USINTERNETWORKING INC
POS AM, 2000-06-15
COMPUTER PROGRAMMING SERVICES
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<PAGE>   1
      As filed with the Securities and Exchange Commission on June 15, 2000

                                                      Registration No. 333-93299

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

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

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

                             USINTERNETWORKING, INC.
             (Exact Name of Registrant as Specified in its Charter)

                 DELAWARE                             52-2078325
     (State or Other Jurisdiction of          (IRS Employer Identification
      Incorporation or Organization)                    Number)

                                  One USi Plaza
                          Anapolis, Maryland 21401-7478
                                 (410) 897-4400
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)

                             William T. Price, Esq.
                  Vice President, Secretary and General Counsel
                                  One USi Plaza
                         Annapolis, Maryland 21401-7478
                                 (410) 897-4400

 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                     of Agent For Service) with a copy to:

                            John D. Watson, Jr., Esq.
                                Latham & Watkins
                   1001 Pennsylvania Avenue, N.W., Suite 1300
                             Washington, D.C. 20004
                                 (202) 637-2200

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

              Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this registration statement as
determined by market conditions.

              If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]

              If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reinvestment plans, please check
the following box. [X]

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

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

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

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


<PAGE>   2


<PAGE>   3



                             USINTERNETWORKING, INC.

                                  $125,000,000
             7% CONVERTIBLE SUBORDINATED NOTES DUE NOVEMBER 1, 2004
                  AND 7,545,272 SHARES OF COMMON STOCK ISSUABLE
                          UPON CONVERSION OF THE NOTES
                         133,372 SHARES OF COMMON STOCK

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

         Holders of our 7% Convertible Subordinated Notes due 2004 may offer for
sale the Notes and the shares of our common stock into which the Notes are
convertible at any time at market prices prevailing at the time of sale or at
privately negotiated prices. The selling holders may sell the Notes or the
common stock directly to purchasers or through underwriters, broker-dealers or
agents, who may receive compensation in the form of discounts, concessions or
commissions. We will not receive any proceeds from the sale of the Notes or the
common stock by the selling holders. We will pay all expenses (other than
selling commissions and fees and stock transfer taxes) of the registration and
sale of the Notes and the common stock into which the Notes are convertible.

         Holders of the Notes may convert any portion of the Note (in multiples
of $1,000) at any time on or before November 1, 2004 into shares of our common
stock at a conversion price of $16.57 per share, subject to adjustment in
certain events. We will pay Interest on the Notes on May 1 and November 1 of
each year, beginning on May 1, 2000. We may redeem some or all of the Notes at
any time on or after November 5, 2002 at the redemption prices described under
the caption "Description of the Notes--Optional Redemption." If we experience a
change in control, holders of the Notes will have the right to require us to
purchase their Notes at a price equal to 100% of the principal amount plus
accrued interest.

         The Notes are unsecured obligations that are subordinated in right of
payment to all of our existing and future senior indebtedness. See "Description
of the Notes--Subordination of Notes." The Notes are not entitled to any sinking
fund.

         In addition, this prospectus relates to the offering by five of our
stockholders of up to 131,951 shares of our common stock acquired in private
placement transactions. As part of these transactions, we granted these
stockholders the right to include resales of their shares in this prospectus. We
will not receive any proceeds from the sale of the common stock by these
stockholders.

         Our common stock is quoted on The Nasdaq National Market under the
symbol "USIX." On June 13, 2000, the last reported sale price of the common
stock was $19.25 per share. The Notes are eligible for trading in The
PORTAL(Sm) Market, a subsidiary of The Nasdaq Stock Market, Inc., however, no
assurance can be given as to the continued development or liquidity of any
market for the Notes.

         Investing in the Notes or our common stock involves substantial risks.
See "Risk Factors" beginning on page 7.

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                 The date of this prospectus is June 15, 2000


<PAGE>   4


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  PAGE
                                                                                  ----
<S>                                                                               <C>
Summary                                                                            5
Risk Factors                                                                       7
Special Note Regarding Forward Looking Statements Contained in the Prospectus     19
Use of Proceeds                                                                   20
Description of Notes                                                              21
Description of Capital Stock                                                      36
Certain United States Federal Income Tax Consequences                             40
Selling Security Holders                                                          44
Plan of Distribution                                                              46
Experts                                                                           48
Legal Matters                                                                     48
Incorporation of Documents by Reference                                           49
Available Information                                                             49
</TABLE>

         This prospectus references and depicts certain trademarks, service
marks and trade names of other companies. "USinternetworking" and "USi" are our
registered trademarks. We have applied for federal registration of the marks
"Internet Managed Application Provider," "iMAP," "PriorityPeering," "USiView,"
"AppHost," "Global Enterprise Management Center" and "GEMC."

         We have not authorized any person to give you any information or to
make any representations other than those contained in this prospectus. You
should not rely on any information or representations other than those contained
in this prospectus. This prospectus is not any offer to sell or a solicitation
of an offer to buy any securities other than the convertible subordinated Notes
and the common stock into which the Notes are convertible. It is not an offer to
sell or a solicitation of an offer to buy securities if the offer or
solicitation would be unlawful. The affairs of USinternetworking may have
changed since the date of this prospectus. You should not assume that the
information in this prospectus is correct at any time subsequent to its date.


<PAGE>   5




                                     SUMMARY

         This summary may not contain all of the information that may be
important to you. You should read the entire prospectus, including the financial
data and description of the Notes, before making an investment decision. Unless
otherwise indicated, all information in this prospectus reflects both a
three-for-two stock split effected by a stock dividend distributed on December
17, 1999 to all stockholders of record at the close of business on December 3,
1999 and an additional three-for-two stock split effected by a stock dividend
distribution on March 28, 2000 to all stockholders of record at the close of
business on March 14, 2000.

                                USINTERNETWORKING

         USi implements, operates and supports packaged software applications
that can be accessed and used over the Internet. These iMAP, or Internet Managed
Application Provider, services are based on packaged applications from leading
software vendors and are designed to meet the needs of middle market and global
1000 companies for business functions such as e-commerce, sales force automation
and customer support, human resource and financial management, messaging and
collaboration and professional services automation. In order to deliver and
support our iMAP solutions, we have constructed a highly reliable, secure global
network, including four Enterprise Data Centers located around the world. We
implement selected packaged software applications in our data centers, configure
them to meet the needs of our clients and bundle them with Internet access,
back-up, security and operational support. We integrate these elements of
technology and sell them to clients as a service for a recurring monthly fee
over a fixed term. In addition, as part of our iMAP services, we offer complex
web hosting services to clients who want to run their own software applications
using our highly reliable and secure network.

         The advantages our clients realize by purchasing our iMAP services
rather than purchasing the application software and implementing it themselves
include:

     -    faster time to benefit;

     -    reduced technical and integration risk;

     -    reduced reliance on internal IT staff; and

     -    lower total costs and elimination of capital investment.

     We are able to deliver these benefits to our clients in part because we
have designed and implemented a network of four Enterprise Data Centers located
in Annapolis, Silicon Valley, Amsterdam and Tokyo. The data centers are linked
by a dedicated network and by robust transit connections to twelve major
Internet backbones--eight in North America and two in Europe and two in Asia.
Our data centers comprise standardized hardware environments to support our
applications, embedded security, EMC disk arrays for storage and real-time
back-up and significant levels of infrastructure redundancy. Our network is
monitored and managed through USiView, which enables a client engineer to see
all hardware, software and network elements of a client application in a single
view. Cisco assisted in the design of our network and has designated it as a
Cisco Powered Network.

     We believe that controlling all elements of the network from the client's
Internet backbone provider or LAN enables us to deliver superior response time,
reliability and security for our clients. We can substantially reduce
implementation time because we implement our applications in a consistent and
pre-configured environment. Moreover, our clients do not need to mediate among
disparate vendors because we



                                       5
<PAGE>   6

take total responsibility for application support and system performance and
availability.

     We implement and manage applications that are developed by others. To
execute this strategy, we have established agreements with leading software
vendors in key application areas, including:

     -    BroadVision and Microsoft in e-commerce;

     -    Ariba in business to business electronic commerce;

     -    Siebel in sales force automation, customer service and enterprise
          marketing;

     -    Lawson and PeopleSoft in human resources and financial management;

     -    Microsoft in enterprise messaging and collaboration;

     -    Niku in professional services automation; and

     -    Sagent in decision-making support.

     Our iMAP clients sign contracts that provide for fixed monthly service
fees, typically for a three- to five-year term, in exchange for the service we
provide. Once a client signs an iMAP contract, we invest in the additional
hardware, software and implementation needed to deliver that client's service.
This requires a substantial investment in the early years to build our client
base. Since we own or provide most of the elements and operational support for a
client's implementation, we anticipate that we will experience a high level of
client retention, even at the end of the contract's term. We also expect to
benefit from rapidly growing recurring revenue, which we believe will generate
substantial positive cash flow in later years.

     We introduced our iMAP services in late 1998. For the three months ended
March 31, 2000, we generated $17.8 million in revenues, of which 78% was derived
from iMAP sales and the balance from traditional IT services. For the year ended
December 31, 1999, we generated $35.5 million in revenues, of which 61% was
derived from iMAP sales and the balance from traditional IT services. As of
March 31, 2000, we had 147 signed contracts with 115 clients for our iMAP
services. The total expected revenue from these contracts, assuming payment over
the full contract terms, exceeds $194.7 million.

     Our principal executive offices are located at One USi Plaza, Annapolis,
Maryland 21401-7478. Our telephone number is (410) 897-4400.



                                       6
<PAGE>   7

                                  RISK FACTORS

     Investing in the Notes or our common stock involves risk. You should
carefully consider the risks and uncertainties described below before making an
investment decision. These risks and uncertainties are not the only ones that we
face or that may adversely affect our business. If any of the following risks or
uncertainties actually occur, our business, financial condition or results of
operations could be materially adversely affected. This prospectus also contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ from those described in the forward-looking statements. This
could occur because of the risks described below and elsewhere in this
prospectus.

OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.

     We began operating in January 1998. Our limited operating history makes
predicting future results difficult. Since our inception, we have focused on
developing our business and only since September 1998 have we begun to contract
with customers for our iMAP offerings. Because of our limited operating history
and the emerging nature of our markets, our historical financial information is
of limited value in projecting our future results. Therefore, it is difficult to
evaluate our business and prospects.

THE SIGNIFICANT AMOUNT OF OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL
HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.

     The issuance of the Notes increased our indebtedness and, therefore, made
us highly leveraged as indicated in the chart below.

<TABLE>
<CAPTION>
                                                  As of March 31, 2000
                                                 -----------------------
                                                 (dollars in thousands)

<S>                                                     <C>
Total long term liabilities.............................$174,846
Stockholders' equity.................................... 189,865
Debt to equity ratio.................................... 0.92
</TABLE>

     Earnings were insufficient to cover fixed charges by $26.8 million for the
period from our date of inception, January 14, 1998 through December 31, 1998,
$89.6 million for the year ended December 31, 1999 and $35.4 million for the
three-month period ended March 31, 2000.

     Our leverage could have important consequences to you. For example, it
could:

     -    make it more difficult for us to satisfy our obligations with respect
          to the Notes or our other indebtedness;

     -    increase our vulnerability to general adverse economic and industry
          conditions;

     -    limit our ability to fund future working capital, capital
          expenditures, acquisitions and other general corporate requirements;



                                       7
<PAGE>   8

     -    require us to dedicate a substantial portion of our cash flow from
          operations to repaying indebtedness, thereby reducing the availability
          of our cash flow to fund working capital, capital expenditures,
          acquisitions and other general corporate purposes;

     -    limit our flexibility in planning for, or reacting to, changes in our
          business and industry; and

     -    limit our ability to borrow additional funds.

     Any additional borrowings would further increase the amount of our leverage
and the associated risks.

THE NOTES ARE SUBORDINATED TO OUR OTHER INDEBTEDNESS.

     The Notes are unsecured and subordinated in right of payment to all of our
existing and future Senior Indebtedness. As of March 31, 2000, we had
approximately $81.3 million of Senior Indebtedness outstanding. We are also
presently pursuing a variety of sources of other debt financing which, if
obtained, would constitute additional Senior Indebtedness. As a result of this
subordination, in the event of bankruptcy, liquidation or reorganization or
certain other events, our assets will be available to pay obligations on the
Notes only after all Senior Indebtedness has been paid in full, and we may not
have sufficient assets remaining to pay amounts on any or all of the Notes then
outstanding.

     In addition, the Notes will be effectively subordinated to all existing
and future indebtedness and other liabilities (including trade payables) of our
subsidiaries, including any subsidiaries which we may acquire or establish in
the future. As of March 31, 2000, our subsidiaries had no outstanding
indebtedness. Our right to receive assets of one of our subsidiaries upon its
liquidation or reorganization (and the consequent right of the holders of the
Notes to participate in those assets) would be effectively subordinated to the
claims of a subsidiary's creditors (including trade creditors), except to the
extent that we are recognized as a creditor of a subsidiary. In that case, our
claims would still be subordinate to any security interests in the assets of
the subsidiary.

THE NOTES ARE NOT PROTECTED BY RESTRICTIVE COVENANTS THAT LIMIT OUR BUSINESS
ACTIVITIES.

     The Indenture governing the Notes does not contain any financial covenants
or restrictions on the payment of dividends, the incurrence of indebtedness,
including Senior Indebtedness, or the issuance or repurchase of securities by us
or any of our subsidiaries. The Indenture contains no covenants or other
provisions to afford protection to holders of the Notes in the event of a highly
leveraged transaction or a change in control of the Company except to the extent
described under "Description of Notes--Purchase of Notes at the Option of
Holders Upon a Change in Control."

WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS.

     Our ability to make payments on our indebtedness, including the Notes, and
to fund planned capital expenditures, development and operating costs will
depend on our ability to generate cash in the future through sales of our
services. We cannot assure you that our available liquidity will be sufficient
to service our indebtedness, including the Notes, or to fund our other cash
needs. We may need to refinance all or a portion of our indebtedness, including
the Notes, on or before maturity, but we may not be able to do so on
commercially reasonable terms, or at all. Without sufficient funds to service
our indebtedness, we would



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<PAGE>   9

have serious liquidity constraints and would need to seek additional financing
from other sources, but we may not be able to do so on commercially reasonable
terms, or at all.

WE EXPECT TO CONTINUE TO INCUR LOSSES AND EXPERIENCE NEGATIVE CASH FLOW.

     We expect to have significant operating losses and to record significant
net cash outflow before financing in the near term. Our business has not
generated sufficient cash flow to fund our operations without resorting to
external sources of capital. Starting up our company and building our network
required substantial capital and other expenditures. As a result, we reported a
net loss of $39.6 million for the three month period ended March 31, 2000 and
EBITDA of negative $21.4 million for the same period. For the year ended 1999,
we reported a net loss of $103.3 million and EBITDA of negative $65.5 million
for the same period. Further developing our business and expanding our network
will require significant additional capital and other expenditures.

WE MAY NEED ADDITIONAL CAPITAL TO FUND OUR OPERATIONS AND FINANCE OUR GROWTH,
AND WE MAY NOT BE ABLE TO OBTAIN IT ON TERMS ACCEPTABLE TO US OR AT ALL.

     We believe that the net proceeds from the sale of the Notes, together with
cash on hand and our existing and anticipated debt and capital lease financing,
will be sufficient to fund our operations for at least the next twelve months.
However, if we expand more rapidly than currently anticipated, if our working
capital needs exceed our current expectations or if we make acquisitions, we
will need to raise additional capital from equity or debt sources. If we cannot
obtain financing on terms acceptable to us or at all, we may be forced to
curtail our planned business expansion and may be unable to fund our ongoing
operations.

OUR HISTORICAL REVENUES WERE DERIVED FROM SERVICES THAT WE DO NOT EXPECT TO BE
THE FOCUS OF OUR BUSINESS IN THE FUTURE.

     We derive a portion of our revenue from professional services. We acquired
two professional services businesses in the fall of 1998 and their services are
substantively different than our iMAP offerings. As a result, historical
financial information of the acquired businesses does not reflect the results we
expect from our core business offering in the future.

OUR SUCCESS DEPENDS ON THE ACCEPTANCE AND INCREASED USE OF INTERNET-BASED
BUSINESS SOFTWARE SOLUTIONS, AND WE CANNOT BE SURE THAT THIS WILL HAPPEN.

     Our business model depends on the adoption of Internet-based business
software solutions by commercial users. Our business could suffer dramatically
if Internet-based solutions are not accepted or not perceived to be effective.
The market for Internet services, private network management solutions and
widely distributed Internet-enabled packaged application software has only
recently begun to develop and is now evolving rapidly.

     The growth of Internet-based business software solutions could also be
limited by:

     -    concerns over transaction security and user privacy;



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<PAGE>   10

     -    inadequate network infrastructure for the entire Internet; and

     -    inconsistent performance of the Internet.

     We cannot be certain that this market will continue to grow or to grow at
the rate we anticipate.

THE GROWTH IN DEMAND FOR OUTSOURCED BUSINESS SOFTWARE APPLICATIONS BY MIDDLE
MARKET COMPANIES IS HIGHLY UNCERTAIN.

     Growth in demand for and acceptance of outsourced business software
applications, including our iMAP offerings, by middle market companies is highly
uncertain. We believe that many of our potential customers are not fully aware
of the benefits of outsourced solutions. It is possible that these solutions may
never achieve market acceptance. If the market for our products does not grow or
grows more slowly than we currently anticipate, our business, financial
condition and operating results would be materially adversely affected.

OUR BUSINESS STRATEGY MAY NOT EFFECTIVELY ADDRESS OUR MARKET AND WE MAY NEVER
REALIZE A RETURN ON THE RESOURCES WE HAVE INVESTED TO EXECUTE OUR STRATEGY.

     We have made substantial investments to pursue our strategy. These
investments include:

     -    building a global network of data centers;

     -    allying with particular software providers;

     -    expanding our work force;

     -    investing to develop unique service offerings; and

     -    developing implementation resources around specific applications.

     These investments may not be successful. More cost effective strategies may
be available to compete in this market. We may have chosen to focus on the wrong
application areas or to work with the wrong partners. Potential customers may
not value the specific product features in which we have invested. There is no
assurance that our strategy will prove successful.

THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE
MUCH GREATER RESOURCES.

     Our current and potential competitors include Application Service Providers
and companies focused on the application hosting business, such as Aristasoft,
Breakaway Solutions, Corio, FutureLink, Interliant, Interpath, NaviSite and
Telecomputing; Web hosting companies, such as Concentric, Digex and Exodus;
enterprise applications vendors, such as Oracle, Siebel and SAP; business
Internet Service Providers, such as MCI WorldCom, PSINet and Verio;
telecommunications companies, such as AT&T, GTE and Qwest (which has agreed to
acquire our customer and significant stockholder, U S WEST); and systems
integrators, such as Andersen Consulting, EDS, IBM and KPMG. Our strategic
partners and suppliers



                                       10
<PAGE>   11

could also become competitors either directly or through strategic relationships
with some of our other competitors. These relationships may take the form of
strategic investments or marketing or other contractual arrangements.

     Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
We cannot be sure that we will have the resources or expertise to compete
successfully in the future. Our competitors may be able to:

     -    more quickly develop and expand their network infrastructures and
          service offerings;

     -    better adapt to new or emerging technologies and changing customer
          needs;

     -    take advantage of acquisitions and other opportunities more readily;

     -    negotiate more favorable licensing agreements with software
          application vendors;

     -    devote greater resources to the marketing and sale of their products;
          and

     -    adopt more aggressive pricing policies.

     Some of our competitors may also be able to provide customers with
additional benefits at lower overall costs. We cannot be sure that we will be
able to match cost reductions by our competitors. In addition, we believe that
there is likely to be consolidation in our markets. Consolidation could increase
price competition and other competitive forces in ways that materially adversely
affect our business, results of operations and financial condition. Finally,
there are few substantial barriers to entry, and we have no patented technology
that would bar competitors from our market.

OTHERS MAY SEIZE THE MARKET OPPORTUNITY WE HAVE IDENTIFIED BECAUSE WE MAY NOT
EFFECTIVELY EXECUTE OUR STRATEGY.

     If we fail to execute our strategy in a timely or effective manner, our
competitors may be able to seize the marketing opportunities we have identified.
Our business strategy is complex and requires that we successfully and
simultaneously complete many tasks. In order to be successful, we will need to:

     -    build and operate a highly reliable, complex global network;

     -    negotiate effective partnerships and develop economically attractive
          service offerings;

     -    attract and retain iMAP customers;

     -    attract and retain highly skilled employees;

     -    integrate acquired companies into our operations;

     -    evolve our business to gain advantages in an increasingly competitive
          environment; and

     -    expand our international operations.



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<PAGE>   12

     In addition, although most of our management team has worked together for
approximately one year, there can be no assurance that we will be able to
successfully execute all elements of our strategy.

WE PLAN TO EXPAND VERY RAPIDLY, AND MANAGING OUR GROWTH MAY BE DIFFICULT.

     We have rapidly expanded our operations since USi was founded in January
1998. We expect our business to continue to grow both geographically and in
terms of the number of products and services we offer. We cannot be sure that we
will successfully manage our growth. In order to successfully manage our growth
we must:

     -    enlarge our network and infrastructure;

     -    improve our management, financial and information systems and
          controls; and

     -    expand, train and manage our employee base effectively.

     There will be additional demands on our customer service support and sales,
marketing and administrative resources as we increase our service offerings and
expand our target markets. The strains imposed by these demands are magnified by
the relatively early stage of our operations. If we cannot manage our growth
effectively, our business, financial condition or results of operations could be
adversely affected.

OUR GROWTH COULD BE LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL.

     We believe that our short- and long-term success depends largely on our
ability to attract and retain highly skilled technical, managerial and marketing
personnel. We particularly require additional management personnel in the areas
of application integration and technical support. Individuals with information
technology skills are in short supply and competition for application
integration personnel is particularly intense. We may not be able to hire the
necessary personnel to implement our business strategy, or we may need to pay
higher compensation for employees than we currently expect. We cannot be sure
that we will succeed in attracting and retaining the personnel we need to
continue to grow.

WE DEPEND ON A LIMITED NUMBER OF KEY PERSONNEL WHO WOULD BE DIFFICULT TO
REPLACE.

     Our success also depends in significant part on the continued services of
our key technical, sales and senior management personnel. Losing one or more of
our key employees could have a material adverse effect on our business, results
of operations and financial condition. We have employment agreements with most
of our vice presidents and other key employees, including Christopher R.
McCleary, Stephen E. McManus, Jeffery L. McKnight, Andrew A. Stern, Harold C.
Teubner, Jr., Mark J. McEneaney and Gary J. Rogers.

WE MAY NOT BE ABLE TO DELIVER OUR IMAP SERVICES IF THIRD PARTIES DO NOT PROVIDE
US WITH KEY COMPONENTS OF OUR INFRASTRUCTURE.

     We depend on other companies to supply key components of our
telecommunications infrastructure and



                                       12
<PAGE>   13

systems and network management solutions. Any failure to obtain needed products
or services in a timely fashion and at an acceptable cost could have a material
adverse effect on our business, results of operations and financial condition.
Although we lease redundant capacity from multiple suppliers, a disruption in
telecommunications capacity could prevent us from maintaining our standard of
service. Some of the key components of our system and network are available only
from sole or limited sources in the quantities and quality we demand. For
example, the hardware we use to support our real-time mirroring and disaster
recovery functions is supplied only by EMC Corporation. We buy these components
from time to time, do not carry significant inventories of them and have no
guaranteed supply arrangements with our vendors.

OUR ABILITY TO PROVIDE OUR IMAP SERVICES DEPENDS ON STRATEGIC RELATIONSHIPS WITH
SOFTWARE VENDORS THAT WE MAY NOT BE ABLE TO MAINTAIN.

     Our iMAP offerings are central to our business strategy. We obtain software
products under license agreements with BroadVision, Ariba, Siebel, PeopleSoft,
Lawson, Microsoft, Niku and Sagent and package them as part of our iMAP
solutions. The agreements are for terms ranging from one to three years. All the
agreements may be terminated upon a breach of the agreement, subject to cure
periods. The agreement with PeopleSoft may be terminated by either party for
convenience upon 90 days notice after an annual review, scheduled to first occur
on or about June 22, 2000. Under an earlier version of our contract, PeopleSoft
on one occasion notified us of its intention to terminate the agreement. After
significant discussion, the issues in dispute were resolved, our agreement with
PeopleSoft was renegotiated and PeopleSoft retracted its notification of its
intent to terminate the agreement. However, we cannot be sure that one or more
of our agreements with software vendors will not be terminated in the future. If
these agreements were to be terminated or not renewed or we otherwise could not
continue to use this software, we might have to discontinue products or services
or delay or reduce their introduction unless we could find, license and package
equivalent technology.

     All but one of our agreements with software vendors are non-exclusive. Our
agreement with SiebelNet, Inc., a wholly-owned subsidiary of Siebel Systems,
Inc., gives us exclusivity as the Application Service Provider of Siebel
enterprise relationship management applications for direct customers of
SiebelNet headquartered in North America. Our vendors may choose to compete with
us directly or to enter into strategic relationships with our competitors. These
relationships may take the form of strategic investments or marketing or other
contractual arrangements. Our competitors may also license and utilize the same
technology in competition with us. We cannot be sure that the vendors of
technology used in our products will continue to support this technology in its
current form. Nor can we be sure that we will be able to adapt our own products
to changes in this technology. In addition, we cannot be sure that the financial
or other difficulties of our vendors will not have a material adverse effect
upon the technologies incorporated in our products, or that, if these
technologies become unavailable, we will be able to find suitable alternatives.

TECHNOLOGY MAY CHANGE FASTER THAN WE CAN UPDATE OUR NETWORK AND TECHNOLOGY.

     The markets we serve are characterized by rapidly changing technology,
evolving industry standards, emerging competition and the frequent introduction
of new services, software and other products. Our success depends partly on our
ability to enhance existing or develop new products, software and services that
meet changing customer needs in a timely and cost-effective way. We cannot be
sure, however, that we will do some or all of these things. For example, if
software application architecture changes in significant ways, the software for
which we have licenses could become obsolete, we may be forced to update our




                                       13
<PAGE>   14

hardware and network configurations or we may be forced to replace our mirroring
technology. This may require substantial time and expense, and even then we
cannot be sure that we will succeed in adapting our businesses to these and
other technological developments.

WE COULD BE HARMED IF OUR SYSTEMS ARE NOT COMPATIBLE WITH OTHER PRODUCTS AND
SERVICES.

     We believe that our ability to compete successfully also depends on the
continued compatibility of our services with products, services and
architectures offered by various vendors. Our failure to conform to a prevailing
standard, or the failure of a common standard to emerge, could have a material
adverse effect on our business, results of operations and financial condition.
Although we will work with vendors to test new products, we cannot be sure that
their products will be compatible with ours or that they will adequately address
changing customer needs. Although we currently plan to support emerging
standards, we cannot be sure what new industry standards will develop. We also
cannot be sure that we will be able to conform to these new standards quickly
enough to stay competitive. In addition, we cannot be sure that products,
services or technologies developed by others will not make ours noncompetitive
or obsolete.

THE LOSS OF A KEY CUSTOMER COULD DECREASE OUR REVENUES.

     During the year ended December 31, 1999, sales to SiebelNet accounted for
approximately 16% of our revenues. We expect sales to SiebelNet to continue to
constitute a significant portion of our revenues in the near term. During that
period, if our sales to SiebelNet decrease, our business will suffer.

IF WE CANNOT OBTAIN ADDITIONAL APPLICATION SOFTWARE WE WILL BE UNABLE TO EXPAND
OR ENHANCE OUR IMAP SERVICE OFFERINGS.

     Our business strategy also depends on obtaining additional application
software. We cannot be sure, however, that we will be able to obtain the new or
enhanced applications we may need to keep our iMAP solutions competitive. If we
cannot obtain these applications and as a result must discontinue, delay or
reduce the availability of our iMAP solutions or other products or services, our
business, results of operations and financial condition may be materially
adversely affected.

DEVELOPING AND EXPANDING OUR OPERATIONS WILL DEPEND, AMONG OTHER THINGS, ON OUR
MANAGEMENT'S ABILITY TO SUCCESSFULLY INTEGRATE NEWLY ACQUIRED OPERATIONS.

     In October 1999, we acquired Conklin & Conklin, Inc. We cannot be sure that
our integration of Conklin will result in the Conklin business performing as
we expected. In addition, we cannot be sure that we will be able to successfully
integrate any business acquired in the future into our own. Our failure to
successfully integrate an acquired company or its subsequent under performance
could have a material adverse effect on our business, results of operations and
financial condition.

WE MAY UNDERTAKE ADDITIONAL ACQUISITIONS WHICH POSE RISKS TO OUR BUSINESS.

     From time to time, we may undertake additional acquisitions. If we do, our
risks may increase because:



                                       14
<PAGE>   15

     -    we may pay more for the acquired company than the value we realize
          from the acquisition;

     -    we may not fully understand the business we acquire;

     -    we may be entering markets in which we have little or no direct prior
          experience;

     -    our ongoing business may be disrupted and resources and management
          time diverted; and

     -    our accounting for acquisitions could require us to amortize
          substantial goodwill, adversely affecting our reported results of
          operations.

     In addition, once we have made an acquisition we will face additional
risks:

     -    it may be difficult to assimilate acquired operations and personnel;

     -    we may not be able to retain the management and other key personnel of
          the acquired business;

     -    we may not be able to maintain uniform standards, controls, procedures
          and policies; and

     -    changing management may impair relationships with an acquired
          business's employees or customers.

WE MAY MAKE INVESTMENTS IN ENTITIES THAT WE DO NOT CONTROL.

     In the future, we may make investments in joint ventures or other entities
over which we do not exercise control. We may make these investments in
connection with entering into strategic partnerships with software vendors,
systems integrators or Internet Service Providers or as strategic investments.
Our inability to control the entity in which we may invest may have consequences
on our ability to receive distributions from such entity or to implement our
business plan. Debt agreements, if entered into by a non-control entity, may
restrict or prohibit such entity from paying distributions to us. Applicable
state or local law may also limit the amount that a non-control entity is
permitted to pay a distribution on its equity interest, and we may not be able
to influence the payment of dividends. If any of the other investors in a
non-control entity fail to observe their commitments, that entity may not be
able to operate according to its business plans or we may be required to
increase our level of commitment to give effect to the plan. In addition, our
ability to implement a business plan for a non-control entity may be limited or
non-existent.

BECAUSE WE HAVE INTERNATIONAL OPERATIONS, WE FACE ADDITIONAL RISKS RELATED TO
FOREIGN POLITICAL AND ECONOMIC CONDITIONS.

     We have established Enterprise Data Centers in Europe and Japan. We intend
to expand further into international markets. We cannot be sure that we will be
able to obtain the necessary telecommunications infrastructure in a
cost-effective manner or compete effectively in international markets. In
addition, there are risks inherent in conducting business internationally. These
include:

     -    unexpected changes in regulatory requirements;



                                       15
<PAGE>   16

     -    export restrictions;

     -    tariffs and other trade barriers;

     -    challenges in staffing and managing foreign operations;

     -    differing technology standards;

     -    employment laws and practices in foreign countries;

     -    political instability;

     -    fluctuations in currency exchange rates;

     -    imposition of currency exchange controls; and

     -    potentially adverse tax consequences.

     Any of these could adversely affect our international operations. We cannot
be sure that one or more of these factors will not have a material adverse
effect on our current or future international operations and, consequently, on
our business, results of operations and financial condition.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET AND COULD LIMIT OUR CLIENTS' USE OF THE INTERNET.

     Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. The adoption or modification of laws
or regulations relating to the Internet could adversely affect our business. In
recent sessions, the United States Congress has enacted Internet laws regarding
children's privacy, copyrights, taxation and the transmission of sexually
explicit material and other similar proposals are continuously being considered.
The European Union recently enacted its own privacy regulations. The law of the
Internet, however, remains largely unsettled, even in areas where there has been
some legislative action. It may take years to determine whether and how existing
laws such as those governing intellectual property, privacy, libel and taxation
apply to the Internet. In addition, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad, that may impose additional burdens on
companies conducting business online. For example, Germany and the European
Union have enforced laws and regulations on content distributed over the
Internet that are more strict than those currently in place in the United
States.

THE OUTCOME OF PROPOSALS PUT TO A VOTE OF STOCKHOLDERS WILL BE DETERMINED BY OUR
EXISTING PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS.

     Our executive officers, directors, existing 5% or greater stockholders and
their affiliates, in the aggregate, own shares representing approximately 53.6%
of our outstanding voting capital stock. As a result, these persons, acting
together, are able to control all matters submitted to our stockholders for
approval and to control our management and affairs. For example, these people,
acting together, control the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our



                                       16
<PAGE>   17

assets.

WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
IN CONTROL OFFER REQUIRED BY THE INDENTURE.

     Upon the occurrence of change in control events, holders of the Notes will
have the right to require us to purchase their Notes at a price equal to 100% of
the principal amount, plus accrued interest. Our ability to repurchase the Notes
upon a change in control event will be limited by the terms of our other debt
agreements. Upon such a change of control event, we may also be required
immediately to repay the outstanding principal and other amounts owed by us
under our other financing agreements.

     We may not be able to repay amounts outstanding under our other financing
agreements or obtain necessary consents, if any, to repurchase the Notes. Any
requirement to offer to purchase the Notes may result in our having to refinance
our outstanding indebtedness, which we may not be able to do. In addition, even
if we were able to refinance that debt, the financing may be on unfavorable
terms. If we are not able to make the required repurchases, we would be in
default under the Indenture. See "Description of the Notes--Repurchase of Notes
at the Option of Holders Upon a Change in Control."

WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP OR CONTINUE FOR
THE NOTES.

     The Notes were originally issued on October 29, 1999. Since that time, the
initial purchasers have engaged in market-making activities with respect to the
Notes. However, the initial purchasers may cease their market-making at any
time. In addition, the liquidity of the trading market in the Notes, and the
market price quoted for the Notes, may be adversely affected by changes in the
overall market for high yield securities and by changes in our financial
performance or prospects or in the prospects for companies in our industry
generally. As a result, you cannot be sure that an active trading market will
develop for the Notes.

THE TRADING PRICE OF OUR SECURITIES COULD BE SUBJECT TO SIGNIFICANT
FLUCTUATIONS.

     The trading price of our common stock has been volatile, and the trading
price for the Notes also may be volatile. Factors such as announcements of
fluctuations in our or our competitors' operating results and market conditions
for Internet related and other technology stocks in general could have a
significant impact on the future trading prices of our common stock and the
Notes. In particular, the trading price of the common stock of many Internet
related and other technology companies has experienced extreme price and volume
fluctuations, which have at times been unrelated to the operating performance of
such companies whose stocks were affected. In addition, the trading prices of
our common stock and the Notes could be subject to significant fluctuations in
response to variations in our prospects and operating results, which may in turn
be affected by changes in interest rates and other factors. There can be no
assurance that these factors will not have an adverse effect on the trading
prices of our common stock and the Notes.

THE MARKET PRICE OF OUR COMMON STOCK COULD BE AFFECTED BY THE SUBSTANTIAL NUMBER
OF SHARES THAT ARE ELIGIBLE FOR FUTURE SALE.

     As of June 12, 2000, we had 96,740,217 shares of common stock issued and
outstanding, excluding



                                       17
<PAGE>   18

1,324,004 shares issuable upon the exercise of warrants and 26,223,063 shares
issuable upon the exercise of options granted under our 1998 Stock Option Plan
and 7,545,272 shares issuable upon conversion of the Notes. We cannot predict
the effect, if any, that future sales of the Notes or shares of common stock,
including common stock issuable upon conversion of the Notes, or the
availability of the Notes or shares of common stock for future sale, will have
on the market price of common stock prevailing from time to time.

INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US, EVEN WITHOUT MERIT, COULD
COST A SIGNIFICANT AMOUNT OF MONEY TO DEFEND AND DIVERT MANAGEMENT'S ATTENTION
AWAY FROM OUR BUSINESS.

     As the number of software products in our target markets increases and the
functionality of these products further overlap, software industry participants
may become increasingly subject to infringement claims. Someone may even claim
that our technology infringes their proprietary rights. Any infringement claims,
even if without merit, can be time consuming and expensive to defend. They may
divert management's attention and resources and could cause service
implementation delays. They also could require us to enter into costly royalty
or licensing agreements. If successful, a claim of product infringement against
us and our inability to license the infringed or similar technology could
adversely affect our business.

WE COULD BE REQUIRED TO USE OUR FINANCIAL RESOURCES TO REPURCHASE SHARES OF
COMMON STOCK FROM U S WEST.

     We could be required to repurchase for cash some of the shares of our
capital stock owned by U S WEST. This would require us to divert our resources
at a time of rapid growth. If we engage in activities in which U S WEST would be
prohibited from engaging and we were considered an affiliate of U S WEST under
regulations of the Federal Communications Commission, U S WEST could force us to
repurchase the number of shares required to make us no longer an affiliate. We
are not presently considered an affiliate of U S WEST under these regulations.
See "Certain Relationships and Related Transactions--Purchases of Series A
Preferred Stock." Although we believe the possibility of this occurring is
remote, repurchasing the shares held by U S WEST could be costly.



                                       18
<PAGE>   19

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
                          CONTAINED IN THIS PROSPECTUS

     This prospectus includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements relate
to, among other things, analyses and other information that are based on
forecasts of future results and estimates of amounts not yet determinable. These
statements also relate to our future prospects, developments and business
strategies.

     These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" or the negative of those
or other variations, or comparable expressions, including references to
assumptions. These statements are contained in sections entitled "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and other sections of this
prospectus and the documents incorporated by reference into this prospectus.

     The forward-looking statements in this prospectus, including statements
concerning projections of our future results, operating profits and earnings,
are based on current expectations and are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed or
implied by those statements. The risks and uncertainties include but are not
limited to our continued ability to:

     -    build and operate a highly reliable, complex global network;

     -    establish and maintain relationships with key software vendors and
          develop economically attractive products;

     -    attract and retain iMAP customers;

     -    attract and retain highly skilled employees;

     -    effectively manage our rapid growth; and

     -    evolve our business to gain advantages in an increasingly competitive
          environment.

     Our risks are more specifically described in "Risk Factors." If one or more
of these risks or uncertainties materializes, or if underlying assumptions prove
incorrect, our actual results may vary materially from those expected, estimated
or projected. Given these uncertainties, you should not place undue reliance on
forward-looking statements.

     We undertake no obligation to update forward-looking statements or risk
factors other than as required by applicable law, whether as a result of new
information, future events or otherwise.



                                       19
<PAGE>   20

                                 USE OF PROCEEDS

     We will not receive any proceeds from the sale of the Notes by the selling
security holders, the issuance of the common stock issuable to the holders of
the Notes upon conversion of the Notes or the sale of any common stock under
this prospectus.



                                       20
<PAGE>   21


                            DESCRIPTION OF THE NOTES

     The Notes were issued under an Indenture, dated as of October 29, 1999,
between USi, as issuer, and The Bank of New York, as Trustee. The following
description is a summary of the material provisions of the Indenture. It does
not restate this agreement in its entirety. We urge you to read the Indenture
because it, and not this description, defines your rights as a holder of the
Notes. A copy of the form of Indenture and the form of certificate evidencing
the Notes is available to you upon request.

     You can find the definitions of the capitalized terms used in this
description under the subheading "Definitions." In this section of the
prospectus, entitled "Description of the Notes," when we refer to "USi," "we,"
"our," or "us," we are referring to USinternetworking, Inc. and not any of its
subsidiaries.

GENERAL

     The Notes are general unsecured obligations of USi, were offered in the
principal amount of $125,000,000 and will mature on November 1, 2004. The Notes
are contractually subordinated in right of payment to all existing and future
Senior Indebtedness. As of March 31, 2000, we had approximately $81.3 million of
Senior Indebtedness outstanding. In addition, the Notes are effectively
subordinated to all obligations, indebtedness and other liabilities (including
trade payables) of any of our Subsidiaries. As of March 31, 2000, our
Subsidiaries had no indebtedness outstanding. Our rights to receive assets of
our Subsidiaries upon their liquidation or reorganization (and the consequent
right of the holders of the Notes to participate in those assets) are
effectively subordinated to the claims of that Subsidiary's creditors (including
trade creditors), in which case our claims are still subordinate to any security
interests in the assets of the Subsidiary and any indebtedness of the Subsidiary
senior to that held by us. In addition, our cash flow and the consequent ability
to service our debt, including the Notes, may depend upon the results of
operations of our Subsidiaries and upon the ability of our Subsidiaries to
provide cash (whether in the form of dividends, loans, or otherwise) to pay
amounts due in respect of our obligations, including the Notes. The Indenture
does not restrict the incurrence of indebtedness (including Senior Indebtedness)
by us or our Subsidiaries. In addition, the Notes are not protected by financial
covenants that limit our business activities.

     The Notes bear interest from October 29, 1999 at the rate per annum of 7%.
Interest is payable semi-annually on May 1 and November 1 of each year,
commencing May 1, 2000, to holders of record at the close of business on April
15 or October 15 preceding each such interest payment date. Interest is
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Principal of and interest on the Notes is payable at the office of the Paying
Agent. The Trustee has initially acted as the Paying Agent.

CONVERSION RIGHTS

     A holder may, at any time prior to the close of business on November 1,
2004, convert the principal amount of a Note (or any portion thereof equal to
$1,000 or any integral multiple thereof) into shares of our common stock at the
conversion price of $16.57 per share, subject to adjustment as described below
(the "Conversion Price"); except that if a Note is called for redemption, the
conversion right will terminate at the close of business on the Business Day
immediately preceding the redemption date for the Note (unless we default in
making the redemption payment when due, in which case the conversion right shall
terminate at the close of business on the date the default is cured and the Note
is redeemed). A Note for which a holder has delivered a notice exercising the
option to require us to purchase the Note may be converted only if the holder's
notice is withdrawn by a written notice of withdrawal delivered by the holder to
a Paying Agent prior to the close of business on the second Business Day prior
to the Change in Control



                                       21
<PAGE>   22

Payment Date in accordance with the Indenture.

     No payment or adjustment will be made for dividends or distributions with
respect to shares of common stock issued upon conversion of a Note. Except as
otherwise provided in the Indenture, interest accrued shall not be paid on Notes
converted. If any holder surrenders a Note for conversion between the record
date for the payment of an installment of interest and the related interest
payment date, then notwithstanding the conversion, the interest payable on the
interest payment date will be paid to the person in whose name the Note was
registered at the close of business on the record date. However, in this event,
unless the Note has been called for redemption, the Note, when surrendered for
conversion, must be accompanied by delivery by the holder of payment in an
amount equal to the interest payable on the interest payment date on the
principal amount of the converted Note. No fractional shares will be issued upon
conversion, but a cash payment will be made for any fractional interest based
upon the closing price (as defined in the Indenture) of the common stock on the
trading day immediately prior to the date of conversion.

     The Conversion Price is subject to adjustment upon the occurrence of
certain events, including:

     (1)  the issuance of shares of common stock as a dividend or distribution
          on our common stock;

     (2)  the subdivision or combination of our outstanding common stock;

     (3)  the issuance to all or substantially all holders of common stock of
          rights or warrants entitling them to subscribe for or purchase common
          stock (or securities convertible into common stock) at a price per
          share (or having a conversion price per share) less than the current
          market price per share (as defined in the Indenture);

     (4)  the distribution to all or substantially all holders of common stock
          of shares of capital stock of USi (other than common stock), evidences
          of indebtedness or other non-cash assets (including securities of any
          person other than USi but excluding (a) dividends on distributions
          paid exclusively in cash, (b) dividends or distributions referred to
          in clauses (1) and (2) above and (c) distributions in connection with
          a reclassification, consolidation or sale referred to in the next
          succeeding paragraph);

     (5)  the distribution to all or substantially all holders of common stock
          of rights or warrants to subscribe for USi's securities (other than
          those rights and warrants referred to in (3) above and other than the
          distribution of rights to all holders of common stock pursuant to the
          adoption of a stockholders rights plan or the detachment of such
          rights under the terms of such plan);

     (6)  the distribution to all or substantially all holders of common stock
          of cash in an aggregate amount that (together with (A) any cash and
          the fair market value of any other consideration payable in respect of
          any tender offer by USi or any of our Subsidiaries for common stock
          consummated within the preceding 12 months not triggering a Conversion
          Price adjustment and (B) all other cash distribution to all or
          substantially all holders of common stock made within the preceding 12
          months not triggering a Conversion Price adjustment) exceeds an amount
          equal to 10.0% of our market capitalization (determined as provided in
          the Indenture) on the Business Day immediately preceding the day on
          which we declare the distribution; and

     (7)  the purchase of common stock pursuant to a tender offer made by USi or
          any of its Subsidiaries to the extent that the same involves aggregate
          consideration that (together with (A) any cash and the



                                       22
<PAGE>   23

          fair market value of any other consideration payable in respect of any
          other tender offer by USi or any of our Subsidiaries for common stock
          consummated within the preceding 12 months not triggering a Conversion
          Price adjustment and (B) all cash distributions to all or
          substantially all holders of common stock made within the preceding 12
          months not triggering a Conversion Price adjustment) exceeds an amount
          equal to 10.0% of USi's market capitalization (determined as provided
          in the Indenture) on the expiration date of such tender offer.

     Notwithstanding the foregoing, no adjustment need be made in the Conversion
Price for a transaction of the nature described above in this paragraph if all
holders of Notes are entitled to participate in the transaction on a basis and
with notice that the Board of Directors determines to be fair and appropriate in
light of the basis and notice on which holders of common stock participate in
the transaction; no adjustment to the Conversion Price need be made or any
issuance of common stock pursuant to any of our plans for reinvestment of
dividends or interest or for a change in the par value of the common stock; and,
to the extent that the Notes become convertible into the right to receive cash,
no adjustment to the Conversion Price need be made thereafter as to the cash,
and interest will not accrue on the cash. We, from time to time, may reduce the
Conversion Price by an amount for any period of time if the period is at least
20 days or such longer period as may be required by law and if the reduction is
irrevocable during the period; provided, however, that in no event may we reduce
the Conversion Price to be less than the par value of a share of our common
stock. No adjustment of the Conversion Price will be required to be made until
the cumulative adjustments require an increase or decrease of at least 1% in the
Conversion Price as last adjusted.

     Subject to any applicable right of the holders upon a Change in Control, if
USi reclassifies or changes its common stock issuable upon conversion of the
Notes (other than a change in par value, or as a result of a subdivision or
combination, or any other change for which a Conversion Price adjustment is
provided in the Indenture) or mergers into or transfers or leases all or
substantially all of its assets to any person, or is a party to a merger that
reclassifies or changes its outstanding common stock, the Notes will become
convertible into the kind and amount of securities and property (including cash)
which the holders of the Notes would have owned immediately after the
transaction if the holders had converted the Notes immediately before the
effective date of the transaction.

     Adjustments to the Conversion Price to reflect our issuance of other
rights, warrants, evidences of indebtedness, securities or other property
(including cash) to holders of the common stock may result in constructive
distributions taxable as dividends to holders of the Notes.

OPTIONAL REDEMPTION

     The Notes may not be redeemed at the option of the Company prior to
November 5, 2002. On that date and thereafter, the Notes may be redeemed at our
option, in whole or, in part, upon not less than 30 nor more than 60 days'
notice by mail.

     The redemption prices (expressed as a percentage of principal amount) are
as follows for Notes redeemed during the periods set forth below:

<TABLE>
<CAPTION>
PERIOD                                                        PERCENTAGE
------                                                        ----------
<S>                                                           <C>
November 5, 2002 through October 31, 2003.......................101.75%
November 1, 2003 and thereafter.................................100.00%
</TABLE>



                                       23
<PAGE>   24

in each case together with accrued interest up to but not including the
redemption date; provided that if the redemption date falls after an interest
payment record date and on or before an interest payment date, then the interest
payment shall be payable to holders of record on the relevant record date.

     If less than all of the outstanding Notes are to be redeemed, the Trustee
shall select the Notes to be redeemed in principal amounts of $1,000 or
multiples thereof by lot, pro rata or by another method the Trustee considers
fair and appropriate. If a portion of a holder's Notes is selected for partial
redemption and that holder converts a portion of those Notes, the converted
portion shall be deemed to be of the portion selected for redemption.

     All Notes which are redeemed or otherwise acquired by us or any of our
Subsidiaries prior to maturity will be immediately canceled and may not be held,
reissued or resold.

PURCHASE OF NOTES AT THE OPTION OF HOLDERS UPON A CHANGE IN CONTROL

     In the event of a Change in Control each holder has the option, subject to
the terms and conditions of the Indenture, to require us to purchase all or any
part (provided that the principal amount must be $1,000 or an integral multiple
thereof) of the holder's Notes for a purchase price equal to 100% of the
principal amount thereof, plus accrued interest up to but not including the
Change in Control Payment Date, as described below. This payment is referred to
as the Change in Control Payment.

     Within 30 days following any Change in Control, we will mail a notice to
each holder, stating:

     (1)  that the Change in Control Offer is being made pursuant to the
          covenant entitled "Change in Control" in the Indenture and that all
          the Notes tendered will be accepted for payment;

     (2)  the purchase price and the purchase date, which shall be no earlier
          than 30 days nor later than 40 days from the date such notice is
          mailed. This date is referred to as the Change in Control Payment
          Date;

     (3)  that interest will continue to accrue on any convertible Notes not
          tendered, as provided in the convertible Notes;

     (4)  that, unless USi defaults in the payment of the Change in Control
          Payment, with respect to all the Notes accepted for payment pursuant
          to the Change in Control Offer, interest will cease to accrue after
          the Change in Control Payment Date;

     (5)  that holders electing to have any of the Notes purchased pursuant to a
          Change in Control Offer will be required to surrender the Notes, with
          the form entitled Option of Holder to Elect Purchase on the reverse of
          the Notes completed, to the Paying Agent at the address specified in
          the notice prior to the close of business on the third Business Day
          preceding the Change in Control Payment Date;

     (6)  that holders will be entitled to withdraw their election if the Paying
          Agent receives, not later than the close of business on the second
          Business Day preceding the Change in Control Payment Date, a telegram,
          facsimile transmission or letter setting forth the name of the holder,
          the principal amount of the Notes delivered for purchase, and a
          statement that such holder is withdrawing his election to have the
          Notes purchased; and

     (7)  that holders whose Notes are being purchased only in part will be
          issued new Notes equal in



                                       24
<PAGE>   25

          principal amount to the unpurchased portion of the Notes surrendered,
          which unpurchased portion must be equal to $1,000 in principal amount.

     A Change in Control shall be deemed to have occurred if any of the
following occurs after the Issue Date of the Notes:

     (1)  the consolidation with or merger by USi into any other Person, or any
          other Person merges into USi, unless the stockholders of USi
          immediately before such transaction own, directly or indirectly
          immediately following such transaction, at least a majority of the
          combined voting power of our outstanding voting securities entitled to
          vote generally in the election of directors of USi or the Person
          resulting from such transaction;

     (2)  the sale, lease or transfer of all or substantially all of our assets
          to any "person" or "group", within the meaning of Sections 13(d)(3)
          and 14(d)(2) of the Exchange Act or any successor provision to either
          of the foregoing, including any group acting for the purpose of
          acquiring, holding or disposing of securities within the meaning of
          Rule 13d-5(b)(1) under the Exchange Act;

     (3)  the approval by the requisite stockholders of USi of a plan of
          liquidation or dissolution of USi;

     (4)  any "person" or "group," within the meaning of Sections 13(d) and
          14(d)(2) of the Exchange Act or any successor provision to either of
          the foregoing, including any group acting for the purpose of
          acquiring, holding or disposing of securities within the meaning of
          Rule 13d-5(b)(1) under the Exchange Act, becomes the "beneficial
          owner," as defined in Rule 13d-3 under the Exchange Act, of more than
          50% of the total voting power of all classes of our voting stock
          and/or warrants or options to acquire such voting stock, calculated on
          a fully diluted basis, unless, as a result of such transaction, the
          ultimate direct or indirect ownership USi is substantially the same
          immediately after such transaction as it was immediately prior to such
          transaction; or

     (5)  during any period of two consecutive years, individuals who at the
          beginning of such period constituted our Board of Directors, together
          with any new directors whose election or appointment by such board or
          whose nomination for election by our stockholders was approved by a
          vote of a majority of the directors then still in office who were
          either directors at the beginning of such period or whose election or
          nomination for election was previously so approved, cease for any
          reason to constitute a majority of our Board of Directors then in
          office.

     We will comply with the requirements of Rule 13e-4 and Rule 14e-1, under
the Exchange Act, and with any other securities laws and regulations thereunder
to the extent these laws and regulations are applicable in connection with any
offer by USi to purchase Notes at the option of the holders upon a Change in
Control.

     The Change in Control purchase feature of the Notes may in some
circumstances make more difficult or discourage a takeover of USi and the
removal of incumbent management. We are not aware of any specific effort to
accumulate shares of common stock or to obtain control of USi by means of a
merger, tender offer, solicitation or otherwise, nor is the Change in Control
purchase feature part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the Change in Control purchase feature is a result of
negotiations between USi and the initial purchasers.

     Subject to the limitation on mergers and consolidations discussed below, we
could, in the future, enter into transactions, including recapitalizations of
USi, that would not constitute a Change in Control under



                                       25
<PAGE>   26

the Indenture, but that would increase the amount of indebtedness (including
Senior Indebtedness) outstanding or otherwise adversely affect the holders of
the Notes. There will be no restrictions in the Indenture on the creation of
additional indebtedness (including Senior Indebtedness) by USi or its
Subsidiaries and the incurrence of significant amounts of additional
indebtedness could have an adverse effect on our ability to service our
indebtedness, including the Notes.

     If a Change in Control were to occur, there can be no assurance that we
would have sufficient funds to pay the Change in Control Payment for the Notes
tendered by the holders thereof. In addition, other indebtedness which we may
incur in the future may have similar change in control provisions permitting the
holders thereof to accelerate or require us to repurchase such indebtedness upon
the occurrence of events similar to a Change in Control. Our failure to
repurchase the Notes when required following a Change in Control will result in
an Event of Default under the Indenture whether or not such repurchase is
permitted by the subordination provisions thereof.

     Other than granting holders the option to require USi to purchase all or
part of their Notes upon the occurrence of the Change in Control as described
above, the Indenture will not contain any covenants or other provisions designed
to afford holders protection in the event of takeovers, recapitalizations,
highly leveraged transactions or similar restructurings involving USi.

     In the event that Certificated Notes are issued under the limited
circumstances described herein, holders electing to exercise the option to have
their Notes repurchased following a Change in Control must surrender the
Certificated Notes, together with such additional documents as are required by
the Indenture, at the office of a Paying Agent. Where not all of the Notes
represented by a Certificated Notes are submitted for purchase, a new
Certificated Note in respect of the principal amount of the Notes that have not
been so submitted for purchase will be issued to the holder.

SUBORDINATION OF NOTES

     To the extent set forth in the Indenture, the Notes are subordinated in
right of payment to all of our existing and future Senior Indebtedness. Upon any
payment or distribution of our assets in connection with any dissolution,
winding-up, liquidation or reorganization of USi (whether in insolvency or
bankruptcy proceedings or otherwise), all Senior Indebtedness must be paid in
full before any payment is made in respect of the Notes. In the event of a
default in payment (whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise) of principal of or premium, if any, or interest on
Senior Indebtedness, no payment may be made by us in respect of the Notes until
payment in full of the Senior Indebtedness then due or the cure, waiver or
cessation of the default. Upon an event of default with respect to any Senior
Indebtedness (other than a default in the payment of principal of, or premium,
if any or interest on Senior Indebtedness) permitting a holder thereof to
accelerate its maturity, and upon written notice, referred to as a Default
Notice, of such default to the Trustee and USi by any holder of such Senior
Indebtedness or its representative, then, unless and until such default has been
cured, waived or has ceased to exist, no payment may be made by USi in respect
of the Notes; except that nothing in the foregoing provisions of this sentence
will prevent the making of any payment (which is not otherwise prohibited by the
provisions described in the immediately preceding sentence) in respect of the
Notes for a period of more than 180 days after the date such Default Notice is
given unless the maturity of the Senior Indebtedness has been accelerated, in
which case no payment on the Notes may be made until the acceleration has been
waived, rescinded or annulled or the Senior Indebtedness has been paid in full.
Notwithstanding the provisions described in the preceding sentence, not more
than one Default Notice shall be given with respect to the same issue of Senior
Indebtedness within a period of 360 consecutive days, and no event of default
which existed on the date of any Default Notice and was known to the holders of
any issue of



                                       26
<PAGE>   27

Senior Indebtedness shall be made the basis for the giving of a subsequent
Default Notice by the holders of the issue of Senior Indebtedness.

     In the event that, notwithstanding the provisions set forth in the
immediately preceding paragraph, the Trustee, any Paying Agent or any holder of
the Notes receives any payment or distribution of assets of USi of any kind in
contravention of any of the terms of the Indenture, whether in cash, property or
securities, in respect of the Notes before all Senior Indebtedness is paid in
full, then such payment or distribution will be held by the recipient in trust
for the benefit of holders of Senior Indebtedness or their representatives to
the extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution
to or for the holders of Senior Indebtedness.

     As a result of these subordination provisions, in the event of our
insolvency, holders of the Notes may recover ratably less, than our other
creditors. Such subordination will not prevent the occurrence of any Event of
Default under the Indenture.

     The Indenture does not limit the amount of indebtedness, including Senior
Indebtedness, that USi, or any Subsidiary, can create, incur, assume or
guarantee.

DEFINITIONS

     "Business Day" means each day which is not a Legal Holiday.

     "Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.

     "Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, but excluding any debt
securities convertible into such equity.

     "Currency Agreement" means in respect of a Person, any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.

     "Event Of Default" means an event of default under the Indenture.

     "GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in:

     (1)  the opinions and pronouncements of the Accounting Principles Board of
          the American Institute of Certified Public Accountants;

     (2)  statements and pronouncements of the Financial Accounting Standards
          Board;

     (3)  such other statements by such other entity as approved by a
          significant segment of the accounting profession; and



                                       27
<PAGE>   28

     (4)  the rules and regulations of the Commission governing the inclusion of
          financial statements (including pro forma financial statements) in
          registration statements filed under the Securities Act of 1933 and
          periodic reports required to be filed pursuant to Section 13 of the
          Exchange Act, including opinions and pronouncements in staff
          accounting bulletins and similar written statements from the
          accounting staff of the Commission.

     "Indebtedness" means, with respect to any person, without duplication:

     (1)  all liabilities of such person for borrowed money or for the deferred
          purchase price of property or services, excluding any trade accounts
          payable and other current liabilities incurred in the ordinary course
          of business;

     (2)  all obligations of such person evidenced by bonds, notes, debentures,
          or other similar instruments;

     (3)  all Capital Lease Obligations of such person;

     (4)  all guarantees of Indebtedness referred to in this definition by such
          person;

     (5)  all obligations of such person under or in respect of Currency
          Agreements and Interest Rate Agreements of such person; and

     (6)  any amendment, supplement, modification, deferral, renewal, extension
          or refunding of any liability of the types referred to in clauses (1)
          through (5) above.

     "Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.

     "Issue Date" means the date on which the Notes are originally issued.

     "Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record
shall not be affected.

     "Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.

     "Senior Indebtedness" means the principal of, premium, if any, interest and
other amounts payable on or in respect of any Indebtedness of USi, whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to, or shall be junior in right of payment to, or shall be pari passu,
in right of payment with, the Notes. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include:

     (1)  Indebtedness evidenced by the Notes;



                                       28
<PAGE>   29

     (2)  Indebtedness which, when incurred and without respect to any election
          under Section 1111 (b) of Title 11, United States Code (or any
          successor provision thereto), is without recourse to USi;

     (3)  trade accounts payable or other current liabilities incurred in the
          ordinary course of business;

     (4)  Indebtedness of or amounts owed by USi for compensation to employees
          or for services rendered to USi;

     (5)  any liability for federal, state, local or other taxes owed or owing
          by USi;

     (6)  Indebtedness of USi to a Subsidiary of USi; and

     (7)  amounts owing under leases (other than Capital Lease Obligations).

     "Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of USi within the meaning of Rule 1-02 under Regulation
S-X promulgated by the Commission.

     "Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, general partners or trustees
thereof is at the time owned or controlled, directly or indirectly, by:

     (1)  such Person;

     (2)  such Person and one or more Subsidiaries of such Person; or

     (3)  one or more Subsidiaries of such Person.

     "Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.

EVENTS OF DEFAULT; NOTICE WAIVER

     If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization with respect to USi or any Significant
Subsidiary) occurs and is continuing, the Trustees may, by notice to USi,
declare all unpaid principal of and accrued interest to the date of acceleration
on the Notes then outstanding to be due and payable immediately. Also, in such
event, the holders of at least 25% in principal amount at the Notes then
outstanding may, by notice to USi and the Trustee, declare all unpaid principal
of and accrued interest to the date of acceleration on the Notes then
outstanding to be due and payable immediately. If an Event of Default resulting
from events of bankruptcy, insolvency or reorganization with respect to USi or
any Significant Subsidiary shall occur, all unpaid principal of and accrued
interest on the Notes then outstanding shall become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder.

     The Indenture provides that the holders of a majority in principal amount
of the outstanding Notes may on behalf of all holders waive any existing default
or Event of Default and its consequences except a



                                       29
<PAGE>   30

default or Event of Default in the payment of principal or accrued interest on
the Notes or any default in respect of any provision of the Indenture that
cannot be modified or amended without the consent of the holder of each Note
affected.

     The following are Events of Default under the Indenture:

     (1)  failure of USi to pay any interest on the Notes for 30 days after the
          same is due or failure of USi to pay any principal of or premium, if
          any, on the Notes when due (whether at maturity, upon redemption, on a
          Change in Control Payment Date or otherwise);

     (2)  failure of USi to comply with any of its other agreements contained in
          the Notes or the Indenture for 60 days after receipt of notice of such
          failure from the Trustee or the holders of not less than 25% in
          aggregate principal amount of the Notes then outstanding;

     (3)  default under any bond, debenture, note or other evidence of
          indebtedness for money borrowed of USi or any Significant Subsidiary
          having an aggregate outstanding principal amount in excess of $15
          million, which default shall have resulted in such indebtedness being
          accelerated, without such indebtedness being discharged, or such
          acceleration having been rescinded or annulled, within ten days from
          the date of such acceleration; and

     (4)  certain events of bankruptcy, insolvency or reorganization with
          respect to the Company or any Significant Subsidiary.

     The Trustee shall, within 90 days after the occurrence of any default known
to it, give to the holders notice of such default, provided that, except in the
case of default in the payment of principal of or interest on any of the Notes,
the Trustee may withhold such notice if it in good faith determines that the
withholding of such notice is in the interests of the holders.

     No holder may pursue any remedy under the Indenture or the Notes against
USi (except actions for payment of overdue principal or interest or for the
conversion of the Notes), unless:

          (1) the holder gives to the Trustee written notice of a continuing
          Event of Default;

          (2) the holders of at least 25% in principal amount of the outstanding
          Notes make a written request to the Trustee to pursue the remedy;

          (3) such holder or holders offer satisfactory indemnity to the Trustee
          against any loss or expense;

          (4) the Trustee does not comply with the request within the 60 days
          after receipt of the request and the offer of indemnity; and

          (5) the Trustee shall not have received during such 60-day period a
          contrary direction from the holders of at least a majority in
          principal amount of the outstanding Notes.

     We must deliver an Officer's Certificate to the Trustee within 90 days
after the end of each fiscal year of USi as to the signer's knowledge of our
compliance with all conditions and covenants on our part contained in the
Indenture, and stating whether or not the signers know of any default or Event
of Default. If any such signer knows of such a default or Event of Default, the
Officer's Certificate shall describe the default or Event of Default and the
efforts to remedy the same.



                                       30
<PAGE>   31

AMENDMENT

     USi and the Trustee may amend or supplement the Indenture or the Notes with
the written consent of the holders of at least a majority in principal amount of
the outstanding Notes. The holders of a majority in principal amount of the
Notes outstanding may waive compliance in a particular instance by USi with any
provision of the Indenture or the Notes without notice to any holder. However,
without the consent of the holder of each Note affected thereby, an amendment,
supplement or waiver may not:

     (1)  reduce the percentage of the principal amount of outstanding Notes
          whose holders must consent to an amendment, supplement or waiver;

     (2)  reduce the rate of or change the fixed maturity of any Note;

     (3)  alter the conversion provisions with respect to any Note in a manner
          adverse to the holder thereof;

     (4)  waive a default in the payment (whether at maturity, upon redemption,
          on an interest payment date, on a Change in Control Payment Date or
          otherwise) of the principal of or premium or interest on any Note;

     (5)  reduce the percentage of Notes necessary to waive defaults or Events
          of Default;

     (6)  modify any of the subordination provisions in the Indenture in a
          manner adverse to the holders of the Notes; or

     (7)  make any Note payable in money other then that stated in the Note.

     USi and the Trustee may amend or supplement the Indenture or the Notes
without notice to or consent of any holder in some events, such as to comply
with the conversion, adjustment, liquidation and merger provisions described in
the Indenture, to cure any ambiguity, defect or inconsistency or to make any
other change that does not adversely affect the rights of the holders, to comply
with the provisions of the Trust Indenture Act or to appoint a successor
Trustee.

     No amendment may be made that adversely affects the rights under the
provisions described under "--Subordination of Notes" above of a holder of an
issue of Senior Indebtedness unless the holders of that issue, pursuant to its
terms, consents to such amendment.

REGISTRATION RIGHTS

     The following summary of the registration rights provided in the
registration rights agreement and the Notes is not complete. You should refer to
the registration rights agreement and the Notes for a full description of the
registration rights that apply to the Notes.

     USi has agreed, pursuant to a Registration Rights Agreement dated October
29, 1999, the Issue Date between USi and the initial purchasers, to file a Shelf
Registration Statement under the Securities Act within 60 days after the latest
date of original issuance of the Notes, referred to as the Filing Date, to
register resales of the Notes and the shares of common stock into which the
Notes are convertible, referred to as Registrable Securities. USi has complied
with this provision of the Registration Rights Agreement by filing the
Registration Statement, of which this prospectus is a part, and causing the
Registration Statement



                                       31
<PAGE>   32

to become effective. USi will use reasonable efforts to keep the Registration
Statement effective until the earliest of:

     (1)  two years after the Filing Date;

     (2)  the date when all Registrable Securities shall have been registered
          under the Securities Act and disposed of; or

     (3)  the date on which all Registrable Securities are eligible to be sold
          to the public pursuant to Rule 144(k) under the Securities Act.

     A holder of Registrable Securities that sells Registrable Securities
pursuant to the Shelf Registration Statement generally will be required to
provide information about itself and the specifics of the sale, be named as a
selling security holder in the related prospectus and deliver a prospectus to
purchasers, be subject to relevant civil liability provisions under the
Securities Act in connection with such sales and be bound by the provisions of
the Registration Rights Agreements which are applicable to such holder
(including certain indemnification obligations).

     If:

     (1)  on or prior to the 60th day after the first date of original issuance
          of the Notes, the Shelf Registration Statement has not been filed with
          the Commission;

     (2)  on or prior to the 150th day after the latest date of original
          issuance of the Notes, the Shelf Registration Statement has not been
          declared effective by the Commission;

     (3)  USi fails to supplement the Shelf Registration Statement in a timely
          manner in order to name additional selling security holders; or

     (4)  after the Shelf Registration Statement has been declared effective,
          such Shelf Registration Statement ceases to be effective or usable
          (subject to certain exceptions) in connection with resales of Notes
          and the common stock issuable upon the conversion of the Notes in
          accordance with and during the periods specified in the Registration
          Rights Agreement (each such event referred to in clauses (1) through
          (4), a "Registration Default"),

additional interest will accrue on the Notes over and above the rate set forth
in the title of the Notes, from and including the date on which any such
Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured, at the rate of 0.5% per annum. We will
have no other liabilities for monetary damages with respect to our registration
obligations. With respect to each holder, our obligations to pay additional
interest remain in effect only so long as the Notes and the common stock
issuable upon the conversion of the Notes held by the holder are "Registrable
Securities" within the meaning of the Registrable Rights Agreement.

     We will pay all expenses of the Shelf Registration Statement, provide each
holder that is selling Registrable Securities pursuant to the Shelf Registration
Statement copies of the related prospectus and take other actions as are
required to permit, subject to the foregoing, unrestricted resales of the
Registrable Securities.



                                       32
<PAGE>   33

SATISFACTION AND DISCHARGE

     If all of the Notes have been delivered to the Trustee for cancellation
(subject to certain limited exceptions) or if all of the Notes not theretofore
delivered to the Trustee for cancellation have become due and payable or will
become due and payable within one year at their stated maturity or upon
redemption, then USi may terminate all of its obligations under the Indenture,
other than its obligations (including its obligation to deliver shares of common
stock upon conversion of the Notes and its obligation to purchase Notes
following a Change in Control), at any time, by depositing with the Trustee or a
Paying Agent other than USi , money sufficient to pay the principal of and
interest on the Notes then outstanding to maturity or redemption, as the case
may be.

MERGERS AND CONSOLIDATIONS

     Subject to the right of the holders to require USi to purchase the Notes in
the event of a Change in Control, USi may consolidate or merge with or into any
other corporation, and USi may sell, lease, convey, assign, or otherwise
transfer all or substantially all its property and assets to any other
corporation; provided:

     (1)  either USi is the resulting or surviving corporation, or the successor
          corporation is organized and existing under the laws or the Unites
          States of America, any state thereof or the District of Columbia which
          expressly assumes, by supplemental indenture executed and delivered to
          the Trustee, payment of the principal of and interest on the Notes and
          performance and observance of every covenant of USi in the Indenture
          and the Notes (including, without limitation, the agreement to deliver
          shares of common stock upon conversion of Notes);

     (2)  immediately after giving effect to such transaction, no default or
          Event of Default shall have occurred and be continuing; and

     (3)  other conditions are met.

     Thereafter, in any transaction (other than a lease) in which USi is not the
surviving or resulting corporation, USi shall be released from all of its
obligations under the Indenture and the Notes.

CONCERNING THE TRUSTEE

     The Bank of New York serves as the Trustee under the Indenture. The Trustee
will be permitted to deal with USi and any affiliate of USi with the same rights
as if it were not Trustee; provided, however, that under the Trust Indenture
Act, if the Trustee acquires any conflicting interest (as defined in the Trust
Indenture Act) and there exists a default with respect to the Notes, it must
eliminate such conflicts or resign.

     The holders of a majority in principal amount of all outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy or power available to the Trustee, provided that such
direction does not conflict with any law or the Indenture, is not unduly
prejudicial to the rights of another holder or the Trustee and does not involve
the Trustee in personal liability.



                                       33
<PAGE>   34

BOOK-ENTRY; DELIVERY AND FORM

     We issued the Notes in the form of one or more global notes (the "Global
Note"). The Global Note was deposited with the Trustee as custodian for DTC and
registered in the name of a nominee of DTC. The Global Note (and any shares of
common stock issuable upon conversion) is subject to certain restrictions on
transfer set forth therein and will bear the legend regarding these restrictions
set forth under "Transfer Restrictions." Except as set forth below, the Global
Note may be transferred, in whole and not in part, only to DTC or another
nominee of DTC. You may hold your beneficial interests in the Global Note
directly through DTC if you have an account with DTC or indirectly through
organizations which have accounts with DTC. Notes in definitive certificated
form (the "Certificated Notes") will be issued only in certain limited
circumstances described below.

     DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and "a clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with DTC ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (which may include the initial purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's
book-entry system is also available to others such as banks, brokers, dealers
and trust companies (collectively, the "indirect participants") that clear
through or maintain a custodial relationship with a participant, whether
directly or indirectly.

     We expect that pursuant to procedures established by DTC, upon the deposit
of the Global Note with DTC, DTC credited, on its book-entry registration and
transfer system, the principal amount of Notes represented by such Global Note
to the accounts of participants. The accounts to be credited were designated by
the initial purchasers. Ownership of beneficial interests in the Global Note has
been limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Note is shown on,
and the transfer of those ownership interests will be effected only through,
records maintained by DTC (with respect to participants' interests), the
participants and the indirect participants (with respect to the owners of
beneficial interests in the Global Note other than participants). The laws of
some jurisdictions may require that certain purchasers of securities take
physical delivery of such securities in definitive form. These limits and laws
may impair the ability to transfer or pledge beneficial interests in the Global
Note.

     Beneficial owners of interests in Global Notes who desire to convert their
interests into common stock should contact their brokers or other participants
or indirect participants through whom they hold such beneficial interests to
obtain information on procedures, including proper forms and cut-off times, for
submitting requests for conversion.

     So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Indenture and the Notes. In addition, no beneficial owner of an
interest in a Global Note will be able to transfer that interest except in
accordance with the applicable procedures of DTC (in addition to those under the
Indenture referred to in this prospectus; see "Transfer Restrictions"). Except
as set forth below, as an owner of a beneficial interest in the Global Note, you
will not be entitled to have the Notes represented by the Global Note registered
in your name, will not receive or



                                       34
<PAGE>   35

be entitled to receive physical delivery of certificated Notes and will not be
considered to be the owner or holder of any Notes under the Global Note. We
understand that under existing industry practice, in the event an owner of a
beneficial interest in the Global Note desires to take any action that DTC, as
the holder of the Global Note, is entitled to take, DTC would authorize the
participants to take such action, and the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.

     We have and will continue to make payments of principal of, premium, if
any, and interest on the Notes represented by the Global Note registered in the
name of and held by DTC or its nominee to DTC or its nominee, as the case may
be, as the registered owner and holder of the Global Note. Neither we, the
Trustee nor any Paying Agent have or will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.

     We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest on the Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Note as shown on the records of
DTC or its nominee. We also expect that payments by participants or indirect
participants to owners of beneficial interests in the Global Note held through
such participants or indirect participants will be governed by standing
instructions and customary practices and will be the responsibility of such
participants or indirect participants. We do not have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the Global Note for any Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between DTC and
its participants or indirect participants or the relationship between such
participants or indirect participants and the owners of beneficial interests in
the Global Note owning through such participants.

     Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.

     DTC has advised us that it will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for conversion as described
above) only at the direction of one or more participants to whose account the
DTC interests in the Global Note is credited and only in respect of such portion
of the aggregate principal amount of Notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the Notes, DTC will exchange the Global Note for Certificated
Notes which it will distribute to its participants and which will be legended as
set forth under the heading "Transfer Restrictions."

     Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of DTC,
they are under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither we nor the Trustee
will have any responsibility or liability for the performance by DTC or the
participants or indirect participants of their respective obligations under the
rules and procedures governing their respective operations.




                                       35
<PAGE>   36

                          DESCRIPTION OF CAPITAL STOCK

     The following description of our capital stock is only a summary and is
qualified by reference to the actual terms and provisions of the capital stock
contained in our Second Amended and Restated Certificate of Incorporation, which
became effective on April 14, 1999 and was amended on January 14, 2000 and our
bylaws, which were amended at the same time.

     Our certificate of incorporation authorizes 450,000,000 shares of common
stock, par value $.001 per share and 1,000,000 shares of preferred stock, par
value $.001 per share, the rights and preferences of which may be designated by
the board of directors. As of June 12, 2000, there were 96,740,217 shares of
common stock issued and outstanding and no shares of preferred stock issued and
outstanding. As of May 9, 2000, there were 19,213 holders of record of our
common stock.

COMMON STOCK

     Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by the board of directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding preferred stock. Upon the liquidation, dissolution or winding up of
USi, the holders of common stock are entitled to receive ratably the net assets
of USi available after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding preferred stock. Holders of the
common stock have no preemptive, subscription, redemption or conversion rights.
The outstanding shares of common stock are, and the shares that we offer in this
offering will be, when issued and paid for, validly issued, fully paid and
nonassessable. The rights, preferences and privileges of holders of common stock
are subject to, and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock which we may designate and issue in the
future. Upon the closing of this offering, there will be no shares of preferred
stock outstanding.

PREFERRED STOCK

     The board of directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 1,000,000 shares of preferred stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption, including sinking fund provisions,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change of control of USi. We have no present plans to issue any shares of
preferred stock.

WARRANTS

     At March 31, 2000, there were warrants outstanding to purchase a total of
1,324,004 shares of common stock. Warrants to purchase 1,174,004 shares at $1.52
per share will expire in September.



                                       36
<PAGE>   37

CONVERTIBLE NOTES

     At March 31, 2000 there were subordinated convertible Notes outstanding
convertible into a total of 7,545,272 shares of common stock. These Notes are
convertible at the election of the holder at any time prior to the close of
business on the business day immediately preceeding the date they are called for
redemption or November 1, 2004.

REGISTRATION RIGHTS

     The holders of 69,523,934 shares of common stock and 1,324,004 shares of
common stock issuable upon the exercise of warrants to purchase common stock are
entitled to rights with respect to registration of such shares under the
Securities. The holders of warrants to purchase 88,915 shares of common stock
are entitled to rights with respect to registration of such shares under the
Securities Act. Under these registration rights, in the event we elect to
register any of our shares of common stock for purposes of effecting any public
offering, the holders of the warrants or the shares issued upon exercise of the
warrants are entitled to include their shares of common stock in the
registration, subject however to the right of USi or the underwriters of the
proposed offering, if any, to reduce the number of shares proposed to be
registered in view of market conditions. All expenses in connection with any
registration other than underwriting discounts and commissions will be borne by
USi.

     We have agreed to register up to 3,023,438 shares held by officers of USi
in the event an officer's employment is terminated due to death or disability.

RESTRICTIONS ON SALE

     Stockholders holding 55,463,376 shares of common stock in the aggregate
have agreed with us that, upon the expiration of the agreement they had with
the underwriters of our February offering of common stock not to dispose of any
of their shares of common stock for a period that ended May 17, 2000, they would
limit sales, pledges or other dispositions of shares of common stock until
December 31, 2000. Pursuant to the agreement that each of these stockholders has
with us, since May 15, 2000 the stockholders are permitted to dispose of up to
one-seventh of the shares beneficially owned by the stockholder that are subject
to the agreement in any thirty-day period between May 17, 2000 and December 31,
2000.

CERTAIN ANTI-TAKEOVER, LIMITED LIABILITY AND INDEMNIFICATION PROVISIONS

     As noted above, our board of directors, without stockholder approval, has
the authority under our certificate of incorporation to issue preferred stock
with rights superior to the rights of the holders of common stock. As a result,
preferred stock could be issued quickly and easily, could adversely affect the
rights of holders of common stock and could be issued with terms calculated to
delay or prevent a change of control of USi or make removal of management more
difficult.

     Election And Removal Of Directors. The certificate and bylaws provides for
the division of our board of directors into three classes, as nearly equal in
number as possible, with the directors in each class serving for a three-year
term, and one class being elected each year by our stockholders. Directors may
be removed only for cause. This system of electing and removing directors may
tend to discourage a third party from making a tender offer or otherwise
attempting to obtain control of USi and may maintain the incumbency of the board
of directors, as it generally makes it more difficult for stockholders to
replace a majority of directors.



                                       37
<PAGE>   38

     Stockholder Meetings. Our bylaws provide that the stockholders may not call
a special meeting of the stockholders of USi. Rather, only the board of
directors, the chairman of the board or the president will be able to call
special meetings of stockholders.

     Requirements For Advance Notification Of Stockholder Nominations And
Proposals. Our bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the board of
directors or one of its committees.

     Delaware Anti-Takeover Law. We are a Delaware corporation subject to
Section 203 of the Delaware General Corporation Law. Under Section 203, certain
"business combinations" between a Delaware corporation whose stock generally is
publicly traded or held of record by more than 2,000 stockholders and an
"interested stockholder" are prohibited for a three-year period following the
date that such stockholder became an interested stockholder, unless:

     -    The corporation has elected in its certificate of incorporation not to
          be governed by Section 203. We have not made such an election,

     -    The business combination or the transaction which resulted in the
          stockholder becoming an interested stockholder was approved by the
          board of directors of the corporation before such stockholder became
          an interested stockholder,

     -    Upon consummation of the transaction that made such stockholder an
          interested stockholder, the interested stockholder owned at least 85%
          of the voting stock of the corporation outstanding at the commencement
          of the transaction excluding voting stock owned by directors who are
          also officers or held in employee benefit plans in which the employees
          do not have a confidential right to tender stock held by the plan in a
          tender or exchange offer, or

     -    The business combination is approved by the board of directors of the
          corporation and authorized at a meeting by two-thirds of the voting
          stock which the interested stockholder did not own.

     The three-year prohibition also does not apply to some business
combinations proposed by an interested stockholder following the announcement or
notification of an extraordinary transaction involving the corporation and a
person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the corporation's directors. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware corporation
and an interested stockholder, transactions with an interested stockholder
involving the assets or stock of the corporation or its majority-owned
subsidiaries, and transactions which increase an interested stockholder's
percentage ownership of stock. The term "interested stockholder" is defined
generally as those stockholders who become beneficial owners of 15% or more of a
Delaware corporation's voting stock, together with the affiliates or associates
of that stockholder.

     Limitation Of Officer And Director Liability And Indemnification
Arrangements. Our certificate limits the liability of our directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
will not be personally liable for monetary damages for breach of their fiduciary
duties as directors, except liability for:

     -    any breach of their duty of loyalty to the corporation or its
          stockholders,



                                       38
<PAGE>   39

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

     -    unlawful payments of dividends or unlawful stock repurchases or
          redemptions, or

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

     This charter provision has no effect on any non-monetary remedies that may
be available to us or our stockholders, nor does it relieve us or our officers
or directors from compliance with federal or state securities laws. The
certificate also generally provides that we shall indemnify, to the fullest
extent permitted by law, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit,
investigation, administrative hearing or any other proceeding by reason of the
fact that he is or was a director or officer of ours, or is or was serving at
our request as a director, officer, employee or agent of another entity, against
expenses incurred by him in connection with such proceeding. An officer or
director shall not be entitled to indemnification by us if:

     -    The officer or director did not act in good faith and in a manner
          reasonably believed to be in, or not opposed to, our best interests,
          or

     -    With respect to any criminal action or proceeding, the officer or
          director had reasonable cause to believe his conduct was unlawful.

     These charter and bylaw provisions and provisions of Delaware law may have
the effect of delaying, deterring or preventing a change of control of USi.

TRANSFER AGENT AND REGISTRAR

     American Stock Transfer & Trust Company is the transfer agent and registrar
for the common stock.



                                       39
<PAGE>   40

             CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     The following discussion is a summary of certain United States federal
income tax considerations that may be relevant to the purchase, ownership and
disposition of the Notes by U.S. holders, as defined below, and the ownership
and disposition of our common stock received upon conversion of the Notes by
U.S. holders. This discussion does not purport to be a full description of all
United States federal income tax considerations that may be relevant to the
purchase, holding and disposition of the Notes or our common stock and does not
address any other taxes that might be applicable to a holder of the Notes or our
common stock, such as tax consequences arising under the tax laws of any state,
locality or foreign jurisdiction. We cannot assure you that the United States
Internal Revenue Service will take a similar view of these consequences.
Further, this discussion does not address all aspects of taxation that may be
relevant to particular holders of Notes or common stock in light of their
personal circumstances and does not deal with persons that are subject to
special tax rules, such as dealers in securities, financial institutions,
insurance companies, tax-exempt entities, persons holding the Notes as part of a
hedging or conversion transaction, a straddle or constructive sale, persons
whose functional currency is not the United States dollar and persons who are
not U.S. holders. The discussion below assumes that the Notes and the common
stock into which such Notes are convertible are held as capital assets within
the meaning of section 1221 of the Internal Revenue Code.

     The discussion of the United States federal income tax considerations below
is based on currently existing provisions of the Internal Revenue Code, the
applicable Treasury regulations promulgated and proposed under the Internal
Revenue Code, judicial decisions and administrative interpretations, all of
which are subject to change, possibly on a retroactive basis. Because individual
circumstances may differ, you are strongly urged to consult your tax advisor
with respect to your particular tax situation and the particular tax effects of
any state, local, non-United States or other tax laws and possible changes in
the tax laws.

     As used herein, a U.S. holder means a beneficial owner of a Note or common
stock who is, for United States federal income tax purposes:

     -    a citizen or resident of the United States;

     -    a corporation or partnership created or organized in or under the laws
          of the United States or of any state thereof or in the District of
          Columbia, unless in the case of a partnership Treasury regulations
          enacted in the future provide otherwise;

     -    an estate the income of which is subject to United States federal
          income taxation regardless of its source; or

     -    a trust if either (a) a court within the United States is able to
          exercise primary supervision over the administration of the trust and
          one or more United States persons have the authority to control all
          substantial decisions of the trust or (b) the trust has a valid
          election in effect under applicable Treasury regulations to be treated
          as a United States person.

     STATED INTEREST. Interest on a Note will be includable in the income of a
U.S. holder as ordinary income at the time interest is received or accrued, in
accordance with a holder's method of accounting for United States federal income
tax purposes.


                                       40
<PAGE>   41

     REGISTRATION RIGHTS. The registration of the Notes pursuant to our
obligation as described under "Description of the Notes--Registration Rights"
will not constitute a taxable event for United States federal income tax
purposes, will not affect a U.S. holder's tax basis in the Notes, and a U.S.
holder's holding period for the registered Notes will include the holding period
such U.S. holder had in the Notes before such Notes were registered.

     MANDATORY PURCHASE AND OPTIONAL REDEMPTION. In the event of a Change in
Control, the holders of the Notes will have the right to require us to purchase
their Notes at a price equal to 100% of the aggregate principal amount, plus
accrued interest. Under Treasury regulations issued under provisions of the
Internal Revenue Code relating to original issue discount, computation of yield
and maturity of the Notes is not affected by this purchase right and obligation
if, based on all the facts and circumstances as of the issue date, payments on
the Notes are significantly more likely than not to occur in accordance with the
stated payment schedule on the Notes (which does not reflect a Change in
Control). We believe, based on all the facts and circumstances as of the issue
date, it was significantly more likely than not that the Notes would be paid
according to their stated schedule. Therefore, we have not and will not take the
purchase right and obligation into account in determining the yield and maturity
of the Notes.

     We may redeem the Notes, in whole or in part, at any time on or after
November 5, 2002, at prices specified under the heading "Description of the
Notes--Optional Redemption." The Treasury regulations that relate to original
issue discount contain rules for determining the yield and maturity of any
instrument that may be redeemed prior to its stated maturity date at the option
of the issuer. Under these regulations, solely for purposes of the accrual of
original issue discount, it is assumed that the issuer will exercise any option
to redeem a debt instrument if the exercise will lower the yield-to-maturity of
the debt instrument. We believe that we will not be presumed to redeem the Notes
prior to their stated maturity under the foregoing rules because the exercise of
the option would not lower the yield-to-maturity of the Notes.

     SALE, EXCHANGE OR REDEMPTION OF NOTES. A U.S. holder of a Note will
recognize gain or loss upon the sale, exchange, redemption or other taxable
disposition of a Note in an amount equal to the difference between (a) the
amount of cash plus the fair market value of any property received, other than
an amount received in respect of accrued interest, which will be taxable as
interest if not previously included in income which is taxable as ordinary
income and (b) the U.S. holder's adjusted tax basis in the Note. A U.S. holder's
adjusted tax basis in a Note generally will equal the cost of the Note to the
holder. Generally, gain or loss recognized on the disposition of a Note will be
capital gain or loss and will be long-term capital gain or loss if the U.S.
holder's holding period in the Note is more than one year at the time of the
disposition.

     MARKET DISCOUNT. The tax treatment of a U.S. holder with respect to the
Notes may be altered if the holder acquires the Notes at a "market discount."
Market discount on a Note will generally equal the amount, if any, by which the
principal amount of the Note exceeds the holder's initial tax basis in the Note
(generally the Note's acquisition price). Subject to a de minimis exception, a
U.S. holder of a Note acquired at a market discount is generally required to
treat as ordinary income any gain recognized on the disposition of the Note to
the extent of the "accrued market discount" at the time of disposition, unless
the holder elects to include accrued market discount in income currently. Market
discount on a Note will be treated as accruing on a straight-line basis over the
term of such Note, or at the election of the holder, under a constant-yield
method. A U.S. holder of a Note acquired at a market discount who does not elect
to include accrued market discount in income currently may be required to defer
the deduction of the portion of the interest on any indebtedness incurred or
maintained to purchase or carry the Note until the Note is disposed of in a
taxable transaction. If a Note with accrued market discount is converted into
our common stock, the amount of such accrued market discount at the time of
conversion generally will be taxable to the U.S. holder as ordinary income upon
disposition of our common stock.



                                       41
<PAGE>   42

     AMORTIZABLE BOND PREMIUM. A U.S. holder that purchases a Note at a premium
over its stated principal amount generally may elect to amortize such premium as
amortizable bond premium from the purchase date to the Note's maturity date
(taking into account earlier call dates, as appropriate) under a yield to
maturity formula if an election by the taxpayer under section 171 of the Code is
in effect or is made. The amortizable bond premium will not include any premium
attributable to the Note's conversion feature. The premium attributable to the
conversion feature is the excess, if any, of the Note's purchase price over what
the Note's fair market value would be if there were no conversion feature. In
addition, under Treasury Regulations, the amount of amortizable bond premium
that a U.S. holder may deduct in any accrual period is limited to the amount by
which the holder's total interest inclusions on the Note in prior accrual
periods exceeds the total amount treated by the holder as a bond premium
deduction in prior accrual periods. If any of the excess bond premium is not
deductible under section 171, that amount is carried forward to the next accrual
period and is treated as bond premium allocable to that period.

     An election under section 171 of the Code is available only if the Notes
are held as capital assets. Such election is revocable only with the consent of
the Internal Revenue Service and applies to all debt obligations owned or
subsequently acquired by the taxpayer. In general, a U.S. holder's tax basis in
a Note will be reduced by the amount of any bond premium that is amortized or
used to offset interest income. Such amortization will cease upon conversion of
the Note into our common stock.

     CONVERSION. A U.S. holder of a Note will not recognize gain or loss on the
conversion of a Note solely into our common stock except with respect to cash in
lieu of fractional shares and except to the extent that the common stock issued
upon conversion is treated as attributable to accrued interest on the Note. The
holding period of the common stock received upon conversion will include the
period during which the Note was held, and the holder's aggregate tax basis in
the common stock received upon conversion of the Note will be equal to the
holder's aggregate tax basis in the Note at the time of conversion, less any
portion allocable to any fractional share. However, a holder's tax basis in
shares of common stock considered attributable to accrued interest generally
will equal the amount of such accrued interest included in income and the
holding period will begin on the day following the date of conversion. A U.S.
holder of a Note will recognize gain or loss for federal income tax purposes
upon the receipt of cash in lieu of a fractional share of our common stock in an
amount equal to the difference between the amount of cash received and the
holder's tax basis in such fractional share. This gain or loss should be capital
gain or loss and should be taxable as described under "Sale, Exchange or
Redemption of the Notes." The fair market value of shares of common stock
received, which is attributable to accrued interest, will be taxable as ordinary
interest income.

     CONSTRUCTIVE DISTRIBUTIONS. The conversion price of the Notes is subject to
adjustment under specified circumstances. Under section 305 of the Internal
Revenue Code and applicable Treasury regulations, adjustments or the failure to
make adjustments to the conversion price of the Notes may result in a taxable
constructive distribution to U.S. holders of Notes, resulting in ordinary income
(subject to a possible dividends received deduction in the case of corporate
stockholders) to the extent of our earnings and profits, as determined in
accordance with United States federal income tax principles, if, and to the
extent that, these adjustments in the conversion price increase the
proportionate interest of a U.S. holder of a Note in our fully diluted common
stock, whether or not the holder ever converts the Notes into our common stock.

     ADDITIONAL INTEREST. We intend to take the position that payments of
additional interest as described under the heading "Description of the
Notes--Registration Rights" if paid as required therein, should be taxable to
U.S. holders as ordinary income when received or accrued in accordance with the
U.S. holder's method of accounting for United States federal income tax
purposes. The Internal Revenue Service may



                                       42
<PAGE>   43

take a different position, however, which could affect the timing of a U.S.
holder's income with respect to additional interest.

     DISTRIBUTIONS ON COMMON STOCK. A distribution by our company with respect
to our common stock will be treated for United States federal income tax
purposes as ordinary dividend income to the extent that such distributions do
not exceed our earnings and profits as determined under United States federal
income tax principles. To the extent a distribution exceeds our earnings and
profits, it will be treated first as a tax-free return of the U.S. holder's tax
basis in the common stock to the extent of the holder's tax basis, and then will
generally be treated as gain from the sale of a capital asset.

     DISPOSITION OF COMMON STOCK. A U.S. holder of our common stock will
recognize capital gain or loss upon the sale or other taxable disposition of our
common stock in an amount equal to the difference between the amount of cash
plus the fair market value of any property received and the U.S. holder's tax
basis in the common stock. The taxation of such capital gains will be as
described above under "Sale, Exchange or Redemption of Notes."

     UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING. Under current
United States federal income tax law, "reportable" payments, including payments
on interest and dividends and under specified circumstances principal payments
on the Notes made to, specified U.S. holders may be subject to backup
withholding tax at the rate of 31%, if these persons fail to supply correct
taxpayer identification numbers and other required information in the specified
manner.

     Any amounts withheld under the backup withholding rules from payment to a
holder of Notes or common stock will be refunded or credited against the
holder's United States federal income tax liability provided that the required
information is furnished to the United States Internal Revenue Service.

     We will report to holders of Notes and common stock and to the Internal
Revenue Service the amount of any reportable payments for each calendar year and
the amount of any tax withheld with respect to reportable payments.



                                       43
<PAGE>   44

                            SELLING SECURITY HOLDERS

     The Notes were originally issued by us and sold by the initial purchasers
in a transaction exempt from the registration requirements of the Securities Act
to persons reasonably believed by the initial purchasers to be qualified
institutional buyers or other institutional accredited investors. Credit Suisse
First Boston Corporation, Morgan Stanley & Co. Incorporated, Bear, Stearns & Co.
Inc., Legg Mason Wood Walker, Incorporated, Wasserstein Perella Securities,
Inc., C.E. Unterberg, Towbin and The Robinson-Humphrey Company, LLC acted as the
initial purchasers in this transaction. Selling security holders, including
their transferees, pledgees or donees or their successors, may from time to time
offer and sell pursuant to this prospectus any or all of the Notes and common
stock into which the Notes are convertible.

     The following table sets forth information, as of May 30, 2000, with
respect to the selling security holders and the principal amounts of Notes
beneficially owned by each selling holder that may be offered under this
prospectus. The information is based on information provided by or on behalf of
the selling security holders. The selling security holders may offer all, some
or none of the Notes or common stock into which the Notes are convertible.
Accordingly, no estimate can be given as to the amount of the Notes or common
stock that will be held by the selling security holders upon termination of any
sales. In addition, the selling security holders identified below may have sold,
transferred or otherwise disposed of all or a portion of their Notes since the
date on which they provided the information regarding their Notes in
transactions exempt from the registration requirements of the Securities Act.

<TABLE>
<CAPTION>
                                                PRINCIPAL AMOUNT OF                             NUMBER OF
                                                       NOTES                                CONVERSION SHARES
                                              BENEFICIALLY OWNED THAT     PERCENTAGE OF        THAT MAY BE
SELLING SECURITYHOLDER                              MAY BE SOLD         NOTES OUTSTANDING      SOLD(1)(2)
----------------------                        -----------------------   -----------------   -----------------
<S>                                           <C>                       <C>                 <C>
AAM/Zazone Institutional Income Fund,
  L.P......................................         $    800,000               1.1%                48,280
Argent Classical Convertible Arbitrage Fund
  (Bermuda) L.P............................            1,000,000               1.4                 60,350
Aristeia International, Ltd................            3,022,000               4.3                182,377
Aristeia Trading, LLC......................            1,478,000               2.1                 89,197
BNP Arbitrage SNC..........................              250,000                *                  15,087
Black Diamond Offshore, Ltd................              381,000                *                  22,993
BT Equities Strategies.....................              500,000                *                  30,175
Convexity Partners, L.P....................              400,000                *                  24,140
Credit Suisse First Boston Corporation
  London...................................              527,000                *                  31,804
Double Black Diamond Offshore LDC..........            1,029,000               1.5                 62,100
ECT Investments, Inc.......................            2,000,000               2.8                120,700
Elliott Associates, L.P....................              745,000               1.1                 44,960
Family Service Life Insurance Co...........              300,000                *                  18,105
General Motors Employees Global Group
  Pension Trust............................              691,000                *                  41,701
Guardian Life Insurance Co.................            4,500,000               6.4                271,575
Guardian Pension Trust.....................              200,000                *                  12,070
Jackson Investment Fund Ltd. C/o Leeds
  Management Services (Cayman) Ltd.........              130,000                *                   7,845
JMG Triton Offshore Fund, Ltd..............            9,500,000              13.5                573,325
Nelson Partners Ltd. C/o Leeds Management
  Services (Cayman) Ltd....................              455,000                *                  27,459
LLT Limited................................              150,000                *                   9,052
The Liverpool Limited Partnership..........              255,000                *                  15,389
Lord Abbett Bond Debenture Fund............            3,000,000               4.3                181,050
Olympus Securities, Ltd. C/o Leeds
  Management Services Ltd..................              740,000               1.1                 44,659
Putnam Convertible Income--Growth Trust....              601,000                *                  36,270
</TABLE>



                                       44
<PAGE>   45


<TABLE>
<CAPTION>
                                                PRINCIPAL AMOUNT OF                             NUMBER OF
                                                       NOTES                                CONVERSION SHARES
                                              BENEFICIALLY OWNED THAT     PERCENTAGE OF        THAT MAY BE
SELLING SECURITYHOLDER                              MAY BE SOLD         NOTES OUTSTANDING      SOLD(1)(2)
----------------------                        -----------------------   -----------------   -----------------
<S>                                           <C>                       <C>                 <C>
UBS Warburg, LLC...........................            3,000,000                4.3 %             181,050
Value Line Convertible Fund, Inc...........              500,000                 *                 30,175
Westgate International, L.P................            1,000,000                1.4                60,350
</TABLE>

------------------------
*   Less than 1%

(1)  Consists of shares of common stock issuable upon conversion of the Notes.

(2)  Assumes a conversion price of $16.57 and a cash payment in lieu of any
     fractional share interest. The conversion price is subject to adjustment as
     described under "Description of Notes--Conversion."

     The following table sets forth information, as of June 8, 2000, with
respect to the five selling stockholders and the number of shares of common
stock beneficially owned by each selling stockholder that may be offered under
this prospectus. The selling stockholders acquired these shares in private
placement transactions and have contractual rights to include resales of their
shares in this prospectus.

<TABLE>
<CAPTION>
                                                                  NUMBER OF
                                                               SHARES THAT MAY
SELLING STOCKHOLDER                                                BE SOLD
-------------------                                           ---------------
<S>                                                           <C>
Luis Sebastian Alegrett.....................................       42,187
Carlos E. Bravo.............................................        5,388
Michael Q. Mai..............................................       26,590
Vicente Perez de Tudela.....................................        9,573
Southeastern Technology Fund L.P............................       48,213
                                                                  -------
    Total...................................................      131,951
</TABLE>

     None of the selling holders nor any of their affiliates, officers,
directors or principal equity holders has held any position or office or has had
any material relationship with USi within the past three years other than Luis
Sebastian Alegrett, Carlos E. Bravo, Michael Q. Mai and Vicente Perez de
Tudela, who are all consultants of USi.

     Information concerning the selling holders may change from time to time and
any changed information will be set forth in supplements to this prospectus if
and when necessary. In addition, the conversion rate and therefore, the number
of shares of common stock issuable upon conversion of the Notes, is subject to
adjustment under certain circumstances. Accordingly, the aggregate principal
amount of Notes and the number of shares of common stock into which the Notes
are convertible may increase or decrease.



                                       45
<PAGE>   46

                              PLAN OF DISTRIBUTION

     The selling holders and their successors, including their transferees,
pledgees or donees or their successors, may sell the Notes and the common stock
into which the Notes are convertible directly to purchasers or through
underwriters, broker-dealers or agents, who may receive compensation in the form
of discounts, concessions or commissions from the selling holders or the
purchasers. These discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.

     The Notes and the common stock into which the Notes are convertible may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at prices related to the prevailing market prices, at varying
prices determined at the time of sale, or at negotiated prices. These sales may
be effected in transactions, which may involve crosses or block transactions:

     -    on any national securities exchange or U.S. inter-dealer system of a
          registered national securities association on which the Notes or the
          common stock may be listed or quoted at the time of sale;

     -    in the over-the-counter market;

     -    in transactions otherwise than on these exchanges or systems or in the
          over-the-counter market;

     -    through the writing of options, whether the options are listed on an
          options exchange or otherwise; or

     -    through the settlement of short sales.

     In connection with the sale of the Notes and the common stock into which
the Notes are convertible or otherwise, the selling holders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the Notes or the common stock into which
the Notes are convertible in the course of hedging the positions they assume.
The selling holders may also sell the Notes or the common stock into which the
Notes are convertible short and deliver these securities to close out their
short positions, or loan or pledge the Notes or the common stock into which the
Notes are convertible to broker-dealers that in turn may sell these securities.

     The aggregate proceeds to the selling holders from the sale of the Notes or
common stock into which the Notes are convertible offered by them will be the
purchase price of the Notes or common stock less discounts and commissions, if
any. Each of the selling holders reserves the right to accept and, together with
their agents from time to time, to reject, in whole or in part, any proposed
purchase of Notes or common stock to be made directly or through agents. We will
not receive any of the proceeds from this offering.

     Our outstanding common stock is listed for trading on the Nasdaq National
Market. We do not intend to list the Notes for trading on any national
securities exchange or on the Nasdaq National Market and can give no assurance
about the development of any trading market for the Notes.

     In order to comply with the securities laws of some states, if applicable,
the Notes and common stock into which the Notes are convertible may be sold in
these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the Notes and common stock into which the Notes are




                                       46
<PAGE>   47

convertible may not be sold unless they have been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.

     The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the Notes and common stock into which the Notes are
convertible may be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling holders who are "underwriters" within the meaning of
Section 2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act. The selling holders have acknowledged that
they understand their obligations to comply with the provisions of the Exchange
Act and the rules thereunder relating to stock manipulation, particularly
Regulation M.

     In addition, any securities covered by this prospectus that qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling holder
may not sell any Notes or common stock described in this prospectus and may not
transfer, devise or gift these securities by other means not described in this
prospectus.

     To the extent required, the specific Notes or common stock to be sold, the
names of the selling holders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post- effective
amendment to the registration statement of which this prospectus is a part.

     The Registration Statement of which this prospectus is a part is being
filed pursuant to a registration rights agreement that we entered into for the
benefit of holders of the Notes to register their Notes and common stock under
applicable federal and state securities laws under specific circumstances and at
specific times. The registration rights agreement provides for
cross-indemnification of the selling holders and us and their and our respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the Notes and the common stock, including
liabilities under the Securities Act.

     The five selling stockholders acquired their shares of common stock in
private placement transactions. As part of these transactions, we entered into
agreements that granted the selling stockholders rights to include resales of
their shares in this prospectus. These agreements provide for
cross-indemnification provisions similar to those in the registration rights
agreement discussed above. The selling stockholders may distribute their shares
in the same manner as the shares of common stock underlying the Notes may be
distributed.

     We will pay substantially all of the expenses incurred by the selling
holders incident to the offering and sale of the Notes and the common stock.



                                       47
<PAGE>   48

                                     EXPERTS

     Our consolidated financial statements appearing in our Annual Report
(Form 10-K) for the period January 14, 1998 (date of inception) through December
31, 1998 and the year ended December 31, 1999, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.

     The consolidated financial statements of I.I.T. Holding, Inc. and
subsidiaries' appearing in our Annual Report (Form 10-K) for each of the two
years in the period ended December 31, 1997 and for the period from January 1,
1998 through September 7, 1998, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing. As to the years
1996 and 1997, Ernst & Young's report is based in part on the report of Bassan &
Associates S.C., independent auditors.

                                 LEGAL MATTERS

     Certain legal matters in connection with the offering and sale of the Notes
will be passed upon for USi by Latham & Watkins, Washington, D.C. Partners of
Latham & Watkins own in total shares of our common stock representing less than
1% of the total number of shares of common stock outstanding.



                                       48
<PAGE>   49

                     INCORPORATION OF DOCUMENTS BY REFERENCE

     The Commission allows us to incorporate by reference the information
contained in documents that we file with them. This means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. Information in this prospectus supercedes information incorporated
by reference that we filed with the Commission prior to the date of this
prospectus, while information that we file later with the Commission will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings we will make with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934:

     -    Our Annual Report on Form 10-K for the fiscal year ended December 31,
          1999, filed on March 29, 2000, including all material incorporated by
          reference therein;

     -    Our Quarterly Report on Form 10-Q for the fiscal quarter ended March
          31, 2000, filed on May 15, 2000, including all material incorporated
          by reference therein; and

     -    The description of the common stock contained in our Registration
          Statement on Form 8-A, filed on April 8, 1999.

                              AVAILABLE INFORMATION

     We are currently subject to the periodic reporting and other requirements
of the Securities Exchange Act of 1934. You may read and copy any document we
file or incorporate by reference into this prospectus at the Commission's public
reference rooms located at 450 5th Street, N.W., Washington, D.C. 20549. Please
call the Commission at 1-800-SEC-0330 for further information on the public
reference rooms. Our Commission filings are also available to the public from
commercial document retrieval services and at the web site maintained by the
Commission at: http://www.sec.gov. Our common stock trades on The Nasdaq
National Market.

     You may request a copy of any of this information, at no cost, by writing
or telephoning us at the following address or phone number:

                             USinternetworking, Inc.
                                  One USi Plaza
                         Annapolis, Maryland 21401-7478
                                 (410) 897-4400



                                       49
<PAGE>   50


                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

          Set forth below is an estimate of the amount of fees and expenses to
be incurred in connection with the issuance and distribution of the Notes and
common stock registered under this prospectus:

<TABLE>
<S>                                                                             <C>
          SEC Registration Fee                                                  $  34,392
          Printing and Mailing Costs                                               50,000
          Legal Fees and Expenses                                                 100,000
          Accounting Fees and Expenses                                             40,000
          Miscellaneous                                                            10,000
                                                                                   ------

          Total                                                                  $234,392
                                                                                 ========
</TABLE>

ITEM 15. LIMITATION OF LIABILITY AND INDEMNIFICATION

     Section 145 of the General Corporation Law of the State of Delaware
("Section 145") permits a Delaware corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit, or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.

     In the case of an action by or in the right of the corporation, Section 145
permits the corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interest of the corporation. No indemnification may be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

     To the extent that a present or former director or officer of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding two paragraphs, Section 145 requires
that such person be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.



                                      II-1
<PAGE>   51

     Section 145 provides that expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative, or
investigative action, suit or proceeding may be paid the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in Section 145.

     The Company's Certificate provides that an officer or director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as an officer or director,
except in certain cases where liability is mandated by the DGCL. The provision
has no effect on any non-monetary remedies that may be available to the Company
or its stockholders, nor does it relieve the Company or its officers or
directors from compliance with federal or state securities laws. The Certificate
also generally provides that the Company shall indemnify, to the fullest extent
permitted by law, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit, investigation,
administrative hearing or any other proceeding (each, a "Proceeding") by reason
of the fact that he is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another entity, against expenses incurred by him in connection with such
Proceeding. An officer or director shall not be entitled to indemnification by
the Company if (i) the officer or director did not act in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
the Company, or (ii) with respect to any criminal action or proceeding, the
officer or director had reasonable cause to believe his conduct was unlawful.

     The Bylaws of the Company provide that it shall indemnify any person who is
made a party to any threatened, pending or completed action, suit or proceeding
by reason of the fact that he or she is or was a director or officer of the
Company, and may indemnify any employee or agent of the Company in such
circumstances, against expenses, including attorneys fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding. No indemnification may be
provided for any person who shall have been finally adjudicated not to have
acted honestly or in the reasonable belief that his or her action was in or not
opposed to the best interests of the Company or who had reasonable cause to
believe that his or her conduct was unlawful. Indemnification must be provided
to any director, officer, employee or agent of the Company to the extent such
person has been successful, on the merits or otherwise, in defense of any action
or claim described above. Any indemnification under this provision of the
Bylaws, unless required under the Bylaws or ordered by a court, can be made only
as authorized in each specific case upon a determination by a majority of
disinterested directors or by independent legal counsel or by the stockholders
that such indemnification is appropriate under the standard set forth in the
preceding sentence.

ITEM 16.  EXHIBITS

 (a) Exhibits

<TABLE>
<CAPTION>
       EXHIBIT
         NO.            DESCRIPTION
       -------          -----------
<S>                     <C>

      3.1(a)            Second Amended and Restated Certificate of Incorporation of
                        the Company.

      3.2(a)            Amended and Restated Bylaws of the Company.

      3.3(d)            First Amendment to the Company's Second Amended and Restated
                        Certificate of Incorporation.

      4.1(b)            Specimen Certificate for shares of Common Stock, $.001 par
                        value, of the Company.
</TABLE>



                                      II-2
<PAGE>   52

<TABLE>
<S>                     <C>
      4.2(c)            Indenture for the 7% Convertible Subordinated Notes due
                        November 1, 2004 between the Company, as issuer, and the
                        Bank of New York, as Trustee, dated as of October 29, 1999.

      5.1(*)            Opinion of Latham & Watkins with respect to the validity of
                        the Common Stock.
</TABLE>



                                      II-3
<PAGE>   53

<TABLE>
<S>                     <C>
     21.1(a)            Subsidiaries of the Company.

     23.1(*)            Consent of Ernst & Young LLP, independent auditors
                        (regarding the Company's financial statements).

     23.2(*)            Consent of Bassan & Associados S.C., independent
                        auditors (regarding IIT financial statements).

     23.3(*)            Consent of Ernst & Young LLP, independent auditors
                        (regarding IIT financial statements).

     23.5(b)            Consent of Latham & Watkins (included in Exhibit 5.1).
</TABLE>



                                      II-4
<PAGE>   54

<TABLE>
<S>                     <C>
     24.1(a)            Powers of Attorney (included on signature page herein and as
                        previously filed).

     25.1(a)            Form T-1 Statement of Eligibility under the Trust Indenture
                        Act of 1939, as amended, of Bank of New York as Trustee
                        under the Indenture for the 7% Convertible Subordinated
                        Notes due November 1, 2004.
</TABLE>

*    Filed herewith.

(a)  Previously filed.

(b)  Incorporated by reference to the Company's Registration Statement on Form
     S-1, as amended (Reg. No. 333-70717)

(c)  Incorporated by reference to the Company's Quarterly Report on Form 10-Q
     for the quarter ended September 30, 1999 filed by the Company on November
     15, 1999.

(d)  Incorporated by reference to Company's Registration's Statement on Form
     S-1, as amended (Reg. No. 333-95543).

(e)  Not filed, in accordance with Instruction No. 2 to Item 601 of Regulation
     S-K, because the contract is substantially identical to Exhibit 10.22
     except as to the parties thereto and the principal amount of the Note.

(f)  Confidential treatment obtained as to certain portions.

(g)  Incorporated by reference to the Company's Definitive Proxy Statement filed
     by the Company of April 4, 2000 (File No. 0-25737)

(b)  Schedules

     All schedules have been omitted because they are not required or because
the required information is given in the Consolidated Financial Statements or
Notes thereto.

ITEM 17.  UNDERTAKINGS

     The undersigned Registrant hereby undertakes:

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

          (iii)To include any material information about the plan of
               distribution not previously disclosed in this registration
               statement or any material change to this information in this
               registration statement.

     However, subparagraphs (i) and (ii) do not apply if the information
     required to be included in a post-effective amendment by those paragraphs
     is contained in the periodic reports filed by the Registrant pursuant to
     Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
     incorporated by reference in this registration statement.

     -    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



                                      II-5
<PAGE>   55

          Securities offered herein, and the offering of such Securities at that
          time shall be deemed to be the initial bona fide offering thereof.

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

                The undersigned Registrant hereby further undertakes that, for
the purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the Securities offered herein, and the offering of such
Securities at that time shall be deemed to be the initial bona fide offering
thereof.

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



                                      II-6
<PAGE>   56



                                   SIGNATURES

Power of Attorney Know All Men by These Presents, that Mark J. McEneaney, whose
signature appears below constitutes and appoints Christopher R. McCleary and
William T. Price, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments thereto
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Pursuant to the requirements of the Securities Act, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3, and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Annapolis, State of Maryland on June 14, 2000.

                      USINETERNETWORKING, INC.

                      By:                        *
                               ------------------------------------
                               Christopher R. McCleary
                               Chairman of the Board and Chief Executive Officer



                                      II-7
<PAGE>   57



                Pursuant to the requirements of the Securities Act of 1933, the
registration statement has been signed below on June 16, 2000 by the following
persons in the capacities indicated.

<TABLE>
<CAPTION>
               SIGNATURE                                          TITLE
               ---------                                          -----
<S>                                       <C>
*                                         Chairman of the Board and Chief Executive Officer
---------------------
Christopher R. McCleary

*                                         President -E-Commerce Business Unit and Director
---------------------
Stephen E. McManus

/s/ Mark J. McEneaney                     Senior Vice President and Chief Financial Officer
---------------------
Mark J. McEneaney

*                                         Director
---------------------
R. Dean Meiszer

*                                         Director
---------------------
Benjamin Diesbach

*                                         Director
---------------------
Ray A. Rothrock

*                                         Director
---------------------
Frank A. Adams

*                                         Director
---------------------
William F. Earthman

*                                         Director
---------------------
John H. Wyant

*                                         Director
---------------------
Joseph R. Zell

*                                         Director
---------------------
Michael C. Brooks

*                                         Director
---------------------
David J. Poulin

*                                         Director
---------------------
Cathy M. Brienza
</TABLE>

                                        *By:   /s/ William T. Price
                                               ---------------------------
                                               William T. Price
                                               Attorney-in-fact



                                      II-8



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