918 10,658 2,260 3,660
------- --------- --------- --------- ---------
Loss from operations.............................. (191) (4,681) (6,872) (1,154) (2,830)
Other income (expense), net........................... (4) 54 (10) (6) 30
------- --------- --------- --------- ---------
Net loss.......................................... $ (195) $ (4,627) $ (6,882) $ (1,160) $ (2,800)
------- --------- --------- --------- ---------
------- --------- --------- --------- ---------
Basic and diluted net loss per share.................. $ (0.19) $ (2.19) $ (2.46) $ (0.55) $ (0.93)
Shares used in per share calculation(1)............... 1,006 2,111 2,799 2,121 3,025
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------- MARCH 31,
1995 1996 1997 1998
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit)............................................ $ (69) $ (221) $ 2,222 $ 2,682
Total assets......................................................... 486 3,159 9,887 11,832
Notes payable, less current portion.................................. -- 682 727 606
Accumulated deficit.................................................. (195) (4,822) (11,704) (14,504)
Total stockholders' equity (deficit)................................. (12) (164) 2,851 3,559
</TABLE>

- ---------

(1) See Note 1 of Notes to Consolidated Financial Statements.

24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY CONTAINS FORWARD-LOOKING
STATEMENTS RELATING TO THE FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF
THE COMPANY, 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, BUT NOT LIMITED TO, THOSE
SET FORTH UNDER "RISK FACTORS," "BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

NetGravity, Inc. is the leading provider of online advertising and direct
marketing software solutions. The Company develops, markets and supports its
mission-critical AdServer family of software products which, together with its
extensive consulting and support capabilities, is designed to enhance the
effectiveness and efficiency of the entire advertising and direct marketing
supply chain. From inception (September 5, 1995) to December 31, 1995 (the
"Inception Period"), the Company was in the development stage, and its
activities primarily related to raising capital, recruiting personnel,
conducting research and development activities, purchasing operating assets, and
building the NetGravity identity. From January 1996 through March 31, 1998, the
Company began shipping products, built a consulting and support organization,
continued to invest in research and development, built domestic and
international sales organizations, expanded its marketing activities and
developed its general and administrative infrastructure.

To date, the Company has generated all of its revenues from the license and
related upgrade, consulting and support of its AdServer family of software
products. In March 1996, the Company's initial release, AdServer 1.0, became
generally available. Subsequently, the Company has had two major releases of its
AdServer products: AdServer 2.0 in October 1996 and AdServer 3.0 in June 1997.
The Company believes that its current AdServer family of software products and
software products in development, together with the related consulting and
support services, will continue to account for substantially all of its revenues
for the foreseeable future.

The Company records an account receivable and deferred revenue upon shipment
and invoicing of a software license to a customer. The Company recognizes
software license revenue upon completion of the product installation provided
that no significant vendor obligations exist, which the Company's management has
generally determined to occur at the point in time at which the customers begin
"serving ads" utilizing the Company's products. This methodology has been
applied consistently for all software license revenue since the inception of the
Company. A portion of the initial software product license fee is attributed to
the customer's right to receive at no additional charge significant software
upgrades released during the subsequent twelve months. Revenues attributable to
significant software upgrades are deferred and recognized ratably over the
period covered by the software license agreement, which is generally one year.
Revenue from consulting services are recognized as the services are performed.
Customer support revenue is deferred and recognized ratably over the period
covered by the customer support agreement, which is generally one year. In
October 1997, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 97-2, SOFTWARE REVENUE RECOGNITION, which the
Company adopted, effective January 1, 1998. Such adoption had no material effect
on the Company's methods of recognizing revenue from its software licenses,
software upgrades, and consulting and support activities. See Note 1 of Notes to
Consolidated Financial Statements.

Pricing for AdServer products is based on the number of copies licensed to
the customer, scaled to provide discounts based on the overall size of the
system being licensed. Initial license sales include a one-year subscription
entitling the licensee to free upgrades of major releases of the product. The
software upgrade revenue is broken out separately for every license in
accordance with SOP 97-2, based on vendor specific objective evidence for the
upgrade element, and the revenue allocated to the upgrade element is recognized
over the agreement term. For subsequent years, customers may subscribe on an
annual basis for the right to receive major product upgrades. The cost to
subscribe to the upgrade program is based on a percentage of the list price of
software the customer has licensed. Annual support contracts, which are
generally purchased in conjunction with the licensing of a product,

25
<PAGE>
are sold separately from the initial license for a fee, which is also based on a
percentage of the list price of the software. Support packages typically include
non-major product releases, on-line support and telephone support. Consulting
revenues consist of implementation services and training. Consulting is charged
at a per diem rate or on a fixed fee basis for a package of services.

The Company sells its products and services primarily through its direct
sales force and telesales organizations and maintains sales and support
organizations in North America, Europe and Asia Pacific. See Note 7 of Notes to
Consolidated Financial Statements. Indirect sales channels, including resellers
and web hosting providers, also sell the Company's products. Indirect channels
generally provide less revenue per license to the Company since the channel
partner usually receives discounts. Through March 31, 1998, revenues through
indirect channels have not been material.

The Company's business has grown from inception through March 31, 1998, with
total revenues increasing from $1.9 million in the year ended December 31, 1996
to $6.4 million in the year ended December 31, 1997 and $2.0 million in the
three months ended March 31, 1998. However the Company has experienced net
losses over this entire period, and as of March 31, 1998 had an accumulated
deficit of $14.5 million. These losses resulted from significant costs incurred
in the development and sale of the Company's products and services. During this
period, the number of Company employees increased from 10 at December 31, 1995
to 94 at March 31, 1998. The Company currently expects to expand its sales and
marketing operations, to continue international expansion, to increase its
investment in product development, to further expand its consulting and support
organizations and to improve its internal operating and financial infrastructure
in support of the Company's business plan, all of which will increase operating
expenses. As a result, the Company expects to incur additional losses and
continued negative cash flow from operations for the foreseeable future, and
such losses are anticipated to increase significantly from current levels.

The Company has recorded deferred stock compensation expense of $1,784,000
for the year ended December 31, 1997 and $390,000 for the three months ended
March 31, 1998 as a result of stock options granted during 1997 and the first
three months of 1998. Amortization of deferred stock compensation expense of
approximately $115,000 was recognized in 1997, and $246,000 was recognized in
the three months ended March 31, 1998. Amortization of deferred stock
compensation expense is allocated to costs of consulting and support and to all
operating expense lines identified on the statement of operations. Deferred
stock compensation expense is amortized over the life of the options, generally
four years. As a result, amortization of deferred stock compensation expense
will adversely impact the Company's operating results for the next four years.

The Company believes that period-to-period comparisons of its operating
results are not meaningful and should not be relied upon as predictive of future
performance. The Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in the early stage
of development, particularly companies in new and rapidly evolving markets.
There can be no assurance that the Company will be successful in addressing such
risks and difficulties. In addition, although NetGravity has experienced
significant revenue growth recently, there can be no assurance that the Company
will increase or even sustain its current level of revenues or that the Company
will achieve profitability in the future. See "Risk Factors--Limited Operating
History; History of Losses; Anticipated Continued Losses," "--Potential
Fluctuations in Quarterly Operating Results; Seasonality; Possible Price
Erosion" and "--Management of Growth; Risks of Potential Future Acquisitions."

26
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth consolidated statement of operations data for
the periods indicated as a percentage of total revenues:

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
---------------- ----------------
1996 1997 1997 1998
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Software licenses......................................... 65.1% 45.6% 52.5% 38.7%
Software upgrades......................................... 5.5 17.7 13.7 20.1
Consulting and support.................................... 29.4 36.7 33.8 41.2
------- ------- ------- -------
Total revenues.......................................... 100.0 100.0 100.0 100.0
------- ------- ------- -------
Cost of revenues(1):
Cost of software licenses(2).............................. -- 1.2 0.5 0.8
Cost of consulting and support(3)......................... 36.2 39.3 17.7 57.8
------- ------- ------- -------
Total cost of revenues.................................. 36.2 40.5 18.2 58.6
------- ------- ------- -------
Gross margin............................................ 63.8 59.5 81.7 41.4
Operating costs and expenses:
Research and development.................................. 91.0 47.7 50.1 49.7
Selling and marketing..................................... 146.4 95.5 99.1 97.7
General and administrative................................ 67.8 24.4 17.8 35.3
------- ------- ------- -------
Total operating costs and expenses...................... 305.2 167.6 167.0 182.7
------- ------- ------- -------
Loss from operations.................................... (241.4) (108.1) (85.3) (141.3)
Other income (expense), net................................. 2.8 (0.2) (0.4) 1.5
------- ------- ------- -------
Net loss................................................ (238.6)% (108.2)% (85.7)% (139.8)%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>

- ---------

(1) There are no material costs of revenues associated with software upgrades.

(2) As a percentage of software licenses revenues, cost of software licenses was
0.0%, 2.6%, 1.0% and 1.9% in the years ended December 31, 1996 and 1997 and
the three months ended March 31, 1997 and 1998, respectively.

(3) As a percentage of consulting and support revenues, cost of consulting and
support was 123.2%, 106.9%, 52.4% and 140.2% in the years ended December 31,
1996 and 1997 and the three months ended March 31, 1997 and 1998,
respectively.

REVENUES

The Company's total revenues increased from $1.4 million in the three months
ended March 31, 1997 to $2.0 million in the three months ended March 31, 1998.
Total revenues increased from $1.9 million in 1996 to $6.4 million in 1997. The
Company had no revenues in the Inception Period. International revenues,
primarily comprised of export revenues, as a percentage of total revenues were
0% and 29.3% in the three months ended March 31, 1997 and March 31, 1998,
respectively; and 0% and 7.7% in 1996 and 1997, respectively. Growth in
international revenues in all periods was attributable to expanded sales and
marketing efforts overseas and the opening of a European regional office in
April 1997. The increase in international revenues in the last three months of
1997 and the first three months of 1998 more than offset a decline in North
American revenues in each of those quarters. The decline in North American
revenues in those periods was primarily attributable to increased focus on
international revenues, dedication of resources in North America to
implementation issues associated with the

27
<PAGE>
release of AdServer 3.0 and insufficient North American sales personnel. No
customer accounted for more than 10% of total revenues in the three months ended
March 31, 1997 or 1998 or in the years ended December 31, 1996 or 1997.

SOFTWARE LICENSES. Software licenses revenues increased from $710,000 in
the three months ended March 31, 1997 to $775,000 in the three months ended
March 31, 1998, and increased from $1.3 million in 1996 to $2.9 million in 1997.
The increase in each period was attributable to an increase in the number of
AdServer Enterprise licenses sold and the introduction of AdServer Network in
March 1997. The Company anticipates that revenues attributable to licenses of
its AdServer Network product will increase as a percentage of total software
licenses revenues in future periods. The percentage of the Company's total
revenues attributable to software licenses revenues decreased from 52.5% in the
three months ended March 31, 1997 to 38.7% in the three months ended March 31,
1998, and decreased from 65.1% in 1996 to 45.6% in 1997. The decrease in each
period as a percentage of total revenues was primarily a result of increased
demand for consulting services and the increased number of customers
participating in software upgrade and support plans. Because software upgrades
revenues and consulting and support revenues are, to a large extent, a function
of software licenses revenues, the Company's future operating results will be
substantially dependent on growth of software licenses revenues, and the failure
to increase software licenses revenues would likely have a material adverse
effect on the Company's business, results of operations and financial condition.

SOFTWARE UPGRADES. Software upgrades revenues increased from $185,000 in
the three months ended March 31, 1997 to $402,000 in the three months ended
March 31, 1998, and increased from $107,000 in 1996 to $1.1 million in 1997. The
increase in each period was a result of software upgrades being provided to a
larger installed customer base, which more than offset reductions in software
upgrades pricing during these periods. The percentage of the Company's total
revenues attributable to software upgrades revenues increased from 13.7% in the
three months ended March 31, 1997 to 20.1% in the three months ended March 31,
1998, and from 5.5% in 1996 to 17.7% in 1997.

CONSULTING AND SUPPORT. Consulting and support revenues increased from
$458,000 for the three months ended March 31, 1997 to $826,000 for the three
months ended March 31, 1998, and increased from $570,000 in 1996 to $2.3 million
in 1997. The increase in each period was primarily as a result of the increased
demand for consulting services, expansion into Europe and Asia, the larger
installed customer base, and customers electing to renew their support program.
The percentage of the Company's total revenues attributable to consulting and
support revenues increased from 33.8% for the three months ended March 31, 1997
to 41.2% for the three months ended March 31, 1998, and increased from 29% in
1996 to 37% in 1997.

COST OF REVENUES

Gross margins decreased from 81.7% in the three months ended March 31, 1997
to 41.5% in the three months ended March 31, 1998 as a result of the increase in
consulting and support revenues as a percentage of total revenues and the
increased staffing levels in the consulting and support organizations. Gross
margins decreased from 63.8% in 1996 to 59.5% in 1997. There were no costs of
revenues in 1995. There are no material costs of revenues associated with
software upgrades revenues.

COST OF SOFTWARE LICENSES. Cost of software licenses consists of royalties
paid to third parties for licensed technology. Cost of software licenses was
$7,000 and $15,000 in the three months ended March 31, 1997 and 1998,
respectively, and $0 and $76,000 in 1996 and 1997, respectively. As a percentage
of software licenses revenues, cost of software licenses was 1.0% and 1.9% in
the three months ended March 31, 1997 and 1998, respectively, and 0.0% and 2.6%
in 1996 and 1997, respectively.

COST OF CONSULTING AND SUPPORT. Cost of consulting and support consists
primarily of personnel-related costs incurred in providing consulting, support
and training to customers. The cost of consulting and support increased from
$240,000 in the three months ended March 31, 1997 to $1.2 million in the three
months ended March 31, 1998, and increased from $702,000 in 1996 to $2.5 million
in 1997. The increase in each period was primarily due

28
<PAGE>
to an increase in personnel as the Company increased staff to meet customer
demand and due to travel costs associated with the increased volume of service
provided by the consulting and support organizations. The Company expects that
the cost of consulting and support will continue to increase in absolute dollar
amounts in future periods as the Company continues to hire additional
consulting, training and customer support personnel. Cost of consulting and
support increased as a percentage of consulting and support revenues from 52.4%
in the three months ended March 31, 1997 to 140.2% in the three months ended
March 31, 1998 due to a significant increase in consulting and support
personnel. Cost of consulting and support as a percentage of consulting and
support revenues decreased from 123.2% in 1996 to 106.8% in 1997, primarily due
to better utilization of consulting and support personnel associated with an
increased customer base.

Gross margins may be impacted by the mix of products sold by the Company,
the mix of software licenses revenues, software upgrades revenues and consulting
and support revenues, the mix of international and North American revenues, and
the mix of distribution channels used by the Company. The Company typically
realizes higher gross margins on software upgrades revenues than on software
licenses revenues, substantially higher gross margins on software licenses
revenues than on consulting and support revenues, and higher gross margins on
direct sales than on indirect sales. Shifts in mix towards lower margin revenues
or sales through indirect channels would adversely impact the Company's overall
gross margin and could materially adversely impact the Company's operating
results.

RESEARCH AND DEVELOPMENT

Research and development expenses consist primarily of compensation and
consulting expenses and related equipment. To date, the Company has not
capitalized any such development costs under Statement of Financial Accounting
Standards ("SFAS") No. 86; all research and development costs have been expensed
as incurred. Research and development expenses increased from $678,000 in the
three months ended March 31, 1997 to $996,000 in the three months ended March
31, 1998, and increased from $39,000 in the Inception Period to $1.8 million in
1996 to $3.0 million in 1997. The increase in absolute dollars in all periods
was primarily due to the increased personnel and related costs associated with
enhancements of existing products and development of new products. Research and
development costs decreased as a percentage of total revenues from 50.1% in the
three months ended March 31, 1997 to 49.7% in the three months ended March 31,
1998, and decreased from 91.0% in 1996 to 47.7% in 1997. The Company believes
that continued investment in research and development is critical to attaining
its strategic objectives and, as a result, expects research and development
expenses to increase significantly in absolute dollars in future periods.

SELLING AND MARKETING

Selling and marketing expenses consist primarily of salaries, commissions,
advertising expenses, trade show expenses, seminars and costs of marketing
materials. Selling and marketing expenses increased from $1.3 million in the
three months ended March 31, 1997 to $2.0 million in the three months ended
March 31, 1998, and increased from $21,000 in the Inception Period to $2.8
million in 1996 to $6.1 million in 1997. The increase in absolute dollars in
each period was due primarily to the increase in sales personnel and commissions
and costs related to the continued development and implementation of the
Company's marketing and branding campaigns. Selling and marketing expenses
decreased as a percentage of total revenues from 99.1% in the three months ended
March 31, 1997 to 97.7% in the three months ended March 31, 1998, and decreased
from 146.4% in 1996 to 95.5% in 1997. The Company expects selling and marketing
expenses to increase significantly in absolute dollars in future periods, as the
Company hires additional personnel, expands into new markets and continues to
promote the NetGravity brand.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of salaries and
related costs for the Company's executive, administrative, finance and human
resources personnel, support services and professional services fees. General
and administrative expenses increased from $241,000 in the three months ended
March 31, 1997 to

29
<PAGE>
$708,000 in the three months ended March 31, 1998, and increased from $131,000
in the Inception Period to $1.3 million in 1996 to $1.6 million in 1997. The
increase in absolute dollars in each period was primarily a result of increased
personnel, professional service fees and facility expenses necessary to support
the Company's increased scale of operations. General and administrative expenses
as a percentage of total revenues increased from 17.8% in the three months ended
March 31, 1997 to 35.3% in the three months ended March 31, 1998, primarily as a
result of expansion of international operations. General and administrative
expenses decreased as a percentage of total revenues from 67.8% in 1996 to 24.4%
in 1997. The Company expects general and administrative expenses to increase in
absolute dollars in future periods as the Company expands its staff, incurs
additional costs related to expansion of its operations, and is subject to the
requirements of being a publicly traded company.

INCOME TAXES

As of December 31, 1997, the Company had a net operating loss carryforward
for federal and state income tax purposes of approximately $9.8 million. In
addition, the Company had federal and state research and development credit
carryforwards of approximately $145,000 and $120,000, respectively. The
Company's federal net operating loss and research and development credit
carryforwards will expire in the years 2010 through 2012, if not utilized. The
Company's state net operating loss carryforwards will expire in the year 2003.
The state research and development credit can be carried forward indefinitely.

As of December 31, 1997, NetGravity Europe Limited had a net operating loss
carryforward in the United Kingdom of approximately $600,000, which can be used
to offset NetGravity Europe Limited's future income. The United Kingdom net
operating loss carryforward can be carried forward indefinitely.

Federal and state tax laws impose substantial restrictions on the
utilization of net operating loss and tax credit carryforwards in the event of
an "ownership change" as defined in Section 382 of the Internal Revenue Code of
1986, as amended. The Company has not yet determined whether such an ownership
change has occurred.

The Company has not recognized any benefit from the future use of such loss
carryforwards because management's evaluation of all the available evidence in
assessing the realizability of the tax benefits of such loss carryforwards
indicates that the underlying assumptions of future profitable operations
contain risks that do not provide sufficient assurance to recognize such tax
benefits currently. See Note 4 of Notes to Consolidated Financial Statements.

30
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited consolidated statement of
operations data for each of the nine quarters ended March 31, 1998, as well as
such data expressed as a percentage of the Company's total revenues for the
periods indicated. In the opinion of management, this information has been
prepared substantially on the same basis as the audited consolidated financial
statements appearing elsewhere in this Prospectus, and all necessary
adjustments, consisting only of normal recurring adjustments, have been included
in the amounts stated below to present fairly the unaudited consolidated
quarterly results of operations data. The consolidated quarterly data should be
read in conjunction with the audited Consolidated Financial Statements of the
Company and the Notes thereto appearing elsewhere in this Prospectus. The
operating results for any quarter should not be considered indicative of results
of any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
MAR. 31 JUNE 30 SEP. 30 DEC. 31
1996 1996 1996 1996
-------- ------- ------- -------
(IN THOUSANDS, EXCEPT AS A
PERCENTAGE OF TOTAL REVENUES)
<S> <C> <C> <C> <C>
Revenues:
Software licenses............................. $ -- $ 172 $ 597 $ 493
Software upgrades............................. -- 1 16 90
Consulting and support........................ 11 60 155 344
-------- ------- ------- -------
Total revenues.............................. 11 233 768 927
-------- ------- ------- -------
Costs of revenues(1):
Cost of software licenses..................... -- -- -- --
Cost of consulting and support................ -- 217 274 211
-------- ------- ------- -------
Total cost of revenues...................... -- 217 274 211
-------- ------- ------- -------
Gross profit................................ 11 16 494 716
Operating costs and expenses:
Research and development...................... 261 333 521 649
Selling and marketing......................... 103 568 925 1,243
General and adminstrative..................... 270 181 254 610
-------- ------- ------- -------
Total operating costs and expenses.......... 634 1,082 1,700 2,502
-------- ------- ------- -------
Loss from operations........................ (623 ) (1,066 ) (1,206 ) (1,786)
Other income (expense), net..................... 17 24 16 (2)
-------- ------- ------- -------
Net loss.................................... $ (606 ) $(1,042) $(1,190) $(1,788)
-------- ------- ------- -------
-------- ------- ------- -------

Revenues:
Software licenses............................. -- 73.8% 77.7% 53.2%
Software upgrades............................. -- 0.4 2.1 9.7
Consulting and support........................ 100.0% 25.8 20.2 37.1
-------- ------- ------- -------
Total revenues.............................. 100.0 100.0 100.0 100.0
-------- ------- ------- -------
Cost of revenues(1):
Cost of software licenses(2).................. -- -- -- --
Cost of consulting and support(3)............. -- 93.1 35.7 22.8
-------- ------- ------- -------
Total cost of revenues...................... -- 93.1 35.7 22.8
-------- ------- ------- -------
Gross profit................................ 100.0 6.9 64.3 77.2
Operating costs and expenses:
Research and development...................... 2,372.7 142.9 67.8 70.0
Selling and marketing......................... 936.4 243.8 120.4 134.1
General and administrative.................... 2,454.5 77.7 33.1 65.8
-------- ------- ------- -------
Total operating costs and expenses.......... 5,763.6 464.4 221.3 269.9
-------- ------- ------- -------
Loss from operations........................ (5,663.6) (457.5 ) (157.0 ) (192.7)
Other income (expense), net..................... 154.5 10.3 2.0 (0.2)
-------- ------- ------- -------
Net loss.................................... (5,509.1)% (447.2 )% (155.0 )% (192.9)%
-------- ------- ------- -------
-------- ------- ------- -------

MAR. 31 JUNE 30 SEP. 30 DEC. 31 MAR. 31
1997 1997 1997 1997 1998
------- ------- ------- ------- -------

<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses............................. $ 710 $ 665 $ 824 $ 702 $ 775
Software upgrades............................. 185 266 303 369 402
Consulting and support........................ 458 470 614 792 826
------- ------- ------- ------- -------
Total revenues.............................. 1,353 1,401 1,741 1,863 2,003
------- ------- ------- ------- -------
Costs of revenues(1):
Cost of software licenses..................... 7 21 7 41 15
Cost of consulting and support................ 240 513 728 1,015 1,158
------- ------- ------- ------- -------
Total cost of revenues...................... 247 534 735 1,056 1,173
------- ------- ------- ------- -------
Gross profit................................ 1,106 867 1,006 807 830
Operating costs and expenses:
Research and development...................... 678 782 677 896 996
Selling and marketing......................... 1,341 1,410 1,558 1,764 1,956
General and adminstrative..................... 241 353 310 648 708
------- ------- ------- ------- -------
Total operating costs and expenses.......... 2,260 2,545 2,545 3,308 3,660
------- ------- ------- ------- -------
Loss from operations........................ (1,154 ) (1,678 ) (1,539 ) (2,501 ) (2,830 )
Other income (expense), net..................... (6 ) (8 ) (27 ) 31 30
------- ------- ------- ------- -------
Net loss.................................... $(1,160) $(1,686) $(1,566) $(2,470) $(2,800)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Revenues:
Software licenses............................. 52.5% 47.5% 47.3% 37.7% 38.7%
Software upgrades............................. 13.7 19.0 17.4 19.8 20.1
Consulting and support........................ 33.8 33.5 35.3 42.5 41.2
------- ------- ------- ------- -------
Total revenues.............................. 100.0 100.0 100.0 100.0 100.0
------- ------- ------- ------- -------
Cost of revenues(1):
Cost of software licenses(2).................. 0.5 1.5 0.4 2.2 0.7
Cost of consulting and support(3)............. 17.7 36.6 41.8 54.5 57.8
------- ------- ------- ------- -------
Total cost of revenues...................... 18.2 38.1 42.2 56.7 58.5
------- ------- ------- ------- -------
Gross profit................................ 81.7 61.9 57.8 43.3 41.5
Operating costs and expenses:
Research and development...................... 50.1 55.8 38.9 48.1 49.7
Selling and marketing......................... 99.1 100.6 89.5 94.7 97.7
General and administrative.................... 17.8 25.2 17.8 34.8 35.3
------- ------- ------- ------- -------
Total operating costs and expenses.......... 167.0 181.6 146.2 177.6 182.7
------- ------- ------- ------- -------
Loss from operations........................ (85.3 ) (119.7 ) (88.4 ) (134.3 ) (141.2 )
Other income (expense), net..................... (0.4 ) (0.6 ) (1.6 ) 1.7 1.5
------- ------- ------- ------- -------
Net loss.................................... (85.7 )% (120.3 )% (90.0 )% (132.6 )% (139.7 )%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>

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

(1) There are no material costs of revenues associated with software upgrades
revenues.

(2) As a percentage of software licenses revenues, costs of software licenses
have been 0.0%, 0.0%, 0.0%, 0.0%, 1.0%, 3.2%, 0.8%, 5.8% and 1.9%,
respective to the quarters presented chronologically above.

(3) As a percentage of consulting and support revenues, costs of consulting and
support have been 0.0%, 361.7%, 176.8%, 61.3%, 52.4%, 109.1%, 118.6%, 128.2%
and 140.2%, respective to the quarters presented chronologically above.

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<PAGE>
The Company's total revenues have increased in each quarter presented. The
increases have been generally due to increased acceptance of the Company's
AdServer family of products, expansion of the Company's direct sales force, the
introduction of AdServer Network in April 1997 and increased software upgrades
and consulting and support revenues as the installed customer base has grown.
Total costs of revenues have generally increased in absolute dollars over the
quarters presented due to the Company's increased staffing in customer support,
consulting and training. Cost of revenues as a percentage of total revenues has
increased every quarter since the three months ended March 31, 1997 to the three
months ended March 31, 1998 as a result of the increased percentage of
consulting and support revenues over this period of time. Total operating
expenses have generally increased in absolute dollar amounts over the quarters
shown due to the Company's increased staffing in research and development, sales
and marketing and general and administrative functions.

FACTORS AFFECTING OPERATING RESULTS

The Company's results of operations may fluctuate significantly in the
future as a result of a variety of factors, many of which are beyond the
Company's control. These factors include: (i) varying demand for the Company's
products and services, (ii) the Company's success in addressing new and related
market opportunities, (iii) the introduction of new or enhanced online
advertising or direct marketing solutions by the Company or its competitors,
(iv) changes in the market demand for online advertising and direct marketing
software, (v) market acceptance of new products and services offered by the
Company, (vi) the timing and size of individual license transactions, (vii) the
sales and implementation cycles of the Company's customers, (viii) the addition
or loss of customers, (ix) the mix between software licenses, software upgrades
and consulting and support revenues, (x) the mix between domestic and
international revenues, (xi) the amount of advertising budgets committed to
online advertising and direct marketing activities by the Company's current and
prospective customers, (xii) price changes or changes in pricing models by the
Company or its competitors, (xiii) the mix of distribution channels through
which the Company's products are sold, (xiv) increasing complexity of the
Company's products resulting in higher costs to develop and maintain, which may
not be recouped by increased prices, (xv) the loss of key employees and the time
required to train new hires, particularly sales, consulting and customer support
personnel, (xvi) the ability to penetrate markets outside of North America,
(xvii) the incurrence of costs relating to possible acquisitions of technology
or businesses, (xviii) seasonality related to slower European sales in the third
quarter and a shorter implementation period in the fourth quarter, (xix) the
amount and timing of capital expenditures and other costs relating to the
expansion of the Company's operations, and (xx) general economic conditions.

32
<PAGE>
research and development, increase its sales and marketing operations, develop
new distribution channels, improve its operational and financial systems and
broaden its customer support capabilities. To the extent that such expenses
precede or do not correspond with increased revenues, the Company's business,
results of operations or financial condition could be materially adversely
affected and net losses in a given quarter would be even greater than expected.

Due to all of the foregoing factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Furthermore it is possible that in some future quarters the Company's results of
operations may fall below the expectations of securities analysts and investors.
In such event, the trading price of the Company's Common Stock will likely be
materially and adversely affected. See "Risk Factors--Potential Fluctuations in
Quarterly Operating Results; Seasonality; Possible Price Erosion."

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries in order to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and/ or software used by many companies will
need to be upgraded to comply with "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance issues. A number of date code fields in the user
interface portion of the Company's AdServer products are currently programmed to
accept only two digit entries and, as a result, the Company's AdServer family of
software products is not yet fully Year 2000 compliant. While the Company
believes that date code fields in other components of its products are Year 2000
compliant, there can be no assurance that all or any of such date code fields
are Year 2000 compliant. The Company is currently taking steps to make the date
code fields in the user interface portion of its AdServer products Year 2000
compliant, which action the Company intends to complete by the end of June 1998.
The Company currently estimates that no external personnel or other resources
will be needed to complete such action and that the cost of the re-allocated
engineering personnel will be approximately $25,000. However, there can be no
assurance that the Company will be successful in making its products fully Year
2000 compliant by the end of June 1998 or thereafter or that the actual internal
and external personnel and resources required to achieve such compliance will
not materially exceed these estimates. Any failure by the Company to make its
products Year 2000 compliant could result in a decrease in sales of the
Company's products, deferral of revenue recognition on contracts in which the
Company has warranted (or may in the future warrant) compliance with Year 2000
requirements, an increase in the allocation of resources to address Year 2000
problems of the Company's customers without additional revenue commensurate with
such dedication of resources, or an increase in litigation costs relating to
losses suffered by the Company's customers due to such Year 2000 problems. In
addition, the Company believes that the purchasing patterns of customers and
potential customers may be impacted by Year 2000 issues. Further, many companies
are expending significant resources to correct or patch their current software
systems. These expenditures of funds may result in reduced funds available to
purchase software products such as those offered by the Company. The occurrence
of any of such events could have a material adverse effect on the Company's
business, results of operations or financial condition.

33
<PAGE>

2000 compliant, and that certain of its computer hardware may not be able to be
made Year 2000 compliant. Although the Company believes that such software will
become compliant through updates and upgrades that would have been purchased in
the ordinary course of business for reasons unrelated to the Year 2000 issue and
that the cost to replace such hardware, if necessary, would be less than
$60,000, there can be no assurance that the incremental costs of such software
and hardware will not materially exceed these preliminary estimates, which
higher incremental costs could have a material adverse effect on the Company's
business, results of operations or financial condition. See "Risk Factors--Year
2000 Compliance."

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations primarily
through the private sale of equity securities and, to a lesser extent, bank and
investor borrowings. As of March 31, 1998, the Company had approximately $6.3
million of cash and cash equivalents.

The Company has a revolving credit facility with a bank in the amount of
$1.0 million which bears interest at the prime rate (8.50% as of December 31,
1997) plus 0.75%, and expires in May 1998. Borrowings are limited to the lesser
of $1.0 million or 70% of the net amount of eligible accounts receivable and are
secured by the Company's accounts receivable. As of December 31, 1997 and March
31, 1998, borrowings under this credit facility were $655,000 and $655,000,
respectively. The Company has an equipment line of credit with the same bank
that provides up to $1.0 million, bears interest at the prime rate, and expires
in June 2000. The line of credit is secured by the Company's fixed assets. As of
December 31, 1996 and 1997, and March 31, 1998, $682,000, $584,000 and $524,000,
respectively, had been advanced under this agreement with the principal amount
due in 30 monthly installments of $19,467 beginning December 31, 1997. The
Company also has a second equipment line of credit with the same bank that
provides up to $1.2 million, bears interest at the prime rate, and expires in
June 2000. The line of credit is secured by the Company's fixed assets. As of
December 31, 1997 and March 31, 1998, $628,000 and $566,000, respectively, had
been advanced under this agreement with the principal amount due in 30 monthly
installments of $20,933 beginning December 31, 1997. As of December 31, 1997 and
March 31, 1998, the Company was not in compliance with certain financial
covenants on all of the aforementioned credit facilities, and the Company has
received a waiver of such non-compliance.

Net cash used in operating activities was $1.1 million and $2.1 million in
the three months ended March 31, 1997 and 1998, respectively, and was $146,000,
$3.3 million and $5.1 million in the Inception Period and in 1996 and 1997,
respectively. In each period, cash used by operating activities was primarily a
result of a net loss.

Net cash used in investing activities was $2.7 million and $358,000 in the
three months ended March 31, 1997 and 1998, respectively, and was $62,000,
$854,000 and $1.2 million in the Inception Period and in 1996 and 1997,
respectively. Cash used in investing activities in each period was primarily
related to purchases of property and equipment, except for the three months
ended March 31, 1997, in which cash used in investing activities related
primarily to short-term investments.

Net cash provided by financing activities of $4.5 million and $3.1 million
in the three months ended March 31, 1997 and 1998, respectively, was primarily
attributable in each period to net proceeds from the issuance of Preferred
Stock. Net cash provided by financing activities of $633,000 for the Inception
Period consisted primarily of $450,000 from the issuance of promissory notes
convertible into Series A Preferred Stock and $183,000 from the issuance of
Common Stock. Net cash provided by financing activities of $4.2 million for the
year ended December 31, 1996 primarily consisted of net proceeds of $4.0 million
from the issuance of Preferred Stock. Net cash provided by financing activities
of $10.8 million for the year ended December 31, 1997 primarily consisted of net
proceeds of $9.7 million from the issuance of Preferred Stock and bank
borrowings of $1.2 million on an equipment line of credit and an accounts
receivable line.

The Company's deferred revenue balance includes deferred software licenses
revenues and revenues attributable to uncompleted consulting engagements, as
well as the unamortized portion of the revenues from software upgrades and
support contracts. The Company records an accounts receivable and deferred
revenue upon shipment and invoicing of a software license to a customer. The
Company's accounts receivable balance is relatively

34
<PAGE>
large in comparison to quarterly and annual revenues because the Company
generally recognizes revenue from the licensing of software later than shipment
and invoicing. Further, the Company's deferred revenue balance or changes
therein may not be indicative of changes in the ordering patterns of customers
or the Company's backlog.

Although the Company has no other material commitments other than its
facilities leases (see Note 6 of Notes to Consolidated Financial Statements),
management anticipates that it will experience an increase in its capital
expenditures and lease commitments consistent with its anticipated growth in
operations, infrastructure and personnel. The Company expects that capital
expenditures for 1998 will be at least $2.0 million. In particular, the Company
anticipates incurring capital expenditures in connection with its expansion of
its California, New York and Asia facilities in 1998, and its Europe facilities
in 1999. The Company currently anticipates that it will continue to experience
significant growth in its operating expenses for the foreseeable future and that
its operating expenses will be a material use of the Company's cash resources.
The Company believes that the net proceeds of the offering, together with its
existing cash and cash equivalents and available bank borrowings, will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next twelve months.

35
<PAGE>
BUSINESS

THE FOLLOWING DISCUSSION OF THE COMPANY'S BUSINESS 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, BUT NOT LIMITED TO, THOSE
SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

NetGravity is the leading provider of online advertising and direct
marketing software solutions. A pioneer in the online advertising management
software market, the Company believes that it was the first company to provide
such commercial software to major online content publishers and has recently
expanded into the market for online direct marketing software solutions. The
Company develops, markets and supports its mission-critical AdServer family of
software products which, together with its full range of professional services
and support capabilities, is designed to enhance the effectiveness and
efficiency of each constituent in the online advertising and direct marketing
supply chain: merchants (vendors of products and services), advertising agencies
and content publishers (including advertising networks). In particular, AdServer
is designed to enable customers to increase their revenue from online
advertising and direct marketing by improving response rates through consumer
targeting and to enable customers to reduce their administrative expenses by
automating certain advertising and direct marketing business processes. The
Company markets and sells its products and services primarily through its field
sales and telesales organizations and maintains sales and support operations in
North America, Europe and Asia Pacific. To date, the Company has sold its
software and services to over 225 customers, including 37 of the content
publishers listed in CMR's Interwatch (formerly Jupiter's AdSpend) list of the
top 100 revenue-generating online content publishers for the eight months ended
August 31, 1997. The Company's customers include @Home Network, CNN Interactive,
E*TRADE, J. Walter Thompson, Netscape Communications, ONSALE, Real Cities
(Knight-Ridder New Media), Time Inc. New Media, Virgin Net and WhoWhere?.

INDUSTRY BACKGROUND

The competitive nature of the global marketplace requires merchants to
continually seek out and obtain new customers while preserving their
relationships with existing customers. Historically, merchants have communicated
with consumers through advertising in traditional media (such as print,
television and radio) and through traditional direct marketing channels (such as
telemarketing and direct mail) to establish and maintain their brand identities,
introduce new products, announce improved product features and target offers to
potential and current customers. International Data Corporation ("IDC") has
estimated that $175 billion would be spent on traditional media advertising in
the United States during 1997. The Direct Marketing Association has estimated
that $153 billion would be spent on direct marketing in the United States during
1997.

ADVERTISING AND DIRECT MARKETING SUPPLY CHAIN. The traditional advertising
and direct marketing industries together can be viewed as a supply chain with
three primary constituents: merchants (vendors of products and services),
advertising agencies and content publishers (including advertising networks). As
the driving force in the supply chain, merchants seek to increase their sales
and brand awareness by targeting advertisements and offers to current and
prospective consumers of their products and services. To build relationships
with new and existing customers, merchants work with advertising agencies to
purchase advertising space targeted at the types of consumers that the merchants
desire. Advertising agencies, in turn, identify and secure advertising space
from content publishers that meets the merchants' criteria. Content publishers,
such as magazines, newspapers, radio stations and television programs, attract
audiences of consumers by offering them compelling entertainment and information
and deliver these audiences to merchants. Established, larger content publishers
generally work directly with advertising agencies in order to retain greater
control over their advertising inventories, which, in turn, allows them to
maintain and enhance the long-term value of their advertising space to
advertising agencies and merchants. Smaller, less established content publishers
generally work with advertising agencies through advertising representatives or
networks, which provide these content publishers with an outsourced sales force
for their

36
<PAGE>
advertising space. As depicted below, advertising and direct marketing
expenditures flow down the supply chain from merchants to advertising agencies
and then to content publishers. In turn, audiences of consumers attracted by
content publishers flow up to merchants as prospective customers.

ADVERTISING AND DIRECT MARKETING SUPPLY CHAIN

[GRAPHIC: SUPPLY CHAIN]

GROWTH OF THE WEB AND WEB COMMERCE. IDC estimates that by the end of 1998
there will be over 51 million users of the World Wide Web (the "Web") in the
United States and over 97 million users worldwide. IDC projects that, by the end
of 2001, the number of Web users will increase to over 106 million in the United
States and over 227 million worldwide. The Company believes that the number of
Web users and the amount of time users spend on the Web will continue to
increase as Internet access becomes more widely available, as Internet bandwidth
and reliability are enhanced and as Internet content improves and becomes more
multimedia intensive.

Because online transactions can be faster, less expensive and more
convenient than transactions conducted via traditional means, a growing number
of consumers are transacting business over the Web. Examples of such
transactions include buying consumer goods, trading securities, purchasing
airline tickets and paying bills. Jupiter Communications has estimated that 27%
of adult Web users made online purchases in 1997 and that 50% of adult Web users
will make online purchases in 2000. IDC estimates that purchases of goods and
services over the Internet will increase from $32.4 billion in 1998 to $237.2
billion in 2001. The Company believes that as electronic commerce expands,
advertisers and direct marketers will increasingly seek to use the Web to locate
customers, advertise their products and services and facilitate transactions.

ONLINE ADVERTISING AND DIRECT MARKETING. The Web continues to emerge as a
promising new medium for advertisers due to the growth in the number of Web
users, the attractive demographic profiles of Web users, the ability to quickly
gather response data and other feedback, the interactive nature of the Web, the
potential for reduced costs-per-transaction, the Web's global reach and a
variety of other factors. The Web provides advertisers with the opportunity to
cost-effectively reach broad, global audiences and to target their advertising
based on

37
<PAGE>
consumers' demographic characteristics, specific interests and geographic
location. Online advertising also has the potential to allow advertisers to
measure, in real time, the number of times that a particular advertisement has
been viewed, the responses to the advertisement and certain characteristics of
the viewers of the advertisement. In addition, the interactive nature of the Web
gives advertisers the potential to establish dialogues and one-on-one
relationships with consumers, to receive direct feedback on their advertising
and to quickly refine their advertising based on such feedback. Accordingly, the
Company believes that the Web has the potential to become a more effective and
efficient means for advertisers and direct marketers to reach their target
audiences as compared to traditional media.

The unique characteristics of online advertising, combined with the growth
in the number of Internet users and their attractive demographic profiles, have
led to a significant increase in online advertising. IDC has estimated that
online advertising expenditures in the United States would increase from $551
million in 1997 to $4.0 billion in 2001, representing a 64% compounded annual
growth rate. Historically, the leading online advertisers have generally been
technology companies, Internet search engines and Web content publishers.
However, many of the largest advertisers on traditional media, including mass
marketers such as consumer products companies and automobile manufacturers, have
recently expanded their use of online advertising. The Company believes that
online advertising will become an increasing component of such merchants'
advertising budgets and that this trend will drive demand for sophisticated
online advertising and direct marketing solutions.

Because highly targeted product offers can be made to consumers at their
personal computers, the Company believes that the Internet represents an
attractive new medium for direct marketing, which has traditionally been
conducted through direct mail and telemarketing. The success of a direct
marketing campaign is generally measured by either an increase in response rate
(e.g., number of leads, sales or other transactions as a percentage of
impressions viewed) or a reduction in cost-per-transaction. The Internet has the
potential to enable direct marketers to increase response rates and reduce
cost-per-transaction by targeting and delivering direct marketing campaigns to
consumers based on their specific demographics, characteristics and interests.
Jupiter Communications estimates that expenditures on online direct marketing
were $86.0 million in 1997 and will exceed $1.3 billion in 2002.

SUPPLY CHAIN CONSTITUENTS REQUIRE ENABLING TECHNOLOGY. As the constituents
of the advertising and direct marketing supply chain increase their online
presence, they seek technologies and solutions to allow them to exploit the
attractive demographics, highly-targeted messages, real-time feedback, business
process efficiencies and other potential advantages of online advertising and
direct marketing. Merchants, advertising agencies and content publishers require
comprehensive, reliable and scalable solutions to allow them to effectively and
efficiently leverage the power of the Internet for advertising and direct
marketing. In particular, the Company believes that larger, more established
content publishers will generally require solutions that allow them to continue
to closely control their advertising inventory. Moreover, because the process of
directly managing the sale and delivery of online advertisements can generate
valuable consumer profile and behavioral data, the Company believes that the
desirability of maintaining direct control over consumer data may be even
greater than with respect to traditional media.

NETGRAVITY SOLUTION

38
<PAGE>

automating certain advertising and direct marketing business processes. In
addition, as the Company's software delivers advertisements, it gathers consumer
viewing and response data which are retained by the Company's customers and can
be used to more precisely target future advertisements.

The Company's AdServer products provide benefits to each of the three
primary constituents in the online advertising and direct marketing supply
chain:

MERCHANTS. Merchants with an online presence are focused on attracting
consumers to their Web sites and on maximizing revenue per customer. The
Company's products are designed to allow merchants to gather consumer behavior
data on their sites and correlate this information with other information, such
as purchase history, to build detailed customer-profile databases using third
party technology. Merchants can then use AdServer to target advertisements
promoting new or complementary products to particular consumers based on their
profiles. Merchants can also use AdServer to centrally manage advertising
campaigns and place targeted advertisements on other Web sites in order to drive
interested consumers back to the merchant's Web site. For such campaigns,
AdServer can be used to track purchases made by consumers responding to
particular advertisements and thereby determine the cost-per-transaction for
each campaign.

ADVERTISING AGENCIES. Advertising agencies seek to maximize the impact of
their clients' online campaigns to promote brand awareness or to solicit
transactions. AdServer is designed to enable advertising agencies to manage
their clients' online campaigns, to make changes to campaigns in real-time and
to collect information about consumer behavior that can be mined to create
sophisticated profiles. These profiles can be used to improve targeting for both
current and future campaigns.

CONTENT PUBLISHERS. Content publishers seek to attract consumers to their
Web sites to maximize the value of their advertising space and/or to solicit
transactions. Using AdServer, content publishers can maintain control of their
own advertising inventory, consumer data, mission-critical advertising business
processes and relationships with advertisers and advertising agencies. AdServer
is designed to allow content publishers to predict inventory available for sale,
to deliver targeted advertisements to consumers and to provide reports and
analysis to advertisers. Additionally, AdServer can be integrated with content
management, billing and commerce systems.

The Company's software is designed to be fault tolerant, scalable,
extensible and platform independent to meet the needs of even its largest
customers. For example, Netscape, which operates one of the most visited Web
sites on the Internet, has served up to 33 million impressions per day with the
Company's software. The Company's software also supports industry standard
operating environments including popular Unix systems, Microsoft Windows NT,
standard relational databases, Web servers from Netscape and Microsoft and
Java-enabled Web browsers.

STRATEGY

EXTEND LEADERSHIP IN ONLINE ADVERTISING SOLUTIONS. The Company intends to
extend its leadership position in the market for online advertising solutions by
continuing to enhance its technology through investment in research and
development activities and by incorporating industry-leading components into its
products. The Company believes that maintaining and enhancing its products and
services is critical to its ability to solidify its market leadership,
strengthen its relationships with current customers and enable it to acquire new
customers.

ESTABLISH LEADERSHIP IN ONLINE DIRECT MARKETING SOLUTIONS. The Company
seeks to foster the growth of the emerging market for online direct marketing
and to establish leadership in this market. Recognizing the potential of the Web
as a direct marketing channel, many of the Company's customers are leveraging
AdServer's largely advertising-oriented features to deploy online direct
marketing systems. The Company believes that online direct marketing is emerging
as a distinct market from online advertising and that customers focusing on
online direct

39
<PAGE>
marketing will increasingly demand functionality tailored to their specific
requirements. Therefore, the Company intends to continue to add features to
AdServer designed to meet the specific requirements of direct marketers as well
as to enhance its sales, marketing, professional services and support
capabilities to promote these new features. The Company believes that this
strategy will allow it to address the needs of its direct marketing customers,
to help foster the development of the overall market for online direct marketing
solutions and to establish itself as a leader in this emerging market.

MAXIMIZE CUSTOMER VALUE. The Company seeks to continuously increase the
value of its solutions to its customers by offering customers additional and
improved products and services. In pursuit of this strategy, the Company intends
to enhance and extend AdServer to improve functionality through feature
refinement and through the addition of complementary product modules coupled
with value-added professional services. The Company believes its close
relationships with its customers will allow the Company to determine the
functionality its customers require. The Company believes that its focus on
delivering compelling, high-value solutions to customers will enhance its
opportunity to sell additional products and services to existing and future
customers, particularly as the requirements of these customers grow and evolve.

ENABLE EFFICIENT ADVERTISING BUYING ON THE INTERNET. The Company intends in
the future to develop products to link together its merchant, advertising agency
and content publisher customers to allow them to automate the process of buying
and selling online advertising space. One of the key limitations of the Internet
as compared to other media is the difficulty merchants and advertising agencies
experience when trying to create and manage a campaign across many selected
content publishers. Because online audiences tend to be less concentrated than
those in traditional media, advertisers seeking a given number of impressions
for a particular campaign will generally need to purchase advertising space from
comparatively more content publishers for online campaigns. By developing
technology to enable the Company's customers from each of the constituents of
the advertising and direct marketing supply chain to network with each other to
automate the buying and selling of advertising, the Company believes that
advertising agencies will be able to purchase online advertising as efficiently
as advertising on traditional media. The Company believes that its relationships
with existing customers will assist it in designing and developing such
technology.

EXPAND AND LEVERAGE ALLIANCES WITH KEY BUSINESS AND TECHNOLOGY
PARTNERS. The Company continues to develop cooperative alliances with leading
Internet systems integrators, Web hosting organizations and technology vendors
in order to accelerate the acceptance of the Company's products and to increase
operating leverage. The Company believes that these alliances will provide
additional marketing and sales channels for the Company's products and allow the
Company to leverage its professional services capacity by utilizing these third
parties to assist with AdServer deployment and support.

EXPAND INTERNATIONAL PRESENCE. The Company plans to aggressively expand its
international operations to address the global adoption of the Internet and the
international demand for online advertising and direct marketing solutions. The
Company believes that there are multiple international opportunities for its
AdServer products and has established sales and support operations in Europe and
Asia Pacific with regional headquarters in London and Tokyo. As part of this
expansion, the Company intends to create reselling and systems integration
relationships in Europe and Asia Pacific to leverage its sales and consulting
forces in these regions. The Company also intends to develop localized versions
of its product. The Company believes that an early presence in these markets
will enhance its long-term competitive position in these regions.

PRODUCTS

The Company develops, markets and supports its AdServer family of online
advertising and direct marketing management software solutions and offers
associated services. The following illustrates the role of AdServer in a typical
consumer interaction with a customer's Web site.

40
<PAGE>
[GRAPHIC: CONSUMER INTERACTION WITH WEB SITE THAT USES NETGRAVITY ADSERVER]

CAPTIONS:

1) CONSUMER VISITS WEB SITE THAT USES NETGRAVITY ADSERVER SOLUTION.

2) BROWSER REQUESTS PAGE FROM WEB SITE.

3) NETGRAVITY ADSERVER LOOKS UP CONSUMER PROFILE, AND CHOOSES MOST
APPROPRIATE ADVERTISEMENTS.

4) CONTENT PAGE WITH TARGETED ADVERTISEMENTS DELIVERED TO CONSUMER'S
BROWSER.

5) NETGRAVITY ADSERVER LOGS DELIVERY AND RESULTS FOR FUTURE ANALYSIS AND
REPORTING.

- SITE ADMINISTRATORS USE NETGRAVITY ADSERVER TO MANAGE FORECASTING, AD
INVENTORY, SCHEDULING AND RESULTS ANALYSIS.

NetGravity markets three primary solutions to support the needs of companies in
the online advertising and direct marketing industry: AdServer Enterprise,
AdServer Network and AdCenter. The Company's solutions are designed to be
extensible and robust systems for deploying advertising and direct marketing
management solutions on the Internet. The AdServer solutions utilize a common
fault-tolerant, scalable architecture for real-time delivery of targeted
advertisements, a management system for tracking advertising inventory and a
customizable reporting and analysis system allowing AdServer users to better
understand their customers.

ADSERVER ENTERPRISE. AdServer Enterprise is designed to manage advertising
and direct marketing on individual Web sites. It allows tracking of consumer
action and movement on a Web site and captures consumer responses to
advertisements. AdServer Enterprise is designed to be integrated with other
systems, such as customer databases, to create rich consumer profiles for more
effective targeting. AdServer Enterprise comes pre-configured to address many
common targeting requirements and can be extended to perform more specific
targeting. AdServer Enterprise's scalable architecture allows Web sites to
reliably serve high volumes of targeted advertisements. AdServer Enterprise also
collects and summarizes user interaction data to allow detailed analysis and
reporting to advertisers and direct marketers.

ADSERVER NETWORK. AdServer Network is an enhanced version of AdServer
Enterprise designed to manage multi-site advertising and direct marketing.
AdServer Network is designed to allow central management of advertising
inventories of multiple Web sites, delivery of targeted advertisements to
multiple remote Web sites based on centralized targeting data, centralized
collection and analysis of user information and targeting of advertisements to
consumers on remote Web sites. These features make AdServer Network an
attractive solution for a variety of applications. For example, AdServer Network
can be used by content publishers to deliver targeted advertisements to a set of
affiliated Web sites or by advertising agencies to manage campaigns for their
clients across all of the Web sites in the campaign.

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<PAGE>

ADCENTER. AdCenter is a service designed to allow customers to outsource
certain advertising management functions to the Company. NetGravity works with
Web hosting organizations to manage a centralized solution for customers that do
not wish to hire a technical staff or to maintain their Internet systems.

<TABLE>
<S> <C> <C> <C>
PRODUCT MARKET BENEFITS INTRODUCTION DATES
AdServer SINGLE-SITE Provides single-site Version 1.0: March 1996
Enterprise merchants and management of user Version 2.0: September
content publishers information, targeting 1996
of advertisements, and Version 2.1: March 1997
analysis and reporting Version 3.0: June 1997
capabilities.
AdServer Network MULTI-SITE Provides the capability Version 2.1: March 1997
merchants, to target Version 3.0: June 1997
advertising advertisements to
agencies, content consumers on remote Web
publishers and sites, while
advertising aggregating all
networks consumer information
and providing
centralized management
capabilities.
AdCenter SINGLE AND Provides a service to Version 1.0: April 1998
MULTI-SITE allow customers to
merchants, outsource advertising
advertising management to the
agencies, content Company.
publishers and
advertising
networks
</TABLE>

PROFESSIONAL SERVICES

The Company's professional services organization as of March 31, 1998
consisted of 29 individuals, including 14 consultants, who provide the following
range of services:

CONSULTING. The Company offers consulting services to customers that
address each of the activities its customers require for the initial
implementation and long-term operation of their NetGravity products. NetGravity
offers: implementation services to assist its customers in deploying AdServer;
system extension services that enable customers to extend NetGravity's products
to meet their specific business needs or technical requirements; and migration
services that enable customers to migrate to NetGravity's current products from
earlier versions of NetGravity's products or from their in-house systems. A
typical AdServer implementation requires up to 10 days of professional services.
The Company also offers other consulting services, including project management,
requirements definition, business process re-engineering, system and solutions
design, technical architecture design, systems integration design, custom
reporting and software development.

TECHNICAL SUPPORT. The Company provides product support services, including
telephone support and upgrade rights to new minor releases, under its standard
maintenance agreements. All of the Company's license customers have entered into
standard maintenance agreements. The annual maintenance fee for these services
is payable in advance and is based upon a percentage of the then-current list
price for the licensed software. A dedicated team of engineers trained to answer
questions on the installation and usage of AdServer products provides telephone
support from 6:30 a.m. to 4:30 p.m., Pacific time, Monday through Friday, from
the Company's corporate offices in San Mateo, California. The Company also
offers telephone support 24 hours a day, seven days a week through a call-back
procedure to certain customers who pay an additional fee for this service. The
Company believes that providing high quality customer service and technical
support is necessary to achieve rapid product implementation which, in turn, is
essential to customer satisfaction and revenue growth. Accordingly, the Company
is committed to continued recruiting and maintenance of a high-quality technical
support team.

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EDUCATION. NetGravity provides training for both the users of AdServer and
the technical staffs who maintain AdServer. The Company also offers training in
advertising on the Internet, managing advertising sales with AdServer, and
administering AdServer. NetGravity will soon be offering training in developing
custom extensions to the AdServer product line. All training is made available
at either the customer's location or at NetGravity's facilities in San Mateo,
California or New York, New York.

TECHNOLOGY

NetGravity's AdServer is designed to be a robust architecture for customers
to implement flexible, scalable and reliable online advertising and direct
marketing solutions, as well as to integrate these solutions with external
systems such as electronic commerce and dynamic content generation systems. The
AdServer architecture is also extensible through documented application
programming interfaces ("APIs") and adheres to numerous industry standards. In
addition, the Company believes that the AdServer system architecture is flexible
enough to serve as the foundation for related future products.

[GRAPHIC: ADSERVER SYSTEM MODULES]

CAPTIONS:

- ADMANAGER PROVIDES FORECASTING, INVENTORY MANAGEMENT, AND SCHEDULING.

- ADINSIGHT PROVIDES AUTOMATIC REPORT GENERATION AND PUBLISHING.

- ADCONSOLE PROVIDES SYSTEM STATUS AND CONTROL.

- SITE AND CONSUMER DATA IS USED FOR REPORTING AND ANALYSIS.

PRIMARY ADSERVER SUBSYSTEMS

ADSERVER ADVERTISING DELIVERY ENGINE. The Company's AdServer advertising
delivery engine performs the actual content delivery function for the AdServer
System. The AdServer engine was designed to deliver highly targeted messages
with low latency to Web browsers, Web servers and proprietary content delivery
systems. The AdServer delivery engine architecture is designed to be highly
scalable, reliable and extensible. The Company has also incorporated several
performance and reliability enhancing technologies into the AdServer engine,
including built-in load balancing, automatic fail-over, automatic restart and
monitoring tools that notify technicians in the event of system failure.

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ADMANAGER BUSINESS PROCESS MANAGEMENT APPLICATION. AdManager is a
three-tier application (comprised of user interface, application server and
database tiers) designed to allow customers to manage certain online advertising
and direct marketing business processes and associated data. In particular,
AdManager utilizes proprietary software to automate certain inventory
management, scheduling and availability functions that enable more efficient use
of available inventory.

ADINSIGHT ADVERTISING PERFORMANCE AND REPORTING SYSTEM. The Company
believes that the information resulting from online advertising and direct
marketing placements and consumer response is extremely valuable for
understanding consumer behavior and measuring return on investment. The
AdInsight measurement and reporting system has been designed to permit detailed
reporting and analysis for Web sites and networks. Because of the volume of data
gathered from high-traffic sites and networks, AdInsight offers customizable
summarization and reporting functions to reduce database size and storage
requirements. AdInsight also implements a scheduling system to generate reports
for automatic delivery to advertisers and others directly over the Internet.

ADCONSOLE SYSTEM MANAGEMENT APPLICATION. AdConsole is designed to simplify
the process of maintaining and administering the entire AdServer System by
providing system administrators with a user interface for common system
management tasks. For example, AdConsole permits centralized starting, stopping,
monitoring and administering of multiple AdServer engines. AdConsole allows
system administrators to schedule routine tasks and monitor and administer
AdServer engines across multiple CPUs which increases the reliability of the
entire system by reducing opportunities for administration or configuration
errors.

OPEN ARCHITECTURE AND EXTENSIBILITY

The Company designed the AdServer System with numerous extensibility
features to allow integration into existing systems and creation of new
functionality. The Company's open targeting architecture allows customers to
augment AdServer's standard targeting functionality through the addition of
external targeting capabilities. The Company's advertising delivery API allows
integration into custom electronic commerce systems, dynamic content delivery
systems and other kinds of advertising delivery mechanisms. In addition,
AdServer stores business process data, including advertisements, targeting
information, delivery statistics and reporting data in a standard relational
database management system (RDBMS) in documented data structures, allowing
industry standard reporting and query tools to be used to view and manipulate
this data. These open extensibility features allow AdServer to be integrated
with customers' legacy systems and/or third-party systems, such as sophisticated
targeting engines, content delivery systems and customized data mining and
analysis tools.

INDUSTRY STANDARDS

The Company uses many widely accepted standards in developing its products,
including SQL for accessing RDBMSs, HTTP for Internet access, NSAPI (Netscape
Application Programming Interface) for access to Netscape's Internet servers,
ISAPI (Internet Server Application Programming Interface) for access to
Microsoft's Internet servers and HTML for formatting advertisements. Most of the
Company's software is written in C++, a widely accepted standard programming
language for developing object-oriented applications. Adherence to industry
standards provides compatibility with existing applications, enables ease of
modification, and reduces the need for software to be rewritten, thus protecting
the customer's investment. In addition, the Company is active in formulating
standards for advertising measurement on the Internet. For example, an officer
of the Company serves on the Board of Directors of the Internet Advertising
Bureau, a standards setting body for Web publishers.

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CUSTOMERS AND MARKETS

As of March 31, 1998, NetGravity had over 225 customers. The Company
licenses its AdServer products to merchants, advertising agencies, content
publishers and advertising networks. The following is a partial list of the
Company's customers:

MERCHANTS:

Cendant
Commercial Dynamics
Corbis Corporation
Didax Online

DIRECTV, Inc.

E*TRADE Group, Inc.

Impluse! Buy Network

Ingram Micro, Inc.
International Billing Systems
Internet Travel Network
N2K Inc.
ONSALE
Planet Direct Corporation
Sallie Mae
SRDS
Ticketmaster Corporation
TUCOWS Interactive Limited
West Group

ADVERTISING AGENCIES:

Dentsu Inc. (CCI)
J. Walter Thompson

CONTENT PUBLISHERS:

Advanta (GoodCompany)
Alexa
Asahi Shimbun
Associated Media Base (Electronic Telegraph)
Associated Press
Big Network
Bloomberg
Blue Window
British Telecommunications
Cinetic GmbH
CondeNet
Continental Internet Services
Detroit Newspaper
Family Education Company
Forbes
Fujitsu
General Internet, Inc.
Geosystems (Map Quest)
GolfWeb
Hachette Filipacchi Interactions SA
Harris Publishing Systems Corporation
Healthgate Data Corp.
Hearst New Media and Technology
Hitachi Business International
Hollywood Online Inc.
Hollywood Stock Exchange
HotWired
Houston Chronicle

Inc. Online

InfoSeek
IVI Publishing, Inc.
iVillage
Knight Ridder New Media
La Tribune Interactive
Las Vegas Review-Journal
Los Angeles Times
LiveWorld Productions
Matrix
Macroview Communications
MCA/Universal Studios
McGraw Hill (Business Week)
Medscape, Inc.
Merrill Lynch
Miller Freeman PLC
Minneapolis Star Tribune Interactive
Mirror Group
Motorola (audioSENSE)
Mpath Interactive
MTV Interactive
Netscape Communications Corporation
Nettavisen
New Media Publisher
News Corporation (TVgen)
Newsday
NewTimes, Inc.
Nihon Keizai Shimbun
Nikkei Business Publications, Inc.
Northern Telecom (Nortel)
Online Career Center
PC World Communications
Planet Internet
Quote.com, Inc.
Red Herring
relationships.com, Inc.
Reuters Ltd. (Europe)
Rodale Press
Scientific American Inc.
Straylight
Streamix Corporation
Telecom New Zealand
The AmerUS Group Inc.
The Boston Globe
The Weather Channel
Third Age Media, Inc.
Time Inc. New Media
Toronto Morning Star
Toshiba Corporation
Travel Channel
TriCast Media
Turner Broadcasting (CNN Interactive)
USA.NET
USA Today
U S West (Dex)
U S West (IRG)
ViewCall Canada Inc.
Wire Networks
Virgin Net
Warner Bros. Online
Worldview Systems

ADVERTISING NETWORKS:

Active Agent
@Home Network
AudioNet, Inc.
Canadian Broadcasting Company
Canoe, Canadian Online Explorer
CDA Investment Technology
China Internet Corp.
Clickthrough Canada
Cyberfirst, Inc.
Digital Skies
EMC(2)
GoGlobal.net
GTE Gov't Sys. Corp.
HongKong Telecom IMS
Interealty Corp.
MediaLinx
Nippon Telegraph and Telephone Corporation
Overseas Connections
Riks New Media
Scandinavia Online
StarMedia Network, Inc.
Tele Danmark
Telstra Corporation Ltd.
WhoWhere?
www.yellowpages.com inc.

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<PAGE>
SELECTED CUSTOMER CASE STUDIES

CNN INTERACTIVE. Since August 1995, Cable News Network, Inc. has operated
CNN Interactive, a family of Web sites which now includes CNN.com, CNNfn,
CNN-Time All Politics, CNN enEspanol, CNN emPortugues and CNN-Sports
Illustrated. CNN Interactive is consistently ranked as one of the most visited
families of sites on the Web, and currently averages over 75 million page views
per week. CNN Interactive initially relied on an internally developed system to
manage its online advertising. Daily advertisement rotations were done manually
by CNN Interactive personnel using spreadsheets to track advertising inventory.
As user traffic and advertising inventory grew dramatically, CNN Interactive
concluded that it needed to automate and streamline its online advertising
management activities to keep pace with such growth. CNN Interactive turned to
NetGravity and, in December 1996, deployed AdServer Enterprise to replace its
internal advertising management system. AdServer Enterprise now performs
automatic, real-time impression-based advertisement rotation on the CNN
Interactive sites. In addition, CNN Interactive uses AdServer's reporting
features to generate individualized weekly reports for each of its more than 150
advertisers.

KNIGHT RIDDER REAL CITIES. Knight Ridder, a major domestic newspaper
publisher, through its Knight Ridder New Media division, manages Real Cities, a
network of approximately 40 Web sites, each of which is affiliated with a local
newspaper. Real Cities sites include MercuryCenter.com from the San Jose Mercury
News, Freep.com from the Detroit Free Press and PhillyNews.com from the
Philadelphia Inquirer and Philadelphia Daily News. Together, the Real Cities
sites receive an average of more than 12.5 million page views per week. Knight
Ridder sells local advertising space on individual Real Cities sites and
national advertising space on multiple Real Cities sites. Knight Ridder
initially attempted to manage these multiple inventories manually. As the number
of Real Cities sites increased and as user traffic at each site grew, their
system began to fail. Unable to precisely and quickly determine the aggregate
impressions delivered for an advertisement across all Real Cities sites, Knight
Ridder often over-delivered advertisements, thereby effectively reducing salable
inventory. Using both AdServer Network and AdServer Enterprise, Knight Ridder is
now able to more precisely and efficiently manage national campaigns while at
the same time allowing local control over individual Real Cities sites. The
impression-based scheduling and other controls provided by AdServer have allowed
Knight Ridder to significantly increase salable inventory while at the same time
reducing the resources dedicated to advertising management. In addition, Knight
Ridder has a long-term strategy of increasing the value of its advertising
inventory through the use of AdServer's targeting capabilities.

NETNOIR ONLINE. NetNoir Online offers a variety of Afrocentric content on
its Web site designed to promote black cultural values and to create an
interactive online black "community." Initially, NetNoir attempted to manually
manage advertising placement and rotation for its site, which, at the time,
served approximately 100,000 advertisement impressions per month. This method
was time-consuming, prone to human error and did not allow dynamic targeting of
advertisements. NetNoir attempted to outsource tracking and reporting functions
to reduce the administrative burden of advertising management but was
unsatisfied with the infrequency of the monthly reports that the tracking and
reporting firm was providing it. As NetNoir prepared for anticipated growth, it
engaged a leading Web hosting organization to host the NetNoir site and to
assist NetNoir in upgrading its advertising management capabilities. Through
NetGravity's AdHost program, the Web hosting organization purchased an AdServer
Enterprise license from the Company, installed and configured the software at
the hosting organization's facilities and allowed NetNoir to pay for the use of
AdServer through a monthly fee based on number of advertisements served. This
arrangement allowed NetNoir to access the sophisticated features of AdServer
Enterprise without a significant initial investment and without the need to hire
additional technical personnel to maintain its Internet systems. AdServer has
significantly reduced the administrative burdens of advertising placement,
rotation, tracking and reporting for NetNoir and has scaled smoothly with
NetNoir's rapid growth. NetNoir has also begun to use AdServer's targeting
features and expects to increase its use of targeting for advertisements and
other content in the future.

SALES AND MARKETING

The Company markets and sells its products and services primarily through
its field sales and telesales organizations and maintains sales and support
operations in North America, Europe and Asia Pacific. On

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<PAGE>
March 31, 1998, the Company's sales organization consisted of 21 individuals.
The Company has sales and support offices in San Mateo, California, New York,
New York, London and Tokyo. The Company sells its products in Europe and Asia
Pacific through its subsidiaries in the United Kingdom and Japan. The Company
intends to broaden its presence in international markets by aggressively
expanding its international sales force and by entering into distribution
agreements with foreign distributors. See "Risk Factors--Dependence on Key
Personnel; Need for Additional Qualified Personnel" and "--Risks Associated with
International Expansion."

The Company's sales process begins with the generation of sales leads. Sales
leads are obtained primarily from telesales, customer referrals, the Company's
Web site, responses to the Company's public relations and marketing efforts and
through trade shows. The majority of the Company's sales leads to date have come
from content publishers seeking online advertising management software. Initial
sales activity normally includes a product demonstration of AdServer directly
over the Internet to the prospective customer. This demonstration is followed by
one or more technical discussions where the customer's issues and concerns are
addressed. For interested accounts, a field sales representative and a sales
engineer make an on-site visit where the needs of such customer are assessed.
Soon thereafter, a proposal is generated containing a statement of work for
NetGravity consulting and training services and a quote for the package of
software license and services to be delivered. In addition, the Company has
developed pre-configured packages suitable for many common customer
applications.

The Company uses a variety of marketing programs to: stimulate demand for
its products; build market awareness through the press and industry analysts;
produce and maintain marketing information and sales tools; generate and develop
customer leads; and establish and manage marketing alliances. As of March 31,
1998, eight employees were engaged in a variety of marketing activities,
including: preparing marketing research and collateral marketing materials;
product planning; managing press coverage and other public relations;
identifying potential customers; attending trade shows, seminars and
conferences; establishing and maintaining close relationships with recognized
industry analysts; and maintaining the Company's Web site.

Sales of the Company's software products generally require the Company to
engage in a lengthy sales effort including significant education of prospective
customers regarding the use and benefits of the Company's products. As a result,
the sales cycle for the Company's products is long, currently averaging
approximately four months. In particular, the sales cycle for the Company's
online direct marketing solutions is likely to be comparatively longer than the
sales cycle for the online advertising solutions, since online direct marketing
is less established and will require more education of the Company's potential
customers. In addition, the implementation of the Company's products often
involves a significant commitment of resources by customers and/or the Company's
consultants over an extended period of time. The Company's sales and customer
implementation cycles are subject to a number of potential delays. These include
delays related to product defects or errors as well as delays over which the
Company has little or no control, including customers' budgetary constraints,
internal acceptance reviews and the complexity of customers' online advertising
or direct marketing needs. See "Risk Factors--Lengthy Sales and Implementation
Cycles."

MARKETING ALLIANCES

An important element of the Company's sales strategy is to form business
alliances to assist the Company in marketing and selling its products and
developing customer applications. This approach is intended to increase the
resources available to perform application design and development services for
the Company's customers and to enhance the Company's market credibility,
potential for lead generation and access to large accounts. Additionally,
business partners can provide online advertising and direct marketing expertise
in solving the business problems of the Company's customers. The Company has
relationships with the following organizations:

WEB HOSTING ORGANIZATIONS. Web hosting organizations centrally house and
maintain Internet connectivity equipment, server hardware and software for their
customers. Many Web sites utilize the services of hosting organizations and rely
on their advice and recommendations in selecting Internet software solutions.
Because of their influence in the market, the Company strives to maintain good
business relationships with these organizations. The following Web hosting
organizations have provided hosting services to NetGravity customers: ANS

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<PAGE>
Communications, BBN Corporation, Digex Incorporated, EUnet International B.V.,
Exodus Communications, Inc., Frontier GlobalCenter, Inc., Proxicom, Inc. and TCG
CERFnet, the data and Internet service business unit of Teleport Communications
Group Inc.

INTERNET SYSTEMS INTEGRATORS. Internet systems integrators assist online
content publishers and merchants in the design, procurement and deployment of
their Web sites. These Internet systems integrators often recommend advertising
management and other Internet solutions to their clients. The following Internet
systems integrators have worked with NetGravity customers: CKS--Enterprise, a
systems integration and consulting organization within CKS Group, Inc., Fort
Point Partners, Horizon Technologies, Organic Inc. and Poppe Tyson Interactive.

PRODUCT DEVELOPMENT

The Company believes that its future success will depend in large part on
its ability to enhance the AdServer System, develop new products, maintain
technological leadership, and satisfy an evolving range of customer requirements
for large scale online advertising and direct marketing applications. The
Company's product development organization is responsible for product
architecture, core technology, product testing and quality assurance, writing
user documentation, and expanding the ability of NetGravity products to operate
with the leading hardware platforms, operating systems, database management
systems, content management systems and electronic commerce systems. Since
inception, the Company has made substantial investments in product development
and related activities. In addition, certain technologies have been acquired and
integrated into NetGravity products through licensing arrangements. As of March
31, 1998, there were 23 employees in the Company's product development
organization. The Company's research and development expenses were $39,000, $1.8
million, and $3.0 million in the period ended December 31, 1995 and the years
ended December 31, 1996 and 1997, respectively. To date, the Company has not
capitalized any software development costs. The Company expects to continue to
devote substantial resources to its product development activities. The Company
plans to release its next major version of AdServer in 1999. The Company may
also release one or more less significant updates prior to the release of the
next major version.

If the Company is unable, for technological or other reasons, to develop on
a timely basis the next release of AdServer or other new software products,
enhancements to existing products or corrections to errors or defects or
performance problems in products, or if such new products or enhancements do not
achieve a significant degree of market acceptance or if such products, in order
to be released on a timely basis, contain material defects or errors or
performance problems, the Company's business, results of operations and
financial condition would be materially adversely affected. In addition, there
can be no assurance that the introduction or announcement of new product
offerings by the Company or one or more of its competitors will not cause
customers to decline or defer licensing of existing Company products. Any
decline or deferral of purchases could have a material adverse effect on the
Company's business, results of operations or financial condition. Further, if
the Company's current or future products do not meet the scalability
requirements of its customers due to vastly increased use of the Internet, the
Company would have to incur substantial expenditures and resources to address
such issue and there can be no assurance that the Company would be successful in
scaling the capabilities of its products to such level.

48
<PAGE>
automating the online advertising purchasing process among such constituents. If
demand for a comprehensive solution develops and the Company fails to develop
such a solution on a timely basis, or at all, it could have a material adverse
effect on the Company's business, results of operations or financial condition.
In addition, as more customers demand online advertising and direct marketing
solutions, the Company must tailor its products to the specific requirements of
both online advertisers and direct marketers and provide a solution for
supplying demographic and behavioral data. Specifically, the online direct
marketing market will require more narrowly targeted advertisements than the
online advertising market and will be even more reliant on demographic data than
the online advertising market. Although AdServer's largely advertising-oriented
features can be used for online direct marketing, the Company has not yet
developed products with the custom features required by online direct marketers.
If the Company does not develop a satisfactory product to address the online
direct marketing market, future growth of the Company could be impaired and the
Company could lose customers to competitors with more comprehensive solutions.
The occurrence of any such event could have a material adverse effect on the
Company's business, results of operations or financial condition.

The Company's products are designed to operate on a variety of hardware and
software platforms employed by its customers in their individual networks. The
Company must continually modify and enhance its products to keep pace with
changes in hardware and software platforms and database technology. As a result,
uncertainties related to the timing and nature of new product announcements,
introductions or modifications by operating systems vendors, particularly
Microsoft and Sun, by vendors of relational database software, particularly
Oracle and Microsoft, and browsers, particularly Netscape and Microsoft could
materially adversely impact the Company's business, results of operations or
financial condition.

COMPETITION

Historically, participants in the online advertising and direct marketing
supply chain have used internally developed systems to manage their own online
advertising and direct marketing functions. However, the Company believes that
its primary competition will increasingly come from vendors that provide online
advertising and direct marketing software or service solutions or service
solutions. In the online advertising market, the Company competes directly with
DoubleClick, CMG (through its Engage/Accipiter unit) and Excite (through its
MatchLogic unit), and a variety of other online advertising service providers.
Some of these companies (such as DoubleClick) have adopted a business model
focused on outsourcing of advertising and direct marketing management. If this
model increases in popularity for the Company's targeted markets, the Company
will be required to devote additional resources to keep its own outsourcing
solution competitive. Any failure by the Company to successfully design, develop
and market an advanced outsourced solution under such circumstances would have a
material adverse effect on the Company's business, results of operations and
financial condition. In the online direct marketing market, the Company expects
to face indirect competition from the vendors of electronic commerce systems,
including BroadVision, Interworld and Open Market, among others. Additionally,
providers of electronic commerce could build online direct marketing solutions
that would obviate the need for any current or future
products of the Company targeted to the online direct marketing industry. The
Company also encounters competition from Netscape and Microsoft, which build or
bundle advertising management products with their Internet commerce solutions.
Both Netscape and Microsoft have significantly greater resources than the
Company, and due to their control of the browser market, if either of them were
to offer online advertising and direct marketing management solutions with
features comparable to those offered by the Company, there can be no assurance
that the Company would be able to compete effectively against any such product
offerings.

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Many of the Company's current and potential competitors have longer
operating histories and significantly greater financial, technical, marketing
and other resources than the Company and thus may be able to respond more
quickly to new or changing opportunities, technologies and customer
requirements. Also, many current and potential competitors have greater name
recognition, more extensive customer bases and larger proprietary consumer
databases that could be leveraged, thereby gaining market share to the Company's
detriment. Such competitors may be able to undertake more extensive promotional
activities, adopt more aggressive pricing policies, or offer more attractive
terms to purchasers than the Company. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to enhance their products. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share.

The principal competitive factors affecting the market for the Company's
products are depth and breadth of functionality offered, ease of deployment,
expense of maintenance relative to service offerings, outsourcing capability,
control over consumer profile data, product quality, price, and consulting and
customer support. The Company believes it presently competes favorably with
respect to each of these factors. However, the Company's market is still
evolving, and there can be no assurance that the Company will be able to compete
successfully with current or future competitors, or that competitive pressures
faced by the Company will not have a material adverse effect on the Company's
business, results of operations or financial condition.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

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will be enforceable. In addition, 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, whether successful or unsuccessful, could result in substantial
costs and diversions of resources, either of which could have a material adverse
effect on the Company's business, results of operations or financial condition.

EMPLOYEES

As of March 31, 1998, the Company had 94 employees, including 29 in sales
and marketing, 23 in research and development, 29 in professional services,
customer support and education, and 13 in finance and administration. Of these,
five are located in Asia, nine are located in Europe and the remainder are
located in North America. None of the Company's employees is represented by a
labor union. The Company has experienced no work stoppages and believes its
relationship with its employees is good.

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FACILITIES

The Company is headquartered in San Mateo, California where it leases
approximately 13,000 square feet pursuant to a term lease that expires on May
31, 1998. The Company is seeking to lease a larger facility in the San Mateo
area for its headquaters and expects to occupy its current San Mateo facility on
a month-to-month basis until a new facility is leased and prepared for
occupancy. In the event the Company's month-to-month lease is terminated on
short notice, there can be no assurance that the Company will be able to find
alternate facilities on a timely basis or at reasonable cost. In addition, the
Company maintains a regional office in New York, New York where it leases
approximately 3,000 square feet of office space pursuant to a lease that expires
in 2003. The Company also leases space in London and Tokyo to support its
international operations. See Note 6 of Notes to Consolidated Financial
Statements.

LEGAL PROCEEDINGS

The Company is not currently subject to any material legal proceedings. The
Company may from time to time become a party to various legal proceedings
arising in the ordinary course of its business.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, and their ages as of
March 31, 1998, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------------- --- -------------------------------------------------------
<S> <C> <C>
John W. Danner..................................... 31 Chairman of the Board and Chief Executive Officer
Stephen E. Recht................................... 46 Chief Financial Officer and Secretary
Susan Atherton..................................... 41 Vice President of Sales
Rick E. D. Jackson IV.............................. 37 Vice President of Marketing
Douglas S. Kaplan(1)............................... 32 Vice President and General Manager of Asia Pacific
Martin G. Lane-Smith............................... 50 Vice President of Engineering
Thomas A. Shields.................................. 30 Vice President, Chief Technology Officer
Jitendra Valera.................................... 40 Vice President and General Manager of Europe
Larry C. Wear...................................... 32 Vice President of Support and Service
John D. D. Kohler(2)............................... 44 Director
Jonathan D. Lazarus(3)............................. 47 Director
Alexander R. Slusky(2)(3).......................... 30 Director
</TABLE>

- ----------

(1) Mr. Kaplan is an employee of Asia Pacific Ventures Co., a consulting firm
providing management services to NetGravity Asia Pacific K.K., and is not
directly employed by the Company or by NetGravity Asia Pacific K.K. See
"Certain Transactions."

(2) Member of Audit Committee.

(3) Member of Compensation Committee.

JOHN W. DANNER co-founded the Company in 1995, served as its President from
inception until April 1998 and has served as Chief Executive Officer and as a
Director since inception. In April 1998, Mr. Danner was elected Chairman of the
Board. From 1994 to 1995, Mr. Danner was a technical lead/architect for Silicon
Graphics, Inc. ("Silicon Graphics"), where he architected the set-top and server
side of a component of Silicon Graphics' interactive television system. From
1990 to 1994, Mr. Danner was a development manager at Oracle Corporation
("Oracle"), where he oversaw product development for Oracle Book, a multimedia
browser. Since January 1998, Mr. Danner has served on the Board of Directors of
the Internet Advertising Bureau, an online advertising advocacy group and
standards-setting body for online content publishers. Mr. Danner received
B.S.E.E. and M.S.E.E. degrees from Stanford University.

STEPHEN E. RECHT has served as the Chief Financial Officer and Secretary of
the Company since 1996. From 1995 to 1996, Mr. Recht was the Chief Financial
Officer of AuraVision Corporation, a fabless, multimedia semiconductor company,
where Mr. Recht was responsible for all financial operations, investor
relations, contract administration, human resources and facilities. From 1992 to
1995, Mr. Recht was the Vice President, Finance and Administration and the Chief
Financial Officer of ViewStar Corporation, a client/server, business process
automation software company, where Mr. Recht directed all financial operations
and investor relations. Mr. Recht received a B.A. degree in Economics from
Stanford University and an M.B.A. degree from the Wharton School at the
University of Pennsylvania.

SUSAN ATHERTON has served as the Company's Vice President of Sales since
April 1998. From 1996 to 1998, Ms. Atherton was the Vice President, Worldwide
Sales, of Datamind Corporation, a developer of data mining client/server and
Web-enhanced products, where Ms. Atherton managed the company's direct and
indirect channels sales organization worldwide and helped develop key strategic
relationships with several technology companies. From 1995 to 1996, Ms. Atherton
was the Vice President, Worldwide Sales, of Red Pepper Software, a supply chain
management software developer, where Ms. Atherton managed the company's direct
and indirect channels sales organization worldwide. From 1993 to 1995, Ms.
Atherton was the Area Vice President of Ross Systems, Inc., a

53
<PAGE>
provider of supply chain management solutions and client/server business
software for enterprise resource planning, where Ms. Atherton helped manage the
company's Western U.S. sales force. Ms. Atherton received a B.S. degree in
Economics from the University of California, Riverside.

RICK E. D. JACKSON IV has served as the Company's Vice President of
Marketing since 1997. From 1996 to 1997, Mr. Jackson was the Vice President,
Marketing for mFactory, Inc., an advanced multimedia authoring tool company,
where Mr. Jackson assembled and led a team of professionals responsible for all
aspects of product and corporate marketing. From 1994 to 1996, Mr. Jackson was
the Director of Product Marketing for Taligent, Inc. ("Taligent"), a software
company, where Mr. Jackson managed the marketing organization responsible for
various Taligent products. From 1990 to 1994, Mr. Jackson was the Director of
Product Marketing for NeXT Computer, Inc., a desktop computer and software
manufacturer, where Mr. Jackson assembled, managed and led the company's product
marketing team. Mr. Jackson received a B.S. degree in Computer Science from
California State University, Northridge.

DOUGLAS S. KAPLAN, a non-employee consultant to the Company, has served as
the Company's Vice President and General Manager of Asia Pacific since 1997. Mr.
Kaplan is an employee of Asia Pacific Ventures Co., a consulting firm providing
management services to NetGravity Asia Pacific K.K. From 1995 to 1997, Mr.
Kaplan was the Vice President of Nikkei BP BizTech Inc. ("Nikkei"), a Japanese
business and technology publisher, which Mr. Kaplan founded. At Nikkei, Mr.
Kaplan defined the company's business plan and developed Nikkei as a consulting
and research company. From 1990 to 1995, Mr. Kaplan was a Representative
Director and a co-founder of CMP Japan, the Japanese subsidiary of CMP Media,
Inc., a technology publisher. At CMP Japan, Mr. Kaplan developed the company's
business plan and implemented the business of consulting with U.S. technology
companies interested in conducting business in Japan. Mr. Kaplan received a B.A.
degree in Asian Studies and Economics from the University of California,
Berkeley.

MARTIN G. LANE-SMITH has served as the Company's Vice President of
Engineering since 1997. From 1991 to 1997, Mr. Lane-Smith was the Vice
President, Engineering of Edify Corporation, a provider of software solutions
for interactive online services, where Mr. Lane-Smith was responsible for all
aspects of product development, product support and the management of the
company's engineering team. Mr. Lane-Smith received a B.A. degree and an M.S.
degree, each in Natural Sciences (Math and Physics), from the University of
Cambridge.

THOMAS A. SHIELDS co-founded the Company in 1995 and served as the Company's
Vice President of Engineering and Secretary until 1996. Since 1996 Mr. Shields
has served as the Company's Vice President, Chief Technology Officer. From 1992
to 1995, Mr. Shields was a Development Manager and a Project Lead for Oracle,
where he led the Oracle Book project through two release cycles and designed the
entire feature set of Oracle Book version 2. Mr. Shields received a A.B. degree
in Computer Science from Harvard University.

JITENDRA VALERA has served as its Vice President and General Manager of
Europe since 1997. From 1996 to May 1998, Mr. Valera was an employee of Protege
Software (Holdings) Limited, a consulting firm providing management services to
NetGravity Europe Ltd. From 1994 to 1996, Mr. Valera was the Managing Director
of Applix (UK) Ltd., the United Kingdom subsidiary of Applix Inc., a producer
and marketer of enterprise software, where Mr. Valera was responsible for
management of the company. From 1989 to 1993, Mr. Valera held various positions
with Data Logic Ltd. ("Data Logic"), a computer services company, including most
recently, Director of Sales, Professional Services Division (International
Territory) and Director, International Sales and Marketing, Professional
Services Division. Among Mr. Valera's responsibilities at Data Logic was
establishing sales groups and strategies. Mr. Valera received a Business Studies
degree from Havering Technical College and an HND degree in Business Studies
from Hatfield Polytechnic.

LARRY C. WEAR has served as the Company's Vice President of Support and
Service since 1995. From 1994 to 1995, Mr. Wear was the Director of Customer
Support for Mercury Interactive Corporation, an automated client/ server testing
software company, where Mr. Wear was responsible for all customer support,
training, consulting and pre-sales engineering in North America. From 1992 to
1993, Mr. Wear was the Vice President of Software

54
<PAGE>
Development for XALT Software Corporation, a producer of personal and group
productivity tools, where he oversaw the design, development, testing, porting
and release of a suite of products. Mr. Wear received a B.S.E.E. degree from the
University of California, Davis, and an M.S.E.E. degree from Stanford
University.

JOHN D. D. KOHLER has served as a Director of the Company since inception.
In 1996, Mr. Kohler founded Redleaf Venture Management, L.L.C., a venture
management firm, of which he is currently a Managing Member. From 1994 to 1995,
Mr. Kohler was Vice President and General Manager, Customer Solutions, at
Netscape Communications Corporation. From 1991 to 1993, Mr. Kohler was a Vice
President and General Manager at Silicon Graphics. Over the previous 15 years,
Mr. Kohler held executive positions at Hewlett Packard Company, Convergent
Technologies and Unisys Corporation. Mr. Kohler received a B.A. degree in
International Relations and Economics from the University of California, Los
Angeles.

JONATHAN D. LAZARUS has served as a Director of the Company since 1996. From
1985 to 1996, Mr. Lazarus worked at Microsoft Corporation ("Microsoft"), where
he served most recently as Vice President, Strategic Relations. Mr. Lazarus is
an advisor to Microsoft, the Universal Studios New Media Group and ZDTV. Mr.
Lazarus currently serves on the boards of directors of Ziff-Davis, Inc. and
several private companies. Mr. Lazarus received a B.S. degree in Communications
from Temple University.

ALEXANDER R. SLUSKY has served as a Director of the Company since 1997.
Since April 1998, Mr. Slusky has been the Managing Member of Vector Capital
Partners, L.L.C., the General Partner of Vector Capital, L.P. ("Vector
Capital"), a technology equity fund affiliated with Ziff Brothers Investments
("ZBI"). Since 1995, Mr. Slusky has been a Principal of ZBI and from 1996 to
April 1998 was a General Partner of Vector Capital. From 1992 to 1995, Mr.
Slusky was an Associate at New Enterprise Associates ("NEA"), a venture capital
fund, and from 1993 until 1995 a Special Limited Partner of NEA VI, an entity
affiliated with NEA. Mr. Slusky serves on the boards of directors of several
private companies. Mr. Slusky received an A.B. degree in Economics from Harvard
University and an M.B.A. from the Harvard Business School.

BOARD COMMITTEES

The Board of Directors has a Compensation Committee and an Audit Committee.

COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors reviews and makes recommendations to the Board regarding all forms of
compensation provided to the executive officers and directors of the Company and
its subsidiaries including stock compensation and loans. In addition, the
Compensation Committee reviews and makes recommendations on bonus and stock
compensation arrangements for all employees of the Company. As part of the
foregoing, the Compensation Committee also administers the Company's 1995 Stock
Option Plan, 1998 Stock Plan and 1998 Employee Stock Purchase Plan. The current
members of the
Compensation Committee are Messrs. Lazarus and Slusky.

AUDIT COMMITTEE. The Audit Committee of the Board of Directors reviews and
monitors the corporate financial reporting and the internal and external audits
of the Company and its subsidiaries, including, among other things, the
Company's internal audit and control functions, the results and scope of the
annual audit and other services provided by the Company's independent auditors
and the Company's compliance with legal matters that have a significant impact
on the Company's financial reports. The Audit Committee also consults with the
Company's management and the Company's independent auditors prior to the
presentation of financial statements to stockholders and, as appropriate,
initiates inquiries into aspects of the Company's financial affairs. In
addition, the Audit Committee has the responsibility to consider and recommend
the appointment of, and to review fee arrangements with, the Company's
independent auditors. The current members of the Audit Committee are Messrs.
Kohler and Slusky.

55
<PAGE>
DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS

Directors of the Company do not receive cash compensation for their service
as directors. Each non-employee director will automatically receive an option to
purchase 25,000 shares of Common Stock upon joining the Board of Directors. Each
incumbent director will automatically be granted an option to purchase an
additional 5,000 shares of Common Stock annually. See "Management--Employee
Benefit Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors currently consists of
Messrs. Lazarus and Slusky. No interlocking relationship exists between any
member of the Company's Board of Directors or the Company's Compensation
Committee and any member of the board of directors or compensation committee of
any other company, and no such interlocking relationship has existed in the
past.

EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS

Pursuant to the Founder's Stock Purchase Agreements entered into in
September 1995 between the Company and each of John W. Danner, the Company's
Chairman of the Board and Chief Executive Officer, and Thomas A. Shields, the
Company's Vice President, Chief Technology Officer, the vesting of the stock
purchased under such agreements will accelerate upon certain changes of control
of the Company. See "Certain Transactions."

Pursuant to various agreements entered into between the Company and each of
Stephen E. Recht, the Company's Chief Financial Officer and Secretary, Susan
Atherton, the Company's Vice President of Sales, and Jitendra Valera, the
Company's Vice President and General Manager of Europe, upon certain changes of
control, certain benefits will be provided to each of such individuals under
certain circumstances in accordance with their respective agreement. See
"Certain Transactions--Employment and Severance Agreements."

EXECUTIVE COMPENSATION

The following table sets forth in summary form information concerning the
compensation awarded to, earned by or paid for services rendered to the Company
in all capacities during fiscal 1997 by (i) the Company's Chief Executive
Officer; (ii) the Company's four other most highly compensated executive
officers whose salary and bonus for such year exceeded $100,000, including one
former officer; and (iii) two other executive officers whose salary and bonus
for fiscal 1997 would have exceeded $100,000, had they served as officers during
the entire fiscal 1997 (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
FISCAL 1997
-------------
LONG-TERM
COMPENSATION
-------------
FISCAL 1997
--------------------- AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#)
- ---------------------------------------------------------------------------- ---------- --------- -------------
<S> <C> <C> <C>
John W. Danner, Chairman of the Board and Chief Executive Officer........... $ 124,280 $ -- --
Stephen E. Recht, Chief Financial Officer and Secretary..................... 154,517 -- 78,408
Rick E. D. Jackson IV, Vice President of Marketing (1)...................... 78,462 -- 150,000
Martin G. Lane-Smith, Vice President of Engineering (2)..................... 21,346 25,000 214,603
Thomas A. Shields, Vice President, Chief Technology Officer................. 100,500 -- --
Larry C. Wear, Vice President of Support and Service........................ 137,922 -- 81,817
Stephen Reade, former Vice President of Sales (3)........................... 104,000 149,876 79,545
</TABLE>

- ----------
(1) Mr. Jackson joined the Company in June 1997; his annualized base salary for
fiscal 1997 was $150,000.

(2) Mr. Lane-Smith joined the Company in November 1997; his annualized base
salary for fiscal 1997 was $185,000.

(3) Mr. Reade resigned as an employee of the Company in January 1998 and has
been retained by the Company as a consultant since that time. See "Certain
Transactions."

56
<PAGE>
OPTION GRANTS IN FISCAL 1997

The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the fiscal year ended December
31, 1997. All such options were awarded under the Company's 1995 Stock Option
Plan. No stock appreciation rights were granted to these individuals during such
year.

<TABLE>
<CAPTION>
POTENTIAL REALIZED
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------
NAME GRANTED(#) FISCAL 1997(%) SHARE($)(2)(3) DATE(4) 5%($) 10%($)
- ---------------------------------- ----------- ----------------- --------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John W. Danner, Chairman of the
Board and Chief Executive
Officer......................... -- -- -- -- -- --

Stephen E. Recht, Chief Financial
Officer and Secretary........... 72,727 5.5% $ 0.22 3/20/2007 $ 10,062 $ 25,500

5,681 0.4 0.22 11/20/2007 786 1,992

Rick E. D. Jackson IV, Vice
President of Marketing.......... 150,000 11.4 0.22 6/16/2007 20,754 52,594

Martin G. Lane-Smith, Vice
President of Engineering........ 214,603 16.3 0.22 11/3/2007 29,692 75,245

Thomas A. Shields, Vice President,
Chief Technology Officer........ -- -- -- -- -- --

Larry C. Wear, Vice President of
Support and Service............. 34,090 2.6 0.22 3/20/2007 4,717 11,953

47,727 3.6 0.22 11/20/2007 6,603 16,734

Stephen Reade, former Vice
President of Sales (5).......... 79,545 6.0 0.22 3/20/2007 11,006 27,890
</TABLE>

- ----------
(1) The 5% and 10% assumed rates of appreciation are prescribed by the rules and
regulations of the Securities and Exchange Commission and do not represent
the Company's estimate or projection of the future trading prices of its
Common Stock. There can be no assurance that any of the values reflected in
this table will be achieved. Actual gains, if any, on stock option exercises
are dependent on numerous factors, including the future performance of the
Company, overall market conditions and the option holder's continued
employment with the Company throughout the entire vesting period and option
term, which factors are not reflected in this table.

(2) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by the Board of Directors on the
date of grant.

(3) Exercise price may be paid in (i) cash, (ii) check, (iii) promissory note,
(iv) by delivery of already-owned shares of the Company's Common Stock
subject to certain conditions, (v) by delivery of a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required
to pay the exercise price or (vi) any combination of the foregoing methods
of payment under applicable law.

(4) Twenty-five percent (25%) of the shares issuable upon exercise of options
granted under the Company's 1995 Stock Option Plan become vested on the
first anniversary of the vesting commencement date and the balance vests at
the rate of 1/48th of such shares for each month thereafter.

(5) Mr. Reade resigned as an employee of the Company in January 1998 and has
been retained by the Company as a consultant since that time. See "Certain
Transactions."

57
<PAGE>
AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND DECEMBER 31, 1997 OPTION VALUES

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

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997(#) DECEMBER 31, 1997($)(1)
-------------------------------- ------------------------------
NAME EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------- ------------- ----------------- ----------- -----------------

<S> <C> <C> <C> <C>
John W. Danner, Chairman of the Board and Chief Executive
Officer.................................................. -- -- -- --

Stephen E. Recht, Chief Financial Officer and Secretary.... 187,498 -- $ 61,874 --

Rick E. D. Jackson IV, Vice President of Marketing......... 150,000 -- 49,500 --

Martin G. Lane-Smith, Vice President of Engineering........ 214,603 -- 70,819 --

Thomas A. Shields, Vice President, Chief Technology
Officer.................................................. -- -- -- --

Larry C. Wear, Vice President of Support and Service....... 81,817 -- 27,000 --

Stephen Reade, former Vice President of Sales (3).......... 79,545 -- 26,250 --
</TABLE>

- ----------

(1) Represents the difference between the fair market value of the shares of
Common Stock underlying the options at December 31, 1997 ($0.55 per share,
as determined by the Board of Directors) less the exercise price of such
options ($0.22 per share).

(2) The option shares are immediately exercisable, subject to the Company's
repurchase option at the original exercise price upon the optionee's
cessation of service prior to vesting in such option shares. The repurchase
option lapses or the option shares become vested as follows: 25% of the
option shares vest upon the completion of one year of service from the
vesting commencement date and an additional 1/48th of such shares become
exercisable each month thereafter.

(3) Mr. Reade resigned as an employee from the Company in January 1998 and has
been retained by the Company as a consultant since such time. See "Certain
Transactions."

EMPLOYEE BENEFIT PLANS

1995 STOCK OPTION PLAN. The Company's 1995 Stock Option Plan (the "1995
Plan") was adopted by the Board of Directors in September 1995 and was approved
by the Company's stockholders in October 1995. At April 30, 1998, a total of
3,000,297 shares of Common Stock had been reserved for issuance under the 1995
Plan. The 1995 Plan provides for grants of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), to employees (including officers and employee directors) and
nonstatutory stock options to employees (including officers and employee
directors) and consultants of the Company. Directors who are not also employees
are not eligible to receive grants under the 1995 Plan once the Company
registers any class of any equity security pursuant to the Exchange Act. The
purposes of the 1995 Plan are to attract and retain the best available personnel
for positions of substantial responsibility, to provide additional incentive to
employees and consultants of the Company and its subsidiaries and to promote the
success of the Company's business. The 1995 Plan is administered by the Board of
Directors or by a committee appointed by the Board which identifies optionees
and determines the terms of options granted, including the exercise price,
number of shares subject to the option and the exercisability thereof.

The terms of options granted under the 1995 Plan may not exceed ten years.
The term of all incentive stock options granted to an optionee who, at the time
of grant, owns stock representing more than 10% of the voting

58
<PAGE>
power of all classes of stock of the Company or a parent or subsidiary of the
Company (a "Ten Percent Stockholder"), may not exceed five years, however.
Generally, options granted under the 1995 Plan vest and become exercisable
starting one year after the date of grant, with 25% of the shares subject to the
option becoming exercisable at that time and an additional 1/48th of such shares
becoming exercisable each month thereafter. Holders of options granted under the
1995 Plan may exercise their options prior to complete vesting of shares,
provided that such holders enter into a restricted stock purchase agreement
granting the Company an option to repurchase any unvested shares at a price per
share equal to the original exercise price per share for the option in the event
of a termination of the optionee's employment or consulting relationship. The
exercise price of incentive stock options granted to an employee under the 1995
Plan must be at least equal to the fair market value of the shares on the date
of grant. The exercise price of any incentive stock option granted to a Ten
Percent Stockholder must equal at least 110% of the fair market value of the
Common Stock on the date of grant. The exercise price of nonstatutory stock
options granted to a Ten Percent Stockholder under the 1995 Plan must be no less
than 110% of the fair market value of the Common Stock on the date of grant. The
exercise price of nonstatutory stock options granted to a non-Ten Percent
Stockholder may be no less than 85% of the fair market value of the Common Stock
on the date of grant for non-Ten Percent Stockholder employees and consultants.
The consideration for exercising any incentive stock option or any nonstatutory
stock option is determined by the Board of Directors and may consist of (i)
cash, (ii) check, (iii) promissory note, (iv) delivery of already-owned shares
of the Company's Common Stock subject to certain conditions, (v) delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price or (vi) any combination of the foregoing
methods of payment under applicable law.

No option granted under the 1995 Plan may be transferred by the optionee
other than by will or the laws of descent or distribution, and each option may
be exercised, during the lifetime of the optionee, only by such optionee. An
optionee whose relationship with the Company or any related corporation ceases
for any reason (other than death or permanent and total disability) may exercise
options in the three-month period following such cessation (unless such options
terminate or expire sooner by their terms). In the event of a proposed sale of
all or substantially all of the Company's assets or merger of the Company with
or into another corporation, all outstanding options may either be assumed or an
equivalent option may be substituted by the surviving entity. If such options
are not assumed or substituted, each optionee may exercise options as to all of
the shares subject to the option agreement, including shares as to which such
options would not otherwise be exercisable and the options become fully vested,
or to the extent such options have been exercised and unvested shares remain
subject to a restricted stock purchase agreement, the Company's repurchase
option will lapse entirely. In the event that the options become fully vested in
connection with a sale of assets or merger of the Company, the optionees will be
notified that the options are fully vested for a period of fifteen (15) days
from the date of such notice, and that the options will terminate upon the
expiration of such period.

As of April 30, 1998, 1,205,861 shares of Common Stock had been issued upon
exercise of options outstanding under the 1995 Plan. Options to purchase
1,723,441 shares of Common Stock at a weighted average exercise price of $1.83
were also outstanding.

1998 STOCK PLAN. The Company's 1998 Stock Plan (the "1998 Plan") was
adopted by the Board of Directors on April 23, 1998 and was approved by the
Company's stockholders effective as of May 8, 1998. As of the date of this
Prospectus, no shares had been issued and no stock options had been granted
under the 1998 Plan.

The 1998 Plan provides for the grant of incentive stock options, within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, (the
"Code") to employees (including officers and employee directors) and for the
grant of nonstatutory stock options and stock purchase rights ("SPRs") to
employees, directors and consultants. A total of 2,000,000 shares of Common
Stock, plus annual increases equal to the lesser of (i) 1,000,000 shares, (ii)
5% of the outstanding shares, or (iii) a lesser amount determined by the Board
of Directors, are currently reserved for issuance pursuant to the 1998 Plan.
Unless terminated sooner, the 1998 Plan will terminate automatically in April
2008.

59
<PAGE>
The 1998 Plan may be administered by the Board of Directors or a committee
of the Board (as applicable, the "Administrator"). The Administrator has the
power to determine the terms of the options or SPRs granted, including the
exercise price of the option or SPR, the number of shares subject to each option
or SPR, the exercisability thereof, and the form of consideration payable upon
such exercise. In addition, the Administrator has the authority to amend,
suspend or terminate the 1998 Plan, provided that no such action may affect any
share of Common Stock previously issued and sold or any option previously
granted under the 1998 Plan.

Options and SPRs granted under the 1998 Plan are generally not transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1998 Plan must
generally be exercised within three months after the end of optionee's status as
an employee, director or consultant of the Company, or within twelve months
after such optionee's termination by death or disability, but in no event later
than the expiration of the option's term.

In the case of SPRs, unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with the Company for any reason (including
death or disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.

The exercise price of all incentive stock options granted under the 1998
Plan must be at least equal to the fair market value of the Common Stock on the
date of grant. The exercise price of nonstatutory stock options and SPRs granted
under the 1998 Plan is determined by the Administrator, but with respect to
nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the exercise
price must be at least equal to the fair market value of the Common Stock on the
date of grant. With respect to any participant who owns stock possessing more
than 10% of the voting power of all classes of the Company's outstanding capital
stock, the exercise price of any incentive stock option granted must equal at
least 110% of the fair market value on the grant date and the term of such
incentive stock option must not exceed five years. The term of all other options
granted under the 1998 Plan may not exceed ten years.

The 1998 Plan provides that in the event of a merger of the Company with or
into another corporation, or a sale of substantially all of the Company's
assets, each option and SPR shall be assumed or an equivalent option substituted
for by the successor corporation. If the outstanding options and SPRs are not
assumed or substituted for by the successor corporation, the Administrator shall
provide for the optionee to have the right to exercise the option or SPR as to
all of the optioned stock, including shares as to which it would not otherwise
be exercisable. If an option or SPR becomes exercisable in full in connection
with a merger or sale of assets, the Administrator shall notify the optionee
that the option or SPR shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the option or SPR will terminate upon the
expiration of such period.

1998 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1998 Employee Stock
Purchase Plan (the "1998 Purchase Plan") was adopted by the Board of Directors
on April 23, 1998 and was approved by the Company's stockholders effective as of
May 8, 1998. A total of 200,000 shares of Common Stock have been reserved for
issuance under the 1998 Purchase Plan, plus annual increases equal to the lesser
of (i) 750,000 shares, (ii) 4% of the outstanding shares on such dates or (iii)
a lesser amount determined by the Board.

The 1998 Purchase Plan, which is intended to qualify under Section 423 of
the Code, contains consecutive, overlapping, twenty-four month offering periods.
Each offering period includes four six-month purchase periods. The offering
periods generally start on the first trading day on or after February 1 and
August 1 of each year, except for the first such offering period which commences
on the first trading day on or after the effective date of this Offering and
ends on the last trading day on or before July 31, 2000.

Employees are eligible to participate if they are customarily employed by
the Company or any participating subsidiary for at least 20 hours per week and
more than five months in any calendar year. However, any employee who (i)
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of

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all classes of the capital stock of the Company, or (ii) whose rights to
purchase stock under all employee stock purchase plans of the Company accrues at
a rate which exceeds $25,000 worth of stock for each calendar year may not be
granted an option to purchase stock under the 1998 Purchase Plan. The 1998
Purchase Plan permits participants to purchase Common Stock through payroll
deductions of up to 10% of the participant's "compensation." Compensation is
defined as the participant's base straight time gross earnings and commissions
but excludes payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses and other compensation. The maximum number of shares
a participant may purchase during a single purchase period is 5,000 shares.

Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each purchase period. The price of stock
purchased under the 1998 Purchase Plan is 85% of the lower of the fair market
value of the Common Stock (i) at the beginning of the offering period or (ii) at
the end of the purchase period; provided, however, that under certain
circumstances, the purchase price may be adjusted to a price not less than 85%
of the lower of the fair market value on the Common Stock on (i) the date the
Company's stockholders approve an increase in shares reserved for issuance under
the 1998 Purchase Plan or (ii) at the end of the purchase period. In the event
the fair market value at the end of a purchase period is less than the fair
market value at the beginning of the offering period, the participants will be
withdrawn from the current offering period following exercise and automatically
re-enrolled in a new offering period. The new offering period will use the lower
fair market value as of the first date of the new offering period to determine
the purchase price for future purchase periods. Participants may end their
participation at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with the Company.

Rights granted under the 1998 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1998 Purchase Plan. The 1998 Purchase Plan provides
that, in the event of a merger of the Company with or into another corporation
or a sale of substantially all of the Company's assets, each outstanding option
may be assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the outstanding options, the
offering period then in progress will be shortened and a new exercise date will
be set that is before the date of the Company's proposed sale or merger. The
1998 Purchase Plan will terminate in April 2008. The Board of Directors has the
authority to amend or terminate the 1998 Purchase Plan, except that no such
action may adversely affect any outstanding options under the 1998 Purchase
Plan.

1998 DIRECTOR OPTION PLAN. The 1998 Director Option Plan (the "Director
Plan") was adopted by the Board of Directors on April 23, 1998 and was approved
by the Company's stockholders effective as of May 8, 1998. The Director Plan
provides for the grant of nonstatutory stock options to non-employee directors.
The Director Plan has a term of ten years, unless terminated sooner by the
Board. A total of 200,000 shares of Common Stock have initially been reserved
for issuance under the Director Plan. In addition, the Director Plan provides
for annual increases equal to the lesser of (i) the number of shares needed to
restore the maximum aggregate number of shares available for sale under the
Director Plan to 200,000 shares or (ii) a lesser number of shares determined by
the Board.

The Director Plan provides that each non-employee director shall
automatically be granted an option to purchase 25,000 shares of Common Stock
(the "First Option") on the later of (i) the effective date of the Director Plan
or (ii) the date which such person first becomes a non-employee director. In
addition to the First Option, each non-employee director shall automatically be
granted an option to purchase 5,000 shares (a "Subsequent Option") on the date
of each of the Company's annual meeting of stockholders, if on such date he or
she shall have served on the Board for at least six months. Each First Option
and Subsequent Option shall have a term of 10 years. The shares subject to the
First Option and Subsequent Option shall vest as to 25% of the optioned stock
one year from the date of grant, and 1/48 of the optioned stock shall vest each
month thereafter, provided the person continues to serve as a director on such
dates. Holders of options granted under the Director Plan may exercise their
options prior to complete vesting of shares, subject to such holders entering
into restricted stock purchase agreements granting the Company an option to
repurchase, any unvested shares at a price per share equal to the original
exercise

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<PAGE>
price per share for the option in the event of a termination of the optionee's
directorship. The exercise price of each First Option and each Subsequent Option
shall be 100% of the fair market value per share of the Common Stock on the date
of grant.

In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option may be assumed or an equivalent option
substituted for by the successor corporation. If an option is assumed or
substituted for by the successor corporation, it shall continue to vest as
provided in the Director Plan. However, if a non-employee director's status as a
director of the Company or the successor corporation, as applicable, is
terminated other than upon a voluntary resignation by the non-employee director,
each option granted to such non-employee director shall become fully vested and
exercisable upon such termination date. If the successor corporation does not
agree to assume or substitute for the option, each option shall become fully
vested and exercisable for a period of fifteen days from the date the Board
notifies the optionee of the option's full exercisability, after which period
the option shall terminate. Options granted under the Director Plan must be
exercised within three months of the end of the optionee's tenure as a director
of the Company, or within twelve months after such director's termination by
death or disability, but in no event later than the expiration of the option's
ten-year term. Options granted under the Director Plan are generally not
transferable by the optionee other than by will or the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, only by such optionee.

401(K) PLAN. The Company participates in a tax-qualified employee savings
and retirement plan (the "401(k) Plan") which covers all of the Company's
full-time employees who are at least 21 years of age. Pursuant to the 401(k)
Plan, eligible employees may defer up to 20% of their pre-tax earnings, subject
to the Internal Revenue Service's annual contribution limit. The 401(k) Plan
permits additional discretionary matching contributions by the Company on behalf
of all participants in the 401(k) Plan in such a percentage amount as may be
determined annually by the Board of Directors. To date, the Company has made no
such matching contributions. The 401(k) Plan is intended to qualify under
Section 401 of the Internal Revenue Code of 1986, as amended, so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn from
the 401(k) Plan, and so that contributions by the Company, if any, will be
deductible by the Company when made. The trustee under the 401(k) Plan, at the
direction of each participant, invests the assets of the 401(k) Plan in any of a
number of investment options.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Amended and Restated Certificate of Incorporation, as amended,
limits the liability of directors to the maximum extent not prohibited by
Delaware law. Delaware law provides that a corporation's certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director for monetary damages for breach of their fiduciary
duties as directors, except for liability (i) for any breach of their duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) for any transaction from which the director derived an improper personal
benefit.

The Company's Amended and Restated Bylaws provide that the Company shall
indemnify its directors, officers and employee benefit plan fiduciaries, and may
indemnify its employees and agents to the fullest extent permitted by law. The
Company believes that indemnification under its Amended and Restated Bylaws
covers at least negligence and gross negligence on the part of indemnified
parties. The Company's Amended and Restated Bylaws also permit the Company to
advance expenses incurred by an indemnified director or officer in connection
with the defense of any action or proceeding arising out of such director's or
officer's status or service as a director or officer of the Company upon an
undertaking by such director or officer to repay such advances if it is
ultimately determined that such director or officer is not entitled to such
indemnification.

The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Amended and Restated Bylaws. These agreements, among other

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<PAGE>
things, indemnify the Company's directors and officers for certain expenses
(including attorneys' fees and associated legal expenses), judgments, fines and
amounts paid in settlement amounts if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld, actually and
reasonably incurred by any such person in any action, suit, proceeding or
alternative dispute resolution mechanism 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 directors and officers.

At present, there is no pending litigation or proceeding involving any
director, officer, employee benefit plan fiduciary, 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.

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<PAGE>
CERTAIN TRANSACTIONS

Since the Company's inception in September 1995, there has not been any
transaction or series of similar transactions to which the Company was or is a
party in which the amount involved exceeded or exceeds $60,000 and in which any
Director, executive officer, holder of more than 5% of any class of the
Company's voting securities or any member of the immediate family of any of the
foregoing persons had or will have a direct or indirect material interest, other
than the transactions described below.

EQUITY AND CONVERTIBLE DEBT FINANCINGS

INITIAL SALES OF COMMON STOCK TO FOUNDERS. In September 1995, the Company
issued and sold 1,636,363 shares of Common Stock to John W. Danner, the
Company's Chairman of the Board and Chief Executive Officer, and 818,181 shares
of Common Stock to Thomas A. Shields, the Company's Vice President, Chief
Technology Officer, for an aggregate purchase price of $150,000 or approximately
$0.06 per share. Such shares are subject to pro-rata monthly vesting over a
four-year period commencing on the purchase date. This vesting will accelerate
in full upon certain changes of control of the Company. In March 1997, the
Company repurchased 89,212 and 356,850 shares of such Common Stock from Messrs.
Danner and Shields, respectively, for an aggregate purchase price of $98,134 or
$0.22 per share.

COMMON STOCK AND BRIDGE NOTE FINANCING. From September through November
1995, the Company issued and sold an aggregate of 818,181 shares of Common Stock
for an aggregate purchase price of $49,999.98, or approximately $0.06 per share,
and issued bridge notes in the aggregate amount of $450,000, the principal and
interest of which were convertible into Preferred Stock (the "Common Stock and
Bridge Note Financing"). The investors in the Common Stock and Bridge Note
Financing included, among others, (1) a trust controlled by Alden E. and Ann
Danner, parents of John W. Danner, which trust purchased 163,636 shares of
Common Stock and lent the Company $90,000 at an annual simple interest rate of
5.91%, which principal and interest converted into Series A Preferred Stock in
the Company's Series A Preferred Stock financing (the "Series A Preferred Stock
Financing"); (2) Thomas A. Shields, Sr., the father of the Company's Vice
President, Chief Technology Officer, who purchased 81,818 shares of Common Stock
and lent to the Company $45,000 at an annual simple interest rate of 5.91%,
which principal and interest converted into Series A Preferred Stock in the
Series A Preferred Stock Financing; and (3) a trust controlled by John D. D.
Kohler, a Director of the Company, which trust purchased 163,636 shares of
Common Stock and lent the Company $90,000 at an annual simple interest rate of
5.91%, which principal and interest converted into Series A Preferred Stock in
the Series A Preferred Stock Financing.

SERIES A PREFERRED STOCK FINANCING. In January and April 1996, the Company
issued and sold an aggregate of 4,404,578 shares of Series A Preferred Stock for
an aggregate purchase price of $4,448,623.78, or $1.01 per share. The investors
in such shares included, among others, (1) Vector Capital, L.P. ("Vector
Capital"), a general partner of which is Vector Capital Partners, L.L.C., of
which Alexander R. Slusky, a Director of the Company, is the Managing Member,
which limited partnership purchased 500,000 shares of Series A Preferred Stock;
(2) a trust controlled by Alden E. and Ann Danner, parents of John W. Danner,
which trust purchased 90,623 shares of Series A Preferred Stock; (3) a trust
controlled by Thomas A. Shields, Sr., which trust purchased 45,117 shares of
Series A Preferred Stock; (4) a trust controlled by John D. D. Kohler, which
trust purchased 90,609 shares of Series A Preferred Stock; (5) Larry C. Wear,
Vice President of Support and Services, who purchased 49,504 shares of Series A
Preferred Stock; and (6) certain entities affiliated with an institutional
investor that was a holder of more than 5% of the Company's securities and that
held a seat on the Board of Directors of the Company until March 1998, which
entities purchased 3,073,738 shares of Series A Preferred Stock, all of which
stock was sold by such investor and its affiliated entities in March 1998 to
other institutional investors in the Company for an aggregate selling price of
approximately $3,688,485. Upon consummation of this offering, the outstanding
shares of Series A Preferred Stock will automatically convert into an aggregate
of 2,494,147 shares of Common Stock.

SERIES B PREFERRED STOCK FINANCING. In March 1997, the Company issued and
sold an aggregate of 4,307,969 shares of Series B Preferred Stock at an
aggregate purchase price of $4,299,999.24, or approximately $1.00 per share. The
investors in such shares included, among others, (1) Vector Capital which
purchased 3,506,487 shares of

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<PAGE>

Series B Preferred Stock; (2) Redleaf Venture I, L.P. and Redleaf Associates I,
L.P. (together, "Redleaf"), the general partner of which is Redleaf Venture
Management, L.L.C. of which John D. D. Kohler, a Director of the Company, is a
Managing Member, which limited partnerships purchased an aggregate of 300,556
shares of Series B Preferred Stock; (3) Jonathan D. Lazarus, a Director of the
Company, who purchased 75,139 shares of Series B Preferred Stock; and (4)
certain entities affiliated with an institutional investor that was a holder of
more than 5% of the Company's securities and that held a seat on the Board of
Directors of the Company until March 1998, which entities purchased 400,741
shares of Series B Preferred Stock, all of which stock was sold by such investor
and its affiliated entities in March 1998 to other institutional investors in
the Company for an aggregate selling price of approximately $480,889. Upon
consummation of this offering, the outstanding shares of Series B Preferred
Stock will automatically convert into an aggregate of 1,958,158 shares of Common
Stock.

SERIES C PREFERRED STOCK FINANCING. In November 1997 and March 1998, the
Company issued and sold an aggregate of 3,887,978 shares of Series C Preferred
Stock for aggregate net proceeds to the Company of $8,683,000, or approximately
$2.24 per share. The investors in such shares included, among others, (1) London
Pacific Life & Annuity Company, an owner of more than 5% of the Company's Common
Stock, which purchased 2,437,241 shares of Series C Preferred Stock and (2)
Vector Capital, which purchased 669,571 shares of Series C Preferred Stock. Upon
consummation of this offering, the outstanding shares of Series C Preferred
Stock will automatically convert into an aggregate of 1,767,261 shares of Common
Stock.

REGISTRATION RIGHTS AGREEMENT

Certain holders of Preferred Stock have certain registration rights with
respect to their shares of Common Stock issuable upon conversion of their
Preferred Stock. See "Description of Capital Stock--Registration Rights of
Certain Holders."

EMPLOYMENT AND SEVERANCE AGREEMENTS

JITENDRA VALERA EMPLOYMENT AGREEMENT. In May 1998, the Company and Mr.
Valera, the Company's Vice President and General Manager of Europe, entered into
an employment agreement under which Mr. Valera is entitled to receive severance
benefits under certain circumstances. In the event Mr. Valera is involuntarily
terminated from the Company or a successor Company without cause within 12
months of a Change of Control, defined to include (i) the acquisition of the
Company, (ii) the merger or consolidation of the Company with any other
corporation, (iii) a sale of all or substantially all of the Company's assets or
(iv) the acquisition by any person of beneficial ownership of 50% or more of the
total voting power of the Company's then outstanding securities, Mr. Valera
would be entitled to a lump sum payment equal to 18 months of Mr. Valera's base
salary as in effect immediately prior to the Change of Control, which lump sum
payment would equal approximately 123,750 pounds sterling, based on Mr. Valera's
current base salary. In the event of any other involuntary termination of Mr.
Valera's employment with less than six months notice, Mr. Valera would be
entitled to continued monthly payment of his base salary for six months
following such notice.

SUSAN ATHERTON EMPLOYMENT AGREEMENT. In April 1998, the Company and Ms.
Atherton, the Company's Vice President of Sales, entered into an employment
agreement under which Ms. Atherton is entitled to receive severance benefits
under certain circumstances. Pursuant to her employment agreement, Ms. Atherton
was granted an option to purchase up to 176,802 shares of the Company's Common
Stock, subject to the Company's standard vesting provisions. In the event that
Ms. Atherton's employment with the Company is involuntarily terminated by the
Company without cause prior to October 23, 1998, such option would become
immediately vested as to 22,100 shares of Common Stock. In the event Ms.
Atherton is involuntarily terminated by the Company or a successor company
without cause within 12 months of a Change of Control, defined to include (i)
the acquisition of the Company, (ii) the merger or consolidation of the Company
with any other corporation or (iii) a sale of all or substantially all of the
Company's assets, Ms. Atherton would be entitled to a lump sum payment equal to
18 months of Ms. Atherton's base salary as in effect immediately prior to the
Change of Control, which lump sum payment would equal approximately $225,000,
based on Ms. Atherton's current base salary.

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<PAGE>
STEPHEN E. RECHT EMPLOYMENT AND SEVERANCE AGREEMENT. In March 1998, the
Company and Mr. Recht, Chief Financial Officer and Secretary of the Company,
entered into an employment and severance agreement under which Mr. Recht is
entitled to receive certain benefits generally in the event Mr. Recht is
involuntarily terminated by the Company or a successor company without cause (i)
upon the acquisition of the Company, (ii) upon the merger or consolidation of
the Company with any other corporation, (iii) upon a sale of all or
substantially all of the Company's assets (each a "Change of Control") or (iv)
within 12 months of a Change of Control. Upon such a termination, Mr. Recht
would be entitled to (i) a total of 18 monthly payments equal to Mr. Recht's
monthly base salary as in effect immediately prior to the Change of Control,
currently $13,750 per month, and (ii) reimbursements for a period of 18 months
for the cost of Mr. Recht's group health and dental plan coverage.

STEPHEN READE SEPARATION AGREEMENT. In March 1998, the Company and Mr.
Reade, the Company's former Vice President of Sales, entered into a separation
agreement and release of all claims with the Company. Pursuant to such
agreement, Mr. Reade agreed to provide consulting services to the Company for a
six-month period following his resignation date (the "Consulting Period"), to
continue to be subject to certain competitive restrictions during the Consulting
Period and to release the Company from all claims related to his employment. The
Company also agreed to pay Mr. Reade $50,000 for his consulting services, to
allow the continued vesting of his outstanding stock options during the
Consulting Period and to release Mr. Reade from all claims related to his
employment.

MARTIN LANE-SMITH EMPLOYMENT AGREEMENT. In October 1997, the Company and
Mr. Lane-Smith, the Company's Vice President of Engineering, entered into an
employment agreement under which Mr. Lane-Smith was granted an option covering
an aggregate of 214,603 shares of Common Stock. The employment agreement, as
amended, also provides for the grant of an additional option to purchase up to
78,021 additional shares of the Company's Common Stock, which option will be
granted in October 1998 in the event Mr. Lane-Smith meets certain performance
criteria established by the Company.

The Company also has granted options to certain of its executive officers
pursuant to at-will employment agreements. Such options are described further in
the Management section under "Executive Compensation" and "Option Grants in
Fiscal 1997."

PROTEGE SOFTWARE PROFESSIONAL SERVICES AGREEMENT. In March 1997, the
Company and Protege Software (Holdings) Limited ("Protege") entered into a
professional services agreement (the "Professional Services Agreement") under
which Protege agreed to act as general manager for the Company in Europe. In
addition, Protege agreed to perform certain professional services for the
Company. In connection with the Professional Services Agreement, Jitendra Valera
the Company's Vice President and General Manager of Europe, served in such
capacity via the Professional Services Agreement as an employee of Protege from
March 1997 through May 1998. In May 1998, the Company and Protege amended the
Professional Services Agreement to, among other things, allow the Company to
hire Mr. Valera directly. Effective May 1998, Mr. Valera became an employee of
NetGravity Europe Limited and continued to serve as the Company's Vice President
and General Manager of Europe. See "Management--Executive Officers and
Directors."

ASIA PACIFIC VENTURES CO. CONSULTANT AND REPRESENTATIVE AGREEMENT. In June
1998, the Company and Asia Pacific Ventures Co. ("Asia Pacific Ventures")
entered into a consultant and representative agreement (the "Consultant and
Representative Agreement") under which Asia Pacific Ventures has agreed to
advise and represent the Company in Asia. In connection with the Consultant and
Representative Agreement, Douglas Kaplan, an employee of Asia Pacific Ventures,
serves as the Company's Vice President and General Manager of Asia Pacific. See
"Management--Executive Officers and Directors."

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1998 and as adjusted to
reflect the sale of the 3,000,000 shares of Common Stock offered hereby by (i)
each person or entity who is known by the Company to own beneficially 5% or more
of the Company's outstanding Common Stock, (ii) each director of the Company,
(iii) each of the Named Executive Officers and (iv) all directors and executive
officers of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED(1)(3)
SHARES ------------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OWNED(1) OFFERING OFFERING
- -------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Vector Capital, L.P.(2) ........................................................ 3,449,504 33.6% 26.0%
c/o Ziff Brothers Investments
153 East 53rd Street, 43rd Floor
New York, NY 10022
London Pacific Life & Annuity Company .......................................... 1,377,461 13.4 10.4
3109 Poplarwood Court, Suite 108
Raleigh, NC 27604
John W. Danner(3)(8)............................................................ 1,545,809 15.1 11.7
John D. D. Kohler(4)............................................................ 621,181 6.1 4.7
Alexander R. Slusky(2).......................................................... 3,449,504 33.6 26.0
Jonathan D. Lazarus(5).......................................................... 52,335 * *
Stephen E. Recht(6)............................................................. 193,292 1.8 1.4
Rick E. D. Jackson IV(7)........................................................ 172,839 1.7 1.3
Thomas A. Shields(3)(8)......................................................... 461,444 4.5 3.5
Martin G. Lane-Smith(9)......................................................... 219,261 2.1 1.6
Larry C. Wear(3)(10)............................................................ 195,206 1.9 1.5
Stephen Reade(3)(11)............................................................ 248,007 2.4 1.9
All directors and executive officers as a group (13 people)(12)................. 7,437,875 66.0 52.1
</TABLE>

- ----------
* Represents beneficial ownership of less than 1% of the outstanding shares of
Common Stock.

(1) Applicable percentage ownership is based on 10,257,210 shares of Common
Stock and Preferred Stock (on an as converted to Common Stock basis)
outstanding as of April 30, 1998 and 13,257,210 shares immediately following
the completion of this offering (assuming no exercise of the Underwriters'
over-allotment option). Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities, subject to
community property laws, where applicable. Shares of Common Stock subject to
options or warrants that are presently exercisable or exercisable within 60
days of April 30, 1998 are deemed to be beneficially owned by the person
holding such options or warrants for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person.

(2) Includes all shares held by Vector Capital, L.P. Vector Capital Partners,
L.L.C. is the General Partner of Vector Capital, L.P. Mr. Slusky, a Director
of the Company, is the Managing Member of Vector Capital Partners, L.L.C.
Mr. Slusky disclaims beneficial ownership of the shares held by Vector
Capital, L.P. except to the extent of his pecuniary interests therein from
his membership interest in Vector Capital Partners, L.L.C.

(3) This column assumes no exercise of the Underwriter's over-allotment option.
If, however, the Underwriters' over-allotment option is exercised in full,
the Selling Stockholders will sell an aggregate of 200,000 shares of Common
Stock. Specifically, in such event, in addition to those share amounts set
forth in the table above, (i) John W. Danner, Chairman of the Board and
Chief Executive Officer of the Company, will sell an aggregate of 77,290
shares and will beneficially own 1,468,519 shares, which is 10.9% of the
Company's outstanding Common Stock, after completion of this offering, (ii)
Thomas A. Shields will sell an aggregate of 22,727 shares and will
beneficially own 438,717 shares, which is 3.2% of the Company's outstanding
Common Stock, after completion of this offering, (iii) Larry C. Wear will
sell an aggregate of 4,545 shares and

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<PAGE>

will beneficially own 190,661 shares, which is 1.4% of the Company's
outstanding Common Stock, after completion of this offering, (iv) Stephen
Reade, a former Vice President of the Company, will sell an aggregate of
2,272 shares and will beneficially own 245,735 shares, which is 1.8% of the
Company's outstanding Common Stock, after completion of this offering, (v) a
trust controlled by Bradley V. Husick, a former Vice President of the
Company, will sell an aggregate of 65,680 shares and will beneficially own
98,805 shares, which is less than 1% of the Company's outstanding Common
Stock, after completion of this offering, (vi) a trust controlled by Alden
and Ann Danner will sell an aggregate of 10,727 shares and will beneficially
own 204,225 shares, which is 1.5% of the Company's outstanding Common Stock,
after completion of this offering, (vii) Arthur and Vida Goldstein will sell
an aggregate of 10,727 shares and will beneficially own 96,680 shares, which
is less than 1% of the Company's outstanding Common Stock, after completion
of this offering, and (viii) John Krystynak will sell 1,000 shares and will
beneficially own 104,350 shares, which is less than 1% of the Company's
outstanding Common Stock, after completion of this offering.

(4) Includes 163,636 shares held by the Kohler Family Trust, of which Mr. Kohler
is a trustee. Also includes 5,607 shares held by Redleaf Associates I, L.P.
and 451,938 shares held by Redleaf Venture I, L.P. (collectively, the
"Redleaf Limited Partnerships"). Mr. Kohler, a Director of the Company, is
the Managing Member of Redleaf Venture Management, L.L.C., the General
Partner of the Redleaf Limited Partnerships. Mr. Kohler disclaims beneficial
ownership of the shares held by the Redleaf Limited Partnerships except to
the extent of his pecuniary interest therein.

(5) Consists of 52,335 shares held by Lazarus Family Investments LLC, of which
Mr. Lazarus is a Managing Member.

(6) Includes 193,179 shares issuable upon the exercise of stock options
exercisable within 60 days of April 30, 1998.

(7) Consists of 172,839 shares of Common Stock issuable upon the exercise of
stock options exercisable within 60 days of April 30, 1998.

(8) Includes 113 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of April 30, 1998.

(9) Consists of 219,261 shares of Common Stock issuable upon the exercise of
stock options exercisable within 60 days of April 30, 1998.

(10) Includes 104,656 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of April 30, 1998.

(11) Includes 79,545 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of April 30, 1998.

(12) Includes 1,010,367 shares of Common Stock issuable upon the exercise of
stock options exercisable within 60 days of April 30, 1998.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon the completion of this offering, the Company will be authorized to
issue 50,000,000 shares of Common Stock, $0.001 par value, and 5,000,000 shares
of undesignated Preferred Stock, $0.001 par value. Immediately after the
completion of this offering and assuming no exercise of the Underwriters'
over-allotment option, there will be an aggregate of 13,257,210 shares of Common
Stock outstanding, 1,723,441 shares of Common Stock will be issuable upon
exercise of outstanding options and no shares of Preferred Stock will be issued
and outstanding.

The following description of the Company's capital stock and certain
provisions of the Company's Amended and Restated Certificate of Incorporation,
as amended, and Amended and Restated Bylaws does not purport to be complete and
is subject to and qualified in its entirety by the Company's Amended and
Restated Certificate of Incorporation and Bylaws, which are included as exhibits
to the Registration Statement of which this Prospectus forms a part, and by
applicable provisions of Delaware law.

COMMON STOCK

As of April 30, 1998, there were 4,037,644 shares of Common Stock
outstanding that were held of record by approximately 79 stockholders. There
will be 13,257,210 shares of Common Stock outstanding (assuming no exercise of
the Underwriters' over-allotment option and no exercise of options then
outstanding) after giving effect to the sale of Common Stock offered to the
public hereby. The holders of Common Stock are entitled to one vote per share
held of record on all matters submitted to a vote of stockholders. Holders of
Common Stock do not have cumulative voting rights, and, therefore, holders of a
majority of the shares voting for the election of directors can elect all of the
directors. In such event, the holders of the remaining shares will not be able
to elect any directors.

Holders of the Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between the Company and its debtholders. The Company has never declared or paid
cash dividends on its capital stock, expects to retain future earnings, if any,
for use in the operation and expansion of its business, and does not anticipate
paying any cash dividends in the foreseeable future. In addition, the Company's
bank line of credit agreement contains a restrictive covenant that limits the
Company's ability to pay cash dividends or make stock repurchases without the
prior written consent of the lender. See "Dividend Policy." In the event of the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets legally available for
distribution after payment of all debts and other liabilities and subject to the
prior rights of holders of Preferred Stock then outstanding, if any.

PREFERRED STOCK

Effective upon the closing of this offering, the Company will be authorized
to issue 5,000,000 shares of undesignated Preferred Stock. The Board of
Directors has the authority to issue the Preferred Stock in one or more series
and to fix the price, rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting a series or the designation of such series, without any
further vote or action by the Company's stockholders. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders and may adversely affect the market price of, and the
voting and other rights of, the holders of Common Stock. The issuance of
Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock, including the loss of voting
control to others. The Company has no current plans to issue any shares of
Preferred Stock.

69
<PAGE>
ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION, BYLAWS AND
DELAWARE LAW

The Company's Amended and Restated Certificate of Incorporation, as amended
(the "Certificate") provides that all stockholder actions must be effected at a
duly called annual or special meeting and may not be effected by written
consent. The Company's Amended and Restated Bylaws provide that, except as
otherwise required by law, special meetings of the stockholders can only be
called pursuant to a resolution adopted by a majority of the Board of Directors
or by the chief executive officer of the Company. In addition, the Amended and
Restated Bylaws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders, including proposed
nominations of persons for election to the Board. Stockholders at an annual
meeting may only consider proposals or nominations specified in the notice of
meeting or brought before the meeting by or at the direction of the Board of
Directors or by a stockholder who was a stockholder of record on the record date
for the meeting, who is entitled to vote at the meeting and who has delivered
timely written notice in proper form to the Company's Secretary of the
stockholder's intention to bring such business before the meeting. The
Certificate and the Amended and Restated Bylaws provide that the affirmative
vote of holders of at least a majority of the total votes eligible to be cast in
the election of directors is required to amend, alter, change or repeal certain
of their provisions.

The foregoing provisions of the Company's Certificate and Amended and
Restated Bylaws are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions which may involve an actual or threatened change of control of the
Company. Such provisions are designed to reduce the vulnerability of the Company
to an unsolicited acquisition proposal and, accordingly, could discourage
potential acquisition proposals and could delay or prevent a change in control
of the Company. Such provisions are also intended to discourage certain tactics
that may be used in proxy fights but could, however, have the effect of
discouraging others from making tender offers for the Company's shares and,
consequently, may also inhibit fluctuations in the market price of the Company's
shares that could result from actual or rumored takeover attempts. These
provisions may also have the effect of preventing changes in the management of
the Company. See "Risk Factors--Antitakeover Effects of Certain Charter
Provisions, Bylaws and Delaware Law."

EFFECT OF DELAWARE ANTITAKEOVER STATUTE

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by the employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer; or (iii) on or
subsequent to such date, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation; (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,

70
<PAGE>

pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person. See "Risk Factors--Antitakeover Effects of
Certain Charter Provisions, Bylaws and Delaware Law."

REGISTRATION RIGHTS OF CERTAIN HOLDERS

After this offering, the holders of 9,305,068 shares of Common Stock will be
entitled upon expiration of lock-up agreements with the Underwriters to certain
rights with respect to the registration of such shares under the Securities Act.
Under the terms of the agreement between the Company and the holders of such
registrable securities, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other securities holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include shares
of such Common Stock therein. Holders of registration rights may also require
the Company to file a registration statement under the Securities Act at the
Company's expense with respect to their shares of Common Stock, and the Company
is required to use its best efforts to effect such registration. Further,
holders may require the Company to file registration statements on Form S-3 at
the Company's expense when such form becomes available for use to the Company.
All such registration rights are subject to certain conditions and limitations,
including the right of the underwriters of an offering to limit the number of
shares to be included in such registration.

WARRANTS

As of April 30, 1998, warrants to purchase 27,650 shares of Common Stock of
the Company at an aggregate exercise price of $0.22 were outstanding.

TRANSFER AGENT

The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services. Its address is 235 Montgomery Street, 23rd Floor, San
Francisco, California 94109, and its telephone number at this location is (415)
743-1444.

LISTING

The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the trading symbol "NETG."

71
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time.
Furthermore, since only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.

Upon completion of this offering, the Company will have outstanding an
aggregate of 13,257,210 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options. Of
these shares, the 3,000,000 shares sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), unless such shares are purchased by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act (the "Affiliates"). The remaining 10,257,210 shares of Common
Stock held by existing stockholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act ("Restricted Shares"). Restricted
Shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rules 144, 144(k) or 701 promulgated
under the Securities Act, which rules are summarized below. As a result of the
contractual restrictions described below and the provisions of Rules 144, 144(k)
and 701, additional shares will be available for sale in the public market as
follows: (i) 139,174 shares will be eligible for immediate sale on the date of
this Prospectus, (ii) 7,509,289 shares will be eligible for sale upon expiration
of the lock-up agreements 180 days after the date of this Prospectus and (iii)
2,608,747 shares will be eligible for sale upon expiration of their respective
one-year holding periods, subject to the volume limitations described below, if
applicable.

Upon completion of this offering, the holders of 9,305,068 shares of Common
Stock, or their transferees, will be entitled to certain rights with respect to
the registration of such shares under the Securities Act. See "Description of
Capital Stock--Registration Rights." Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable without
restriction under the Securities Act (except for shares purchased by Affiliates)
immediately upon the effectiveness of such resignation.

All officers and directors, and 69 stockholders and 74 option holders of the
Company have agreed not to sell, make any short sale of, grant any option for
the purchase of, or otherwise transfer or dispose of, any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for Common
Stock for a period of 180 days after the date of this Prospectus, without the
prior written consent of BancAmerica Robertson Stephens. BancAmerica Robertson
Stephens currently has no plans to release any portion of the securities subject
to lock-up agreements. When determining whether or not to release shares from
the lock-up agreements, BancAmerica Robertson Stephens will consider, among
other factors, the stockholder's reasons for requesting the release, the number
of shares for which the release is being requested and market conditions at the
time.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately 132,572 shares immediately after
this offering); or (ii) the average weekly trading volume of the Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an Affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years (including the holding period of any
prior owner except an Affiliate), is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144; therefore, unless otherwise restricted, "144(k)
shares" may be sold immediately upon the completion of this offering. In
general, under Rule 701 of the Securities Act as currently in effect, any
employee, consultant or

72
<PAGE>
advisor of the Company who purchased shares from the Company in connection with
a compensatory stock or option plan or other written agreement is eligible to
resell such shares 90 days after the effective date of this offering in reliance
on Rule 144, but without compliance with certain restrictions, including the
holding period, contained in Rule 144.

The Company intends to file a registration statement on Form S-8 under the
Securities Act covering shares of Common Stock reserved for issuance under the
Company's 1995 Plan, 1998 Plan, 1998 Director Plan and 1998 Purchase Plan. Based
on the number of options outstanding and shares reserved for issuance at April
30, 1998 under such plans, such registration statement would cover approximately
4,365,080 shares. Such registration statement is expected to be filed and become
effective as soon as practicable after the effective date of this offering.
Accordingly, shares registered under such registration statement will, subject
to 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 above. As of April 30, 1998,
options to purchase 1,723,441 shares of Common Stock were issued and outstanding
under the 1995 Plan, and no options to purchase shares had been granted under
the Company's 1998 Plan, 1998 Director Plan, and 1998 Purchase Plan. See
"Management--Employee Benefit Plans."

73
<PAGE>
UNDERWRITING

The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens, NationsBanc Montgomery Securities LLC and First
Albany Corporation (the "Representatives"), have severally agreed, subject to
the terms and conditions of the Underwriting Agreement, to purchase from the
Company the numbers of shares of Common Stock set forth opposite their
respective names below. The Underwriters are committed to purchase and pay for
all such shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
BancAmerica Robertson Stephens...................................................
NationsBanc Montgomery Securities LLC............................................
First Albany Corporation.........................................................

----------
Total........................................................................ 3,000,000
----------
----------
</TABLE>

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the price to the public set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession of not more than $ per share, of which $ may be reallowed
to other dealers. After the public 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 Company and the Selling Stockholders have granted to the Underwriters an
option, exercisable during the 30-day period after the date of this Prospectus,
to purchase up to an aggregate of 450,000 additional shares of Common Stock at
the initial public offering price per share set forth on the cover of this
Prospectus. 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 Common Stock
to be purchased by it shown in the above table represents as a percentage of the
total number of shares offered hereby. If purchased, such additional shares will
be sold by the Underwriters on the same terms as those on which the shares
offered hereby are being sold.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.

Pursuant to the terms of lock-up agreements, the holders of 10,117,923
shares of the Company's Common Stock (including 6,219,566 shares of Common Stock
issuable upon conversion of outstanding Preferred Stock), have agreed, for a
period of up to 180 days after the date of this Prospectus, that, subject to
certain exceptions, they will not contract to sell or otherwise dispose of any
shares of Common Stock, any options or warrants to purchase shares of Common
Stock or any securities convertible into, or exchangeable for, shares of Common
Stock, owned directly by such holders or with respect to which they have the
power of disposition, without the prior written consent of BancAmerica Robertson
Stephens. BancAmerica Robertson Stephens may, in its sole discretion, and at any
time without notice, release all or any portion of the securities subject to the
lock-up agreements. All of the shares of Common Stock subject to the lock-up
agreements will be eligible for sale in the public market upon the expiration of
the lock-up agreements, subject in the case of any restricted shares to Rule
144.

74
<PAGE>
In addition, the Company has agreed that until 180 days after the date of
this Prospectus, the Company will not, without the prior written consent of
BancAmerica Robertson Stephens, subject to certain exceptions, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock, any options
or warrants 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 shares of Common
Stock upon the exercise of outstanding options and warrants and the conversion
of shares of preferred stock and the grant of options to purchase shares of
Common Stock under existing employee stock option or stock purchase plans. See
"Shares Eligible for Future Sale."

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock offered hereby was determined through negotiations among the Company and
the Representatives. Among the factors considered in such negotiations were
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.

The Underwriters have reserved for sale, at the initial public offering
price, up to 170,000 shares of the Common Stock offered hereby for certain
persons designated by the Company who have expressed an interest in purchasing
such shares of Common Stock in the offering. The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the Underwriters to the general public on the same basis as other shares offered
hereby.

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

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the 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 the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the 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 the offering
if the 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.

75
<PAGE>
LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
Menlo Park, California, is acting as counsel for the Underwriters in connection
with certain legal matters relating to the shares of Common Stock offered
hereby. Certain members of Wilson Sonsini Goodrich & Rosati beneficially own an
aggregate of 14,016 shares of Common Stock through an investment trust. In
addition, a member of Wilson Sonsini Goodrich & Rosati beneficially owns an
additional 164,485 shares which were issued to the spouse of such member in
connection with such spouse's former employment with the Company. If the
Underwriters' over-allotment is exercised in full, 65,680 of such shares will be
sold in the offering.

EXPERTS

The consolidated financial statements and related schedule of NetGravity,
Inc. and subsidiary as of December 31, 1996 and 1997 and for the period from
September 5, 1995 (inception) to December 31, 1995 and each of the years in the
two-year period ended December 31, 1997, have been included herein and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules filed as a part thereof. Statements contained in this Prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete. In each instance, reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, and each
such statement is qualified in all respects by such reference. The Registration
Statement, including exhibits and schedules thereto, may be inspected without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and Northwestern Atrium Center, 500 Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Information concerning the Company is also available
for inspection at the offices of the Nasdaq National Market, Reports Section,
1735 K Street, N.W., Washington, D.C. 20006. 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 Commission's Web site is http://www.sec.gov.

76
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2

Consolidated Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998 (unaudited)................ F-3

Consolidated Statements of Operations for the Period from September 5, 1995 (Inception) to December 31,
1995, and the Years ended December 31, 1996 and 1997, and Three Months ended March 31, 1997 and 1998
(unaudited).............................................................................................. F-4

Consolidated Statements of Stockholders' Equity (Deficit) for the Period from September 5, 1995 (Inception)
to December 31, 1995, and the Years ended December 31, 1996 and 1997, and Three Months ended March 31,
1998 (unaudited)......................................................................................... F-5

Consolidated Statements of Cash Flows for the Period from September 5, 1995 (Inception) to December 31,
1995, and the Years ended December 31, 1996 and 1997, and Three Months ended March 31, 1997 and 1998
(unaudited).............................................................................................. F-6

Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
NetGravity, Inc.:

We have audited the accompanying consolidated balance sheets of NetGravity,
Inc. and subsidiary as of December 31, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the period from September 5, 1995 (inception) to December 31, 1995 and
each of the years in the two-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
NetGravity, Inc. and subsidiary as of December 31, 1996 and 1997, and the
results of their operations and their cash flows for the period from September
5, 1995 (inception) to December 31, 1995 and for each of the years in the
two-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.

KPMG PEAT MARWICK LLP

San Francisco, California,
April 17, 1998, except as to Note 8,
which is as of May 8, 1998

F-2
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1998
-------------------- ----------------------
1996 1997 ACTUAL PRO FORMA
--------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 1,020 $ 5,637 $ 6,318 $ 6,318
Accounts receivable, net of allowances of $169, $223 and $137 at
December 31, 1996 and 1997, and as of March 31, 1998,
respectively....................................................... 1,218 2,739 3,812 3,812
Prepaid expenses and other current assets........................... 182 155 219 219
--------- --------- --------- -----------
Total current assets.............................................. 2,420 8,531 10,349 10,349
Property and equipment, net........................................... 695 1,356 1,483 1,483
Other assets.......................................................... 44 -- -- --
--------- --------- --------- -----------
$ 3,159 $ 9,887 $ 11,832 $ 11,832
--------- --------- --------- -----------
--------- --------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of notes payable.................................... $ -- $ 1,140 $ 1,139 $ 1,139
Accounts payable.................................................... 257 305 289 289
Accrued liabilities................................................. 666 1,344 1,612 1,612
Deferred revenue.................................................... 1,718 3,520 4,627 4,627
--------- --------- --------- -----------
Total current liabilities......................................... 2,641 6,309 7,667 7,667
Notes payable, less current portion................................... 682 727 606 606

Commitments

Stockholders' equity (deficit):
Convertible preferred stock; $0.001 par value; 26,540,194 shares
authorized; 4,404,578, 11,149,788 and 12,600,525 shares issued and
outstanding at December 31, 1996 and 1997, and as of March 31,
1998, respectively; aggregate liquidation preference of $14,216 as
of December 31, 1997; 5,000,000 shares authorized, none outstanding
on a pro forma basis as of March 31, 1998.......................... 4 11 13 --
Common stock, $0.001 par value; 35,000,000 shares authorized;
4,234,511, 3,979,125 and 4,042,295 shares issued and outstanding at
December 31, 1996, 1997, and March 31, 1998, respectively;
50,000,000 shares authorized; 10,261,861 shares issued and
outstanding on a pro forma basis as of March 31, 1998.............. 4 4 4 10
Additional paid-in capital.......................................... 4,650 16,209 19,859 19,866
Deferred stock compensation......................................... -- (1,669) (1,813) (1,813)
Accumulated deficit................................................. (4,822) (11,704) (14,504) (14,504)
--------- --------- --------- -----------
Total stockholders' equity (deficit).............................. (164) 2,851 3,559 3,559
--------- --------- --------- -----------
$ 3,159 $ 9,887 $ 11,832 $ 11,832
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ------------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock for cash.............................. -- $ -- 3,822 $ 4 $ 146
Issuance of common stock upon exercise of stock options........ -- -- 542 1 32
Net loss....................................................... -- -- -- -- --
--------- --- ----- --- -------------
Balances as of December 31, 1995............................... -- -- 4,364 5 178
Issuance of common stock upon exercise of stock options........ -- -- 310 -- 62
Repurchases of common stock.................................... -- -- (439) (1) (27)
Compensation expense related to non-employee option grants..... -- -- -- -- 8
Issuance of Series A preferred stock, net of issuance costs of
$15.......................................................... 4,405 4 -- -- 4,429
Net loss....................................................... -- -- -- -- --
--------- --- ----- --- -------------
Balances as of December 31, 1996............................... 4,405 4 4,235 4 4,650
Issuance of common stock for cash.............................. -- -- 17 -- 4
Issuance of common stock upon exercise of stock options........ -- -- 301 -- 67
Compensation expense related to non-employee option grants..... -- -- -- -- 120
Deferred compensation related to grants of stock options....... -- -- -- -- 1,784
Amortization of deferred compensation.......................... -- -- -- -- --
Repurchases of common stock in connection with revaluation..... -- -- (446) -- (98)
Repurchases of common stock.................................... -- -- (126) -- (26)
Issuance of Series B preferred stock, net of issuance costs of
$18.......................................................... 4,308 4 -- -- 4,277
Issuance of Series C preferred stock, net of issuance costs of
$566......................................................... 2,437 3 -- -- 5,431
Net loss....................................................... -- -- -- -- --
--------- --- ----- --- -------------
Balances as of December 31, 1997............................... 11,150 $ 11 3,979 $ 4 $ 16,209
Issuance of common stock for cash (unaudited).................. -- -- 11 -- 2
Issuance of common stock upon exercise of stock options
(unaudited).................................................. -- -- 56 -- 12
Repurchases of common stock (unaudited)........................ -- -- (4) -- (1)
Issuance of Series C preferred stock, net of issuance costs of
$1 (unaudited)............................................... 1,451 2 -- -- 3,247
Deferred compensation related to grants of stock options
(unaudited).................................................. -- -- -- -- 390
Amortization of deferred stock compensation (unaudited)........ -- -- -- -- --
Net loss (unaudited)........................................... -- -- --
--------- --- ----- --- -------------
Balances as of March 31, 1998 (unaudited)...................... 12,601 $ 13 4,042 $ 4 $ 19,859
--------- --- ----- --- -------------
--------- --- ----- --- -------------

<CAPTION>
TOTAL
DEFERRED STOCKHOLDERS'
STOCK ACCUMULATED EQUITY
COMPENSATION DEFICIT (DEFICIT)
------------- ------------ --------------
<S> <C> <C> <C>
Issuance of common stock for cash.............................. $ -- $ -- $ 150
Issuance of common stock upon exercise of stock options........ -- -- 33
Net loss....................................................... -- (195) (195)
------------- ------------ -------
Balances as of December 31, 1995............................... -- (195) (12)
Issuance of common stock upon exercise of stock options........ -- -- 62
Repurchases of common stock.................................... -- -- (28)
Compensation expense related to non-employee option grants..... -- -- 8
Issuance of Series A preferred stock, net of issuance costs of
$15.......................................................... -- -- 4,433
Net loss....................................................... -- (4,627) (4,627)
------------- ------------ -------
Balances as of December 31, 1996............................... -- (4,822) (164)
Issuance of common stock for cash.............................. -- -- 4
Issuance of common stock upon exercise of stock options........ -- -- 67
Compensation expense related to non-employee option grants..... -- -- 120
Deferred compensation related to grants of stock options....... (1,784) -- --
Amortization of deferred compensation.......................... 115 -- 115
Repurchases of common stock in connection with revaluation..... -- -- (98)
Repurchases of common stock.................................... -- -- (26)
Issuance of Series B preferred stock, net of issuance costs of
$18.......................................................... -- -- 4,281
Issuance of Series C preferred stock, net of issuance costs of
$566......................................................... -- -- 5,434
Net loss....................................................... -- (6,882) (6,882)
------------- ------------ -------
Balances as of December 31, 1997............................... $ (1,669) $ (11,704) $ 2,851
Issuance of common stock for cash (unaudited).................. -- -- 2
Issuance of common stock upon exercise of stock options
(unaudited).................................................. -- -- 12
Repurchases of common stock (unaudited)........................ -- -- (1)
Issuance of Series C preferred stock, net of issuance costs of
$1 (unaudited)............................................... -- -- 3,249
Deferred compensation related to grants of stock options
(unaudited).................................................. (390) -- --
Amortization of deferred stock compensation (unaudited)........ 246 -- 246
Net loss (unaudited)........................................... -- (2,800) (2,800)
------------- ------------ -------
Balances as of March 31, 1998 (unaudited)...................... $ (1,813) $ (14,504) $ 3,559
------------- ------------ -------
------------- ------------ -------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 5, 1995 YEAR ENDED DECEMBER THREE MONTHS ENDED
(INCEPTION) TO 31, MARCH 31,
DECEMBER 31, -------------------- --------------------
1995 1996 1997 1997 1998
------------------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................................... $ (195) $ (4,627) $ (6,882) $ (1,160) $ (2,800)
Adjustments to reconcile net loss to net cash used in
operating activities:........................................
Depreciation................................................ 5 172 540 86 231
Amortization of deferred stock compensation................. -- -- 115 -- 246
Compensation from grant of non-employee stock options....... -- 8 120 -- --
Changes in operating assets and liabilities:
Accounts receivable, net.................................. -- (1,218) (1,521) (897) (1,073)
Prepaid expenses and other assets......................... (4) (178) 27 135 (64)
Accounts payable.......................................... 18 239 48 (94) (16)
Accrued liabilities....................................... 30 635 678 114 268
Deferred revenue.......................................... -- 1,718 1,802 718 1,107
----- --------- --------- --------- ---------
Net cash used in operating activities................... (146) (3,251) (5,073) (1,098) (2,101)
----- --------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures.......................................... (62) (810) (1,201) (261) (358)
Purchases of short-term investments........................... -- (2,705) (2,466) (2,466) --
Proceeds from maturities of short-term investments............ -- 2,705 2,466 -- --
Other assets.................................................. -- (44) 44 -- --
----- --------- --------- --------- ---------
Net cash used in investing activities................... (62) (854) (1,157) (2,727) (358)
----- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from notes payable................................... 450 683 1,185 173 --
Repayment of notes payable.................................... -- (450) -- -- (122)
Proceeds from issuance of preferred stock, net................ -- 4,433 9,715 4,281 3,249
Proceeds from issuance of common stock........................ 183 62 71 -- 14
Repurchases of common stock................................... -- (28) (124) -- (1)
----- --------- --------- --------- ---------
Net cash provided by financing activities............... 633 4,700 10,847 4,454 3,140
----- --------- --------- --------- ---------
Net increase in cash and cash equivalents....................... 425 595 4,617 629 681
Cash and cash equivalents at beginning of year/period........... -- 425 1,020 1,020 5,637
----- --------- --------- --------- ---------
Cash and cash equivalents at end of year/period................. $ 425 $ 1,020 $ 5,637 $ 1,649 $ 6,318
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest........................................ $ -- $ 18 $ 91 $ 15 $ 41
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
Non-cash financing activities:
Deferred compensation cost on employee stock option
grants..................................................... $ -- $ -- $ 1,784 $ -- $ 390
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

NetGravity, Inc. (the Company), a Delaware corporation, was incorporated in
September 1995. The Company is the leading provider of online advertising and
direct marketing software solutions. The Company maintains its US headquarters
in California and incorporated a subsidiary in the UK in April 1997 for its
European operations. The Company incorporated a subsidiary in Japan in April
1998 for its Asia Pacific operations.

LIQUIDITY

The Company has experienced operating losses and negative cash flows from
operating activities since inception. The Company currently expects that it will
have sufficient cash and investments and available credit facilities to fund its
projected operations through at least December 31, 1998; however, if the Company
is unable to achieve projected operating results and/or obtain sufficient
financing, management will be required to curtail growth plans and implement
cost controls. Management believes that achievement of the Company's growth
goals beyond December 31, 1998 will require additional financing. No assurances
can be given that the Company will be successful in maintaining its available
credit facilities or raising additional financing.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

Cash equivalents are highly liquid investments with remaining maturities of
three months or less at the date of purchase.

INVESTMENTS

The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. SFAS
No. 115 requires entities to classify investments in debt and equity securities
with readily determined fair values as "held-to-maturity," "available-for-sale"
or "trading" and establishes accounting and reporting requirements for each
classification. The Company generally has classified its investment securities
as available-for-sale and accounts for them at estimated fair value. Realized
and unrealized gains and losses were not significant for all periods presented.
As of December 31, 1996 and 1997, the Company did not hold any marketable
securities.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation.
Depreciation of property and equipment is provided over the estimated useful
lives of the respective assets, estimated to be three years on a straight-line
method.

F-7
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
SOFTWARE DEVELOPMENT COSTS

In accordance with SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE TO BE SOLD, LEASED, OR OTHERWISE MARKETED, development costs related to
the software products are expensed as incurred until the technological
feasibility of the product has been established. Technological feasibility in
the Company's circumstances occurs when a working model is completed. The
Company believes its process for developing software is essentially completed
concurrent with the establishment of technological feasibility, and,
accordingly, no research and development costs have been capitalized to date.

REVENUE RECOGNITION

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2, SOFTWARE REVENUE RECOGNITION (SOP 97-2).
Effective January 1, 1998, the Company adopted SOP 97-2. SOP 97-2 generally
requires revenue earned on software arrangements involving multiple elements
such as software products, upgrades, enhancements, post-contract customer
support, installation and training to be allocated to each element based on the
relative fair values of the elements. The fair value of an element must be based
on evidence which is specific to the vendor. The revenue allocated to software
products, including specified upgrades or enhancements, generally is recognized
upon delivery of the products. The revenue allocated to unspecified upgrades and
updates and post contract customer support generally is recognized as the
services are performed. If evidence of the fair value for all elements of the
arrangement do not exist, all revenue from the arrangement is deferred until
such evidence exists or until all elements are delivered. There was no material
change to the Company's accounting for revenues as a result of the adoption of
SOP 97-2.

INCOME TAXES

The Company uses the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.

F-8
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
CONCENTRATION OF CREDIT RISK

Accounts receivable potentially subject the Company to concentrations of
credit risk. The Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral for accounts
receivable. When required, the Company maintains allowances for credit losses,
and to date such losses have been within management's expectations.

ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of their carrying amount or fair value less cost to
sell.

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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation arrangements using the
intrinsic-value method pursuant to APB Opinion No. 25. As such, compensation
expense is recorded when on the date of grant the fair value of the underlying
common stock exceeds the exercise price for stock options or the purchase price
for issuance or sales of common stock. Pursuant to SFAS No. 123, the Company
discloses the pro forma effects of using the fair value method of accounting for
stock-based compensation arrangements.

ADVERTISING EXPENSE

The cost of advertising is generally expensed as incurred. Such costs are
included in selling and marketing expense and totalled approximately $37,000,
$783,000, $494,000, $225,000 and $266,000 during the period from September 5,
1995 (inception) to December 31, 1995, for the years ended December 31, 1996 and
1997, and for the three-month periods ended March 31, 1997 and 1998,
respectively.

FOREIGN CURRENCY TRANSACTIONS

The functional currency of the Company's UK subsidiary is the US dollar.
Resulting foreign exchange gains and losses are included in operating results
and have not been significant to the Company's consolidated operating results in
any period.

F-9
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
COMPREHENSIVE INCOME

In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME,
which establishes standards for reporting and disclosure of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997 and requires reclassification of financial
statements for earlier periods to be provided for comparative purposes. The
Company has not determined the manner in which it will present the information
required by SFAS No. 130 in its annual financial statements for the year ending
December 31, 1998. The Company's total comprehensive income (loss) for all
periods presented herein would not have differed from those amounts reported as
net loss in the consolidated statements of operations.

PER SHARE INFORMATION

Basic and diluted net loss per share are computed using the weighted average
number of outstanding shares of common stock. Pursuant to SEC Staff Accounting
Bulletin No. 98, common stock and convertible preferred stock issued for nominal
consideration, prior to the anticipated effective date of the IPO, are included
in the calculation of basic and diluted net loss per share as if they were
outstanding for all periods presented. To date, the Company has not had any
issuances or grants for nominal consideration.

Net loss per share for the year ended December 31, 1997 does not include the
effect of approximately 11,150,000 (5,563,000 on an as-if converted basis)
shares of convertible preferred stock outstanding, 1,312,399 stock options with
a weighted average exercise price of $0.22 per share, 15,908 common stock
warrants with a weighted average exercise price of $0.22 per share, or 1,171,546
shares of common stock issued and subject to repurchase by the Company at a
weighted average price of $0.22 per share, because their effects are
anti-dilutive.

Net loss per share for the quarter ended March 31, 1998 does not include the
effect of approximately 12,601,000 (6,220,000 on an as-if converted basis)
shares of convertible preferred stock outstanding, 1,304,029 stock options with
a weighted average exercise price of $0.27 per share, 27,650 common stock
warrants with a weighted average exercise price of $0.22 per share, or 1,017,229
shares of common stock issued and subject to repurchase by the Company at a
weighted average price of $0.22 per share, because their effects are
anti-dilutive.

Unaudited pro forma basic and diluted net loss per share is presented below
to reflect per share data assuming the conversion of all outstanding shares of
convertible preferred stock into common stock as if the conversion had taken
place at the beginning of 1997 or at the date of issuance, if later.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31, 1997 MARCH 31, 1998
------------------- ---------------------
<S> <C> <C>
Pro forma basic and diluted net loss per share....... $ (1.00) $ (0.32)
------ ------
------ ------
Shares used in pro forma per share calculation (in
thousands)......................................... 6,856 8,807
------ ------
------ ------
</TABLE>

F-10
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The following table sets forth the reconciliation of shares used in
calculating basic and diluted, and pro forma basic and diluted net loss per
share (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31, 1997 MARCH 31, 1998
------------------- ---------------------
<S> <C> <C>
Shares used in basic and diluted per share
calculation........................................ 2,799 3,025
Conversion of preferred stock--weighted average (pro
forma)............................................. 4,057 5,782
------ ------
Shares used in pro forma basic and diluted per share
calculation........................................ 6,856 8,807
------ ------
------ ------
</TABLE>

UNAUDITED INTERIM FINANCIAL INFORMATION

The consolidated financial information as of March 31, 1998 and for the
three months ended March 31, 1997 and 1998 is unaudited, but includes all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for fair presentation of the financial position at such
dates and the operations and cash flows for the periods then ended. Operating
results for the three months ended March 31, 1998 are not necessarily indicative
of results that may be expected for the entire year.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for the
way public business enterprises report information about operating segments in
annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. SFAS No. 131 is effective for financial statements for periods
beginning after December 31, 1997. The Company has not yet determined the manner
in which it will present the information required by SFAS No. 131.

(2) PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of December 31, 1996
and 1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Computer equipment and software............................................. $ 817 $ 1,837
Furniture and fixtures...................................................... 55 236
--------- ---------
872 2,073
Accumulated depreciation.................................................... (177) (717)
--------- ---------
Property and equipment, net............................................... $ 695 $ 1,356
--------- ---------
--------- ---------
</TABLE>

F-11
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(3) NOTES PAYABLE

The Company has a revolving credit facility with a bank in the amount of
$1,000,000 which bears interest at the prime rate (8.50% as of December 31,
1997) plus 0.75%, and expires in May 1998. Borrowings are limited to the lesser
of $1,000,000 or 70% of the net amount of eligible accounts receivable and are
secured by the Company's accounts receivable. As of December 31, 1997 and March
31, 1998, borrowings under this credit facility were $655,000 and $655,000,
respectively.

The Company has an equipment line of credit with the same bank that provides
up to $1,000,000, bears interest at the prime rate, and expires in June 2000.
The line of credit is secured by the Company's fixed assets. As of December 31,
1996 and 1997, and March 31, 1998, $682,000, $584,000 and $524,000,
respectively, had been advanced under this agreement with the principal amount
due in 30 monthly installments of $19,467 beginning December 31, 1997.

The Company also has a second equipment line of credit with the same bank
that provides up to $1,200,000, bears interest at the prime rate, and expires in
June 2000. The line of credit is secured by the Company's fixed assets. As of
December 31, 1997 and March 31, 1998, $628,000 and $566,000, respectively, had
been advanced under this agreement with the principal amount due in 30 monthly
installments of $20,933 beginning December 31, 1997.

As of December 31, 1997 and March 31, 1998, the Company was not in
compliance with certain financial covenants on all of the aforementioned credit
facilities. The Company has received a waiver of such non-compliance from the
bank.

The aggregate maturities of long-term debt for each of the years in the
three-year period subsequent to December 31, 1997 are as follows: 1998,
$1,140,000; 1999, $485,000; and 2000, $242,000.

(4) INCOME TAXES

The domestic and foreign components of loss before income taxes are as
follows (in thousands):

<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER
SEPTEMBER 5, 1995 31,
(INCEPTION) TO --------------------
DECEMBER 31, 1995 1996 1997
------------------- --------- ---------
<S> <C> <C> <C>
Domestic............................................. $ (195) $ (4,627) $ (6,244)
Foreign.............................................. -- -- (638)
----- --------- ---------
Loss before income taxes......................... $ (195) $ (4,627) $ (6,882)
----- --------- ---------
----- --------- ---------
</TABLE>

The difference between the amount of income tax benefit recorded and the
amount of income tax benefit calculated using the U.S. federal statutory rate of
34% is due to net operating losses not being benefited.

F-12
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(4) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets as of December 31, 1996 and 1997 are
presented below (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Various accruals and reserves not deductible for tax purposes............ $ 113 $ 229
Property and equipment................................................... 34 134
Capitalized start-up expenditures........................................ 117 89
Net operating loss carryforward.......................................... 1,855 4,446
Research and development credit carryforward............................. 86 265
--------- ---------
Total deferred tax assets............................................ 2,205 5,163
Valuation allowance...................................................... (2,205) (5,163)
--------- ---------
Net deferred tax assets.............................................. $ -- $ --
--------- ---------
--------- ---------
</TABLE>

As of December 31, 1997, NetGravity Europe Limited had net operating loss
carryforwards in the UK of approximately $600,000, which can be used to offset
NetGravity Europe Limited's future income. The UK net operating loss can be
carried forward indefinitely.

As of December 31, 1997, the Company has a net operating loss carryforward
for federal and state income tax purposes of approximately $9,800,000. In
addition, the Company had federal and state research and development credit
carryforwards of approximately $145,000 and $120,000, respectively. The
Company's federal net operating loss and research and development credit
carryforwards will expire in the years 2010 through 2012, if not utilized. The
Company's state net operating loss carryforwards will expire in the year 2003.
The state research and development credit can be carried forward indefinitely.

Federal and state tax laws impose substantial restrictions on the
utilization of net operating loss and tax credit carryforwards in the event of
an "ownership change" as defined in Section 382 of the Internal Revenue Code.
The Company has not yet determined whether an ownership change has occurred.

(5) STOCKHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

As of December 31, 1997, the Company had authorized 8,809,156, 8,615,938 and
4,874,482 shares of Series A, B and C convertible preferred stock, respectively.
On March 13, 1998, the Company increased the authorized shares of Series C
convertible preferred stock to 9,115,100.

F-13
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(5) STOCKHOLDERS' EQUITY (CONTINUED)
Convertible preferred stock outstanding consisted of the following numbers
of shares (in thousands):

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------
PRO FORMA NUMBER
DECEMBER 31, OF COMMON SHARES
-------------------- ISSUABLE UPON
SERIES 1996 1997 ACTUAL CONVERSION
- ------------------------------------------------ --------- --------- --------- -----------------
<S> <C> <C> <C> <C>
A............................................... 4,405 4,405 4,405 2,495
B............................................... -- 4,308 4,308 1,958
C............................................... -- 2,437 3,888 1,767
--------- --------- --------- -----
4,405 11,150 12,601 6,220
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>

The rights, preferences and privileges of the holders of preferred stock are
as follows:

- The holders of Series A, B and C convertible preferred stock are entitled
to non-cumulative dividends, if and when declared by the Board of
Directors, of $0.08, $0.08 and $0.18 per share, respectively.

- Shares of convertible preferred stock are convertible to common stock at
any time at the conversion prices of $1.78, $2.20 and $4.93 per share, for
Series A, B and C convertible preferred stock, respectively (as adjusted
for the reverse stock split) (See Note 8). The preferred stock
automatically converts to common stock upon the closing of an underwritten
public offering of the Company's common stock at a per share price of not
less than $8.78 per share and gross proceeds of not less than $10,000,000.

- The holders of convertible preferred stock are protected by certain
anti-dilutive provisions.

- Shares of Series A, B and C convertible preferred stock have a liquidation
preference of $1.01, $1.00 and $2.24 per share, respectively, plus any
declared and unpaid dividends.

- The convertible preferred stock votes equally with shares of common stock
on an "as if converted" basis.

No dividends have been declared or paid on the convertible preferred stock
or common stock since inception of the Company.

COMMON STOCK

In connection with the Board of Directors' revaluation of the Company's fair
value in March 1997, the Company repurchased and retired approximately 446,000
shares of common stock previously held by two of the Company's founders, at an
average purchase price of $0.22 per share. Additionally, the Company adjusted
the conversion price of Series A convertible preferred stock to $1.78 per share
of common stock; previously the conversion price was $2.22 per share of common
stock. The fair value of the additional shares of common stock that would be
issued to the holders of Series A convertible preferred stock upon conversion,
due to the reduction in the conversion price, was not significant.

Common stock issued to certain individuals is subject to repurchase at the
option of the Company, at the original issuance price, in the event an
individual ceases to be employed by the Company. Such shares are subject to
repurchase on a pro rata basis over a four-year period from the date of
issuance. As of December 31, 1996 and 1997

F-14
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(5) STOCKHOLDERS' EQUITY (CONTINUED)
and March 31, 1998, there were approximately 1,688,000, 628,000 and 524,000
shares, respectively, subject to repurchase, at a weighted average price of
$0.07 per share. During 1996 and 1997, and the three months ended March 31,
1998, approximately 439,000, 126,000 and 4,000 shares, respectively, were
repurchased.

As of December 31, 1997, a total of 2,727,570 shares of common stock were
authorized for issuance under the 1995 Stock Option Plan (the Plan). Options may
be granted at an exercise price not less than 100% of the fair market value, as
determined by the Board of Directors, for incentive stock options and 85% of
fair market value for nonqualified stock options at the grant date. All options
are granted at the discretion of the Company's Board of Directors and have a
term not greater than 10 years from the date of grant. Options issued are
generally immediately exercisable and generally vest 25% on the first
anniversary date and 1/48th of the shares each month thereafter, so that all the
shares are vested 48 months after the vesting commencement date.

As of December 31, 1996 and 1997 and March 31, 1998, approximately 155,000,
569,000, and 742,000, shares, respectively, with weighted-average exercise
prices of $0.22 per share, were fully vested.

A summary of the status of the Company's options under the Plan is as
follows:

<TABLE>
<CAPTION>
PERIOD FROM SEPTEMBER
5, 1995 (INCEPTION) TO YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
DECEMBER 31, 1995 1996 1997 MARCH 31, 1998
----------------------- ----------------------- ----------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period..................... -- $ -- 5,000 $ 0.07 456,509 $ 0.22 1,312,399 $ 0.22
Granted at market value...... 547,426 0.07 833,418 0.22 475,193 0.22 17,045 6.60
Granted at less than market
value...................... -- -- -- -- 845,092 0.22 77,785 0.51
Exercised.................... (542,426) 0.07 (309,418) 0.22 (301,009) 0.22 (56,011) 0.22
Canceled..................... -- -- (72,491) 0.22 (163,386) 0.22 (47,189) 0.22
---------- ---------- ---------- ----------
Options at end of period..... 5,000 0.07 456,509 0.22 1,312,399 0.22 1,304,029 0.27
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Options vested at
period-end................. -- 154,540 569,086 741,953
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted-average fair value
of options granted during
the period with exercise
prices equal to market
value at date of grant..... $ 0.02 $ 0.07 $ 0.07 $ 1.78
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted-average fair value
of options granted during
the period with exercise
prices less than market
value at date of grant..... -- -- $ 2.05 $ 4.55
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

F-15
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(5) STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes information about stock options outstanding
as of December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- -----------------------------------------------
WEIGHTED-AVERAGE
REMAINING
CONTRACTUAL LIFE OPTIONS
EXERCISE PRICE NUMBER (YEARS) VESTED
- -------------- ---------- ------------------- -------------
<S> <C> <C> <C>
$0.22 1,311,717 9.36 569,086
$0.55 682 9.92 --
- -------------- ---------- -------------
$0.22 - $0.55 1,312,399 569,086
- -------------- ---------- -------------
- -------------- ---------- -------------
</TABLE>

The Company uses the intrinsic value-based method to account for all its
employee stock-based compensation arrangements. Accordingly, no compensation
cost has been recognized for its stock options in the accompanying consolidated
financial statements because the fair value of the underlying common stock
equals or exceeds the exercise price of the stock options at the date of grant,
except with respect to certain options granted in 1997 and during the first
three months of 1998. The Company has recorded deferred stock compensation
expense of $1,784,000 and $390,000 for the difference at the grant date between
the exercise price and the fair value of the common stock underlying the options
granted in 1997 and the first three months of 1998, respectively. Amortization
of deferred compensation of approximately $115,000 and $246,000 was recognized
in 1997 and the first three months of 1998, respectively.

Had compensation cost for the Company's stock-based compensation plans been
determined consistent with the fair value approach set forth in SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's net losses for the period
from September 5, 1995 (inception) to December 31, 1995 and the years ended
December 31, 1996 and 1997, would have been as follows (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER
SEPTEMBER 5, 1995 31,
(INCEPTION) TO --------------------
DECEMBER 31, 1995 1996 1997
------------------- --------- ---------
<S> <C> <C> <C>
Net loss--as reported........................................... $ (195) $ (4,627) $ (6,882)
Net loss--pro forma............................................. $ (195) $ (4,635) $ (6,883)
Basic and diluted net loss per share--as reported............... $ (0.19) $ (2.19) $ (2.46)
Basic and diluted net loss per share--pro forma................. $ (0.19) $ (2.20) $ (2.46)
</TABLE>

The fair value of options granted during the period from September 5, 1995
(inception) to December 31, 1995 and the years ended December 31, 1996 and 1997
is estimated on the date of grant using the minimum value method with the
following weighted-average assumptions: no dividend yield, risk-free interest
rates of 5.6%, 6.0% and 6.1%, respectively, and expected lives of 5 years.

WARRANTS

In March 1997, in connection with a lease termination agreement, the Company
issued the building landlord a warrant to purchase 6,818 shares of common stock
at a purchase price of $0.22 per share. The warrant expires upon the earlier of
(i) five years from the date of issuance or (ii) the closing of an IPO by the
Company. The value of the warrant was not significant at the date of grant.

F-16
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(5) STOCKHOLDERS' EQUITY (CONTINUED)
In October 1997, in connection with certain consulting activities, the
Company committed to deliver a warrant to purchase 9,090 shares of common stock
at a purchase price of $0.22 per share. The value of the warrant was not
significant at the date of grant.

In January 1998, in connection with a non-employee compensation matter, the
Company committed to deliver a warrant to purchase 11,742 shares of common stock
at a purchase price of $0.22 per share. The value of the warrant was not
significant at the date of grant.

(6) COMMITMENTS

The Company leases its facilities under various operating lease agreements
that expire on various dates through May 1998. As of December 31, 1997, the
remaining future minimum payments for these facilities total $147,000. Total
rent expense, including month to month arrangements, was $13,000, $149,000 and
$313,000 for the period from September 5, 1995 (inception) to December 31, 1995
and for the years ended December 31, 1996 and 1997, respectively.

(7) GEOGRAPHIC AND SEGMENT INFORMATION

The Company licenses and markets its products primarily from its operations
in the United States, and operates in a single industry segment. Information
regarding operations in different geographic regions is as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Export sales to customers located in:
Europe................................................................. $ -- $ 250
Asia................................................................... -- 237
--------- ---------
Total................................................................ $ -- $ 487
--------- ---------
--------- ---------
Loss from operations:
United States.......................................................... $ (4,681) $ (6,072)
Europe................................................................. -- (800)
--------- ---------
Total................................................................ $ (4,681) $ (6,872)
--------- ---------
--------- ---------
Identifiable assets:
United States.......................................................... $ 3,159 $ 9,139
Europe................................................................. -- 748
--------- ---------
Total................................................................ $ 3,159 $ 9,887
--------- ---------
--------- ---------
</TABLE>

For the period from September 5, 1995 (inception) to December 31, 1995,
there were no significant export sales or operations in Europe or Asia. The
Company began operations in Japan in April 1998.

No single customer accounted for greater than 10% of revenues in any period
reported.

F-17
<PAGE>
NETGRAVITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995, 1996 AND 1997

(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS

ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

(8) SUBSEQUENT EVENTS

On April 23, 1998, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission (SEC)
permitting the Company to sell shares of the Company's common stock in
connection with a proposed initial public offering (IPO). If the offering is
consummated under the terms presently anticipated, all currently outstanding
shares of preferred stock will automatically convert into approximately
6,220,000 shares of common stock upon the closing of the proposed IPO. The
conversion of the preferred stock has been reflected in the pro forma balance
sheet as of March 31, 1998. Effective upon the closing of the IPO, the Company
will be authorized to issue 5,000,000 shares of undesignated preferred stock.

The Company's Board of Directors approved a 1-for-2.2 reverse split of the
Company's common stock (approved by the stockholders effective as of May 8,
1998) to be effected at or prior to the effectiveness of the IPO. All common
share amounts in the accompanying consolidated financial statements have been
adjusted retroactively.

The Company's Board of Directors adopted the 1998 Stock Plan (the "1998
Plan") on April 23, 1998 (approved by the stockholders effective as of May 8,
1998). The 1998 Plan provides for the grant of incentive and nonstatutory stock
options and stock purchase rights to employees, directors and consultants. A
total of 2,000,000 shares of common stock, plus annual increases equal to the
lesser of (i) 1,000,000 shares, (ii) 5% of the outstanding shares, or (iii) a
lesser amount determined by the Board of Directors, are proposed to be reserved
for issuance pursuant to the 1998 Plan.

The Company's Board of Directors adopted the 1998 Employee Stock Purchase
Plan (the "1998 Purchase Plan") on April 23, 1998 (approved by the stockholders
effective as of May 8, 1998). A total of 200,000 shares of common stock are
proposed to be reserved for issuance under the 1998 Purchase Plan, plus annual
increases equal to the lesser of (i) 750,000 shares, (ii) 4% of the outstanding
shares on such date, or (iii) a lesser amount determined by the Board of
Directors.

The Company's Board of Directors also adopted the 1998 Director Option Plan
(the "Director Plan") on April 23, 1998 (approved by the stockholders effective
as of May 8, 1998). The Director Plan provides for the grant of nonstatutory
stock options to non-employee directors of the Company or affiliates thereof. A
total of 200,000 shares of common stock have been proposed to be reserved for
issuance under the Director Plan plus annual increases to maintain 200,000
shares of common stock reserved for additional option grants.

F-18
<PAGE>
[LOGO]
<PAGE>
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, commissions and certain accountable expenses, payable by
the Company in connection with the sale of Common Stock being registered. All
amounts are estimates except the SEC registration fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 11,196
NASD Filing Fee................................................. 4,295
Nasdaq National Market Listing Fee.............................. 27,625
Printing Fees and Expenses...................................... 200,000
Legal Fees and Expenses......................................... 400,000
Accounting Fees and Expenses.................................... 300,000
Blue Sky Fees and Expenses...................................... 5,000
Transfer Agent and Registrar Fees............................... 15,000
Miscellaneous................................................... 336,884
---------
Total....................................................... $1,300,000
---------
---------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.

Article Nine of the Registrant's Amended and Restated Certificate of
Incorporation provides for the indemnification of directors, officers or
employee benefit plan fiduciaries, to the fullest extent not prohibited by
Delaware law.

Article VI of the Registrant's Bylaws provides for the indemnification of
directors and officers if such person acted in good faith and in a manner
reasonably believed to be in and not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, the
indemnified party had no reasonable cause to believe his conduct was unlawful.
Article VI also permits the Company to advance expenses incurred by indemnified
directors or officers in connection with the defense of any action or proceeding
arising out of such directors' or officers' status or service as directors or
officers of the Company upon an undertaking by such directors or officers to
repay such advances if it is ultimately determined that such directors or
officers are not entitled to such indemnification.

The Registrant has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Registrant's
Amended and Restated Bylaws. These agreements, among other things, indemnify the
Registrant's directors and officers for certain expenses (including attorneys'
fees and associated legal expenses), judgments, fines and amounts paid in
settlement amounts if such settlement is approved in advance by the Registrant,
which approval shall not be unreasonably withheld, actually and reasonably
incurred by any such person in any action, suit, proceeding or alternative
dispute resolution mechanism arising out of such person's services as a director
or officer of the Registrant, any subsidiary of the Registrant or any other
company or enterprise to which the person provides services at the request of
the Registrant.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

1. In September 1995 the Registrant issued and sold an aggregate of
2,454,544 shares of Common Stock to two founders of the Registrant at a purchase
price of approximately $0.06 per share for an aggregate purchase price of
$150,000. In October 1995 the Registrant issued 548,590 shares of Common Stock
to another founder in consideration of such founder accepting employment with
the Registrant.

2. In September 1995 the Registrant issued and sold an aggregate of 818,181
shares of Common Stock at a purchase price of approximately $0.06 per share for
an aggregate purchase price of $49,860 and issued promissory notes for an
aggregate amount of $450,000.

3. Between January 1996 and April 1996 the Registrant issued and sold an
aggregate of 4,404,578 shares of Series A Preferred Stock convertible into
2,494,147 shares of Common Stock for consideration consisting of cash in the
aggregate amount of $3,556,348.37 and the cancellation of Promissory Notes
referred to above.

4. In March 1997 the Registrant issued and sold an aggregate of 4,307,969
shares of Series B Preferred Stock convertible into 1,958,158 shares of Common
Stock at a purchase price of $0.9982 per share for an aggregate purchase price
of $4,299,999.24.

5. In October 1997 the Registrant issued 11,362 shares of Common Stock to
consultants in consideration for services rendered.

6. In November 1997 and March 1998 the Registrant issued and sold an
aggregate of 3,887,978 shares of Series C Preferred Stock convertible into
1,767,261 shares of Common Stock for aggregate net proceeds to the Registrant of
$8,683,000, or approximately $2.24 per share.

7. In November 1997 the Registrant issued 15,909 shares of Common Stock to
a former employee in connection with the termination of such employee's
employment with the Registrant.

8. From September 1995 through April 30, 1998 the Registrant granted
options under the 1995 Stock Plan to purchase an aggregate of 3,219,772 shares
of the Registrant's Common Stock at exercise prices ranging from $0.06 to $6.60
to 145 employees, directors and consultants.

9. From September 1995 through April 30, 1998 the Registrant issued an
aggregate of 1,205,861 shares of Common Stock pursuant to option exercises at
exercise prices ranging from $0.0277 to $0.22 to 62 employees, directors and
consultants.

10. From September 1995 through April 30, 1998, the Registrant issued
warrants exercisable for an aggregate of 27,650 shares of Common Stock at an
exercise price of $0.22 per share.

The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act as transactions by an issuer not involving a public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under such Rule 701. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following exhibits are attached hereto and incorporated herein by
reference.

<TABLE>
<C> <S>
+1.1 Form of Underwriting Agreement.
+3.1 Amended and Restated Certificate of Incorporation of the Registrant.
+3.2 Form of Certificate of Amendment to Amended and Restated Certificate of
Incorporation.
+3.3 Amended and Restated Bylaws of the Registrant.
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <S>
*4.1 Specimen certificate representing shares of Common Stock of the
Registrant.
+4.2 Second Amended and Restated Registration and Information Rights Agreement.
*5.1 Form of Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
+10.1 Form of Indemnification Agreement for Directors and Officers of the
Registrant.
10.2 1995 Stock Option Plan.
+10.3 1998 Stock Option Plan, together with form of Stock Option Agreement and
form of Stock Issuance Agreement.
+10.4 1998 Employee Stock Purchase Plan.
+10.5 1998 Director Option Plan.
+10.6 Lease dated September 29, 1995 for the Registrant's headquarters in San
Mateo, CA.
+10.7 Lease dated March 2, 1998 for the Registrant's offices in New York, NY.
+10.8 Employment and Severance Agreement dated March 31, 1998 by and between the
Registrant and Stephen E. Recht.
10.9 Professional Services Agreement dated March 27, 1997 by and between the
Registrant and Protege Software (Holdings) Limited as amended by
Amendment dated May 13, 1998.
+10.10 Common Stock Repurchase Agreement and Clarification of Founder's Stock
Purchase Agreement dated March 12, 1997 by and between the Registrant
and John W. Danner.
+10.11 Common Stock Repurchase Agreement and Clarification of Founder's Stock
Purchase Agreement dated March 12, 1997 by and between the Registrant
and Thomas A. Shields.
+10.12 Employment Agreement dated April 22, 1998 by and between the Registrant
and Susan Atherton.
10.13 401(k) Plan.
10.14 Employment Agreement dated May 12, 1998 by and between the Registrant and
Jitendra Valera.
10.15 Consultant and Representative Agreement dated June 1, 1998 by and between
the Registrant and Asia Pacific Ventures Co.
+11.1 Statement Regarding Computation of Earnings Per Share (contained in Note 1
of the Notes to Financial Statements).
+21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
*23.2 Consent of Counsel (included in Exhibit 5.1).
+24.1 Power of Attorney.
+27.1 Financial Data Schedule (Fiscal 1997).
+27.2 Financial Data Schedule (First Quarter 1998).
</TABLE>

- ---------

* To be filed by amendment.

+ Previously filed.

(b) Financial Statement Schedules

Schedules not listed above have been omitted because the information
required to be set forth therein is not, applicable or is shown in the financial
statements or notes thereto.

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.

II-3
<PAGE>
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 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 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:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereto which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement; and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.

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

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Mateo, State of California, on the 14th day of May, 1998.

<TABLE>
<S> <C> <C>
NETGRAVITY, INC.

By: /s/ JOHN W. DANNER
-----------------------------------------
John W. Danner
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
</TABLE>

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED:

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

Chairman of the Board and
/s/ JOHN W. DANNER Chief Executive Officer
- ------------------------------ (principal executive May 14, 1998
John W. Danner officer)

Chief Financial Officer
/s/ STEPHEN E. RECHT and Secretary (principal
- ------------------------------ financial and accounting May 14, 1998
Stephen E. Recht officer)

JOHN D. D. KOHLER*
- ------------------------------ Director May 14, 1998
John D. D. Kohler

JONATHAN D. LAZARUS*
- ------------------------------ Director May 14, 1998
Jonathan D. Lazarus

ALEXANDER R. SLUSKY*
- ------------------------------ Director May 14, 1998
Alexander R. Slusky

*By: /s/ STEPHEN E.
RECHT
--------------------------
Stephen E.
Recht
ATTORNEY-IN-FACT

II-5
<PAGE>

INDEPENDENT AUDITOR'S REPORT ON SCHEDULE

The Board of Directors and Stockholders
NetGravity, Inc.:

Under date of April 17, 1998, except as to Note 8, which is as of May 8, 1998,
we reported on the consolidated balance sheets of NetGravity, Inc. and
subsidiary as of December 31, 1997, and 1996, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
period from September 5, 1995 (inception) through December 31, 1995 and for each
of the years in the two-year period ended December 31, 1997, as contained in the
Registration Statement. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

KPMG PEAT MARWICK LLP

San Francisco, California
April 17, 1998

S-1
<PAGE>
SCHEDULE II

NETGRAVITY, INC.
VALUATION AND QUALIFYING ACCOUNTS--
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT BEGINNING CHARGED TO BALANCE AT END
OF PERIOD EXPENSE DEDUCTIONS OF PERIOD
--------------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Year ended December 31, 1995 $ -- $ -- $ -- $ --
Year ended December 31, 1996 -- 197 28 169
Year ended December 31, 1997 169 67 13 223
</TABLE>

S-2
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<C> <S>
+1.1 Form of Underwriting Agreement.
+3.1 Amended and Restated Certificate of Incorporation of the Registrant.
+3.2 Form of Certificate of Amendment to Amended and Restated Certificate of
Incorporation.
+3.3 Amended and Restated Bylaws of the Registrant.
*4.1 Specimen certificate representing shares of Common Stock of the
Registrant.
+4.2 Second Amended and Restated Registration and Information Rights Agreement.
*5.1 Form of Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
+10.1 Form of Indemnification Agreement for Directors and Officers of the
Registrant.
10.2 1995 Stock Option Plan.
+10.3 1998 Stock Option Plan, together with form of Stock Option Agreement and
form of Stock Issuance Agreement.
+10.4 1998 Employee Stock Purchase Plan.
+10.5 1998 Director Option Plan.
+10.6 Lease dated September 29, 1995 for the Registrant's headquarters in San
Mateo, CA.
+10.7 Lease dated March 2, 1998 for the Registrant's offices in New York, NY.
+10.8 Employment and Severance Agreement dated March 31, 1998 by and between the
Registrant and Stephen E. Recht.
10.9 Professional Services Agreement dated March 27, 1997 by and between the
Registrant and Protege Software (Holdings) Limited as amended by
Amendment dated May 13, 1998.
+10.10 Common Stock Repurchase Agreement and Clarification of Founder's Stock
Purchase Agreement dated March 12, 1997 by and between the Registrant
and John W. Danner.
+10.11 Common Stock Repurchase Agreement and Clarification of Founder's Stock
Purchase Agreement dated March 12, 1997 by and between the Registrant
and Thomas A. Shields.
+10.12 Employment Agreement dated April 22, 1998 by and between the Registrant
and Susan Atherton.
10.13 401(k) Plan.
10.14 Employment Agreement dated May 12, 1998 by and between the Registrant and
Jitendra Valera.
10.15 Consultant and Representative Agreement dated June 1, 1998 by and between
the Registrant and Asia Pacific Ventures Co.
+11.1 Statement Regarding Computation of Earnings Per Share (contained in Note 1
of the Notes to Financial Statements).
+21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
*23.2 Consent of Counsel (included in Exhibit 5.1).
+24.1 Power of Attorney.
+27.1 Financial Data Schedule (Fiscal 1997).
+27.2 Financial Data Schedule (First Quarter 1998).
</TABLE>

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* To be filed by amendment.

+ Previously filed.

<PAGE>
Exhibit 10.2

NETGRAVITY, INC.

1995 STOCK OPTION PLAN
(as amended through April 23, 1998)

1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are
to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive
stock options (as defined under Section 422 of the Code) or nonstatutory
stock options, as determined by the Administrator at the time of grant of an
option and subject to the applicable provisions of Section 422 of the Code,
as amended, and the regulations promulgated thereunder.

2. DEFINITIONS. As used herein, the following definitions shall apply:

(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

(b) "BOARD" means the Board of Directors of the Company.

(d) "COMMITTEE" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.

(e) "COMMON STOCK" means the Common Stock of the Company.

(f) "COMPANY" means NetGravity, Inc., a Delaware corporation.

(g) "CONSULTANT" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company
registers any class of any equity security pursuant to the Exchange Act, the
term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the
Company.

(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that
the employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of (i)
any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary,
or any successor. A leave of absence approved by the Company shall include
sick leave, military leave, or any other personal leave approved by an
authorized representative of the

<PAGE>

Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract, including Company policies. If reemployment upon
expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option.

(i) "EMPLOYEE" means any person, including Officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.

(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(k) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Administrator deems reliable;

(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination, or;

(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.

(m) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.

(n) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

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<PAGE>

(o) "OPTION" means a stock option granted pursuant to the Plan.

(p) "OPTIONED STOCK" means the Common Stock subject to an Option.

(q) "OPTIONEE" means an Employee or Consultant who receives an
Option.

(r) "PARENT" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.

(s) "PLAN" means this 1995 Stock Option Plan.

(t) "SECTION 16(B)" means Section 16(b) of the Securities Exchange
Act of 1934, as amended.

(u) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.

(v) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 6,600,655 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); PROVIDED,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.

4. ADMINISTRATION OF THE PLAN.

(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.

(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE COMPANY
BECOMES SUBJECT TO THE EXCHANGE ACT.

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<PAGE>

(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS.
With respect to grants of Options to Employees who are also Officers or
directors of the Company, the Plan shall be administered by (A) the Board if the
Board may administer the Plan in compliance with the rules under Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3")
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made, or (B) a Committee designated by the Board to administer the
Plan, which Committee shall be constituted to comply with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made.

(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director Officers and Employees who are neither directors nor
Officers.

(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options to Employees or Consultants who
are neither directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of incentive stock option plans, if
any, of California and Delaware corporate and securities laws, of the Code, and
of any applicable stock exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.

(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:

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<PAGE>

(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan;

(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;

(iii) to determine whether and to what extent Options are
granted hereunder;

(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

(v) to approve forms of agreement for use under the Plan;

(vi) to determine the terms and conditions of any award
granted hereunder;

(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;

(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and

(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.

(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

5. ELIGIBILITY.

(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.

(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options

-5-
<PAGE>

shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.

(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Employees:

(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 1,800,000 Shares.

(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 1,800,000 Shares
which shall not count against the limit set forth in subsection (i) above.

(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 11.

(iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the limit
set forth in subsection (i) above. For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.

7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option

-6-
<PAGE>

shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement.

8. OPTION EXERCISE PRICE AND CONSIDERATION.

(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.

(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option

(A) granted to a person who, at the time of the grant
of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.

(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.

(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to

-7-
<PAGE>

accept, the Administrator shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company.

9. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan, but in no case at a rate of less than 20% per year over five (5)
years from the date the Option is granted.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.

Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive
Stock Option shall automatically convert to a Nonstatutory Stock Option on
the date three (3) months and one day from the date of such change of status)
or from Consultant to Employee), such Optionee may, but only within such
period of time as is determined by the Administrator, of at least thirty (30)
days, with such determination in the case of an Incentive Stock Option not
exceeding three (3) months after the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth
in the Option Agreement), exercise his or her Option to the extent that
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the

-8-
<PAGE>

date of such termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall
terminate.

(c) DISABILITY OF OPTIONEE. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise
it at the date of such termination; provided, however, that if such
disability is not a "disability" as such term is defined in Section 22(e)(3)
of the Code, in the case of an Incentive Stock Option such Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the day
three months and one day following such termination. To the extent that
Optionee is not entitled to exercise the Option at the date of termination,
or if Optionee does not exercise such Option to the extent so entitled within
the time specified herein, the Option shall terminate, and the Shares covered
by such Option shall revert to the Plan.

(d) DEATH OF OPTIONEE. In the event of the death of an Optionee,
the Option may be exercised at any time within twelve (12) months following
the date of death (but in no event later than the expiration of the term of
such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert
to the Plan. If, after death, the Optionee's estate or a person who acquired
the right to exercise the Option by bequest or inheritance does not exercise
the Option within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.

(e) RULE 16B-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

(f) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.

10. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

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<PAGE>

11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.

(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option will terminate
immediately prior to the consummation of such proposed action.

(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the
assets of the Company:

(i) OPTIONS. Each Option shall be assumed or an equivalent
option substituted by the successor corporation (including as a "successor"
any purchaser of substantially all of the assets of the Company) or a parent
or subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee
shall have the right to exercise the Option as to all of the Optioned Stock,
including Shares as to which it would not otherwise be exercisable. If an
Option is exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that
the Option shall be fully exercisable for a period of fifteen (15) days from
the date of such notice, and the Option shall terminate upon the expiration
of such period. For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger or sale of assets, the option
confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received
in the merger or sale of assets by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the

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<PAGE>

outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation
or its Parent equal in fair market value to the per share consideration
received by holders of Common Stock in the merger or sale of assets.

(ii) SHARES SUBJECT TO REPURCHASE OPTION. Any Shares
subject to a repurchase option of the Company shall be exchanged for the
consideration (whether stock, cash, or other securities or property) received
in the merger or asset sale by the holders of Common Stock for each Share
held on the effective date of the transaction, as described in the preceding
paragraph. If in such exchange the Optionee receives shares of stock of the
successor corporation or a parent or subsidiary of such successor
corporation, and if the successor corporation has agreed to assume or
substitute for Options as provided in the preceding paragraph, such exchanged
shares shall continue to be subject to a repurchase option as provided in the
Optionee's restricted stock purchase agreement. If, as provided in the
preceding paragraph, the Optionee shall have the right to exercise an Option
as to all of the Optioned Stock covered thereby, all Shares that are subject
to a repurchase option of the Company shall be released from such repurchase
option and shall be fully vested.

12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by
the Board. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.

13. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent.
In addition, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act or with Section 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.

(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company.

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<PAGE>

14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned relevant provisions of law.

15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.

The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

16. AGREEMENTS. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.

17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such stockholder approval shall be
obtained in the degree and manner required under applicable state and federal
law and the rules of any stock exchange upon which the Common Stock is listed.

18. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide
to each Optionee, not less frequently than annually, copies of annual
financial statements. The Company shall also provide such statements to each
individual who acquires Shares pursuant to the Plan while such individual
owns such Shares. The Company shall not be required to provide such
statements to key employees whose duties in connection with the Company
assure their access to equivalent information.

-12-

<PAGE>

NETGRAVITY, INC.

1995 STOCK OPTION PLAN
NOTICE OF GRANT -- EARLY EXERCISE

Unless otherwise defined herein, the terms defined in the Company's 1995
Stock Option Plan (the "Plan") shall have the same defined meanings in this
Stock Option Agreement.

Optionee
------------------------
Address
------------------------

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

You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Stock Option
Agreement, as follows:

Grant Number
----------------------------------
Date of Grant
----------------------------------
Vesting Commencement Date
----------------------------------
Exercise Price per Share
----------------------------------
Total Number of Shares Granted
----------------------------------
Total Exercise Price
----------------------------------
Type of Option: Incentive Stock Option
----
Nonstatutory Stock Option
----

Term/Expiration Date:
----------------------------------

EXERCISE AND VESTING SCHEDULE:

This Option is exercisable immediately, in whole or in part, conditioned
upon Optionee entering into a Restricted Stock Purchase Agreement with
respect to any unvested Option Shares. The Shares subject to this Option
shall vest and/or be released from the Company's repurchase option, as set
forth in the Restricted Stock Purchase Agreement, according to the following
schedule:

25% of the Shares subject to the Option shall vest one year after the
Vesting Commencement Date, and 1/48th of the Shares subject to the Option
shall vest each month thereafter, so that all of the Shares shall be vested
48 months after the Vesting Commencement Date.

TERMINATION PERIOD:

This Option may be exercised, to the extent vested, for three months
after termination of Optionee's employment or consulting relationship, or
such longer period as may be applicable upon death or disability of Optionee
as provided in the Plan, but in no event later than the Term/Expiration Date
as provided above.

<PAGE>

NETGRAVITY, INC.

1995 STOCK OPTION PLAN
STOCK OPTION AGREEMENT -- EARLY EXERCISE

1. GRANT OF OPTION. NetGravity, Inc. (fomerly Netvertiser, Inc.), a
Delaware corporation (the "Company"), hereby grants to the Optionee named in
the Notice of Grant (the "Optionee"), an option (the "Option") to purchase
the total number of shares of Common Stock (the "Shares") set forth in the
Notice of Grant, at the exercise price per share set forth in the Notice of
Grant (the "Exercise Price") subject to the terms, definitions and provisions
of the 1995 Stock Option Plan (the "Plan") adopted by the Company, which is
incorporated herein by reference.

If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an ISO as defined in Section
422 of the Code. However, if this Option is intended to be an ISO, to the
extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be
treated as a Nonstatutory Stock Option ("NSO").

2. EXERCISE OF OPTION. This Option shall be exercisable during its
term in accordance with the provisions of Section 9 of the Plan as follows:

(a) RIGHT TO EXERCISE.

(i) Subject to subsections 2(a)(ii) through 2(a)(v) below,
this Option shall be exercisable cumulatively according to the vesting
schedule set out in the Notice of Grant. Alternatively, at the election of
the Optionee, this option may be exercised in whole or in part at any time as
to Shares which have not yet vested. For purposes of this Stock Option
Agreement, Shares subject to Option shall vest based on continued employment
of Optionee with the Company. Vested Shares shall not be subject to the
Company's repurchase right (as set forth in the Restricted Stock Purchase
Agreement, attached hereto as Exhibit C-1).

(ii) As a condition to exercising this Option for unvested
Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.

(iii) This Option may not be exercised for a fraction of a
Share.

(iv) In the event of Optionee's death, disability or other
termination of the employment or consulting relationship, the exercisability
of the Option is governed by Sections 6, 7 and 8 below, subject to the
limitation contained in subsection 2(a)(v).

(v) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth in the Notice of Grant.

<PAGE>

(b) METHOD OF EXERCISE. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements with
respect to such shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan, including, without limitation, a
right of first refusal in favor of the Company or its assigns with respect to
such shares of Common Stock. Such written notice shall be signed by the
Optionee and, together with an executed copy of the Restricted Stock Purchase
Agreement, if applicable, shall be delivered in person or by certified mail
to the Secretary of the Company. The written notice and Restricted Stock
Purchase Agreement shall be accompanied by payment of the Exercise Price.
This Option shall be deemed to be exercised upon receipt by the Company of
such written notice and Restricted Stock Purchase Agreement accompanied by
the Exercise Price.

No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.

3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her
Investment Representation Statement in the form attached hereto as Exhibit B,
and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.

4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any
of the following, or a combination thereof, at the election of the Optionee:

(a) cash; or

(b) check; or

(c) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised; or

(d) to the extent permitted by the Administrator, delivery of a
properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the Exercise Price.

-2-

<PAGE>

5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the stockholders of the Company,
or if the issuance of such Shares upon such exercise or the method of payment
of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including
any rule under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G") as promulgated by the Federal Reserve Board. As a condition
to the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any
applicable law or regulation.

6. TERMINATION OF RELATIONSHIP. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates, Optionee may, to the extent
the Option was vested at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the
Notice of Grant. To the extent that Optionee was not vested in this Option
at the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.

7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section
6 above, in the event of termination of an Optionee's consulting relationship
or Continuous Status as an Employee as a result of his or her disability,
Optionee may, but only within twelve (12) months from the date of such
termination (and in no event later than the expiration date of the term of
such Option as set forth in the Stock Option Agreement), exercise the Option
to the extent the Option was vested at the date of such termination;
provided, however, that if such disability is not a "disability" as such term
is defined in Section 22(e)(3) of the Code, in the case of an ISO such ISO
shall cease to be treated as an ISO and shall be treated for tax purposes as
an NSO on the ninety-first (91st) day following such termination. To the
extent that Optionee is not vested in the Option at the date of termination,
or if Optionee does not exercise such Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.

8. DEATH OF OPTIONEE. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 10 below), by
Optionee's estate or by a person who acquires the right to exercise the
Option by bequest or inheritance, but only to the extent the Option was
vested at the date of death. To the extent that Optionee is not vested in
the Option at the date of death, or if the Option is not exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

-3-

<PAGE>

10. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set
out in Section 7 of the Plan regarding Options designated as ISOs and Options
granted to more than ten percent (10%) stockholders shall apply to this
Option.

11. TAX CONSEQUENCES. Set forth below is a brief summary as of the
date of this Option of some of the federal and state tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.

(a) EXERCISE OF ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability or state income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal
tax purposes and may subject the Optionee to the alternative minimum tax in
the year of exercise.

(b) EXERCISE OF ISO FOLLOWING DISABILITY. If the Optionee's
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within 90 days of such termination for the ISO
to be qualified as an ISO.

(c) EXERCISE OF NSO. There may be a regular federal income tax
liability and state income tax liability upon the exercise of an NSO. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation
income at the time of exercise. If the Optionee is subject to Section 16 of
the Securities Act of 1934, as amended, the date of income recognition may be
deferred for up to six months.

(d) DISPOSITION OF SHARES. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal and state income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the
Option are held for at least one year after exercise and are disposed of at
least two years after the Date of Grant, any gain realized on disposition of
the Shares will also be treated as long-term capital gain for federal and
state income tax purposes. If Shares purchased under an ISO are disposed of
within such one-year period or within two years after the Date of Grant, any
gain realized on such disposition will be treated as compensation income
(taxable at ordinary income

-4-

<PAGE>

rates) to the extent of the difference between the Exercise Price and the
lesser of (1) the Fair Market Value of the Shares on the date of exercise, or
(2) the sale price of the Shares.

(e) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2)
the date one year after the date of exercise, the Optionee shall immediately
notify the Company in writing of such disposition. Optionee agrees that
Optionee may be subject to income tax withholding by the Company on the
compensation income recognized by the Optionee.

(f) SECTION 83(b) ELECTION FOR UNVESTED SHARES PURCHASED PURSUANT
TO NONQUALIFIED STOCK OPTIONS. With respect to the exercise of a
nonqualified stock option for unvested Shares, an election may be filed by
the Optionee with the Internal Revenue Service and, if necessary, the proper
state taxing authorities, WITHIN 30 DAYS of the purchase of the Shares,
electing pursuant to Section 83(b) of the Code (and similar state tax
provisions if applicable) to be taxed currently on any difference between the
purchase price of the Shares and their Fair Market Value on the date of
purchase. This will result in a recognition of taxable income to the
Optionee on the date of exercise, measured by the excess, if any, of the fair
market value of the Shares, at the time the Option is exercised over the
purchase price for the Shares. Absent such an election, taxable income will
be measured and recognized by Optionee at the time or times on which the
Company's Repurchase Option lapses. Optionee is strongly encouraged to seek
the advice of his or her own tax consultants in connection with the purchase
of the Shares and the advisability of filing of the Election under Section
83(b) and similar tax provisions. A form of Election under Section 83(b) is
attached hereto as Exhibit C-5 for reference.

(g) SECTION 83(b) ELECTION FOR UNVESTED SHARES PURCHASED PURSUANT
TO INCENTIVE STOCK OPTIONS. With respect to the exercise of an incentive
stock option for unvested Shares, an election may be filed by the Optionee
with the Internal Revenue Service and, if necessary, the proper state taxing
authorities, WITHIN 30 DAYS of the purchase of the Shares, electing pursuant
to Section 83(b) of the Code (and similar state tax provisions if applicable)
to be taxed currently on any difference between the purchase price of the
Shares and their Fair Market Value on the date of purchase for alternative
minimum tax purposes. This will result in a recognition of income to the
Optionee on the date of exercise, for alternative minimum tax purposes,
measured by the excess, if any, of the fair market value of the Shares, at
the time the option is exercised, over the purchase price for the Shares.
Absent such an election, alternative minimum taxable income will be measured
and recognized by Optionee at the time or times on which the Company's
Repurchase Option lapses. Optionee is strongly encouraged to seek the advice
of his or her tax consultants in connection with the purchase of the Shares
and the advisability of filing of the Election under Section 83(b) and
similar tax provisions. A form of Election under Section 83(b) for
alternative minimum tax purposes is attached hereto as Exhibit C-6 for
reference.

OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY AND NOT
THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b),

-5-

<PAGE>

EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS
FILING ON OPTIONEE'S BEHALF.

12. LOCKUP AGREEMENT. Optionee hereby agrees that if so requested by
the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell
or otherwise transfer any Shares or other securities of the Company during
the 180-day period (or such longer period of time as may be requested in
writing by the Managing Underwriter and agreed to in writing by the Company)
(the "Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however,
that such restriction shall only apply to the first registration statement of
the Company to become effective under the Securities Act which include
securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.

NetGravity, Inc.

By:
------------------------------------

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED
THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES
AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION
PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE
ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY
TIME, WITH OR WITHOUT CAUSE.

-6-

<PAGE>

Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the
residence address indicated below.

Dated:
------------------------ ---------------------------------------
Optionee

Residence Address:

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

CONSENT OF SPOUSE

The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration
of the Company's granting his or her spouse the right to purchase Shares as
set forth in the Plan and this Option Agreement, the undersigned hereby
agrees to be irrevocably bound by the terms and conditions of the Plan and
this Option Agreement and further agrees that any community property interest
shall be similarly bound. The undersigned hereby appoints the undersigned's
spouse as attorney-in-fact for the undersigned with respect to any amendment
or exercise of rights under the Plan or this Option Agreement.

---------------------------------------
Spouse of Optionee

-7-

<PAGE>

EXHIBIT A

NETGRAVITY, INC.
1995 STOCK OPTION PLAN

EXERCISE NOTICE

NetGravity, Inc.
1670 S. Amphlett Blvd., Suite 314
San Mateo, CA 94402

Attention: Secretary

1. EXERCISE OF OPTION. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of NetGravity, Inc. (the
"Company") under and pursuant to the Company's 1995 Stock Option Plan, as
amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated ________, 19 (the "Option Agreement").

2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

3. RIGHTS AS STOCKHOLDER. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.

Optionee shall enjoy rights as a stockholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have
no further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.

4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise

<PAGE>

transferred (including transfer by gift or operation of law), the Company or
its assignee(s) shall have a right of first refusal to purchase the Shares on
the terms and conditions set forth in this Section (the "Right of First
Refusal").

(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the Shares at the Offered Price to the Company or its assignee(s).

(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.

(c) PURCHASE PRICE. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.

(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.

(e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.

-2-

<PAGE>

(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or
all of the Shares during the Optionee's lifetime or on the Optionee's death
by will or intestacy to the Optionee's immediate family or a trust for the
benefit of the Optionee's immediate family shall be exempt from the
provisions of this Section. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister.
In such case, the transferee or other recipient shall receive and hold the
Shares so transferred subject to the provisions of this Section, and there
shall be no further transfer of such Shares except in accordance with the
terms of this Section.

(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Shares 90 days after the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.

5. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

(a) LEGENDS. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:

REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.

-3-

<PAGE>

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP PERIOD
OF 180-DAYS (OR SUCH LONGER PERIOD AS MAY BE REQUESTED BY THE MANAGING
UNDERWRITER AND AGREED TO BY THE COMPANY) FOLLOWING THE COMPANY'S INITIAL
PUBLIC OFFERING AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND
THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH LOCKUP PERIOD IS BINDING ON
TRANSFEREES OF THESE SHARES.

IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.

Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.

(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

7. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

8. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.

-4-

<PAGE>

9. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

10. NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

11. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

12. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.

13. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement, the Restricted Stock Purchase Agreement, and the Investment
Representation Statement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof.

Submitted by: Accepted by:

OPTIONEE: NetGravity, Inc.

By:
-------------------------------

Its:
------------------------------

- ------------------------------
(Signature)

ADDRESS: ADDRESS:
- ------- --------
1670 S. Amphlett Blvd., Suite 314
- ------------------------------ San Mateo, CA 94402

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

-5-

<PAGE>

-6-

<PAGE>

EXHIBIT B

INVESTMENT REPRESENTATION STATEMENT

OPTIONEE :

COMPANY : NetGravity, Inc.

SECURITY : COMMON STOCK

AMOUNT :

DATE :

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

1. Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

2. Optionee acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company, and any other legend required under applicable
state securities laws.

3. Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of

<PAGE>

"restricted securities" acquired, directly or indirectly from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at
the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer
period as any market stand-off agreement may require) the Securities exempt
under Rule 701 may be resold, subject to the satisfaction of certain of the
conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability
of certain public information about the Company, (3) the amount of Securities
being sold during any three month period not exceeding the limitations
specified in Rule 144(e), and (4) the timely filing of a Form 144, if
applicable.

In the event that the Company does not qualify under Rule 701 at
the time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
the resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by
an affiliate of the Company, within the meaning of Rule 144; and, in the case
of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

4. Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters (the "Managing Underwriter") in connection
with any registration of the offering of any securities of the Company under
the Securities Act, Optionee shall not sell or otherwise transfer any Shares
or other securities of the Company during the 180-day period (or such longer
period of time as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall only apply to
the first registration statement of the Company to become effective under the
Securities Act which include securities to be sold on behalf of the Company
to the public in an underwritten public offering under the Securities Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such Market Standoff
Period.

5. Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and
otherwise than pursuant to Rules 144 or 701 will have a substantial burden of
proof in establishing that an exemption from registration is

-2-
<PAGE>

available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk. Optionee understands that no assurances can be given that any such
other registration exemption will be available in such event.

6. Optionee understands that the certificate evidencing the Securities
will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with
respect to such restriction, a copy of which is attached.

Signature of Optionee:

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

Date:__________________________, 19__

-3-

<PAGE>
EXHIBIT C-1

1995 STOCK OPTION PLAN

RESTRICTED STOCK PURCHASE AGREEMENT

THIS AGREEMENT is made between ____________________________________ (the
"Purchaser") and NetGravity, Inc. (the "Company") as of __________________,
199__.

RECITALS

A. Pursuant to the exercise of the stock option (grant number ____)
granted to Purchaser under the Company's 1995 Stock Option Plan and pursuant to
the Stock Option Agreement (the "Option Agreement") dated ___________ by and
between the Company and Purchaser with respect to such grant, which Option
Agreement is hereby incorporated by reference, Purchaser has elected to purchase
_________ of those shares which have not become vested under the vesting
schedule set forth in the Option Agreement ("Unvested Shares"). The Unvested
Shares and the shares subject to the Option Agreement which have become vested
are sometimes collectively referred to herein as the "Shares".

B. As required by the Option Agreement, as a condition to Purchaser's
election to exercise the option, Purchaser must execute this Restricted Stock
Purchase Agreement, which sets forth the rights and obligations of the parties
with respect to Shares acquired upon exercise of the Option.

1. REPURCHASE OPTION.

(a) If Purchaser's employment or consulting relationship with the
Company is terminated for any reason, including for cause, death, and
disability, the Company shall have the right and option to purchase from
Purchaser, or Purchaser's personal representative, as the case may be, all of
the Purchaser's Unvested Shares as of the date of such termination at the price
paid by the Purchaser for such Shares (the "Repurchase Option").

(b) Upon the occurrence of a termination, the Company may exercise
its Repurchase Option by delivering personally or by registered mail, to
Purchaser (or his transferee or legal representative, as the case may be),
within ninety (90) days of the termination, a notice in writing indicating the
Company's intention to exercise the Repurchase Option and setting forth a date
for closing not later than thirty (30) days from the mailing of such notice. The
closing shall take place at the Company's office. At the closing, the holder of
the certificates for the Unvested Shares being transferred shall deliver the
stock certificate or certificates evidencing the Unvested Shares, and the
Company shall deliver the purchase price therefor.

<PAGE>

(c) At its option, the Company may elect to make payment for the
Unvested Shares to a bank selected by the Company. The Company shall avail
itself of this option by a notice in writing to Purchaser stating the name and
address of the bank, date of closing, and waiving the closing at the Company's
office.

(d) If the Company does not elect to exercise the Repurchase Option
conferred above by giving the requisite notice within ninety (90) days following
the termination, the Repurchase Option shall terminate.

2. TRANSFERABILITY OF THE SHARES; ESCROW.

(a) Purchaser hereby authorizes and directs the secretary of the
Company, or such other person designated by the Company, to transfer the
Unvested Shares as to which the Repurchase Option has been exercised from
Purchaser to the Company.

(b) To insure the availability for delivery of Purchaser's Unvested
Shares upon repurchase by the Company pursuant to the Repurchase Option under
Section 1, Purchaser hereby appoints the secretary, or any other person
designated by the Company as escrow agent, as its attorney-in-fact to sell,
assign and transfer unto the Company, such Unvested Shares, if any, repurchased
by the Company pursuant to the Repurchase Option and shall, upon execution of
this Agreement, deliver and deposit with the secretary of the Company, or such
other person designated by the Company, the share certificates representing the
Unvested Shares, together with the stock assignment duly endorsed in blank,
attached hereto as Exhibit C-2. The Unvested Shares and stock assignment shall
be held by the secretary in escrow, pursuant to the Joint Escrow Instructions of
the Company and Purchaser attached as Exhibit C-3 hereto, until the Company
exercises its purchase right as provided in Section 1, until such Unvested
Shares are vested, or until such time as this Agreement no longer is in effect.
As a further condition to the Company's obligations under this Agreement, the
spouse of the Purchaser, if any, shall execute and deliver to the Company the
Consent of Spouse attached hereto as Exhibit C-4. Upon vesting of the Unvested
Shares, the escrow agent shall promptly deliver to the Purchaser the certificate
or certificates representing such Shares in the escrow agent's possession
belonging to the Purchaser, and the escrow agent shall be discharged of all
further obligations hereunder; provided, however, that the escrow agent shall
nevertheless retain such certificate or certificates as escrow agent if so
required pursuant to other restrictions imposed pursuant to this Agreement.

(c) The Company, or its designee, shall not be liable for any act it
may do or omit to do with respect to holding the Shares in escrow and while
acting in good faith and in the exercise of its judgment.

(d) Transfer or sale of the Shares is subject to restrictions on
transfer imposed by any applicable state and federal securities laws. Any
transferee shall hold such Shares subject to all the provisions hereof and the
Exercise Notice executed by the Purchaser

-2-
<PAGE>

with respect to any Unvested Shares purchased by Purchaser and shall
acknowledge the same by signing a copy of this Agreement.

3. OWNERSHIP, VOTING RIGHTS, DUTIES. This Agreement shall not affect in
any way the ownership, voting rights or other rights or duties of Purchaser,
except as specifically provided herein.

4. LEGENDS. The share certificate(s) evidencing the Shares issued
hereunder shall be endorsed with such legends as may be required (i) by the
Stock Option Agreement and Exercise Notice, (ii) under applicable state or
federal securities laws, and (iii) if not otherwise required, a legend providing
substantially as follows:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

5. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.

6. NOTICES. Notices required hereunder shall be given in person or by
registered mail to the address of Purchaser shown on the records of the Company,
and to the Company at their respective principal executive offices.

7. SURVIVAL OF TERMS. This Agreement shall apply to and bind Purchaser
and the Company and their respective permitted assignees and transferees, heirs,
legatees, executors, administrators and legal successors.

8. SECTION 83(b) ELECTIONS.

(a) ELECTION FOR UNVESTED SHARES PURCHASED PURSUANT TO NONQUALIFIED
STOCK OPTIONS. Purchaser hereby acknowledges that he or she has been informed
that, with respect to the exercise of a nonqualified stock option for Unvested
Shares, that unless an election is filed by the Purchaser with the Internal
Revenue Service and, if necessary, the proper state taxing authorities, WITHIN
30 DAYS of the purchase of the Shares, electing pursuant to Section 83(b) of the
Code (and similar state tax provisions if applicable) to be taxed currently on
any difference between the purchase price of the Shares and their Fair Market
Value on the date of purchase, there will be a recognition of taxable income to
the Optionee, measured by the excess, if any, of the fair market value of the
Shares, at the time the Company's Repurchase Option lapses over the purchase
price for the Shares. Optionee represents that Optionee has consulted any tax
consultant(s) Optionee deems advisable in connection with the purchase of

-3-
<PAGE>

the Shares or the filing of the Election under Section 83(b) and similar tax
provisions. A form of Election under Section 83(b) is attached hereto as
Exhibit C-5 for reference.

(b) ELECTION FOR UNVESTED SHARES PURCHASED PURSUANT TO INCENTIVE
STOCK OPTIONS. Purchaser hereby acknowledges that he or she has been informed
that, with respect to the exercise of an incentive stock option for Unvested
Shares, that unless an election is filed by the Purchaser with the Internal
Revenue Service and, if necessary, the proper state taxing authorities, WITHIN
30 DAYS of the purchase of the Shares, electing pursuant to Section 83(b) of the
Code (and similar state tax provisions if applicable) to be taxed currently on
any difference between the purchase price of the Shares and their Fair Market
Value on the date of purchase, there will be a recognition of income to the
Optionee, for alternative minimum tax purposes, measured by the excess, if any,
of the fair market value of the Shares, at the time the Company's Repurchase
Option lapses over the purchase price for the Shares. Optionee represents that
Optionee has consulted any tax consultant(s) Optionee deems advisable in
connection with the purchase of the Shares or the filing of the Election under
Section 83(b) and similar tax provisions. A form of Election under Section
83(b) for alternative minimum tax purposes is attached hereto as Exhibit C-6 for
reference.

PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND NOT
THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER'S
BEHALF.

9. REPRESENTATIONS. Purchaser has reviewed with his own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Purchaser is relying solely on
such advisors and not on any statements or representations of the Company or any
of its agents. Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.

10. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with applicable state laws.

Purchaser represents that he has read this Agreement and is familiar with
its terms and provisions. Purchaser hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Agreement.

-4-
<PAGE>

IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set
forth above.

"COMPANY"

NetGravity, Inc.

By:
--------------------------------

Title:
-----------------------------

"PURCHASER"

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

Address:
---------------------------

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

Soc. Sec. No.:
---------------------

-5-
<PAGE>

EXHIBIT C-2

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED I, __________________________, hereby sell, assign
and transfer unto __________________________________________________
(__________) shares of the Common Stock of NetGravity, Inc. standing
in my name of the books of said corporation represented by Certificate
No. _____ herewith and do hereby irrevocably constitute and appoint
____________________________ to transfer the said stock on the books of the
within named corporation with full power of substitution in the premises.

This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between NetGravity, Inc. and the undersigned dated
______________, 19__.

Dated: _______________, 19__

Signature:______________________________

INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.

<PAGE>

EXHIBIT C-3

JOINT ESCROW INSTRUCTIONS

_________ , 19__

NetGravity, Inc.
1670 S. Amphlett Blvd., Suite 314
San Mateo, CA 94402

Attention: Secretary

As Escrow Agent for both NetGravity, Inc. (the "Company"), and the
undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby
authorized and directed to hold the documents delivered to you pursuant to the
terms of that certain Restricted Stock Purchase Agreement ("Agreement") between
the Company and the undersigned, in accordance with the following instructions:

1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.

2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.

3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this

<PAGE>

paragraph 3, Purchaser shall exercise all rights and privileges of a
stockholder of the Company while the stock is held by you.

4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 120 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.

5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.

6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.

7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.

8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.

9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.

-2-
<PAGE>

11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.

12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.

13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.

COMPANY: NetGravity, Inc.
1670 S. Amphlett Blvd., Suite 314
San Mateo, CA 94402

Attention: Secretary

PURCHASER:
--------------------------------------------------

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

ESCROW AGENT: Corporate Secretary of
NetGravity, Inc.

-3-
<PAGE>

16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.

17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.

18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.

NetGravity, Inc.

By:
-------------------------------------------

Title:
-------------------------------------------

Purchaser:
-------------------------------------------
(Signature)

-------------------------------------------
(Typed or Printed Name)

Escrow Agent:

-------------------------------------------
Corporate Secretary

-4-
<PAGE>

EXHIBIT C-4

CONSENT OF SPOUSE

I, ____________________, spouse of ___________________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of NetGravity, Inc., as set forth in the Agreement,
I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.

Dated: _______________, 19

______________________________

<PAGE>

EXHIBIT C-5

ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:

1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:

NAME : TAXPAYER: SPOUSE:

ADDRESS: :

IDENTIFICATION NO. : TAXPAYER: SPOUSE:

TAXABLE YEAR:

2. The property with respect to which the election is made is described as
follows: _________ shares (the "Shares") of the Common Stock of
NetGravity, Inc. (the "Company").

3. The date on which the property was transferred is: _____________, 19__.

4. The property is subject to the following restrictions:

The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.

5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$_______________.

6. The amount (if any) paid for such property is:

$_______________.

The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.

THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.

Dated: ___________________, 19__ _______________________________________
_____________________________, Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated: ___________________, 19__ _______________________________________

<PAGE>
EXHIBIT C-6

ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to the provisions of Sections
55-56 and 83(b) of the Internal Revenue Code of 1986, as amended, to include in
taxpayer's alternative minimum taxable income for the current taxable year, as
compensation for services, the excess, if any, of the fair market value of the
property described below at the time of transfer over the amount paid for such
property.

1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:

NAME: TAXPAYER: SPOUSE:

ADDRESS:

IDENTIFICATION NO.: TAXPAYER: SPOUSE:

TAXABLE YEAR:

2. The property with respect to which the election is made is described as
follows: ________ shares (the "Shares") of the Common Stock of
NetGravity, Inc. (the "Company").

3. The date on which the property was transferred is:___________________.

4. The property is subject to the following restrictions:

The Shares may be repurchased by the Company, or its assignee, at its
original purchase price, on certain events. This right lapses with regard
to a portion of the Shares over time.

5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:

$_______________

6. The amount paid for such property is:

$_______________

THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.

Dated: _________________________, Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated: ___________________, 19__ ___________________________________

<PAGE>
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations

260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.

(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:

(1) to the issuer;

(2) pursuant to the order or process of any court;

(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;

(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;

(5) to holders of securities of the same class of the same issuer;

(6) by way of gift or donation inter vivos or on death;

(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;

(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;

(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;

(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;

(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;

(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;

(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;

(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or

(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;

(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;

(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102; provided that any such transfer is on the
condition that any certificate evidencing the security issued to such
transferee shall contain the legend required by this section.

<PAGE>

(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:

"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."

-9-

<PAGE>

Exhibit 10.9

PROTEGE CONFIDENTIAL

NETGRAVITY Inc. PROFESSIONAL SERVICES AGREEMENT

This PROFESSIONAL SERVICES AGREEMENT (the "Agreement") is made this 27th day of
March 1997 between PROTEGE SOFTWARE (HOLDINGS) LIMITED of Richmond House, St
Anne's Place, St. Peter Port, Guernsey, GY1 2NV Channel Islands (the
"Contractor") and NETGRAVITY Inc. of Delaware, USA ("the Company") who agree as
follows:

1. TERM

The initial term of this Agreement shall begin at the date of signing by
the later of the two parties to sign (the "Effective Date"), and shall end
on the termination of the Agreement by either party in accordance with
Paragraph 7.

2. PROFESSIONAL SERVICES

(a) The Contractor agrees to act as General Manager for the Company and
perform the Professional Services specified in the Work Assignment
Schedule contained in Schedule A, as modified from time to time by
mutual agreement of the parties (the "Professional Services")
including:

(i) to set up a wholly owned subsidiary company of the Company
(subject to local approval) to be called NetGravity Europe
Ltd.;

(ii) to set up such other corporation or entities, or in furtherance
of distribution, marketing or agency relationships with third
parties as the Company and Contractor agree to establish in
the Territory (as defined in Schedule A).

(b) The Contractor shall perform the Professional Services for Company,
and shall in all cases act in a professional manner and such services
shall conform to the standards, specifications and other reasonable
requirements agreed between the parties.

3. CONTRACTOR'S REWARD

The Company shall reward the Contractor for its activities as contained in
Schedule A.

<PAGE>

4. PROPRIETARY INFORMATION

(a) Each party acknowledges that it may be furnished or may otherwise
receive or have access to confidential or proprietary information
which relates to the other party's business, including (without
limitation) past, present or future business plans, marketing plans,
products, software, research, development, inventions, processes,
techniques, design or other technical information and data, etc. (the
"Proprietary Information"). Each party further acknowledges that all
intellectual property rights residing in the other party's
Proprietary Information are and will remain the exclusive property
of the other party.

(b) Each party agrees to preserve and protect the confidentiality of
the Proprietary Information and all forms thereof, whether
disclosed to it before this Agreement is signed or afterwards. In
addition, it shall not disclose or disseminate the Proprietary
Information to any third party and shall not use the Proprietary
Information for its own benefit (other than in furtherance of the
goals of the other party) or for the benefit of any third party
(other than in furtherance of the goals of the other party).

(c) The foregoing obligations shall not apply to any information which
the recipient can prove (i) is previously publicly known at the
time of receipt from the other party or which subsequently becomes
publicly known through no act or fault of the recipient; (ii) is
given to it by a third party who is not obligated to maintain
confidentiality; or (iii) was independently developed by it without
resort to the Proprietary Information or other resources of the
other and not in the course of performance of the Professional
Services, and not for the other party, (unless the parties have
otherwise agreed that the specific information was to be governed
by this Agreement).

(d) Within three days after the termination of this Agreement (or any
other time at the other party's request), each party shall return
to the other all copies of Proprietary Information in tangible form
in its possession or control. The Contractor hereby assigns to the
Company all its intellectual and other property rights in its work
product performed pursuant to this Agreement, and waives its moral
rights to or in same, and shall require each of its employees (if
any are so permitted by the Company pursuant to Schedule A) working
on this project to sign the Company's standard independent
contractor confidentiality agreement, and assignment of
intellectual property rights and waiver of moral rights.

<PAGE>

(e) Section 4 of this Agreement shall survive the expiry or termination of
the Agreement.

5. WARRANTIES AND COVENANTS

A. THE CONTRACTOR WARRANTS AND COVENANTS THAT:

(i) it is able to perform the Professional Services, as set out in
the agreed business plan;

(ii) that any service it provides and information or materials it
develops for or discloses to the Company shall not in any way
be based upon any confidential or proprietary information
derived from any source other than the Company, unless the
Contractor is specifically authorised in writing by such
source to use such proprietary information and the Contractor
agrees it shall not knowingly furnish or use any such
information in the performance of this Agreement, without the
prior written consent of the Company provided that the
Company agrees the Contractor can use commercially available
software development tools;

(iii) in performance of its obligations hereunder it shall not
infringe any intellectual property right, or trade secret of
any third party;

(iv) it shall perform all work in a professional manner to the best
of its ability; and

(v) that if the Company incurs any liability or expense outside
of the agreed business plan, as a result of any warranty that
the Contractor makes in this Agreement not being true, the
Contractor shall indemnify the Company and hold it harmless
against all such liability or expense, including reasonable
attorney/solicitor fees, provided that the Company notifies
the Contractor of the claim and co-operates with the
Contractor in defending against the claim. Each party shall
notify the other if it ever becomes aware of any such claim.

B. THE COMPANY WARRANTS AND COVENANTS THAT:

(i) it is entitled to appoint the Contractor to perform the
Professional Services in the Territory;

(ii) that any information or materials it discloses to the
Contractor shall not in any way be based upon any confidential
or proprietary information

<PAGE>

derived from any source other than the Contractor or the
Company, unless the Company is specifically authorised in
writing by such source to use such proprietary information;

(iii) in performance of its obligations and the provision of
information to the Contractor hereunder it will not infringe
any intellectual property right, or trade secret of any
third party;

(iv) if the Contractor incurs any liability or expense as a result
of any warranty the Company makes in this Agreement not being
true, the Company shall indemnify the Contractor and hold it
harmless against all such liability or expense, including
reasonable attorney/solicitor fees, provided that the
Contractor notifies the Company of the claim and cooperates
with the Company in defending against the claim. Each party
shall notify the other if it ever becomes aware of any such
claim; and

(v) it will sell it's products and services in the Territory only
through NetGravity Europe Ltd. In respect of any sales
received by the Company and its Group generated on a world-wide
basis, the parties agree that 30% - 50% of the European
revenues will be included in the calculation of Net Revenue for
the purposes of the Schedule. The precise figure will be
mutually agreed by both parties acting in good faith.

6. LOANED EQUIPMENT

If the Company loans the Contractor any item, the Contractor shall sign the
Company's standard equipment loan agreement and return the loaned equipment
promptly on termination of this Agreement. The same shall apply to any
item loaned by the Contractor to the Company or NetGravity Europe.

7. TERMINATION AND RENEWAL

(a) The Initial Term shall be for a 12 month period from the Effective
Date (the "Initial Term").

(b) This Agreement shall automatically continue, following the expiry of
the Initial Term for subsequent periods of 12 months ("Renewal Terms")
each unless terminated in accordance with the terms set out below.

<PAGE>

(i) without cause, after the Initial Term, on at least 3 months
written notice, provided that if the Company fails to renew any
Renewal Term, it shall provide at least 3 months notice or
payment in lieu thereof.

(ii) during the Initial Term, or any Renewal Term, if the other party
has not performed any material covenant when performance was
due or has otherwise breached any material term of this
Agreement, the following procedures shall apply:

(A) the non-defaulting party shall provide written notice
of the event or circumstances representing such breach
or non-performance together with a demand that such
breach or non-performance be cured immediately;

(B) if the breach or non-performance has not been cured (or
other arrangements satisfactory to the non-defaulting
party have not been agreed to) within 30 days from the
date of the notice delivered under clause (A) above,
immediately upon delivery of a second written notice
terminating this Agreement.

8. MISCELLANEOUS

(a) The laws of England and Wales shall govern this Agreement and the
parties hereby submit to the exclusive jurisdiction of the English
Courts.

(b) This Agreement, including Schedule A attached hereto, is the entire
agreement between the parties. Any change in the Agreement must be
made in writing and signed by both the Company and the Contractor.

(c) If either party cannot perform of its respective obligations due to
causes beyond its reasonable control which shall not include the
reward to the Contractor under Schedule A, then the non-performing
party shall (i) notify the other party, (ii) take reasonable steps to
resume performance as soon as possible, and (iii) not be considered in
breach during the period performance is beyond the party's reasonable
control.

(d) If any provision of this Agreement shall be deemed by a court to be
too broad, the court is hereby authorised to limit any scope,
duration or area of applicability, or all of them, so such provision
is no longer overly broad and to enforce the same as so limited.
Subject to the prior sentence, if any part of this Agreement is held
unenforceable for any reason, such unenforceability shall

<PAGE>

void only such part and shall not render unenforceable any other part
of this Agreement.

(e) Either party's waiver of a default by the other does not constitute a
waiver of future or other defaults.

(f) The parties shall not, for 12 months after the Agreement ends,
directly solicit for employment or any other engagement for work, any
employee or any employee of any affiliate of the other party. In this
Agreement, Affiliate means a company under the ultimate common control
of the other party of which the party has been notified.

(g) The Contractor shall not assign its rights or obligations under this
Agreement unless it first obtains the prior written agreement of the
Company.

(h) Any notice or other communication required or permitted to be given by
his Agreement (including the signing of this Agreement) shall be in
writing and shall be effectively given if delivered personally, by
facsimile confirmed received, or by registered mail to the party at
the relevant party's address below.

Dated at San Mateo, CA, USA this 27 day of March 1997

/s/ Stephen E. Recht
- -----------------------------------
duly authorised for and on behalf of
NETGRAVITY INC. of

<PAGE>

Dated at San Mateo, this 27 day of March 1997

/s/ Larry Levy
- -----------------------------------
duly authorised for and on behalf of
PROTEGE SOFTWARE (HOLDINGS) LIMITED
of Richmond House, St. Anne's Place, St. Peter Port,
Guernsey, GY1 2NV, Channel Islands

<PAGE>

SCHEDULE A

WORK ASSIGNMENT SCHEDULE

Territory - For purposes of this Agreement, Territory means Europe, Africa and
the Middle East, subject to then prevailing export regulations in Canada, the
United States or countries in which NetGravity Europe resides. Europe means
those countries set out in Schedule B. Middle East means all Arab League
countries, Turkey and Israel.

Analysis and Recommendations re:

* Marketing positioning;
* Presentation;
* Technical Support;
* Competitiveness;
* Localisation

Implementation of approved Recommendations:

* Sales,
* Marketing,
* Technical Support,
* Production,
* Finance and Administration

all for operations, in the Territory, as more particularly set out in the annual
business plans (including budgets) of the Company as said plans and budgets
relate to its operations implemented directly or through:

* NetGravity Europe, and/or

* such other corporations or entities, or in furtherance of distribution,
marketing or agency relationships with such third parties, as the Company
and the Contractor agree to establish in the Territory;

The business plan and budgets shall be mutually agreed upon by Contractor and
Company.

This implementation will include, but not necessary be limited to, the
following:

<PAGE>

SCOPE OF ACTIVITIES

During the term, Contractor shall perform the following activities in the
Territory:

* Establishment of an organisation for the Territory, to complement the
current resources, technology and economic considerations of the Company,
and the circumstances that prevail in the Territory.

* Achieving this by the setting up of NetGravity Europe Ltd to initially be a
UK based wholly owned subsidiary of the Company, to serve as the
Territorial headquarters so that Company may professionally provide the
following:

(a) solicitation of sales orders;

(b) provision of support for Company's distributors and dealers in the
Territory;

(c) co-ordination of product and warranty service between NetGravity
Europe and such other affiliated or third party, arms length
corporations or entities, and licensees and distributors/VARs etc.
of the Company's products, located in the Territory;

(d) provision of product technical support services;

(e) the conducting of periodic training courses and seminars regarding
applications and operations of the products in major marketing centres
located in the Territory for the benefit of distributors and dealers
etc.;

(f) development of business plans for the Territory;

(g) management and co-ordination of the implementation of the Company's
marketing strategy in the Territory (for the products of Company
handled by Contractor);

(h) localisation of products;

(i) set up of systems (such as accounting legal and human resources
consistent with those set-up by the Company); the Contractor shall
assist NetGravity Europe (and other related entities as agreed
following Company's request) with implementation and administration of
all general, administrative and financial systems as requested by
Company; and

<PAGE>

SOLICITATION OF CONTRACTS

(a) NetGravity Europe shall solicit orders for product only at such current
prices as may be periodically established in writing by the Company and
notified to the Contractor.

(b) All orders solicited by NetGravity Europe from customers in the Territory
are subject to acceptance or rejection by an officer or other authorised
person at the principal office of the Company, which approval or rejection
shall in all cases be in writing, and no order shall be binding upon
NetGravity Europe until so accepted. The Company and NetGravity Europe
reserve the right to refuse any order originating in the Territory, either
for lack of credit of the customer or for any other reason which, in the
judgement of the Company or NetGravity Europe is reasonable grounds for
refusal. The Contractor agrees to cause NetGravity Europe to fully inform
all customers it solicits of the substance of this sub-paragraph and to
furnish NetGravity Europe and the Company with such periodic reports of its
activity and other information as the Company may reasonably request.

(c) The Contractor agrees to dispatch all inquiries received by it, applicable
to the Company or the products of the Company, from points or sources
outside the Territory promptly to the Company for attention and handling.

(d) Neither NetGravity Europe nor the Company is under any obligation to the
Contractor to continue its business or to manufacture, sell or supply, or
to continue to manufacture, sell or supply any of the products nor shall
any warranty of any nature as to any products run from NetGravity Europe,
the Company, or their affiliates to the Contractor, and neither the Company
nor its affiliates are under any obligations to the Contractor to continue,
discontinue, or change any model or type of any of the products.

(e) All invoices in connection with sales to customers in the Territory shall
be rendered by NetGravity Europe to such customers. It is expressly
understood that full power by and such authority for all collections rest
with NetGravity Europe and the Company, which exercises complete control
over the approval of all customers' credit, orders, and contracts. The
Contractor agrees to protect NetGravity Europe and the Company, as far as
is reasonable by reporting adverse credit information of which it is aware
with respect to customers in the Territory.

<PAGE>

CONTRACTOR REWARD SCHEDULE

1. MONETARY FEE

A. Contractor shall be paid a commission equal to 5% of annual Net
Revenue NetGravity Europe, subject to a minimum of 75,000 Pounds ("the
minimum commission") and a maximum of 150,000 Pounds in each year of
the Initial Term and any Renewal Term.

B. In this Agreement, the currency is in UK pounds sterling.

C. Payment of commission shall be made to Contractor as follows:

(i) monthly in arrears, on the basis of estimated commission
subject to an annual adjustment and repayment of any over
payment

(ii) within 30 days after the end of each calendar quarter, the
parties shall calculate the actual commission due to
Contractor, and the balance due shall be paid or repaid before
the end of said 30th day.

D. Net Revenue means gross revenue from licenses of NetGravity Europe
product, net of returns, allowances, credits, discounts (based on
volume or otherwise), RMAs and net of any bad debt reserve or actual
bad debts. All reserves will be calculated on a consistent basis in
accordance with generally accepted accounting principles.

2. BONUS

A. In addition to the commission referred to above, Contractor shall also
be paid a bonus, calculated as set out below.

B. The bonus shall be calculated as a percentage of revenue, as defined
in the Table below, of one times the Annualised Net revenue of
NetGravity Europe. Annualised Net Revenue means Net Revenue for the
12 months immediately prior to the date on which the bonus payment
obligation is triggered.

C. TERM OF SERVICE % BONUS

0-12 months 20%

GREATER THAN 12-18 months 15%

GREATER THAN 18 months 10%

<PAGE>

D. The bonus payment can be triggered either:

(a) by the Contractor at any time after the date 24 months after
the Effective Date

(a) on termination of the agreement as defined in paragraph 7

E. Triggering by the Contractor of the bonus payment shall constitute an
event which entitles (but does not require) Company to terminate this
Agreement without payment of additional compensation to Contractor.

F. Company may, at its option, pay the bonus in either cash or in shares
of the Company or any successor company.

3. EXPENSE REIMBURSEMENT

The Company will reimburse Contractor within thirty (30) days after the end
of each fiscal month an amount equal to one hundred per cent (100%) of all
costs approved within the agreed business plan or otherwise agreed to by
the Company, and reasonably incurred by Contractor in good faith and
reasonable fulfilment of Contractor's obligations under this Agreement.
For the avoidance of doubt, the cost and expense of the provision of a
managing director by the Contractor shall not be recharged to the Company
and shall be treated as comprised in commission. The Contractor will keep
records of (and receipts for) all costs in incurs in its performance of the
services and will provide copies of such records to the Company upon
reasonable request.

12
<PAGE>

SCHEDULE B

EUROPE MEANS

Such of the countries listed below, except to the extent that Sales of the
Company's products are prohibited pursuant to the laws of the United States or
other jurisdiction applicable to the Company's operations.

Albania Liechtenstein
Andorra Lithuania
Armenia Luxembourg
Austria Macedonia
Azerbaijan Malta & Gozo
Belarus Moldova
Belgium Monaco
Bosnia The Netherlands
Bulgaria Norway
Byclorussia Poland
Croatia Portugal
Cyprus Romania
Czech Republic Russia Federation
Denmark San Marino
Estonia Serbia
Federal Republic of Yugoslavia Slovak Republic
Finland Slovenia
France Spain
Germany Sweden
Gibraltar Switzerland
Greece Tajikistan
Hungary Turkey
Iceland Turkmenistan
Republic of Ireland Ukraine
Italy United Kingdom
Kazakhstan Uzbekistan
Kyrgyzstan Vatican City State
Latvia

<PAGE>

PROTEGE CONFIDENTIAL

AMENDMENT TO THE PROFESSIONAL SERVICES AGREEMENT

This Amendment To The Professional Services Agreement dated 27 March 1997
between PROTEGE SOFTWARE (HOLDINGS) LIMITED of Richmond House, St Anne's
Place, St. Peter Port, Guernsey, GY1 2NV Channel Islands (the "Contractor")
and NETGRAVITY INC of Delaware United States of America ("the Company") (the
"Agreement") is made this day of 13 May 1998 who agree as follows:

1. TERMINATION

1.1 The parties have agreed that the Agreement shall terminate with effect
from 30 September 1998, subject always to the terms of this Amendment to the
Professional Services Agreement.

1.2 The parties have agreed to use reasonable endeavours to co-operate to
achieve the assumption by the Company of the Professional Services with
effect from 30 September 1998 save that the Contractor has agreed to continue
to provide back office functions for the Company to 30 October 1998 for the
purpose of assisting the Company in collating financial information in
relation to activities in the Territory during the financial quarter of the
Company ending 30 September 1998.

2. BONUS AND AMENDMENT

2.1 The parties have agreed that the bonus payable to the Contractor shall be
calculated as 12.5% of the Bookings of NetGravity Europe for the 12 month
period ending 30 September 1998.

Bookings means Licence bookings, First year subscription bookings, Second year
subscription bookings, consulting revenues and support revenues.

2.2 On or before 15 May 1998, the Company shall pay the Contractor the sum of
L100,000 (one hundred thousand pounds sterling) as part payment of the
anticipated bonus payable to the Contractor. The balance of the bonus shall
be paid in cash by the Company to the contractor on or before 30 October 1998.

2.3 The Company agrees and undertakes to use its best efforts to have the
Contractor participate in the forthcoming sale of shares in the Company to
the public by being granted the right to subscribe for approximately 10,000
transferable voting shares in the Company, or as many as are allocated by the
underwriters, at the offering price to the public.

<PAGE>

3. JITENDRA VALERA

Subject to compliance by the Company with the terms of this Amendment to the
Professional Services Agreement, the Contractor confirms that the Company may
offers terms of employment to Jitendra Valera.

4. AGREEMENT OTHERWISE UNAFFECTED

Save as amended and varied by this Amendment to the Professional Services
Agreement, the terms and obligations of the Agreement are otherwise
unaffected.

/s/ Stephen E. Recht CFO
-------------------------------

duly authorised for and on behalf of
NETGRAVITY INC

Dated at San Mateo, CA, USA this 13 day of May 1998
--------------------- ---- ---------

/s/ Larry Levy
-------------------------------
duly authorised for and on behalf of
PROTEGE SOFTWARE (HOLDINGS) LIMITED
of Richmond House, St Anne's Place, St. Peter Port,
Guernsey, GY1 2NV, Channel Islands

Dated at London, England this 13th Day of May 1998.

<PAGE>

SUMMARY OF PLAN PROVISIONS

This is a brief summary of your Regional Standard Profit Sharing Plan's
provisions. For a more detailed explanation, please look at the Summary Plan
Description which follows this summary.

ACCOUNTING, EFFECTIVE DATE AND OTHER DATA

EMPLOYERS NAME NetGravity, Inc.

ADDRESS 1700 S. Amphlett Boulevard, Suite 350
San Mateo, CA 94402

BUSINESS Corporation
ORGANIZATION

EFFECTIVE DATE January 1, 1996

RESTATED DATE January 1, 1996

EMPLOYER December 31
TAX YEAR END

PLAN YEAR END December 31

EMPLOYER 77-0410283
IDENTIFICATION
NUMBER

PLAN NUMBER 001

DESCRIPTION OF Software development
TRADE OR BUSINESS

LIMITATION December 31
YEAR END

ELIGIBILITY

SERVICE NONE
REQUIREMENT

MINIMUM AGE Age 21
REQUIREMENT

EXCLUDED CLASSES Employees included in a collective bargaining
OF EMPLOYEES agreement.

ELIGIBILITY FOR A participant shall be eligible to receive an
EMPLOYER allocation of employer contribution, if any, if the

<PAGE>

CONTRIBUTIONS participant has 1,000 hours of service and is still
employed at the end of the Plan year.

ENTRY DATES 1/1, 4/1, 7/1, 10/1.

PLAN ENTRY An employee shall enter the Plan on the Plan entry
date following the date on which the employee meets
the eligibility requirements indicated above.

ELECTION NOT Not applicable.
TO PARTICIPATE

YEARS OF SERVICE 1,000 hours of service constitutes a year of service
for eligibility and vesting.

DEFINITION OF COMPENSATION

Compensation shall mean Section 3401(a) wages.

Compensation shall mean the amount which is actually paid to the
participant during the determination period which shall be the plan
year.

Compensation shall include employer contributions made pursuant to a
salary reduction agreement which is not includible in the gross income
of the employee under Sections 125, 402(a) (8), 402(h) or 403(b) of the
code.

This definition of compensation shall be effective as of 01/01/97.

Compensation shall be taken into account from the date of entry into
the plan.

ELECTIVE DEFERRALS

ELECTIVE A participant may elect to have his/her
DEFERRALS compensation reduced up to 20 percent per Plan year.

CASH OR DEFERRED A participant may base elective deferrals on up
ELECTIONS to 20% of any cash bonus and elect to have such
deferred into his/her account.

ELECTIONS Each year a participant may elect to commence
deferrals as of 1/1, 4/1, 7/1, 10/1. The participant
may increase or decrease their deferrals on these
dates and terminate such at any time.

MATCHING The employer may, in its sole discretion, make
CONTRIBUTIONS matching contributions in an amount determined by the
employer from year to year. All employer matching
contributions shall be subject to the vesting
schedule. Forfeitures arising from matching
contributions shall be used to reduce

2
<PAGE>

employer contributions.

QUALIFIED The employer may make qualified nonelective
NONELECTIVE contributions to the Plan to be determined by the
CONTRIBUTIONS employer on a year to year discretionary basis. The
allocation of such contributions shall be made to the
accounts of only nonhighly compensated participants.

VOLUNTARY Not applicable
NONDEDUCTIBLE
CONTRIBUTIONS

HARDSHIP Hardship withdrawals of elective deferrals shall
WITHDRAWALS be permitted.

EXCESS ELECTIVE A participant who claims excess elective
DEFERRALS deferrals for the preceding taxable year must submit
his/her claim in writing to the Plan administrator by
February 15.

VESTING

TOP-HEAVY Years of Service Percentage
VESTING SCHEDULE 2 years 25%
3 50%
4 75%
5 100%

NORMAL RETIREMENT AGE

The normal retirement age is 65.

EARLY RETIREMENT AGE

Early retirement age shall be 60.

Early retirement shall only be available to a participant who has completed 0
year(s) or more of service.

service with previous employer will not taken into account except to the
extent service is required to be given pursuant to Code Section 414(a) and
the regulations thereunder.

ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES

3
<PAGE>

BASIC If discretionary employer contributions are
NONINTERGRATED contributed, they are allocated to eligible
FORMULA participants pro rata to compensation for the
Plan year.

ADMINISTRATIVE ELECTIONS

PAYOUTS OF
SMALL ACCOUNT
BALANCES

DISTRIBUTIONS AT
TERMINATION OF
EMPLOYMENT

HARDSHIP
WITHDRAWALS

PARTICIPANT LOANS

PARTICIPANT-
DIRECTED
INVESTMENTS

ROLLOVERS

TRANSFERS

HOURS OF SERVICE

INVESTMENT IN
EMPLOYER SECURITIES

IN-SERVICE
WITHDRAWALS

CUSTODIAN TRUSTEE John Danner

4
<PAGE>

SUMMARY OF PLAN PROVISION ATTACHMENT

EMPLOYER NAME NetGravity, Inc.

PLAN NAME NetGravity 401(k) Plan

EMPLOYER'S (650) 655-4777
PHONE NUMBER

TYPE OF PLAN Third Party Administrator
ADMINISTRATION

AGENT FOR SERVICE John Danner
OF LEGAL PROCESS
<PAGE>

TABLE OF CONTENTS

<C> <S> <C>
I. ELIGIBILITY FOR PARTICIPATION............................... 1
In General.................................................. 1
Eligibility Requirements.................................... 1
Computing Service for Eligibility........................... 1
II. PARTICIPATION............................................... 1
III. CONTRIBUTIONS TO THE PLAN................................... 1
In General.................................................. 1
Computing Your Share of the Contribution.................... 2
Basic Formula (Nonintegrated)............................... 2
Integrated Formula.......................................... 2
Employee Elective Deferrals................................. 4
Employer-Matching Contributions............................. 5
Excess Elective Deferrals................................... 5
Hardship Withdrawal of Your Elective Deferrals.............. 5
Employee Contributions...................................... 6
Rollovers................................................... 6
IV. INVESTMENTS, GAINS AND LOSSES............................... 6
In General.................................................. 6
Participant-Directed Investments............................ 6
V. VESTING..................................................... 7
In General.................................................. 7
Computing Years of Service for Vesting...................... 7
Years That Do Not Count for Vesting......................... 7
Additional Years That May Count for Vesting................. 7
Forfeiture of Nonvested Amounts............................. 7
VI. TOP-HEAVY RULES............................................. 8
VII. BENEFITS.................................................... 8
Eligibility................................................. 8
When and How Benefits Are Paid.............................. 8
Eligible Rollover Distributions............................. 9
Special Rules for Transfers/Conversions from Certain Plans.. 10
VIII. WITHDRAWALS AND LOANS....................................... 11
Employee Contributions...................................... 11
Hardship Withdrawal......................................... 11
Loans....................................................... 11
IX. MISCELLANEOUS............................................... 12
Termination and Amendment of the Plan....................... 12
Protection from Creditors................................... 12
Termination Insurance....................................... 12
X. PROCEDURE FOR PROCESSING CLAIMS............................. 12
XI. YOUR RIGHTS UNDER ERISA..................................... 12

</TABLE>

<PAGE>

I. ELIGIBILITY FOR PARTICIPATION

IN GENERAL

In general, all employees of the employer will have the chance to
participate in the plan. The only exceptions are:

(1) Employees who are covered by a collective bargaining agreement,
unless the collective bargaining agreement provides for their participation;

(2) Employees who are nonresident aliens and who have no income from
sources in this country; and

(3) Employees who are specified as an excluded class in the
"Eligibility" section of the "Summary of Plan Provisions".

Also, the employer may allow you to make an irrevocable election not to
participate in the plan. To find out if this rule applies, see the
"Eligibility" section of the "Summary of Plan Provisions."

ELIGIBILITY REQUIREMENTS

In order to be eligible to participate in the plan, you must satisfy the
service and minimum age requirements described under "Eligibility" in the
"Summary of Plan Provisions" part of this booklet. Also, you should review
the "Service With a Previous Employer" section in the "Summary of Plan
Provisions" to see if your employer counts service with any other employer
for eligibility purposes.

COMPUTING SERVICE FOR ELIGIBILITY

If the plan requires you to complete a certain period of years of
service to be eligible, you must become familiar with several important terms.

(1) YEAR OF SERVICE: A "year of service" is defined by the plan as a
12-month period in which you are credited with at least 1,000 hours of
service or such lesser hours as determined by your employer. See the
"Eligibility" section of the "Summary of Plan Provisions", for the year of
service requirement. The 12-month period is your employment year; that is, a
12-month period measured from the date you are first employed by the business
(or reemployed if you leave and then come back) or any anniversary of your
employment date.

You must complete the required hours of service during an employment
year to receive any credit for that year. Partial credit is not given nor
may you carry over hours from one year to the next.

(2) MONTH OF SERVICE: A "month of service" is a calendar month in which
you complete at least one hour of service.

(3) HOUR OF SERVICE: An "hour of service" is any hour for which you are
paid or entitled to payment for work you have completed for the employer. It
includes periods of time when you are away from work, but for which you get
paid, like vacations and holidays. No more than 501 hours of service are
credited for any continuous period when you are away from work and get paid.

II. PARTICIPATION

You will enter the plan and become a participant on the entry date
either preceding or immediately following the date you satisfy the plan's
eligibility requirements. The entry date(s) and plan entry information are
found in the "Eligibility" section of the "Summary of Plan Provisions."

If you are a participant in the plan and you terminate employment, then
later come back to work, you will participate in the plan immediately on the
day you are reemployed.

III. CONTRIBUTIONS TO THE PLAN

IN GENERAL

When you become a participant in the plan, a special account is set up
in your name. All contributions the employer makes for you will be credited
to this account.

Generally, as a plan participant, you will share in any employer
contributions that are made to the plan. However, if this is a Standard plan
as indicated in the heading of the "Summary of Plan Provisions," and the
employer chooses, it's possible you will not be eligible for employer
contributions if you are not employed on the last day of the plan year and
you work less than 501 hours during the year. To find out if

<PAGE>

this rule applies to you, refer "Eligibility For Employer Contributions"
in the "Eligibility" section of the "Summary of Plan Provisions." If there
is no "Eligibility For Employer Contributions" section, this rule does not
apply.

If this is a Nonstandard plan as indicated in the heading of the
"Summary of Plan Provisions," and the employer chooses, it's possible you
will not be eligible for an employer contribution if you are not employed on
the last day of the plan year and/or if you do not complete 1,000 hours of
service during the plan year. Note that the 1,000 hour requirement does not
apply if the plan is top-heavy. Refer to "Eligibility for Employer
Contributions" under the "Eligibility" section of the "Summary of Plan
Provisions" to see if these rules apply to you. If there is no "Eligibility
for Employer Contributions" section, these rules do not apply.

In a profit sharing plan, the contributions made by the employer may
vary from year to year. The amount to be contributed for the year depends on
a number of factors, such as the profit for the year and the future prospects
for the business. The employer has the discretion under the plan to omit a
contribution for any given year. Generally, the contribution will not exceed
a maximum of 15% of the compensation of all participants for the year.

COMPUTING YOUR SHARE OF THE CONTRIBUTION

The amount of employer contributions allocated to your account for a plan
year depends on the formula your employer has selected. In general, your
share of employer contributions depends on your compensation and how it
compares to the compensation of all the participants in the plan.
"Compensation" includes all the amounts you receive for working for the
employer, with some minor exceptions. Compensation for plan purposes will be
limited to $150,000 (1996 amount - adjusted for the cost of living
increases). To find out how the plan defines compensation, see the
"Definition of Compensation" section of the "Summary of Plan Provisions." If
you are the owner or part owner of the employer and the employer is an
unincorporated business, compensation means your earned income from the
business. Deductions for contributions to the plan are taken into account
for purposes of computing income from the business.

BASIC FORMULA (NONINTEGRATED)

Employer contributions are allocated among all participants. Your share
is an amount equal to the proportion that your compensation for the plan year
bears to the compensation of all participants for the plan year.

EXAMPLE: Bill makes $10,000. The total compensation of all participants
in the plan for the plan year is $50,000. If the employer makes a profit
sharing contribution of $5,000, Bill's share is $1,000 ($10,000/$150,000 X
$5,000).

INTEGRATED FORMULA

If your employer has chosen this type of formula it is called
"integrated" because the formula for allocating profit sharing contributions
takes into account the fact that the employer makes Social Security
contributions on your behalf. The formula allocates the contributions in a
top-heavy profit sharing plan in up to four stages.

(1) First, a minimum or "floor" amount is allocated among all
participants. Your share is an amount equal to the proportion that your
compensation for the plan year bears to the compensation of all participants
for the plan year. Generally, the amount allocated to your account in this
stage will be 3% of your compensation. However, it may be more or less
depending on whether the employer maintains any other plans, whether
contributions are made for you under any other plan, and a number of other
factors. It also assumes that the employer makes a contribution sufficient
to allocate at least 3% of compensation to all participants.

(2) Next, the contribution is allocated among participants who have
compensation above the integration level. If you have compensation above the
integration level, your share of the contribution is an amount equal to the
proportion that your compensation for the plan year above the integration
level bears to all participants' compensation for the plan year above the
integration level. However, the contribution in this stage cannot exceed 3%
of total compensation above the integration level.

(3) Next, the remaining portion of the contribution is allocated among
all participants in the ratio that the sum of each participant's total
compensation and compensation above the integration level bears to the sum of
all participant's total compensation and compensation above the integration
level, but not in excess

<PAGE>

of the profit sharing maximum permitted disparity rate. The maximum
permitted disparity rate varies depending upon the integration level chosen.

a. If the integration level is equal to the taxable wage base, the
maximum disparity rate is 2.7%.

b. If the integration level is no more than 20% of the taxable wage
base, the maximum disparity rate is 2.7%.

c. If the integration level is more than 80% and less than 100% of
the taxable wage base, the maximum disparity rate is 2.4%.

d. If the integration level is 80% or less of the taxable wage base but
greater than the amount described in (b) above, the maximum disparity
rate is 1.3%.

(4) Finally, the balance of employer contributions which have not been
allocated in stages 1,2, and 3 above are allocated among all participants.
Your share is an amount equal to the proportion that your compensation for the
year bears to all participants' compensation for the year.

EXAMPLE: Bill and Joan are the only participants in the plan. Bill
earned $70,000 and Joan made $90,000. The integration level is set at
the Social Security taxable wage base of $62,700 (1996 amount - adjusted
annually for cost of living increases) and the disparity rate is 2.7%. The
employer makes a $15,000 profit sharing contribution and has no other
plans. Bill's and Joan's share of the contribution is computed as follows:

STAGE 1 - JOAN

a. The total compensation for all participants is $160,000 ($70,000 +
$90,000).

b. Joan's percentage of the total compensation is 56.25%
($90,000/$160,000).

c. Joan's share of the contribution is $8,437.50 (56.25% of $15,000).

d. But no more than 3% of Joan's compensation is allocated in Stage 1.

e. The amount of Joan's allocation in Stage 1 is $2,700 (3% of
$90,000).

STAGE 1 - BILL

a. The total compensation for all participants is $160,000 ($70,000 +
$90,000).

b. Bill's percentage of the total compensation is 43.75%
($70,000/$150,000).

c. Bill's share of the contribution is $6,562.50 (43.75% of $15,000).

d. But no more than 3% of Bill's Compensation is allocated in Stage 1.

e. The amount of Bill's allocation in Stage 1 is $2,100 (3% of
$70,000).

Of the $15,000 contribution, $4,800 ($2,700 + $2,100) is allocated
in Stage 1. A remaining contribution of $10,200 needs to be allocated.

STAGE 2 - JOAN

a. The total amount of compensation above the integration level is
$34,600 [Joan's $27,300 ($90,000 - $62,700) plus Bill's $7,300 ($70,000 -
$62,700)].

b. The percentage of Joan's compensation above the integration level
as it relates to the total compensation above the integration level is
78.9% ($27,300/$34,600).

c. Of the remaining $10,200 contribution, Joan gets 78.9% or $8,047.80.

d. But the amount allocated to Joan in this stage cannot exceed 3% of
her compensation above the integration level.

e. Joan's allocation in Stage 2 is $819 (3% of $27,300).

STAGE 2 - BILL

a. The percentage of Bill's compensation above the integration level as
it relates to the total compensation above the integration level is 21.1%
($7,300/$34,600).

b. Of the remaining $10,200 contribution, Bill gets 2l.l% or
$2,152.20.

c. But the amount allocated to Bill in this stage cannot exceed 3% of
his compensation above the integration level.

d. Bill's allocation in Stage 2 is $219 (3% of $7,300).

The total amount allocated in Stage 2 is $1,038 ($819 + $219). A
remaining contribution of $9,162 needs to be allocated.

STAGE 3 - JOAN

a. The balance of $9,162 is allocated based on the ratio that Joan's
total compensation plus compensation above the integration level bears to
the sum of all participants' total compensation plus compensation above
the integration. The allocation is limited to a maximum of 2.7% of total
compensation plus compensation above the integration level.

<PAGE>

b. The ratio of Joan's total compensation plus compensation above the
integration level to all participants is 60.28% [($90,000 + $27,300)
/$90,000 + $27,300 + $70,000 + $7,300].

c. Joan gets 60.28% of the remaining $9,162 or $5,522.85.

d. But the amount allocated to Joan in this stage can't exceed 2.7%
of her total compensation plus her compensation above the integration
level.

e. Joan's allocation in Stage 3 is $3,167.10 [2.7% of $117,300
($90,000 + $27,300)].

STAGE 3 - BILL

a. The ratio of Bill's total compensation plus compensation above the
integration level to all participants is 39.72% [($70,000 + $7,300)/$90,000
+ $27,300 + $70,000 + $7,300].

b. Bill gets 39.72% of the remaining $9,162 or $3,639.15.

c. But the amount allocated to Bill in this stage can't exceed 2.7%
of his total compensation plus his compensation above the integration
level.

d. Bill's allocation in Stage 3 is $2,087.10 [2.7% of $77,300 ($70,000
+ $7,300)].

The total amount allocated in Stage 3 is $5,254.20 ($3,167.10 +
$2,087.10). The balance to be allocated is $3,907.80.

STAGE 4 - JOAN

a. The remaining contribution of $3,907.80 is allocated in the
proportion of each participant's compensation to the total compensation
of all participants.

b. Joan's percentage of the total compensation is 56.25%
($90,000/$160,000).

c. Joan gets $2,198.14 (56.25% of $3,907.80) allocated to her
account in Stage 4.

STAGE 4 - BILL

a. Bill's percentage of the total compensation is 43.75%
($70,000/$160,000).

b. Bill gets $1,709.66 (43.75% of $3,907.80) allocated to his account
in Stage 4.

TOTAL CONTRIBUTION - JOAN

$8,884.24 = [$2,700 (Stage 1) + $819 (Stage 2) + $3,167.10 (Stage 3) +
$2,198.14 (Stage 4)]

TOTAL CONTRIBUTION - BILL

$6,115.76 = [$2,100 (Stage 1) + $219 (Stage 2) + $2,087.10 (Stage 3) +
$1,709.66 (Stage 4)]

NOTE: For any year in which the plan is not top-heavy, the integration
formula begins at Step 3 and the maximum permitted disparity rate is
increased 3%. In this case, 2.7% becomes 5.7%, 2.4% becomes 5.4% and 1.3%
becomes 4.3%.

EMPLOYEE ELECTIVE DEFERRALS

If the plan includes 401(k) provisions, you may be able to have a part
of your wages taken out of each paycheck and contributed to the plan. Refer
to the "Elective Deferrals" section of the "Summary of Plan Provisions" to
find out if you are allowed to make 401(k) contributions. If there is no
"Elective Deferrals" section, this plan does not allow for 401(k)
contributions.

Contributions that you make to the plan under the 401(k) provisions are
called "elective deferrals." Every dollar you contribute as an elective
deferral reduces your W-2 wages--thereby reducing your taxable income for
federal tax purposes. In most cases, elective deferrals also reduce your
income for state and local tax purposes, although you should check to make
sure this is true for the state and city in which you live. All elective
deferrals are subject to FICA and FUTA withholding.

EXAMPLE: John earns $30,000 and contributes $2,500 to the plan as an
elective deferral. For federal tax purposes, John has gross wages of
$27,500. But for FICA and FUTA tax purposes, John has $30,000 of
income.

The most you can contribute to a 401(k) plan is $9,500 per year (1996
amount - adjusted for cost of living increases). If you are a "highly
compensated employee," as defined by IRS regulations, the amount you can
contribute may be limited by the actual deferral percentage test. Your
employer can tell you if you are a highly compensated employee.

The employer can also set a limit on the amount of elective deferrals.
To find out if your employer has set a limit on how much you can contribute
to the plan, refer to the "Elective Deferrals" section of the "Summary of
Plan Provisions."

Besides having amounts taken out of your paycheck, if your employer
chooses, you may also be able to defer all or part of any employer-paid
bonus. To see if bonus deferrals are allowed, refer to the "Elective
Deferral" section of the "Summary of Plan Provisions.

<PAGE>

Elective and bonus deferrals and earnings on the contributions are not
taxable until withdrawn. At that time, amounts withdrawn are added to
the rest of your income for tax purposes.

Before you can have amounts taken out of your paycheck and contributed
to the plan, you must sign a form provided by your employer. This form lets
you choose the dollar amount or percentage of wages you want withheld from
each paycheck and contributed to the plan. You can change or stop making
elective deferrals, but only on the date(s) allowed by the employer. These
dates are found under "Elections" in the "Elective Deferral" section of the
"Summary of Plan Provisions."

EMPLOYER-MATCHING CONTRIBUTIONS

In addition to what you contribute to the plan as elective deferrals,
it's possible your employer will make matching contributions. To find out if
the employer will make matching contributions and the limits on matching
contributions, if any are made, see "Matching Contributions" in the "Elective
Deferral" section of the "Summary of Plan Provisions." If there is no
"Matching Contributions" section, the employer will not make matching
contributions.

If the employer has elected to make matching contributions, your
elective deferral contribution will be matched with a contribution by the
employer. Employer-matching contributions are deposited in a special account
under the plan called the Employer-Matching Contribution Account.

EXAMPLE: Joyce makes $20,000 per year. Her employer has elected to
provide matching contributions equal to 50% of the salary reduction
contributions Joyce makes to the plan. The maximum salary reduction
contributions that will be matched, however, are 5% of a participant's
gross compensation. Joyce decides to contribute 6% of her salary to the
plan. Thus, Joyce's salary is reduced $1,200 (6% of $20,000) and the
$1,200 is contributed to the plan. The employer will match 50% of the
amount Joyce contributes, up to 5% of her gross compensation. Five
percent of Joyce's gross compensation is $1,000 (5% of $20,000), so the
employer's matching contribution is 50% of $1,000, or $500.

If there are excess aggregate contributions to the plan, forfeitures of
these amounts and of any nonqualified matching contributions will either be
used to reduce future employer contributions or be allocated to each
participant on a compensation-to-compensation basis, as determined by the
employer. To find out which method the employer chose, see "Matching
Contributions" in the "Elective Deferrals" section of the "Summary of Plan
Provisions."

EXCESS ELECTIVE DEFERRALS

You are responsible to make sure your elective deferral contributions do
not exceed the maximum limits. The annual limit on your elective deferral
contributions is $9,500 (1996 amount - adjusted for cost of living
increases). To find out what the limit is for any year, ask your employer.

If you do contribute more than the maximum limit, you must notify your
employer by a date specified by the employer. The date by which you must
notify the employer is indicated in the "Elective Deferral" section of the
"Summary of Plan Provisions."

This rule is especially relevant if you participate in a deferred
compensation plan of another company you may also work for.

HARDSHIP WITHDRAWAL OF YOUR ELECTIVE DEFERRALS

Your employer may allow you to withdraw all or part of your elective
deferral contributions because of hardship. Refer to the "Elective Deferral"
section of the "Summary of Plan Provisions" to see if hardship withdrawals
are permitted.

If the employer allows hardship withdrawals, you may withdraw elective
deferrals for the following reasons:

(1) To pay deductible medical expenses of yourself, spouse, children or
dependents;

(2) To purchase a principle residence (house) that you will live in;

(3) To pay tuition and related educational fees for the next 12 months of
post-secondary education for yourself, spouse, children or dependents;

(4) To prevent eviction from or foreclosure on the mortgage of your
house.

At this time, these are the only reasons that qualify for hardship
withdrawals. Eventually the IRS may allow hardship withdrawals for other
reasons.

<PAGE>

Any withdrawal you receive because of hardship is subject to income tax,
and if you are under age 59 1/2, it is also subject to a 10% penalty tax
described later in the section titled, "Distributions Before Age 59 1/2."

Other restrictions apply to hardship withdrawals. This information can
be obtained from your employer.

EMPLOYEE CONTRIBUTIONS

Under the plan, the employer is authorized to establish uniform rules to
permit employee contributions. To determine whether employee contributions
are allowed, see the "Elective Deferral" section of the "Summary of Plan
Provisions." If the employer allows such contributions, they will be
completely voluntary. Note that these contributions you make as an employee
under this plan are not tax deductible; although any earnings on the
contributions are tax-deferred and not taxed until they are actually
distributed to you. Any voluntary contributions you might make to the plan
are placed in your account. Separate records are maintained to keep track of
the contributions you have made.

There are a number of different rules that apply to voluntary employee
contributions. A discussion of these rules follows. You should review them
if the employer permits voluntary employee contributions and you intend to
make voluntary contributions to the plan.

Only participants may make voluntary employee contributions. You may
voluntarily contribute up to 10% of your total compensation from the
employer--paid for all years you're a plan participant. The 10% limit is
cumulative; that is, if you contribute less than the 10% limit in one year,
you can make up that amount and contribute it in a later year, along with the
10% allowed for the later year.

ROLLOVERS

The plan gives the employer the right to establish uniform rules for
rollover contributions. To find out whether the plan allows for rollover
contributions, see the "Administrative Elections" section of the "Summary of
Plan Provisions." If the employer allows rollovers, you may roll over a
distribution received from another plan into this plan. There are a number
of rules that apply to rollovers. If you have a distribution from another
plan which you would like to deposit in this plan you should check with the
employer. Any amounts received from another plan will be deposited in your
account. Separate records will be kept to show the amount in your account
which is attributable to rollovers from another plan.

IV. INVESTMENTS, GAINS AND LOSSES

IN GENERAL

The earnings, gains and losses generated by plan investments will be
allocated among the accounts of the participants in the plan. The extent to
which you share in the investment performance of the plan's assets depends on
the size of your account in relation to the size of all the other
participants' accounts in the plan.

Example: Assume the plan has a balance of $20,000 and your account has
a value of $5,000. One-fourth ($5,000/$20,000) of the earnings, gains and
losses experienced by the plan will be charged or credited to your
account.

Earnings, gains or losses are generally allocated among the
participants' accounts once a year. This happens on the last day of the plan
year. Your employer may have this process take place more frequently,
however, by asking the trustee or custodian to do so.

When allocating earnings, gains and losses, the trustee or custodian
will use the value your account had as of the last time earnings, gains and
losses were allocated, reduced by any distributions and increased by any
contributions which have been made to your account since that time.

PARTICIPANT-DIRECTED INVESTMENTS

The employer may allow you to choose how your account balance is
invested. The "Administrative Elections" section of the "Summary of Plan
Provisions" will indicate whether participant investments are allowed under
this plan. If the employer allows this option, you should instruct the
employer, following the procedure the employer establishes, to invest your
account as desired. The employer, in turn, will advise the trustee.

<PAGE>

If you direct the investment of your account, any earnings, gains or
losses produced by the investments you make will be credited or charged only
to your account. The general procedure for allocating earnings, gains or
losses, which is described on the previous page, will not apply.

If your plan uses a custodian and the employer permits participants to
choose investments, only the following choices are available: (1) a savings
account with the custodian, (2) a time deposit with the custodian, and (3) life
insurance.

V. VESTING

IN GENERAL

"Vesting" means that you have a right to the balance in your account
which cannot be taken away, even if you terminate employment. You become
vested in accordance with the vesting schedule the employer has selected.
The vesting information is found in the "Vesting" section of the "Summary of
Plan Provisions." Regardless of the vesting schedule selected, you are always
100% vested in any voluntary employee contributions you make to the plan as
well as any rollover or transfer contributions to this plan from another
plan. You are also 100% vested in your entire account, including amounts
attributable to employer contributions, when you reach your normal retirement
age or if you become disabled or die before you terminate employment with the
employer.

COMPUTING YEARS OF SERVICE FOR VESTING

If the employer has selected a vesting schedule other than 100% immediate
vesting, you will need to compute your years of service to determine your
vested percentage. Except as provided below, all of your years of service
for the employer will be added together to determine where you are on the
vesting schedule. A year of service for vesting is a plan year in which you
have completed 1,000 or more hours of service. Partial credit is not given,
nor may you carry over hours from one plan year to the next. An hour of
service has the same meaning that it has for eligibility.

YEARS THAT DO NOT COUNT FOR VESTING

Depending on the options selected by the employer, certain years of
service may not be taken into account for vesting. Refer to "Exclusions" in
the "Vesting" section of the "Summary of Plan Provisions" to determine what
years, if any, are excluded.

ADDITIONAL YEARS THAT MAY COUNT FOR VESTING

If the employer has so elected, years of service with a previous
employer may be taken into account for vesting. This information is found
under "Service with a Previous Employer" in the "Service of Plan Provisions."

FORFEITURE OF NONVESTED AMOUNTS

If you terminate employment with the employer at a time when you are
less than 100% vested, the nonvested portion of your account eventually will
be forfeited. The amount forfeited will be allocated among the remaining plan
participants in the same manner as employer contributions. However, if you
return to work before you have five consecutive one-year breaks in service
and repay the amount distributed to you previously, the nonvested amount will
be restored to your account. There is a time limit for this repayment. A
"break in service" is a plan year in which you have 500 or fewer hours of
service.

For example if you are 60% vested and you quit work, you will eventually
receive 60% of your account balance. The 40% nonvested portion is forfeited
and will be divided among the participants.

If you have 500 or fewer hours of service in a plan year because you are
on maternity or paternity leave, (this includes a leave granted because of
the adoption of a child), you will be credited with the hours of service you
would have otherwise been credited with to determine whether you have a break
in service. The credit is given in the plan year the leave begins if you
need it to keep from having a break in service in that year. Otherwise the
credit will be given in the next plan year.

<PAGE>

VI. TOP-HEAVY RULES

There are certain rules that apply to the plan for any year the plan is
top-heavy. A plan is "top-heavy" if the total account balances of key
employees of the employer (and affiliates, if any) is more than 60% of the
account balances of all participants.

A key employee is an employee who:

(1) Is an officer of the employer having an annual compensation of
more than $60,000* for the plan year,

(2) Is one of ten employees having annual compensation of more than the
$30,000* and ownership of one of the ten largest interests in the employer;

(3) Owns more than five percent of the employer; or

(4) Owns more than one percent of the employer and has annual
compensation of more than $150,000.

*1996 amount - adjusted for cost of living increases.

If the plan is top-heavy for any plan year, a minimum contribution
of 3% of compensation must be made for all employees eligible for an
employer contribution.

NOTE: The minimum contribution can be less than 3% as long as it is
equal to the highest percentage of any key employee. In addition, the plan
must have 100% immediate vesting, the 2/20 vesting schedule or the 3-year
cliff schedule.

VIII. BENEFITS

ELIGIBILITY

You will be eligible to receive benefits from the plan under the
following circumstances:

(1) TERMINATION OF EMPLOYMENT: You may be eligible to receive benefits
when you terminate employment with the employer. The "Administrative
Elections" section of the "Summary of Plan Provisions" will tell you if you
are allowed to receive a distribution of the vested portion of your
participant's account at termination of employment. Regardless of this
election by your employer, you will be eligible to receive 100% of your
voluntary contribution and rollover accounts at termination of employment.

(2) DISABILITY: You will be eligible to receive benefits if you
terminate employment with the employer on account of disability. You will be
considered disabled when, due to a physical or mental condition, you are no
longer able to work and your condition is expected to be permanent. The
employer will determine if you are disabled on the basis of medical evidence
you submit.

(3) DEATH: If you die while you are a participant, your beneficiary will
be eligible to receive benefits from the plan. Your beneficiary is named by
filing a Beneficiary Designation form with the employer before your death,
naming the person or persons you want to receive benefits in case of your
death. Your employer has a supply of these forms on hand.

If you are married, your spouse will automatically be your beneficiary
unless your spouse consents to the designation of someone else as your
beneficiary. The consent of your spouse must be in writing, on the form
provided by the employer, and your spouse's signature must be witnessed by a
plan representative or notary public. Your spouse's consent to name someone
else as your beneficiary will only be effective for the spouse that signs the
consent. For example, if you are divorced and later remarry, consent by your
former spouse will only be effective with respect to him or her, and will
not apply to your new spouse.

(4) RETIREMENT. You will become eligible to receive benefits from the
plan on your normal retirement date. The normal retirement date is the first
day of the month following the date you reach your normal retirement age.
The normal retirement age can be found in the "Normal Retirement Age" section
of the "Summary of Plan Provisions."

WHEN AND HOW BENEFITS ARE PAID

Once you become eligible for benefits, you may elect when and how
benefits are to be paid. The election is made by completing a form which the
employer will give you on request. In the case of death benefits, your
beneficiary will have the choice, unless you otherwise provide in your
beneficiary designation.

If you terminate employment for a reason other than death, disability or
retirement, the employer has the option to defer payment of your benefit
until your normal retirement date or the date you become

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<PAGE>

disabled or die, if that occurs before your normal retirement date. The
"Administrative Elections" section of the "Summary of Plan Provisions" will
indicate whether this option was chosen under your plan.

Before you begin receiving benefits, it is strongly recommended that you
consult with your attorney, accountant or other advisor. They can help you
make the right decision and let you know the tax implications of the various
distribution options you have.

When you file an application with the employer to receive benefits, you
may select one of the following or a combination of the following options:

- - LUMP SUM: You may have your benefits paid in one single payment.

- - INSTALLMENTS: You may have your benefits paid in equal, or nearly equal,
annual installments over a certain number of years or months.

- - ANNUITY CONTRACT: You may have the Trustee purchase an annuity contract
and have the contract distributed to you. Only certain kinds of annuity
contracts may be purchased. The restrictions are provided in the plan.

When you make your application for benefits, there are some limitations
that must be kept in mind:

(1) LIMIT ON INSTALLMENTS: If you request installment payments, the
installments cannot exceed a period of time which is longer than your life
expectancy or the combined life expectancy of you and your beneficiary. The
plan measures life expectancy by using tables published by the IRS. In
addition to limitations on the number of installments which you may receive,
certain rules govern the amount which you may receive in each installment.

(2) DISTRIBUTION IN KIND: The employer has the option of paying your
benefits in cash, in kind (actually distributing assets that are in the plan)
or a combination of the two, subject to your approval.

(3) DISTRIBUTION AT AGE 70 1/2: You must start receiving benefits by
April 1 following the year in which you reach age 7O 1/2, whether or not you
have retired.

(4) DISTRIBUTION BEFORE AGE 59 1/2: Distributions before age 59 1/2 may
be subject to a 10% penalty tax. The 10% penalty tax is equal to 10% of that
portion of a distribution that is included in your gross income. It does not
apply if the distribution is payable: 1) on account of death; 2) due to
disability; 3) as part of a series of substantially equal periodic payments
made over your life expectancy or your joint-life expectancy calculated with
your beneficiary (beginning after you separate from service); or 4) due to
separation from service after age 55. Other exceptions may also apply.

(5) PAYOUT OF SMALLER ACCOUNTS: If the balance of your account is $3,500
or less, the employer may elect to distribute your account in a single sum
regardless of the election you make. To find out if this is the case, refer
to the "Administrative Elections" section of the "Summary of Plan
Provisions." If you are not fully vested in your account at the time a
distribution is made, the nonvested portion of your account will be forfeited.

(6) DISTRIBUTIONS AFTER YOUR DEATH: Generally, if you die on or after
April 1 following the year in which you reach age 7O 1/2, payments must
continue to your beneficiaries at least as rapidly as payments were being
made under your payment schedule. If you die before April 1 following the
year in which you reach age 70 1/2, the benefit payable on your death may not
be paid over a period that is longer than the life expectancy of your
designated beneficiary, provided payments to your beneficiary start by
December 31 of the year after you die. If your spouse is your designated
beneficiary, the same rule applies, but the payments don't have to start
until December 31 of the year you would have been age 70 1/2. In all other
cases not covered by the foregoing rules, the benefits payable on your death
may not be spread out over a period of more than five years from the date of
your death.

(7) IN-SERVICE DISTRIBUTIONS: If your employer permits in-service
withdrawals, you can withdraw funds from the plan. You can only withdraw
funds that have been in your participant account for two (2) full plan years.
However, you cannot withdraw your own elective deferral contributions to a
401(k) plan under this rule. Generally, the amount you withdraw will be
subject to income taxes and, if you are under age 59 1/2, a 10% IRS excise
tax. To find out if your plan allows for in-service withdrawals, see the
"Administrative Elections" section of the "Summary of Plan Provisions."

ELIGIBLE ROLLOVER DISTRIBUTIONS

If your retirement benefits to be paid will be an eligible rollover
distribution, you will have to choose how you want it distributed. You can
have the funds sent directly to another retirement plan in a direct rollover,
or you can take possession of the distribution after your employer withholds
20 percent federal income tax.

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An eligible rollover distribution is a distribution of all or any
portion of your account balance in the plan. However, it does not
include the following:

(1) Substantially equal payments at least annually over your life (or
joint lives with your beneficiary) or for a period of 10 years or more;

(2) Distributions you are required to take from the plan because you
are age 7O 1/2 or older; and

(3) Amounts that are not taxable to you when distributed.

These distributions are not "eligible rollover distributions";
therefore, they cannot be rolled over to another retirement plan and
are not subject to 20 percent tax withholding.

You can choose to have an eligible rollover distribution paid
directly to another employer's qualified plan that accepts these
rollovers, or an IRA. This is called a direct rollover.

If you choose to take possession of the distribution, rather than
have it directly rolled over to another retirement plan, your
employer/plan administrator must withhold 20 percent federal income tax
from the amount of the distribution. You may then be able to roll over
the actual amount received (80 percent), within 60 days of receipt. To
avoid taxes and penalties on the amount withheld, you will have to
obtain from other sources an amount equal to the 20 percent withheld
and roll it over along with the 80 percent received.

Prior to receiving an eligible rollover distribution, your
employer/plan administrator must give you a written explanation of
these rules, the choices you will have available, and the tax
implications.

SPECIAL RULES FOR TRANSFERS/CONVERSIONS FROM CERTAIN PLANS

Special distribution rules apply if you were a participant in a
pension plan, or a plan with special survivor annuity rules that has
been transferred or converted into this plan. You may ask the employer
if this section applies to you, and if the answer is yes, the employer
will tell you whether the following rules apply only to a subaccount of
these transferred/converted funds and future earnings or to all funds
in the plan held for you.

If you are married on the date benefits are paid as a result of
termination of employment, disability or retirement, the benefits from
your subaccount will be paid in the form of a joint and survivor
annuity. A joint and survivor annuity is an annuity which pays a
monthly income for your life, with monthly payments continuing to your
surviving spouse for the rest of his or her life after your death. The
payments to your spouse are equal to 50% of the amount that was being
paid to you. The annuity is provided by applying the amount of your
subaccount to purchase an annuity contract from a life insurance
company selected by the employer.

Instead of receiving these benefits in the form of a joint and
survivor annuity, you may elect (with your spouse's consent) to have
the benefits paid in one of the methods described earlier in the
section titled, "When and How Benefits Are Paid." About 90 days before
benefits are scheduled to start, you will receive a notice from the
employer describing the joint and survivor annuity and how an election
can be made to receive benefits in one of these optional methods.

The election to take an optional method of distribution must be
made on a form provided by the employer. The form must be signed by
your spouse and your spouse's signature must be witnessed by a plan
representative or notary public. You can revoke an election or make a
new election to receive an optional method of distribution at any time
before your benefits commence. The number of elections, or revocations
of a prior election, is not limited. Your spouse's consent is not
necessary to revoke a prior election to take an optional method of
distribution.

Generally, you must be married to your spouse on the date benefits
commence in order for the joint and survivor annuity rules to apply.
However, if you are divorced, the joint and survivor rules will apply
to the extent provided in the divorce decree, if the divorce decree
meets certain legal requirements. Likewise, if you are divorced and
remarried before benefits commence, the joint and survivor annuity
rules win apply to your subsequent spouse to the extent not otherwise
provided in a prior divorce decree.

If you die before benefits begin and you are married on the date of
your death, your surviving spouse will be entitled to a preretirement
survivor annuity, unless you have designated a beneficiary other than
your spouse. If you wish to name someone other than your spouse as
beneficiary, you may do so (with your spouse's consent) only during the
applicable election period. This period begins on the first day of the
plan year in which you reach the age of 35 (or if you leave employment
before age 35, on the date you leave) and ends at death. The
preretirement survivor annuity is a monthly benefit payable to your
surviving spouse for the rest of his or her life. The amount of the
benefit is equal to the single life annuity that can be

10
<PAGE>

purchased from a life insurance company selected by the employer by
applying the full value of your subaccount on the date you die.

If you have never been married or if you are divorced but you are not
subject to the joint and survivor annuity rules, benefits from your
subaccount will be paid to you in the form of a life annuity. Instead of a
life annuity, you may elect to have these benefits paid to you in one
of the methods described earlier, in the section titled, "When and How
Benefits Are Paid."

VIII. WITHDRAWALS AND LOANS

EMPLOYEE CONTRIBUTIONS

Employee contributions, including gains or earnings on the
contributions, may be withdrawn. Withdrawal will be subject to rules
established by the employer governing how and when withdrawals may be
made. You may be subject to the 10% penalty described earlier in the
section titled, "Distributions Before Age 59 1/2" if the withdrawal
takes place before age 59 1/2 and if the withdrawal includes gains or
earnings on the voluntary employee contributions. If you are married
and you are a participant in a plan which is a transfer or conversion
plan and your vested interest in your account exceeds $3,500, you must
obtain your spouse's consent to any withdrawal from the subaccount
established to keep track of the funds from the other plan. The spousal
consent rules are the same as those set out in the section covering
transfers/conversions from certain plans.

HARDSHIP WITHDRAWAL

You may be permitted to make a withdrawal of employer contributions
from the plan to meet financial hardship. To find out if hardship
withdrawals are permitted, refer to the "Administrative Elections"
section of the "Summary of Plan Provisions." Any withdrawal may be made
only in accordance with the rules provided by the employer. A
financial hardship is a situation where you have immediate and heavy
financial needs and funds are not reasonably available from other
sources. The amount you may withdraw may not exceed the amount
necessary to meet the hardship. The employer will determine whether
you qualify for a hardship withdrawal. The amount of the withdrawal may
not exceed the vested interest in your account made up of employer
contributions. Any withdrawal you receive because of hardship is
subject to income taxes and, if you are under age 59 1/2 the 10%
penalty described earlier in the section titled, "Distributions Before
Age 59 1/2." If you are married and you are a participant in a plan
which is a transfer or conversion plan and your vested interest in your
account exceeds $3,500, you must obtain your spouse's consent to any
withdrawal from the subaccount established to keep track of the funds
from the other plan. The spousal consent rules are the same as those
set out in the section covering transfers/conversions from certain
plans.

These hardship distribution rules are separate from the hardship
rules that apply to elective deferrals under a 401(k) plan.

LOANS

The plan gives the employer the discretion to permit a plan
participant to borrow against the vested interest in his or her account
if the plan has a trustee. Loans are not permitted if the plan has a
custodian. To find out if the plan allows for loans to participants,
refer to the Administrative Elections" section of the "Summary of Plan
Provisions."

Loans are subject to a number of restrictions including a maximum
loan amount of 50% of your vested account balance up to a maximum of
$50,000, reduced by the excess of the highest outstanding balance of
the previous year over the outstanding balance at the time the loan was
made. If you are married, you must obtain your spouse's consent before
you can borrow against your account. Consent must be obtained in
accordance with the consent requirements set out in the section
covering transfers/conversions from certain plans. If you want to
borrow from your account, you should check with the employer regarding
the availability of loans, the terms and the restrictions that apply.

<PAGE>

IX. MISCELLANEOUS

TERMINATION AND AMENDMENT OF THE PLAN

The employer has adopted the plan with the intention that it will
continue indefinitely. However, the employer has retained the right to
terminate or amend the plan at any time. The plan does not create a
contract which requires the employer to make future contributions
nor does the plan create any kind of employment contract between the
employer and its employees. In the event the plan is terminated, your
entire account will be 100% vested, regardless of where you are on the
vesting schedule or how many years of service you have. Termination or
amendment will not decrease amounts already contributed to your account.

PROTECTION FROM CREDITORS

The assets in your account are protected from the claims of
creditors, to the full extent allowed by law. You, in turn, cannot
assign or transfer the assets of your account to satisfy the claims of
creditors nor may you use your account as security for a loan (except
for loans which may be permitted from the plan).

TERMINATION INSURANCE

The plan falls into the category of plans known as "defined
contribution" plans. There is a government agency called the Pension
Benefit Guarantee Corporation which was established under Title IV of
the Employee Retirement Income Security Act of 1974 (ERISA). This
insurance program guarantees the benefits of certain plans but does not
cover defined contribution plans. Accordingly, this plan is not
covered.

X. PROCEDURE FOR PROCESSING CLAIMS

The employer will notify you in writing within 90 days of your
written application for benefits whether or not you are eligible for
benefits under the plan. If the employer determines you are not
eligible for the benefits requested, the notice will set forth:

(1) The specific reasons for any denial of benefits;

(2) A specific reference to the provision of the plan on which
denial is based;

(3) A description of any additional information or material
necessary for you to perfect your claim (and an explanation why such
information or material is necessary); and

(4) An explanation of the plan's claim review procedure.

It may be that the employer will need more than the initial 90 days
to consider your application for benefits. If so, you will be notified
of the delay, the special circumstances that require additional time
and when a decision can be expected. If this procedure is followed,
the employer will have an additional 90 days to make a decision.

If the employer determines you are not eligible for benefits, or if
you believe that you are entitled to greater or different benefits, you
will have the opportunity to have your claim reviewed by the employer
by filing a petition for review with the employer within 60 days after
you receive the notice issued by the employer.

Your petition should state the specific reasons why you believe you
are entitled to benefits, or greater or different benefits. Within 60
days after the petition is received, the employer will give you (and
your counsel, if any) an opportunity to present your position to the
employer orally or in writing, and you (or your counsel) shall have the
right to review the pertinent documents. Within 60 days after the
hearing or the date of receipt of the petition (if you present your
position in writing) the employer will notify you of its decision in
writing, stating the decision and the specific provisions of the plan
on which the decision is based. If, because of a hearing, the employer
needs more than 60 days to make a decision, you will be notified of the
delay. The employer will then have an additional 60 days to make a
decision.

In the event of your death, the same procedure will apply to your
beneficiary or beneficiaries.

XI. YOUR RIGHTS UNDER ERISA

As a participant in the plan, you are entitled to certain rights
and protections under ERISA. ERISA provides that all plan participants
shall be entitled to:

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<PAGE>

(1) Examine, without charge, all plan documents, including copies
of any documents filed by the plan with the U.S. Department of Labor,
such as detailed annual reports and plan descriptions.

(2) Obtain copies of all plan documents and other plan information
upon written request to the Plan Administrator. The Plan Administrator
may make a reasonable charge for the copies.

(3) Receive a summary of the plan's annual financial report. The
Plan Administrator is required by law to furnish each participant with
a copy of this summary annual report.

(4) Obtain a statement telling you whether you have a right to
receive benefits at normal retirement age and, if so, what your
benefits would be at normal retirement age if you stop working under
the plan now. If you do not have a right to benefits, the statement
will tell you how many more years you have to work to get a right to
benefits. This statement must be requested in writing and is not
required to be given more than once a year. The Plan Administrator
must provide the statement free of charge.

In addition to creating rights for plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the
employee benefit plan. The people who operate your plan, called
"fiduciaries" of the plan, have a duty to do so prudently and in the
interest of you and other plan participants and beneficiaries.

No one, including your employer or any other person, may fire you
or otherwise discriminate against you in any way to prevent you from
obtaining a benefit under the plan or exercising your rights under
ERISA. If your claim for a benefit is denied in whole or part, you
must receive a written explanation of the reason for the denial. You
have the right to have the Plan Administrator review and reconsider
your claim. Under ERISA, there are steps you can take to enforce the
above rights.

For instance, if you request materials which you are entitled to
receive from the Plan Administrator and do not receive them within 30
days, you may file suit in a federal court. In such a case, the court
may require the Plan Administrator to provide the materials and pay you
up to $100 a day until you receive the materials, unless the materials
were not sent because of reasons beyond the control of the Plan
Administrator. If you have a claim for benefits which is denied or
ignored, in whole or part, you may file suit in a state or federal
court. If it should happen that plan fiduciaries misuse the plan's
money, or if you are discriminated against for asserting your rights,
you may seek assistance from the U.S. Department of Labor, or you may
file suit in a federal court.

The court will decide who should pay court costs and legal fees.
If you are successful, the court may order the person you have sued to
pay these costs and fees. If you lose, the court may order you to pay
these costs and fees; for example, if it finds your claim is frivolous.

If you have any questions about your plan, you should contact the
Plan Administrator. If you have any questions about this statement or
about your rights under ERISA, you should contact the nearest area
Office of the U.S. Labor-Management Services Administration, Department
of Labor.

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REGIONAL

PROTOTYPE PROFIT SHARING PLAN AND TRUST/CUSTODIAL

ACCOUNT

NONSTANDARD PLAN ADOPTION AGREEMENT AA #003

The Employer named below adopts the Regional Prototype Profit Sharing Plan
and Trust/Custodial Account and makes the following specified elections
under the Adoption Agreement.

A. ACCOUNTING, EFFECTIVE DATE AND OTHER DATA

1. NAME AND ADDRESS OF EMPLOYER
Employer Name NETGRAVITY, INC.
Address 1700 S. AMPHLETT BOULEVARD, SUITE 350
City, State, ZIP SAN MATEO, CA 94402

2. TYPE OF BUSINESS ORGANIZATION (Select one.)
/ / Sole Proprietorship / / Partnership
/X/ Corporation / / Subchapter S Corporation

3. EFFECTIVE DATE 1/1/96
(IF the Employer is adopting this Plan as a restatement of an existing
plan, the date should be the original effective date of the existing
plan. Otherwise, the date should be the date the Employer chooses the
Plan to be effective.)

4. RESTATED DATE 1/1/97
(Complete only if this Plan is a restatement of a plan previously
adopted.) IF THIS PLAN IS A RESTATEMENT OF A PREVIOUSLY EXISTING PLAN,
ATTACH AN ADDENDUM LISTING ANY OPTIONAL FORMS OF BENEFIT WHICH MUST BE
INCLUDED IN THIS PLAN UNDER CODE SECTION 411(d)(6) AND THE REGULATIONS
THEREUNDER WHICH ARE NOT LISTED ELSEWHERE IN THE PLAN.

5. EMPLOYER TAX YEAR END 12/31

6. PLAN YEAR END 12/31

7. EMPLOYER IDENTIFICATION NUMBER 77-0410283

8. PLAN NUMBER (3 digits) 001

9. DESCRIPTION OF TRADE OR BUSINESS TECHNOLOGY DEVELOPMENT

10. LIMITATION YEAR END 12/31
(if this item is not completed, the limitation year end shall be the
calendar year end.)

B. ELIGIBILITY

1. SERVICE REQUIREMENT (Specify whole years or months.)

Page 1

<PAGE>

a. Whole Years

-- Year(s) of Service [Not more than 2 (1 if the Plan allows 401
(k) contributions). If more than 1 Year of Service is required,
the Plan must provide 100% immediate vesting under Section E.1.]

b. Months
0 Months of Service [Not more than 24 (12 months if the Plan
allows 401(k) contributions). If more than 12 Months of Service
is elected, the Plan must provide 100% immediate vesting under
Section E.1.]

2. MINIMUM AGE REQUIREMENT (Specify.) 21 (May not exceed age
21.)

3. EXCLUDED CLASSES OF EMPLOYEES
(Describe. Employees of an Affiliate must be specified as excluded if
the Affiliate, if any, does not adopt the Plan under Section 0.)
EMPLOYEES INCLUDED IN A UNIT COVERED BY A COLLECTIVE BARGAINING
AGREEMENT BETWEEN EMPLOYER AND EMPLOYEE REPRESENTATIVES, IF RETIREMENT
BENEFITS WERE THE SUBJECT OF GOOD FAITH BARGAINING. THE PLAN SHALL ALSO
EXCLUDE EMPLOYEES WHO ARE NONRESIDENT ALIENS AND WHO RECEIVE NO EARNED
INCOME FROM THE EMPLOYER WHICH CONSTITUTES INCOME FROM SOURCES WITHIN
THE UNITED STATES.

4. ELIGIBILITY FOR EMPLOYER CONTRIBUTIONS (Check all that apply.)
A participant shall be eligible to receive an allocation of Employer
contributions for a Plan Year if he/she meets the following requirements:

a. /X/ The participant must be employed on the last day of the Plan Year.

b. /X/ The participant must complete 1,000 Hours of Service during the
Plan Year unless the Plan is Top-Heavy for such Plan Year.

c. /X/ The requirements of 4.a. and 4.b. (above) shall not apply if the
participant terminates employment due to / / death /X/ disability
/X/ retirement.

d. If elective deferrals are elected under Section D. of this Adoption
Agreement, the requirements of 4.a. and 4.b. (above) / / shall
/X/ shall not apply to Employer contributions made pursuant to a salary
reduction agreement.

e. If elective deferrals are elected under Section D. of this Adoption
Agreement and matching contributions are elected under Section D.4.,
the requirements of 4.a. and 4.b. above / / shall
/ / shall not apply to such matching contributions.

5. ENTRY DATES
The Plan shall have the following entry dates:
a. / / The Plan Anniversary Date.*

b. / / The Plan Anniversary Date and a date six months from the Plan
Anniversary Date.

c. /X/ Other* 1/1, 4/1, 7/1, 10/1

* IF ONLY ONE ENTRY DATE PER YEAR IS PROVIDED AND AN EMPLOYEE ENTERS
THE PLAN ON THE ENTRY DATE FOLLOWING THE DATE ON WHICH THE EMPLOYEE
SATISFIES THE ELIGIBILITY REQUIREMENTS, THE MAXIMUM AGE AND SERVICE
REQUIREMENTS in SECTIONS B.1. AND B.2. (ABOVE) MUST BE REDUCED BY [OMEGA]
YEAR.

6. PLAN ENTRY

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<PAGE>

An employee shall enter the Plan on the Plan entry date /X/ following
/ / prior to / / closest to the date on which the employee meets the
eligibility requirements of the Plan.

7. ELECTION NOT TO PARTICIPATE
The Plan / / shall /X/ shall not permit an eligible Employee or
Participant to elect not to participate.

8. YEARS OF SERVICE
1000 (Not more than 1,000) Hours of Service shall be required to
constitute a Year of Service for eligibility and vesting purposes.

C. DEFINITION OF COMPENSATION

1. Compensation shall mean:
/ / Wages, tips and other compensation box on Form W-2.
/ / Section 3401(a) wages.
/X/ 415 safe-harbor compensation.

2. Compensation shall mean the amount which is actually paid to
the participant during:
/X/ The Plan Year.
/ / The taxable year ending with or within the Plan Year.
/ / The limitation year ending with or within the Plan Year.

3. Compensation /X/ shall / / shall not include Employer
contributions made pursuant to a salary reduction agreement
which are not includible in the gross income of the employee
under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code.

4. Compensation shall not include:
/ / Bonuses
/ / Overtime
/ / Other (Specify):
(NOTE: These exclusions shall not apply if the Plan is
integrated with social security or for purposes of determining
the minimum required contribution for years in which the Plan
is Top-Heavy.)

5. This definition of compensation shall be effective as of 1/1/97.

6. Compensation shall be taken into account:
/ / From the date of entry into the Plan.
/X/ For the entire period in which the employee becomes a
participant.

D. ELECTIVE DEFERRALS

COMPLETE THIS SECTION ONLY IF ELECTIVE DEFERRALS OR VOLUNTARY
NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS ARE ALLOWED UNDER THIS PLAN.

1. ELECTIVE DEFERRALS
A participant may elect to have his or her compensation reduced
by the following percentage or amount per pay period, or for a
specified pay period or periods, as designated in writing to the
plan administrator. (Check any applicable options and fill in
the appropriate blanks.)

Page 3

<PAGE>

a. /X/ An amount not in excess of 20.00% of a participant's compensation.
b. / / An amount not in excess of $ (specify dollar amount) of a
participant's compensation per year.

2. CASH OR DEFERRED ELECTIONS
/X/ Check here if a participant may base elective deferrals on cash bonuses
that, at the participant's election, may be contributed to the CODA or
received by the participant in cash.

3. ELECTIONS
a. A participant may elect to commence deferrals (under 1. or 2. above)
as of 1/1, 4/1, 7/1, 10/1 (enter at least one date during the calendar
year).
b. A participant may elect to terminate or modify the amount of deferrals
as of terminate anytime; modify 1/1, 4/1, 7/1, 10/1 (enter at least
one date during the calendar year).

4. MATCHING CONTRIBUTIONS
a. The Employer will make matching contributions to the Plan on behalf of:
/X/ All participants.
/ / All participants who are nonhighly compensated employees.
b. Matching contributions will be made on behalf of each participant in
the amount of:
1) / / % of the elective deferral made for each Plan Year.
2) / / The sum of: (i) % of the portion of the elective deferral
which does not exceed
% of the participant's compensation; plus (ii)% of
the portion of the elective deferral which exceeds % of the
participant's compensation.

3) /X/ An amount to be determined by the Employer each year.
NOTE: THE PERCENTAGE OF THE PORTION OF ELECTIVE DEFERRALS IN
D(4)(b)(2)(ii) CANNOT BE
GREATER THAN THE PERCENTAGE OF THE PORTION OF ELECTIVE DEFERRALS
IN D(4)(b)(2)(i).
c. The Employer shall not match elective deferrals in 1.a. or 1.b. above
in excess of $ or in excess of % of the participant's
compensation.
d. All Employer matching contributions shall be / / qualified
/X/ nonqualified.

Page 4

<PAGE>

e. Forfeitures of excess aggregate contributions and forfeitures of
any nonqualified matching contributions shall be:
/X/ Used to reduce Employer contributions.
/ / Allocated after all other forfeitures under the Plan, to each
participant's matching contribution account in the ratio which
each participant's compensation for the Plan Year bears to the
total compensation of all participants for such Plan Year.
Qualified Matching Contributions shall mean matching
contributions which are subject to the distribution and
nonforfeitability requirements of Section 401(k) of the Code
when made.

5. QUALIFIED NONELECTIVE CONTRIBUTIONS
a. The Employer /X/ will / / will not make qualified nonelective
contributions to the Plan. If the Employer does make such
contribution to the Plan, then the amount of such
contributions for each Plan Year shall be an amount determined
by the Employer.
b. The allocation of qualified nonelective contributions shall be
made to the account of:
/ / All participants.
/X/ Only nonhighly compensated participants.

6. VOLUNTARY NONDEDUCTIBLE CONTRIBUTIONS
Participants / / will /X/ will not be allowed to make nondeductible
voluntary employee contributions.

7. HARDSHIP WITHDRAWALS
Hardship withdrawals of elective deferrals /X/ shall / / shall not be
permitted.

8. EXCESS ELECTIVE DEFERRALS
Participants who claim excess elective deferrals for the preceding
taxable year must submit their claims in writing to the plan
administrator by FEBRUARY 15. (Specify a date before April 15.)

E. VESTING

1. SCHEDULE (Select one.)
Participants are vested in that portion of their participants'
accounts attributable to Employer contributions in accordance with
the following schedule:

Year(s 100% 5 - 3 - 7 Specify Specify
) of Immediate Year Year % %
Servic / / Cliff / / /X/ / /
e / /
<S> <C> <C> <C> <C> <C> <C>
1 100% 0% 0%
2 100% 0% 0% 25%
3 100% 0% 20% 50% (not less than
20%)
4 100% 0% 40% 75% (not less than
40%)
5 100% 100 60% 100% (not less than
% 60%)
6 100% 100 80% 100% (not less than
% 80%)

</TABLE>

Page 5

7 100% 100 100% 100% 100%
%
</TABLE>

2. EXCLUSIONS: (Check all applicable ones. Does not apply if
100% immediate vesting in Section E.1. above has been
selected.)
a. / / Exclude Year(s) of Service prior to effective date of
the Plan (except periods during which the Employer
maintained a predecessor to this Plan).
b. / / Exclude Year(s) of Service prior to or during
the computation year in which the employee attains
age 18 (age 22 for Plan Years beginning before 1/1/85).

3. Schedule to apply as of the first day of the Plan Year for
which the Plan is Top-Heavy. (Select one.)
/ / 100% Immediate /X/ 2/20 Vesting / / 3-Year Cliff

F. NORMAL RETIREMENT AGE

60.0 (May not be earlier than age 59 [omega] or later than age 65.)

G. EARLY RETIREMENT AGE

(May not be earlier than age 55.)
Early retirement shall only be available to participants who have
completed __ Years of Service.

H. SERVICE WITH PREVIOUS EMPLOYER (Select One.)

1. / / Service with a previous Employer will not be taken into
account except to the extent service is required to be
given pursuant to Code Section 414(a) and the regulations
thereunder.
2. / / Service with the following previous Employer(s) shall be
taken into account for purposes of eligibility (Section
B.1.) and vesting (Section E.1.).

I. LIMITATIONS ON ALLOCATIONS

If the Employer maintains or has ever maintained another qualified
plan in which any participant in this Plan is (or was) a participant
or could become a participant, complete this section. The Employer
must also complete this section if it maintains a welfare benefit
fund, as defined in Section 419(e) of the Code, or an individual
medical account, as defined in Section 415(i)(2) of the Code, under
which amounts are treated as annual additions with respect to any
participant in this Plan.

1. DEFINED CONTRIBUTION PLAN (Select one.)
If the participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a
regional prototype plan:
/ / The provisions of Article VII of the Plan Document will
apply as if the other plan were a regional prototype plan.
/ / Provide the method under which the plans will limit total
annual additions to the maximum permissible amount, and
will properly reduce any excess amounts in a manner that
precludes Employer discretion.

2. DEFINED BENEFIT PLAN

Page 6
<PAGE>

If the participant is or has ever been a participant in a
defined benefit plan maintained by the Employer or an
Affiliate, the annual additions to this and/or another
qualified defined contribution plan, or projected annual
benefit in one or more qualified defined benefit plans shall
be reduced so that the sum of the defined contribution
fraction and the defined benefit fraction will not exceed 1.0.
(Describe in an addendum attached to this Adoption Agreement.
The method specified shall preclude discretion by the Employer
or Affiliate.)

J. ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES
(Complete only if an integrated allocation formula is chosen.)
NOTE: AN INTEGRATED FORMULA MAY NOT BE ELECTED IF THE
EMPLOYER OR AN AFFILIATE MAINTAINS ANY OTHER PLAN INTEGRATED
WITH SOCIAL SECURITY AND SUCH OTHER PLAN COVERS EMPLOYEES WHO
ARE ALSO PARTICIPANTS IN THE PLAN.

INTEGRATION LEVEL (Select one.)
The integration level shall be equal to the taxable wage base or
such lesser amount elected below by the Employer. The taxable
wage base is the maximum amount of earnings which may be
considered wages for a year under Section 3121(a)(1) of the Code
in effect as of the beginning of the Plan Year.

/ / Taxable Wage Base
/ / $ (a dollar amount less than the taxable wage base)
/ / % of Taxable Wage Base (not to exceed 100%)

K. ADMINISTRATIVE ELECTIONS

1. PAYOUTS OF SMALL ACCOUNT BALANCES
Employer /X/ will / / will not automatically make a total
distribution of the participant's vested interest if it is
$3,500 or less upon retirement, termination of employment or
disability.

2. DISTRIBUTIONS AT TERMINATION OF EMPLOYMENT
/X/ A participant /X/ may / / may not take a total distribution
of his/her vested account balance if he/she terminates
employment for reasons other than death, disability, or
retirement.
/ / A participant may take a total distribution of his/her
vested account balance if he/she terminates employment for
reasons other than death, disability, or retirement if the
total benefit is $ or less.

3. HARDSHIP WITHDRAWALS
Hardship withdrawals /X/ shall / / shall not be allowed
under the Plan.

4. PARTICIPANT LOANS
Plan loans to participants /X/ shall / / shall not be allowed.
If loans are allowed, a minimum loan amount of $1,000.00 shall
apply. (Amount cannot exceed $1,000).

5. PARTICIPANT-DIRECTED INVESTMENTS
Participant-directed investments /X/ shall / / shall not be allowed.

6. ROLLOVERS

Page 7
<PAGE>

Rollovers of funds, by participants, from other plans to this
Plan /X/ shall / / shall not be allowed.

7. TRANSFERS
Transfers of funds, by participants, from other plans to this
Plan /X/ shall / / shall not be allowed.

8. HOURS OF SERVICE
Rather than compute service based upon actual Hours of Service, the
Employer may elect to compute service based upon one of the
alternatives listed below. If selected, this method will be applied
to all employees under the Plan. (Check one if desired. If no box
is checked, service will be based upon actual hours worked.)
/ / An employee will be credited with 10 Hours of Service for each
day in which the employee would be credited with 1 Hour of Service.
/ / An employee will be credited with 45 Hours of Service for each
week in which the employee would be credited with at least 1 Hour
of Service.
/ / An employee will be credited with 95 Hours of Service for each
semimonthly pay period in which the employee would be credited
with at least 1 Hour of Service.
/ / An employee will be credited with 190 Hours of Service for each
month in which the employee would be credited with at least 1
Hour of Service.

9. INVESTMENT IN EMPLOYER SECURITIES
The Plan may acquire and hold up to % of the market value of its
assets in securities issued by the Employer.

10. IN-SERVICE WITHDRAWALS
Participants who have not otherwise met a distributable event
/ / shall /X/ shall not be permitted to make withdrawals from the
Plan during service with the Employer.

11. FORFEITURES
Forfeitures arising under Section 9.3 of the Plan Document shall be
allocated: (Select one.)

a. /X/ For the Plan Year in which the forfeiture occurs.

b. / / For the Plan Year immediately following the Plan Year
in which the forfeiture occurred.

c. / / For the Plan Year in which the participant incurs five
consecutive one-year breaks in service.

d. / / For the Plan Year immediately following the Plan Year in which
the participant incurs five consecutive one-year breaks in service.

L. SPECIAL RULES FOR TOP-HEAVY PLANS (Select one.)

This section must be completed if the Plan is a Top-Heavy Plan (see
definition in Section 3.48 of the Plan Document) and the Employer or an
Affiliate maintains another plan or plans in addition to this Plan.
/X/ The minimum contribution and benefit requirements of Code Section 416
will be satisfied as provided in Section 5.4 of the Plan Document.

Page 8
<PAGE>

/ / The minimum contribution and benefit requirements of Code Section 416
will be satisfied as provided in the addendum attached to the Adoption
Agreement. (Specify in an addendum attached to the Adoption Agreement
the method for coordinating all such plans with this Plan so that the
minimum contribution and benefit requirements will be met.)

M. FILING PLAN WITH INTERNAL REVENUE SERVICE

The adopting Employer may not rely on an opinion letter issued by the
National Office of the Internal Revenue Service as evidence that the Plan
is qualified under Section 401 of the Internal Revenue Code. In order to
obtain reliance with respect to Plan qualification, the Employer must
apply to the appropriate key district office for a determination letter.

This Adoption Agreement may be used only in conjunction with Regional Basic
Plan Document 01.

N. ADOPTION AND ADVICE

By executing this document, the Employer agrees to be bound by all
the terms and conditions of the Plan (including the Adoption
Agreement) and further certifies and warrants that it has relied on
the advice of an independent adviser as to the legal and tax effects
of adopting the Plan.

Failure to properly complete all items on this Adoption Agreement
may result in disqualification of the Plan.

The sponsoring organization will notify the adopting Employer of any
amendments made to the Plan or discontinuance or abandonment of the Plan.

The name, address and telephone number of the sponsoring organization or
its agent is imprinted on the top of the Adoption Agreement.

Page 9
<PAGE>

0. SIGNATURES AND DATE

Executed this day of , .

EMPLOYER

Name of Business NetGravity, Inc.

By /s/ John Danner
------------------------------------------------------------

Its (Title)

AFFILIATES (Must be executed on behalf of any Affiliates. Attach addendum
with signatures if more than one Affiliate.)

Name of Business

By
------------------------------------------------------------

Its (Title)

P. CUSTODIAN/TRUSTEE (Select one.)

CAUTION: READ INSTRUCTIONS BEFORE COMPLETING.

INSTRUCTIONS: THE FINANCIAL INSTITUTION MAY ACT AS CUSTODIAN, BUT ONLY IF
THE EMPLOYER AND ANY AFFILIATES ARE SOLE PROPRIETORSHIPS OR PARTNERSHIPS.
A CORPORATE PLAN MAY NOT USE A CUSTODIAN. IN ADDITION, AN INDIVIDUAL MAY
NOT SERVE AS A CUSTODIAN. SELECT FINANCIAL INSTITUTION TRUSTEE ONLY IF THE
FINANCIAL INSTITUTION HAS FULL TRUST POWERS UNDER APPLICABLE STATE AND/OR
FEDERAL LAWS. BY EXECUTING THIS PLAN AS CUSTODIAN OR TRUSTEE, THE
FINANCIAL INSTITUTION WARRANTS AND REPRESENTS THAT IT IS QUALIFIED TO ACT
AS CUSTODIAN OR TRUSTEE, AS THE CASE MAY BE, UNDER ALL APPLICABLE FEDERAL
AND STATE LAWS AND REGULATIONS.

/ / Financial Institution Custodian
/ / Financial Institution Trustee
/X/ Self-Trusteed Plan

CUSTODIAN OR TRUSTEE
Name JOHN DANNER
Address 1700 S. AMPHLETT BLVD., SUITE 350
City, State, ZIP SAN MATEO, CA 94402
By /s/ John Danner
------------------------------------------------------------
Its (Title)

Page 10
<PAGE>

Q. SPONSOR

Bankers Systems, Inc.

Page 11
<PAGE>

ADDITIONAL SUMMARY OF PLAN DESCRIPTION INFORMATION

1. Plan Name NETGRAVITY 401(k) PLAN

2. Employer's Phone Number (415) 655-4777

3. AGENT
Name JOHN DANNER
Address 1700 S. AMPHLETT BLVD., SUITE 350
City, State ZIP SAN MATEO, CA 94402

4. TYPE OF PLAN ADMINISTRATION
/ / Employer provided administration
/X/ Contract (Third Party) administration
/ / Insurer provided administration

5. ADDENDUM
/ / Check here if the Employer has amended its qualified plan from a
plan other than from Bankers Systems and the employer has added
an addendum to continue required optional forms of benefit
(i.e. payment schedule, timing, commencement, medium of
distribution, etc.)

Page 12

<PAGE>
EXHIBIT 10.14

Jitendra Valera PRIVATE & CONFIDENTIAL

May 13, 1998

Dear Jitendra,

As we have previously discussed, we are pleased to offer you the position of
Vice President and General Manager of Europe with NetGravity Europe Limited
subject to the terms and conditions outlined in this letter.

In this position, you will initially report directly to the CEO, NetGravity,
US. and will be responsible for all activities relating to the sales of
NetGravity products and services in the assigned Europe, Middle East &
Africa-EMEA territories.

SALARY

Your annualized base salary will be 82,500 (pds) together with a commission
target of 60,000 (pds) per annum. Your total on-target earnings will
therefore be 142,500 (pds) This will be prorated based on start date. Your
commission sales target will be based on quarterly revenue targets and
achievement, to be mutually agreed upon.

A car allowance of 1250(pds) per month (less any taxes due) will be granted,
with all other vehicle running costs relating to business activities being
covered by mileage payment paid through normal expense claims.

BENEFITS

You will be entitled to join the company health scheme, currently through
PPD, on completion and acceptance of their application criteria, that covers
yourself and your spouse and offspring. This cover will be at the Platinum
level Band B, not to exceed 3000 (pds) per year.

The company will provide Permanent Health Insurance and Death In Service
(DIS) Insurance for you. We will cover PHI for an additional $120.46 (pds)
per month, and DIS for an additional 1500 (pds) per year.

The company will provide you with 25 days annual leave over and above the UK
statutory holidays. You will be eligible to earn an additional 1 day per year
for each year of employment, not to exceed 30 days annual leave per year.

The company will provide 10% of your base salary into a private pension of
your choice.

Should you accept this offer, the Company will grant you, on the start date of
your employment, and upon approval of the Board of Directors, an Incentive
Stock Option (the "Option") to purchase 85,000 (Eighty-Five Thousand) shares
of the Company's Common Stock at an exercise price equal to the current fair
market value of the shares on the date of board approval. The Option will
vest as to 1/4th of the shares twelve months after vesting commences, and as
to an additional 1/48th of the shares each month thereafter until fully

<PAGE>

vested, provided, of course, that you are still employed by the Company on
such dates. The Option would be granted under the Company's 1995 Stock Option
Plan and would be subject to the terms and conditions of the Plan and of the
Company's standard form of Option Agreement.

SEVERANCE BENEFITS

(a) Termination Following A Change of Control

(i) Involuntary Termination. If the Executive's employment with
the Company terminates as a result of an Involuntary
Termination at any time within twelve (12) months after a
"Change of Control" (as defined below), then the Executive
shall be entitled to receive a lump-sum severance payment equal
to eighteen (18) months of the Executive's base salary (as in
effect immediately prior to the Change of Control).

(ii) Definition of Change of Control. For the purpose, "Change of Control" of
the Company is defined as:

(A) Any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended)
is or becomes the "beneficial owner" (as defined in Rule
13d-3 under said Act), directly or indirectly, of
securities of the Company representing 50% or more of the
total voting power represented by the Company's then
outstanding voting securities; or

(B) The date of the consummation of a merger or consolidation
of the Company with any other corporation that has been
approved by the stockholders of the Company, other than a
merger of consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities
of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation,
or the stockholders of the Company approve a plan of
complete liquidation of the Company; or

(C) The date of the consummation of the sale or disposition
by the Company of all or substantially all the Company's
assets (if Executive transfers employment to the
purchaser).

(b) Other Termination of Employment

In the event the Executive is terminated for other than what has been
described in (a) above the Parties hereto agree to provide each other
with 6 months advance notice of such termination (or pay in lieu thereof).

<PAGE>

EMPLOYMENT CONDITIONS

Upon your employment you will be asked to sign a standard Employment
Agreement which confirms your agreement to hold in confidence any proprietary
information received as an employee of NetGravity and to assign to the
Company any inventions that you make while employed in your position. We wish
to impress upon you that we do not wish you to bring with you any
confidential or proprietary material of any former employer or to violate any
other obligation to your former employers.

Please confirm your acceptance of the Company's offer by completing and
returning to me one copy of this letter.

This offer will remain open until May 20, 1998. We sincerely hope that you
will accept this offer and look forward to working with you as we build the
success of NetGravity.

Very truly yours,

/s/ John Danner

John Danner
CEO

ACKNOWLEDGED AND ACCEPTED:

May 12, 1998 /s/ Jitendra Valera
- -------------------------- ---------------------------------------
Date Jitendra Valera

Intended Start Date: May 12, 1998

<PAGE>
Exhibit 10.15

ASIA PACIFIC VENTURES CO.
CONSULTANT & REPRESENTATIVE AGREEMENT WITH
NETGRAVITY, INC.

This Consultant and Representative Agreement, herein referred to as
("Agreement"), is made by and between NetGravity, Inc., a California
corporation located at 1700 South Amphlett Drive, San Mateo, California
94403, USA, ("NETGRAVITY"), and Asia Pacific Ventures Co., a California
limited liability company, located at 535 Middlefield Road, Suite 150, Menlo
Park, California, 94025, USA ("APV"). This Agreement is effective as of June
1, 1998 (the "Effective Date").

1. BACKGROUND
NETGRAVITY develops, manufactures and/or sells Ad Management Software
(together with all upgrades, enhancements, derivatives, modifications,
amendments and new product releases developed during the term of this
Agreement, the "Technology"). NETGRAVITY hereby appoints APV as
NETGRAVITY'S independent advisor and exclusive representative to promote
and assist in the structuring and establishment of business
relationships, including introducing NETGRAVITY'S Technology to
potential partners, distributors, and/or purchasers in the Territory.
The "Territory" is the geographical region of Asia, including but not
limited to the countries of Japan, Korea, Taiwan, and Hong Kong as well
as any area mutually agreed upon for which APV will have agent
responsibility.

2. MAJOR RESPONSIBILITIES OF APV
APV will use reasonable commercial efforts, conditional on NETGRAVITY'S
fulfillment of its responsibilities under Section 3 below, to:

(A) Lay out the strategic plan for establishing business relationships with
key partners in the Territory.

(B) Position NETGRAVITY with leading software vendors in the Territory for
marketing, distribution, and possibly localization of NETGRAVITY'S
Technology.

(D) Assist NETGRAVITY with the collection of market and technology
information and other matters in developing NETGRAVITY'S strategy in the
Territory.

(E) Generate and stimulate interest in the Technology and furnish information
to NETGRAVITY in regard to market developments, trends, and prospective
partners and/or purchasers of the Technology within the markets of the
Territory.

(F) Participate in sales promotion activities to benefit sales of the
Technology and assist and advise NETGRAVITY in this regard within the
markets of the Territory.

(G) Maintain the confidentiality of any materials or information provided to
APV that is clearly identified as confidential, nonpublic information,
and promptly return such materials at the request of NETGRAVITY.

<PAGE>

The detailed responsibilities of APV and their implementation are set forth
in Exhibit A attached hereto:

3. MAJOR RESPONSIBILITIES OF NETGRAVITY
NETGRAVITY will use reasonable commercial efforts to:

(A) Endeavor to fulfill orders according to any agreement negotiated by
NETGRAVITY and individual vendors in the Territory.

(B) Provide APV with appropriate corporate marketing, sales and technical
information and assistance regarding the Technology, and keep APV
informed of changes in the corporate strategy and/or Technology.

(C) Be directly responsible for all expenses of catalogues, samples,
advertisements, exhibitions and seminars created by APV for sales
promotion of NETGRAVITY or the Technology.

(D) Once APV has successfully established a business relationship with a key
partner in the Territory for NETGRAVITY, NETGRAVITY will provide
APV with a copy of the final signed NETGRAVITY/Partner agreement.

4. TERM OF AGREEMENT
This Agreement will become effective on the Effective Date and will
expire seven (7) months thereafter, unless (i) extended by mutual
agreement, (ii) terminated as provided elsewhere in this Agreement, or
(iii) terminated upon thirty (30) days written notice by either party to
the other, provided, however, that any right of APV to compensation
earned or accrued hereunder will survive any such expiration or
termination.

5. PAYMENT TERMS
(A) MONTHLY RETAINER FEE: NETGRAVITY agrees to pay APV a Monthly Retainer
Fee (with the first such fee due on the Effective Date) in advance for
the services outlined in this Agreement. The Monthly Retainer Fee is for
the following time period and amount:

June 1, 1998 - December 31, 1998 $10,000 per month

NETGRAVITY agrees to pay APV the above described monthly Retainer Fees
immediately upon receipt of invoice. NETGRAVITY agrees to pay APV an
additional fee of 5% of the total Monthly Retainer Fee if payment is
received by APV later than thirty (30) days from the invoice date. All
amounts payable to APV under this Agreement must be made in U.S.
currency in the form of a written check, or by wire transfer to:
Cupertino National Bank (ABA #121141152) in the bank account of APV
numbered 003082458, or to such other account as APV shall designate.

<PAGE>

(B) COMMISSION FOR FUNDING ARRANGEMENTS: NETGRAVITY agrees that should any
investment (equity, debt or any combination thereof), acquisition, or
joint venture be consummated, or any manufacturing, production,
distribution or joint development agreements(s) or any other business
arrangements be entered into by NETGRAVITY as a result of introductions
arranged by, negotiations performed by, or other efforts of APV,
NETGRAVITY will pay to APV a commission on the total consideration
actually received or benefits actually derived from such transaction(s)
by NETGRAVITY at any time. The commission rate will be calculated, and
the other terms of payment will be determined in accordance with Exhibit
B hereto.

(C) REVENUE COMMISSION: PURCHASE ORDER AND DELIVERY: NETGRAVITY agrees to
pay APV a commission on actual sales, defined as contracted bookings,
in the Territory during the period covered under this agreement. The
commission rate will be calculated in accordance with Exhibit B.

APV is not authorized to accept any purchase orders on behalf of
NETGRAVITY or to otherwise finalize any business agreements and/or sales
of the Technology. NETGRAVITY will be solely responsible for order
acceptance, product assembly, packaging, shipping, delivery, export
compliance, warranty arrangements and all related responsibilities in
connection with the sale of Technology in the Territory.

(D) COMMISSION PAYMENTS, REPORTS: NETGRAVITY will directly invoice all
contracts, in U.S. dollars, to its customers in the Territory. All
commission payments payable with regard to any funds received by
NETGRAVITY will be due and payable to APV within thirty (30) days of
quarter end.

(E) REIMBURSEMENT OF EXPENSES: NETGRAVITY will reimburse APV for any
reasonable traveling and entertainment (T&E) expenses incurred by APV in
fulfilling its duties hereunder, subject to any exceptions expressly
stated in this Agreement or communicated in writing to APV prior to
incurring such expenses. APV will not make trips or incur other
significant expenses without receiving prior approval from NETGRAVITY.
T&E includes, but is not limited to, airfare, hotel, taxi, bus,
limousine, rental car, meals, telephone, and facsimile charges. Either
party may propose the translation of documents into one or more
languages of the Territory, to assist APV in fulfilling its duties, and
NETGRAVITY will pay APV for translation of any documents NETGRAVITY
authorizes to be so translated. APV will provide NETGRAVITY with
accurate and reasonably detailed invoices, including receipts for
expenses incurred, and NETGRAVITY will pay APV for any of the above
expenses in accordance with such invoices immediately upon their receipt.

6. RELATIONSHIP OF PARTIES
NETGRAVITY and APV agree that APV is an independent contractor.
Personnel employed by APV who perform duties related to the Agreement
will remain under the supervision, management, and control of APV. APV
will have no authority, without NETGRAVITY'S consent, to sign or
otherwise enter into any kind of contract, undertaking or agreement on
behalf of NETGRAVITY, or to make any promise, warranty or representation
with respect to NETGRAVITY Technology except strictly in accordance with
NETGRAVITY materials provided to APV, and NETGRAVITY will not be bound
thereby unless it expressly agrees otherwise. NETGRAVITY may deal
directly with customers in the Territory. If a customer, distributor or
other business partner introduced by APV chooses to deal directly with
NETGRAVITY, NETGRAVITY will notify and consult with APV.

<PAGE>

To Permit APV to freely devote its skilled personnel to services
hereunder, NETGRAVITY agrees that for the term of this Agreement and one
(1) year thereafter, it will not solicit or induce (i) any employee or
independent contractor of APV or (ii) any former employee of APV who was
employed by APV not less than one (1) year prior to the date of
solicitation, to terminate or breach an employment, contractual or other
relationship with APV or to become an employee of NETGRAVITY. In
addition, NETGRAVITY will not retain or accept services from anyone that
it has reason to know is using technology, know-how or information that
is proprietary to APV.

7. ASSIGNMENT OF AGREEMENT
Neither this Agreement nor any rights or obligations of either party
hereunder may be assigned without prior written consent of the other
party. Subject to the provision regarding assignments, the Agreement
will be binding upon the successors and assigns of the respective
parties.

8. TERMINATION
This Agreement may be terminated by either party upon written notice to
the other if any of the following occur: material default of this
Agreement (unless cured within thirty (30) days), receivership,
insolvency or assignment for the benefit of creditors of the other party.

9. REPRESENTATIONS OF NETGRAVITY
NETGRAVITY represents that it has the power and authority to enter into
this Agreement, and that this Agreement does not violate the terms of
any other agreement or understanding of which it is a party. NETGRAVITY
further represents that (i) it has all legal right and authority to
offer the Technology for sale in the Territory, (ii) the sale and use of
the Technology are in the manner contemplated by NETGRAVITY'S published
specifications, and NETGRAVITY and Technology literature and
representations, will not violate any third party rights, and (iii) such
literature and representations of NETGRAVITY may be relied upon by APV
in performing its duties hereunder. It is understood that APV will rely
on representations of NETGRAVITY in its dealings with third parties
concerning NETGRAVITY. NETGRAVITY hereby indemnifies and holds harmless
APV from any cost, expense, liability or loss incurred by APV as a
result of any violation of the representations and warranties.

10. LIMITATION OF LIABILITY
In no event will APV be liable for any special, indirect, incidental or
consequential damages, or any damages resulting from loss of profits
arising out of or in connection with this Agreement or the services
performed hereunder, whether in an action based on contract or tort
including any action for negligence. APV will not be liable for any
damages other than for the gross negligence or intentional misconduct of
its agents. In no event will APV'S total liability for any damages in any
action arising out of or in connection with this Agreement exceed the
total amount paid to APV by NETGRAVITY under this Agreement with regard
to the particular transaction that caused the damages or that is the
subject matter of the cause of action.

<PAGE>

11. NOTICES

Any notice, request, demand, or other communication required or
permitted under this Agreement will be deemed to be properly given three
(3) days after dispatch through the U.S. Postal Service, postage
prepaid, or one (1) day after dispatch with charges prepaid through an
established and reputable national courier, or when made by confirmed
facsimile, addressed to the respective party at the address stated above
in this Agreement, or at such other address as that party may designate
in writing in the future.

12. GOVERNING LAW

This Agreement will be construed according to, and the rights of the
parties will be governed by, the laws of the State of California as
applied to agreements entered into and performed wholly within
California by its residents.

13. DISPUTE RESOLUTION: ARBITRATION

At the written request of a party, each party shall appoint a
knowledgeable, responsible representative to meet and negotiate in good
faith to resolve any dispute arising under this Agreement. The parties
intend that these negotiations be conducted by non-lawyer, business
representatives. The discussions shall be left to the discretion of the
representatives. The representatives may agree to use any alternative
dispute resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the representatives
for purposes of these negotiations shall be treated as confidential
information developed for purposes of settlement, shall be exempt from
discovery and production, and shall not be admissible in the arbitration
described below or in any lawsuit without the concurrence of all
parties. Documents not prepared for purposes of the negotiations are not
so exempted and may, if otherwise admissible, be admitted in evidence in
the arbitration or lawsuit.

If the negotiations do not resolve the dispute within sixty (60) days of
the initial written request, the dispute will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American
Arbitration Association presided over by a single arbitrator selected
pursuant to those rules. A party may demand such arbitration, in
accordance with the procedures set out in those rules, at the office of
the American Arbitration Association closest to the other party.
Discovery shall be limited to no more than two (2) depositions, and a
combined total of not more than twenty-five (25) individual
interrogatories, requests for admission and demands for document
production, unless otherwise agreed. Each party shall bear its own cost
of these procedures (except document reproduction, which will be
reimbursed by the other party), and share equally in the expense of the
arbitrator.

14. ENTIRE AGREEMENT

This Agreement sets forth the entire Agreement between the parties with
regard to the subject matter thereof. This Agreement replaces any
representations or statements, oral or written, made about the subject
matter of this Agreement. This Agreement may be amended only by a
written agreement signed by both parties. If any of the provisions of
this Agreement are found or deemed by a court of competent jurisdiction
to be invalid or unenforceable, the parties intend that they be severed
from the remainder of this Agreement, and not cause its invalidity or
unenforceability. A party's waiver of any breach of a provision of this
Agreement will not constitute a waiver or any other provision, or of any
other breach of the same provision.

<PAGE>

IN WITNESS WHEREOF, the parties have caused this Consultant & Representative
Agreement to be executed by their duly authorized representatives as of the
Effective Date:

/s/ Spencer Tall /s/ Steve Recht
- ------------------------------------- ---------------------------------

Spencer Tall Steve Recht
Partner Chief Financial Officer
ASIA PACIFIC VENTURES CO. NETGRAVITY, INC.

DATE: May 13, 1998 DATE: May 13, 1998
-------------------------------- ----------------------------

<PAGE>

EXHIBIT A

IMPLEMENTATION OF TERRITORY PLAN

June 1, 1998 ~ December 31, 1998

- --) Do final evaluation of potential partners
- clarify objectives with partners
- narrow the list of potential partners and consider other potential
partners
- follow up with potential partners to ensure continued interest

- --) Visit the Territory to negotiate distribution and licensing agreements
with strategic partners
- solicit proposals from strategic partners
- negotiate deal terms

- --) Facilitate start-up of partnership and dialogue between NETGRAVITY and
partners
- help coordinate press announcements
- monitor initial progress of distributors
- assist NETGRAVITY in follow-up with primary distributors
- manage processes and relationship between NETGRAVITY and partners

- --) Establish appropriate pricing plan for Territory
- work with NETGRAVITY to understand costs
- work with NETGRAVITY to finalize pricing for Territory
- announce pricing in Territory

- --) Facilitate sales goals
- work with NETGRAVITY to set CY98 sales goals
- define key accounts to generate business over the next three (3)
quarters
- help get into accounts at high levels
- assist in closing

- --) Facilitate revenue goals
- work with NETGRAVITY to set revenue goals
- work with NETGRAVITY to implement revenue goals

- --) Facilitate establishment of NETGRAVITY operations in the Territory
- work with NETGRAVITY to set staffing goals
- work with NETGRAVITY to hire key staffs
- work with NETGRAVITY to establish an office in the Territory
- work with NETGRAVITY to finalize establishing Japan operations

<PAGE>

EXHIBIT B

(A) COMMISSIONS FOR EQUITY FUNDING/FINANCING (U.S. & TERRITORY): In the
event that NETGRAVITY chooses to raise funds from potential strategic
partners in the Territory by selling equity in the parent organization,
NETGRAVITY requests that APV assist in this effort, and NETGRAVITY (with
assistance from APV) structures, negotiates, and closes a financing
agreement, NETGRAVITY will pay APV a commission for any financing agreed
to and signed between NETGRAVITY and a corporation in the Territory.
This fee will be based on the following schedule and will commence upon
the signing of a financing agreement between NETGRAVITY and a third
party in the Territory:

Amount Received by NETGRAVITY APV Commission
---------------------------- --------------
<S> <C>
First $5,000,000 3.0%
Above $5,000,000 2.0%

</TABLE>

In the event that APV helps NETGRAVITY raise capital by selling equity
in NETGRAVITY's joint venture or subsidiary in the Territory (as
distinguished from equity in NETGRAVITY's parent organization), this fee
will be based on the following schedule and will commence upon the
signing of a financing agreement between NETGRAVITY and a third party in
Territory:

Amount Received by NETGRAVITY APV Commission
---------------------------- --------------
<S> <C>
First $5,000,000 6.0%
Above $5,000,000 4.0%

</TABLE>

(B) COMMISSIONS FOR JOINT TECHNOLOGY DEVELOPMENT OR NON-RECURRING
ENGINEERING (NRE): In the event that NETGRAVITY enters into a contract
for the joint development of technology as a result of introduction and
efforts by APV, NETGRAVITY shall pay to APV a commission on any payments
made to NETGRAVITY in connection with such contract based on the
following schedule:

Amount Received by NETGRAVITY APV Commission
---------------------------- --------------
<S> <C>
First $5,000,000 3.0%
Above $5,000,000 2.0%

</TABLE>

These schedules will remain in place for a period of three (3) years
form the first receipt of funds to NETGRAVITY as a result of the signing
of any funding agreement.

<PAGE>

(C) REVENUE COMMISSION: For the term of the agreement, NETGRAVITY will pay
APV a 5% commission on all contracted bookings as a result of APV's
assistance in the establishment of strategic partnering relationships in
the Territory.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
NetGravity, Inc.:

We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

KPMG PEAT MARWICK LLP

San Francisco, California
May 14, 1998