USINTERNETWORKING INC
S-1, 2000-01-27
COMPUTER PROGRAMMING SERVICES
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<PAGE>
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 2000

                                                 REGISTRATION NO. 333-  -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------

                            USINTERNETWORKING, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                       <C>                                       <C>
                DELAWARE                                    7379                                   522078325
    (State or other jurisdiction of             (Primary Standard Industrial                    (I.R.S. Employer
     incorporation or organization)             Classification Code Number)                   Identification No.)
</TABLE>

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

                                 ONE USI PLAZA
                         ANNAPOLIS, 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)

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

                                   COPIES TO:

<TABLE>
<S>                                                 <C>
            JOHN D. WATSON, JR., ESQ.                            WILLIAM B. GANNETT, ESQ.
                 LATHAM & WATKINS                                CAHILL GORDON & REINDEL
    1001 PENNSYLVANIA AVENUE, N.W., SUITE 1300                        80 PINE STREET
               WASHINGTON, DC 20004                              NEW YORK, NY 10005-1702
                  (202) 637-2200                                      (212) 701-5000
</TABLE>

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

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

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

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

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

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

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

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
                                                                     PROPOSED MAXIMUM     PROPOSED MAXIMUM
           TITLE OF EACH CLASS OF                    AMOUNTS        OFFERING PRICE PER        AGGREGATE            AMOUNT OF
         SECURITIES TO BE REGISTERED           TO BE REGISTERED(1)       SHARE(2)         OFFERING PRICE(2)    REGISTRATION FEE
<S>                                            <C>                  <C>                  <C>                  <C>
Common Stock, $.001 par value................   6,900,000 shares          $56.375           $388,987,500          $102,692.70
</TABLE>

(1) Includes 900,000 shares which the Underwriters have the option to purchase
    to cover over-allotments, if any. See "Underwriting."

(2) Estimated solely for purposes of determining the registration fee in
    accordance with Rule 457(c) under the Securities Act of 1933, as amended,
    based on the average of the high and low prices for the common stock of
    USINTERNETWORKING on January 25, 2000.

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

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                 SUBJECT TO COMPLETION, DATED JANUARY 27, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
                                6,000,000 Shares

                                     [LOGO]

                            USINTERNETWORKING, INC.

                                  Common Stock

                                  -----------

    We are selling 2,000,000 shares of our common stock and the selling
stockholders named under "Selling Stockholders" are selling 4,000,000 shares of
our common stock. We will not receive any of the proceeds from shares of our
common stock sold by the selling stockholders.

    Our common stock is traded on The Nasdaq Stock Market's National Market
under the symbol "USIX". On January 24, 2000, the last reported sale price of
our common stock was $55.00 per share.

    The underwriters have an option to purchase a maximum of 900,000 additional
shares from the selling stockholders to cover over-allotments of shares.

    INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON
PAGE 11.

<TABLE>
<CAPTION>
                                                          UNDERWRITING                  PROCEEDS TO
                                               PRICE TO   DISCOUNTS AND   PROCEEDS TO     SELLING
                                                PUBLIC     COMMISSIONS        USI       STOCKHOLDERS
<S>                                            <C>        <C>             <C>           <C>
Per Share....................................  $             $              $             $
Total........................................  $             $              $             $
</TABLE>

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

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

CREDIT SUISSE FIRST BOSTON

       MERRILL LYNCH & CO.

                 J.P. MORGAN & CO.

                         LEGG MASON WOOD WALKER
                          Incorporated

                                  E*OFFERING

                                          C.E. UNTERBERG, TOWBIN

                                                 WASSERSTEIN PERELLA
                                                 SECURITIES, INC.

                 The date of this Prospectus is          , 2000
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                         PAGE
                                       --------
<S>                                    <C>
PROSPECTUS SUMMARY...................      3
RISK FACTORS.........................     11
USE OF PROCEEDS......................     21
COMMON STOCK PRICE RANGE.............     21
DIVIDEND POLICY......................     22
DILUTION.............................     22
CAPITALIZATION.......................     23
SELECTED HISTORICAL CONSOLIDATED
  FINANCIAL DATA.....................     24
MANAGEMENT'S DISCUSSION AND ANALYSIS
  OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS......................     28
BUSINESS.............................     33
MANAGEMENT...........................     46
</TABLE>

<TABLE>
<CAPTION>
                                         PAGE
                                       --------
<S>                                    <C>

CERTAIN RELATIONSHIPS AND RELATED
  TRANSACTIONS.......................     56
PRINCIPAL AND SELLING STOCKHOLDERS...     60
DESCRIPTION OF CERTAIN CREDIT
  FACILITIES.........................     64
DESCRIPTION OF CAPITAL STOCK.........     65
UNDERWRITING.........................     69
NOTICE TO CANADIAN RESIDENTS.........     71
LEGAL MATTERS........................     72
EXPERTS..............................     72
AVAILABLE INFORMATION................     72
INDEX TO FINANCIAL STATEMENTS........    F-1
UNAUDITED PRO FORMA CONSOLIDATED
  STATEMENT OF OPERATIONS............    P-1
</TABLE>

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

    YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
DOCUMENT MAY BE ONLY USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. YOU SHOULD
ASSUME THAT THE INFORMATION IN THIS DOCUMENT IS ACCURATE ONLY AS OF THE DATE OF
THIS DOCUMENT.
<PAGE>
                               PROSPECTUS 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
RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION. UNLESS WE INDICATE
OTHERWISE, INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS WILL NOT
EXERCISE THEIR OVER-ALLOTMENT OPTION. SHARE DATA IN THIS PROSPECTUS GIVES EFFECT
TO A THREE-FOR-TWO STOCK SPLIT EFFECTED BY A STOCK DIVIDEND DISTRIBUTED ON
DECEMBER 17, 1999.

                               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, 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 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;

                                       3
<PAGE>
    - Ariba in business-to-business e-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 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
December 31, 1999, we had 109 signed contracts with 88 clients for our IMAP
services. The total expected revenue from these contracts, assuming payment over
the full contract terms, exceeds $140 million.

                            MARKET TREND HIGHLIGHTS

    We believe there are several key trends occurring in our marketplace that
create a substantial market opportunity for a single-source service solution
that combines implementation and operation of software, hardware, systems
integration and Internet-based communications for middle market businesses at a
competitive price.

INCREASING ACCEPTANCE OF THE APPLICATION SERVICE PROVIDER MODEL.

    The Application Service Provider model is being increasingly validated by
the emergence of new entrants into this market. International Data Corporation
estimates that the market opportunity in the high-end Application Service
Provider market will reach $2 billion by 2003, representing a four-year compound
annual growth rate of 91%.

RAPID GROWTH OF E-COMMERCE AND INTERNET-BASED COMMUNICATIONS.

    E-commerce is becoming a critical element of many businesses' strategies, as
companies increasingly demand that their vendors communicate ordering, invoicing
and payment transactions through Internet-enabled applications. International
Data Corporation estimates that commerce on the Internet will be more than $1
trillion by 2003, reflecting a four-year compound annual growth rate of 85%.

COMPETITIVE NEED OF MIDDLE MARKET ENTERPRISES TO AUTOMATE KEY BUSINESS
  PROCESSES.

    Middle market enterprises increasingly face competitive demands to automate
business processes, but they frequently have not been able to afford the
functionality available to their larger competitors. Many businesses recognize
that they do not have an infrastructure sufficient to ensure reliable and
responsive deployment of mission-critical applications on the Internet, and so
they are increasingly

                                       4
<PAGE>
turning to Application Service Providers for outsourced solutions. Moreover,
many middle market enterprises lack the staff to implement, operate and maintain
these complex applications.

AVAILABILITY OF INTERNET-ENABLED PACKAGED SOFTWARE APPLICATIONS.

    The trend among packaged software providers to Internet enable their
software is continuing. This is particularly true for those applications with
distributed users such as e-commerce, enterprise resource planning applications
and sales force automation, where the increasing ubiquity of the Internet makes
it a cost-efficient mechanism for implementing distributed functions.

                             COMPETITIVE STRENGTHS

    We have built and are capitalizing on a number of key strengths to develop a
leading market position as a facilities-based Application Service Provider.
These strengths include:

SPECIALIZED GLOBAL NETWORK ALREADY IN PLACE.

    We have a highly reliable, redundant global network specifically designed to
support our IMAP solutions. Our network is designed to provide the fastest
possible response time, the highest level of security and 99.9% availability to
our clients.

FIRST MOVER ADVANTAGE.

    We believe we have created a recognized brand name in the emerging
Application Service Provider market by establishing relationships with leading
software providers in key application areas and by promoting our superior levels
of client service. We believe this is a first mover advantage that should give
us leverage in attracting new customers and in building additional partnerships
with leading software application providers.

SINGLE POINT OF RESPONSIBILITY.

    Our IMAP solutions enable clients to buy the functionality of leading
enterprise software applications as a service from a single service provider,
rather than as a collection of technologies from multiple vendors. We take full
responsibility for the deployment and maintenance of these IMAP best-of-breed
packaged software applications. This allows our clients to focus on their core
competencies without mediating among disparate vendors.

KEY ALLIANCES WITH LEADING APPLICATION PROVIDERS.

    We have established relationships with vendors in key application areas.
These agreements provide us with a software portfolio that can meet a broad
range of clients' e-commerce, enterprise resource planning and communication
needs. Some of these agreements also provide USI with an advantageous market
position. For example, we are the exclusive Application Service Provider of
Siebel enterprise relationship management applications for direct customers of
SiebelNet, headquartered in North America.

RECURRING REVENUE AND CLIENT RETENTION MODEL.

    Our business model is designed to capture significant recurring revenue
because our clients sign contracts that provide for fixed monthly service fees,
generally over a three- to five-year term. Furthermore, our ongoing support of
our clients provides us the opportunity to identify and supply additional IMAP
solutions. We believe that the level of integration and complexity associated
with our service offerings will create a significant inducement for our clients
to remain with us after their contract terms expire.

                                       5
<PAGE>
EXPERIENCED MANAGEMENT.

    We have assembled a highly qualified management team that has considerable
experience in the management and growth of Internet, software, hardware and
telecommunications businesses. We believe that our management's experience in
the development of similar systems and services will be of significant value in
ensuring the quality and success of the IMAP service offerings. Key members of
management have previously held senior operating and management positions with
ARINC, Booz Allen & Hamilton, Clarus, Data General, DIGEX, EDS, IBM, Silicon
Graphics, Sprint, Sun Microsystems and Sybase.

                               BUSINESS STRATEGY

    The focus of our strategy is to deliver timely, reliable and secure IMAP
services to our clients. We believe that by doing so we will rapidly build our
client base and secure long-term relationships, especially with those clients in
the middle market. We intend to continue investing to maintain a value advantage
over our competitors and to capitalize on our first mover advantages, as
follows:

DEVELOP NEW BUSINESS.

    We will continue to develop new business by soliciting potential clients
through joint marketing campaigns with our hardware, software and integration
partners, advertising in periodicals and newspapers, sponsoring seminars and
trade shows in selected markets and conducting targeted mass mailings of
marketing material.

CROSS-SELL PRODUCTS TO INCREASE PENETRATION OF ACCOUNTS.

    We are able to provide a range of packaged software applications and complex
Web hosting services to our clients. We actively seek to increase our sales to
clients by cross-selling our products and services. Our aim is to increase our
implementation and provision of our clients' mission-critical business
processes.

EXPAND OUR PORTFOLIO OF IMAP SOLUTIONS.

    We have entered into strategic partnerships with numerous application
software vendors. These vendors are offering or developing additional
applications in specific vertical market segments which we expect to deploy in
order to expand our portfolio of IMAP solutions.

ENHANCE THE CAPACITY AND FUNCTIONALITY OF OUR GLOBAL NETWORK.

    We will continue to deploy enhanced value features into our network. In
addition, as we begin to address clients located in Europe and Asia, we will
expand our capacity in those regions. Today, we provide European and Asian
mirror sites to our clients from collocated EDCs in Amsterdam and Tokyo.

EMPHASIZE THE IMAP BRAND.

    We have focused our sales and marketing efforts to distinguish IMAP as a
branded product offering focused on the middle market and selected divisions of
larger multi-national organizations. Our direct sales organization allows our
sales representatives to understand each client's specific business needs better
and provide the ongoing support that facilitates effective cross-selling.

                                       6
<PAGE>
                              RECENT DEVELOPMENTS

    RECENT OPERATING RESULTS.  Our results of operations for the three months
ended December 31, 1998 (unaudited) and 1999 (unaudited), for the period from
January 14, 1998 through December 31, 1998 and for the year ended December 31,
1999 (unaudited) are summarized below. The operating results for the period from
January 14, 1998 through December 31, 1998 were derived from our audited
financial statements. The data related to the three month periods ended
December 31, 1998 and 1999 and the year ended December 31, 1999 is unaudited,
but in our opinion reflects all adjustments, consisting only of normal recurring
adjustments, necessary for fair presentation of results for these periods.
Operating results for interim periods are not necessarily indicative of results
expected for full fiscal years. On September 8, 1998, we acquired IIT, on
October 2, 1998 we acquired ACR and on October 8, 1999 we acquired Conklin &
Conklin, Inc. Our results of operations include the operating results of the
acquired companies from the date of respective acquisition.

<TABLE>
<CAPTION>
                                                                   FOR THE PERIOD FROM
                                            THREE MONTHS ENDED    JANUARY 14, 1998 (DATE
                                               DECEMBER 31,       OF INCEPTION) THROUGH     YEAR ENDED
                                            -------------------        DECEMBER 31,        DECEMBER 31,
                                              1998       1999              1998                1999
                                            --------   --------   ----------------------   ------------
                                                (UNAUDITED)                                (UNAUDITED)
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                         <C>        <C>        <C>                      <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................  $  3,606   $ 14,661           $  4,122           $  35,513

Costs and expenses:
  Direct cost of service..................     3,082      9,327              3,425              23,225
  Base and infrastructure costs...........     2,186      4,878              2,186              16,238
  Sales and marketing.....................     3,321     12,042              5,123              36,595
  General and administrative..............     9,019      6,210             19,427              22,052
  Product research and development........       431      3,347                690               5,351
  Non-cash stock compensation.............       140      3,545                231              10,351
  Depreciation and amortization...........     2,911      8,032              3,179              22,826
                                            --------   --------           --------           ---------
Total costs and expenses..................    21,090     47,381             34,261             136,638
Operating loss............................   (17,484)   (32,720)           (30,139)           (101,125)
Interest income (expense).................    (2,546)    (1,546)            (2,314)             (2,193)
Net loss..................................  $(20,030)  $(34,266)          $(32,453)          $(103,318)
                                            ========   ========           ========           =========
Basic and diluted loss per common share
  attributable to shareholders............  $ (24.91)  $  (0.56)          $ (40.64)          $   (2.93)
</TABLE>

<TABLE>
<CAPTION>
                                                              AS OF DECEMBER 31, 1999
                                                              -----------------------
                                                                    (UNAUDITED)
<S>                                                           <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................         $120,158
Available-for-sale securities...............................           23,852
Working capital.............................................          119,106
Total assets................................................          325,454
Current portion of long term debt and capital lease
  obligations...............................................           18,421
Long term debt and capital lease obligations, excluding
  current portion...........................................          166,671
Stockholders' (deficit) equity..............................          102,461
</TABLE>

                                       7
<PAGE>
                                  THE OFFERING

<TABLE>
<S>                                         <C>       <C>
Common stock offered by us................  2,000,000 shares

Common stock offered by selling
  stockholders............................  4,000,000 shares
                                            ---------

                                            6,000,000
                                            =========
</TABLE>

<TABLE>
<S>                                         <C>
Common stock to be outstanding
  after this offering.....................  63,929,932 shares

Over-allotment option.....................  900,000 shares offered by the selling stockholders

Use of proceeds...........................  The continued expansion and enhancement of our network
                                            and facilities, increased marketing efforts, investment
                                            in licenses, the addition of services to our IMAP
                                            offerings, funding debt service, acquire complimentary
                                            products, working capital and other general corporate
                                            purposes.

Nasdaq National Market symbol.............  USIX
</TABLE>

    The shares of common stock to be outstanding after the offering are stated
as of January 15, 2000. The shares of common stock to be outstanding exclude:

    - 7,946,049 shares of common stock issuable upon exercise of stock options
      at a weighted average exercise price of $10.15 per share;

    - 1,481,324 shares of common stock issuable upon exercise of warrants at a
      weighted average exercise price of $2.29 per share; and

    - 5,030,181 shares of common stock issuable upon conversion of $125,000,000
      original principal amount of our 7% Convertible Subordinated Notes due
      November 1, 2004. See "Capitalization," "Management," and "Description of
      Capital Stock."

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

    We were incorporated in Delaware in January 1998. In this prospectus, we
will refer to USINTERNETWORKING, Inc. and its subsidiaries, collectively, as
"USI," "we" and "us." Our principal executive offices are located at One USI
Plaza, Annapolis, Maryland 21401-7478. Our telephone number is
(410) 897- 4400. Our web site is located at WWW.USI.NET. The information on our
web site is not part of this prospectus.

    This prospectus references and depicts certain trademarks, service marks and
trade names of other companies. "USINTERNETWORKING" "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."

                                       8
<PAGE>
          SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

    The summary historical financial data for the period from our date of
inception, January 14, 1998, through December 31, 1998 presented below was
derived from our audited consolidated financial statements. The summary
historical consolidated financial data for the period from January 14, 1998
through September 30, 1998 and for the nine-month period ended September 30,
1999 presented below was derived from our unaudited consolidated financial
statements. This data is unaudited but in our opinion reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of results for interim periods. Operating results for interim
periods are not necessarily indicative of results to be expected for the full
fiscal years. You should read this information in conjunction with the sections
of this Prospectus entitled "Selected Historical Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in conjunction with the historical consolidated financial
statements and Notes included in the back of this prospectus.

<TABLE>
<CAPTION>
                                                FOR THE PERIOD        FOR THE PERIOD
                                                     FROM                  FROM
                                               JANUARY 14, 1998      JANUARY 14, 1998
                                              (DATE OF INCEPTION)   (DATE OF INCEPTION)
                                                    THROUGH               THROUGH         NINE MONTHS ENDED
                                               DECEMBER 31, 1998    SEPTEMBER 30, 1998    SEPTEMBER 30, 1999
                                              -------------------   -------------------   ------------------
                                                                        (UNAUDITED)          (UNAUDITED)
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                           <C>                   <C>                   <C>
STATEMENT OF OPERATIONS DATA:
Revenue.....................................       $  4,122              $    515              $ 20,852
Costs and expenses:
  Direct cost of services...................          3,425                   343                13,898
  Network and infrastructure costs..........          2,186                    --                11,360
  Selling, general and administrative.......         25,240                12,469                42,400
  Non-cash stock compensation expense.......            231                    90                 6,805
  Depreciation and amortization.............          3,179                   269                14,794
                                                   --------              --------              --------
Total costs and expenses....................         34,261                13,171                89,257
                                                   --------              --------              --------
Operating loss..............................        (30,139)              (12,656)              (68,405)
Interest (expense) income...................         (2,314)                  233                  (647)
                                                   --------              --------              --------
Net loss....................................        (32,453)              (12,423)              (69,052)
Dividends accrued on Series A Convertible
  Preferred Stock and Series B Convertible
  Redeemable Preferred Stock(a).............         (1,503)                 (843)               (2,328)
Accretion of common stock subject to
  repurchase to fair value(a)...............         (3,904)               (1,475)              (23,938)
Accretion of Series B Convertible Redeemable
  Preferred Stock to fair value(a)..........           (237)                   --                   (99)
                                                   --------              --------              --------
Net loss attributable to common
  stockholders..............................       $(38,097)             $(14,741)             $(95,417)
                                                   ========              ========              ========
Basic and diluted loss per common share
  attributable to common stockholders.......       $ (40.64)             $ (15.72)             $  (2.49)
                                                   ========              ========              ========
OTHER DATA:
  Capital expenditures......................         20,128                16,219                58,868
  EBITDA(b).................................        (26,729)              (12,387)              (45,546)
  Cash used in operating activities.........        (20,603)               (7,794)              (56,412)
  Cash used in investing activities.........        (37,669)              (31,258)             (100,055)
  Cash provided by financing activities.....        102,074                50,282               141,241
</TABLE>

                                       9
<PAGE>
    The following table summarizes consolidated balance sheet data as of
September 30, 1999 and as adjusted to give effect to the offering of our 7%
Convertible Subordinated Notes, including the receipt by us of $120.1 million in
net proceeds from the convertible note offering and as further adjusted to give
effect to this offering, including the receipt by us of approximately
$103.8 million in net proceeds from this offering based on an assumed offering
price of $55.0 per share.

<TABLE>
<CAPTION>
                                                                    AS OF SEPTEMBER 30, 1999
                                                             ---------------------------------------
                                                                                          AS FURTHER
                                                              ACTUAL        AS ADJUSTED    ADJUSTED
                                                             --------       -----------   ----------
                                                                           (UNAUDITED)
                                                                         (IN THOUSANDS)
<S>                                                          <C>            <C>           <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................  $ 28,577         $148,677     $252,452
Available-for-sale securities..............................    40,425           40,425       40,425
Working capital............................................    46,736          166,836      270,636
Total assets...............................................   205,072          330,072      433,872
Current portion of long-term debt and capital lease
  obligations..............................................    13,805           13,805       13,805
Long-term debt and capital lease obligations, excluding
  current portion..........................................    34,572          159,572      159,572
Stockholders' equity.......................................   132,859          132,859      236,659
</TABLE>

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

(a) Our Series A Convertible Preferred Stock and our Series B Convertible
    Redeemable Preferred Stock all converted to common stock upon the
    consummation of our initial public offering on April 14, 1999.

(b) EBITDA consists of earnings (loss) before net interest, income taxes,
    depreciation and amortization, stock option compensation expense (a non-cash
    charge) and amortization of deferred IMAP costs. EBITDA is presented to
    clarify our operating results and they are not intended to represent cash
    flow or results of operations in accordance with generally accepted
    accounting principles. EBITDA is not calculated under generally accepted
    accounting principles and is not necessarily comparable to similarly titled
    measures of other companies. For a presentation of cash flows calculated
    under generally accepted accounting principles, see our historical
    consolidated financial statements contained in the back of this prospectus.

                                       10
<PAGE>
                                  RISK FACTORS

    INVESTING IN 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.

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 $69.1 million for the first nine months of 1999 and EBITDA of negative
$45.6 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 common stock, together
with cash on hand and our existing and anticipated debt and capital lease
financing, will be sufficient to fund our operations for 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

                                       11
<PAGE>
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;

    - 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 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.

                                       12
<PAGE>
    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.

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

    Our ability to make payments on our indebtedness 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 or
to fund our other cash needs. We may need to refinance all or a portion of our
indebtedness 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 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.

THE SIGNIFICANT AMOUNT OF OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL
  HEALTH.

    The issuance of the convertible notes increased our indebtedness and,
therefore, made us highly leveraged. The following chart shows certain important
as adjusted credit statistics, assuming we had completed the issuance of the
convertible notes as of the date specified below and had applied the proceeds as
intended.

<TABLE>
<CAPTION>
                                                         AS OF SEPTEMBER 30, 1999
                                                               AS ADJUSTED
                                                         ------------------------
                                                          (DOLLARS IN THOUSANDS)
<S>                                                      <C>
Long-term debt and capital lease obligations, excluding
  current portion......................................          $159,572
Stockholders' equity...................................           132,859
Debt to equity ratio...................................            1.20:1
</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,
$12.0 million for the period from our date of inception, January 14, 1998,
through September 30, 1998, and $62.8 million for the nine months ended
September 30, 1999.

    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
      our indebtedness;

                                       13
<PAGE>
    - 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;

    - 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.

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.

    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.

                                       14
<PAGE>
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. 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 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

                                       15
<PAGE>
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
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 18.6% 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.

                                       16
<PAGE>
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
we will be able to continue to successfully integrate the business of Conklin
into our own, or that the Conklin business will perform as 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 underperformance 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:

    - 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 EDCs 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

                                       17
<PAGE>
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;

    - 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, will own shares representing approximately
    % of our outstanding voting capital stock after the completion of this
offering. 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 assets.

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

    The trading price of our common stock has been volatile. Factors such as
announcements of fluctuations in our or our competitors' operating results and
market conditions for Internet related and

                                       18
<PAGE>
other technology stocks in general could have a significant impact on the future
trading price of our common stock. 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 price of our common stock 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 price of our common stock.

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

    As of January 15, 2000, we had 61,929,932 shares of common stock issued and
outstanding, excluding 1,481,324 shares issuable upon the exercise of warrants,
7,946,049 shares issuable upon the exercise of options granted under our 1998
Stock Option Plan and 5,030,181 shares issuable upon conversion of our
convertible notes. We cannot predict the effect, if any, that future sales of
shares of common stock, including common stock issuable upon conversion of the
notes, or the availability of shares of common stock for future sale, will have
on the market price of common stock prevailing from time to time.

    USI, our officers and directors, the selling stockholders and some of our
other stockholders have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file a registration
statement under the Securities Act relating to, any shares of common stock or
securities convertible or exchangeable or exercisable for any shares of our
common stock for a period of 90 days after the date of this prospectus, subject
to limited exceptions as described under "Underwriting," without the prior
written consent of Credit Suisse First Boston Corporation. In addition, the
selling stockholders and other stockholders have agreed that, after the
expiration of the 90 day period referred to above they will only sell, transfer
or otherwise dispose of a limited percentage of their shares of common stock
during defined time periods as described under "Description of Capital
Stock--Restrictions on Sale."

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

                                       19
<PAGE>
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.

FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS ARE SUBJECT TO RISKS AND
  UNCERTAINTIES.

    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.

    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.

                                       20
<PAGE>
                                USE OF PROCEEDS

    We will receive net proceeds of approximately $103.8 million from the sale
of 2,000,000 shares of common stock at an assumed public offering price of
$55.00 per share, after deducting the underwriting discounts and commissions and
estimated offering expenses we will owe. We will not receive any portion of the
proceeds from the sale of shares of common stock by the selling stockholders. We
intend to use the net proceeds we receive:

    - to continue expanding and enhancing our network and facilities;

    - to increase marketing efforts;

    - to invest in licenses, research and product development in order to add
      new applications to our IMAP offerings;

    - to finance debt service;

    - to acquire complementary products; and

    - for working capital and other general corporate purposes.

    Some of the net proceeds we receive may also be used;

    - to repay current or future debts;

    - to obtain the right to use complementary technologies; and

    - to fund acquisitions that we may pursue on an opportunistic basis.

    The amounts and timing of our actual expenditures will depend upon numerous
factors, including the status of our product development efforts, marketing and
sales activities, the amount of cash generated by our operations and
competition. Actual expenditures may vary substantially. We may find it
necessary or advisable to use portions of the proceeds for other purposes.
Pending application of the net proceeds as described above, we intend to invest
the net proceeds of this offering in short-term, investment-grade,
interest-bearing securities.

                            COMMON STOCK PRICE RANGE

    Our common stock has been traded on The Nasdaq National Market under the
symbol "USIX" since the completion of our initial public offering in
April 1999. All sales prices below have been adjusted to reflect our
three-for-two stock split effected by means of a stock dividend which was
distributed December 17, 1999.

    The folowing table sets forth, for the periods indicated, the high and low
prices of our common stock on The Nasdaq National Market for the second, third
and fourth quarters of 1999 and the first quarter of 2000 from the commencement
of trading on April 9, 1999 through January   , 2000.

<TABLE>
<CAPTION>
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
YEAR ENDED DECEMBER 31, 1999:
    Second Quarter (from April 9, 1999).....................  $40.00      $15.33
    Third Quarter...........................................   27.96        9.54
    Fourth Quarter..........................................   69.88       16.92

YEAR ENDING DECEMBER 31, 2000:
    First Quarter (through January 24, 2000)................  $64.75      $45.69
</TABLE>

    The last sale price of the common stock on The Nasdaq National Market on
January 24, 2000 was $55.00.

                                       21
<PAGE>
                                DIVIDEND POLICY

    We have never paid cash dividends on our common stock and have no plans to
do so in the forseeable future. The declaration and payment of any dividends in
the future will be determined by the board of directors and will depend on a
number of factors, including our earnings, capital requirements and overall
financial condition. The payment of dividends is also restricted by the terms of
our indebtedness.

                                    DILUTION

    Our net tangible book value per share on December 31, 1999, was $1.19. After
giving effect to this offering, our net tangible book value will be $2.79 per
share. Purchasers of common stock in this offering will experience substantial
and immediate dilution in net tangible book value per share for financial
accounting purposes, as illustrated in the following table based on an assumed
offering price of $55.00 per share, the closing sales price per share of the
common stock on The Nasdaq National Market on January 24, 2000:

<TABLE>
<S>                                                           <C>
Pro forma assumed public offering price per share...........  $  55.00
Less adjusted net tangible book value per share after the
  offering (1)..............................................      2.79
Pro forma immediate dilution in net tangible book value per
  share to new investors....................................  $  52.21
</TABLE>

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

(1) Determined by dividing the total number of shares to be outstanding after
    the offering into our adjusted net tangible book value, after giving effect
    to the application of the net proceeds of this offering.

                                       22
<PAGE>
                                 CAPITALIZATION

    The following table sets forth our capitalization as of September 30, 1999.
We have presented our capitalization:

    - on an actual basis;

    - on an as adjusted basis to reflect the issuance of the convertible notes
      and our receipt of the net proceeds from the sale of the convertible
      notes; and

    - on a further adjusted basis to reflect the sale of the common stock in
      this offering and our receipt of the net proceeds from the offering.

<TABLE>
<CAPTION>
                                                               AS OF SEPTEMBER 30, 1999
                                                              --------------------------   AS FURTHER
                                                                ACTUAL      AS ADJUSTED     ADJUSTED
                                                              -----------   ------------   ----------
                                                                     (UNAUDITED)
                                                              (IN THOUSANDS, EXCEPT FOR
                                                                    SHARE AMOUNTS)
<S>                                                           <C>           <C>            <C>
Cash, cash equivalents and available-for-sale securities....   $ 69,002       $189,102      $292,877
Long-term liabilities:
  Long-term debt, excluding current portion.................     26,485         26,485        26,485
  Capital lease obligations, excluding current portion......      8,087          8,087         8,087
  Convertible subordinated notes due 2004...................         --        125,000       125,000
                                                               --------       --------      --------
    Total long-term liabilities.............................     34,572        159,572       159,572
Stockholders' equity (deficit):
  Common stock, $.001 par value; 75,000,000 shares
    authorized; 60,813,704 shares issued and outstanding
    actual, and as adjusted and 63,813,704 shares issued and
    outstanding as further adjusted(a)......................         61             61            63
  Additional paid-in capital................................    236,631        236,631       340,404
  Note receivable from officer for purchase of common
    stock...................................................     (2,250)        (2,250)       (2,250)
  Unearned compensation.....................................       (362)          (362)         (302)
  Accumulated deficit.......................................   (101,505)      (101,505)     (101,505)
  Accumulated other comprehensive income....................        284            284           284
                                                               --------       --------      --------
    Total stockholders' equity..............................    132,859        132,859       236,634
                                                               --------       --------      --------
      Total capitalization..................................   $167,431       $292,431      $396,206
                                                               ========       ========      ========
</TABLE>

    The share numbers in the table exclude:

    - 6,978,033 shares of common stock issuable upon exercise of stock options
      outstanding as of September 30, 1999 at a weighted-average exercise price
      of $6.36;

    - 2,223,972 shares of common stock reserved for issuance upon exercise of
      warrants exercisable as of September 30, 1999 at a weighted-average
      exercise price of $2.91; and

    - 5,031,081 shares of common stock issuable upon conversion of the
      subordinated convertible notes at a conversion price of $24.85 per share.

    Please read this capitalization table together with the sections of this
prospectus entitled "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the financial statements of
USI, ACR and IIT included in this Prospectus.

- ------------------------
(a) Our authorized shares were increased to 450,000,000 on January 14, 2000.

                                       23
<PAGE>
                SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

    The following table summarizes:

    - our historical consolidated financial data for the period from our date of
      inception, January 14, 1998, through December 31, 1998 and as of December
      31, 1998;

    - our historical consolidated operating statement data for the period from
      the date of our inception, January 14, 1998, through September 30, 1998;
      and

    - our historical consolidated financial data for the nine month period ended
      September 30, 1999.

    The selected financial data for the period from our date of inception,
January 14, 1998, through December 31, 1998 and as of December 31, 1998 have
been derived from, and is qualified by reference to, our audited consolidated
financial statements for that period. Our audited consolidated financial
statements for the period from our inception through December 31, 1998 include
the results of I.I.T. Holding, Inc., or IIT, from September 8, 1998 through
December 31, 1998 and the results of Advanced Communication Resources, Inc., or
ACR, from October 2, 1998 through December 31, 1998.

    The financial statement data for the nine month period ended September 30,
1999 and as of September 30, 1999 and for the period from the date of our
inception through September 30, 1998 has been derived from our unaudited
consolidated financial statements. This data is unaudited but in our opinion
reflects all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of results for interim periods. Operating
results for interim periods are not necessarily indicative of results to be
expected for the full fiscal years. You should also read "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes of USI, ACR and IIT included in this
prospectus.

    In the table below:

    - the Series B preferred stock is not presented as a part of our
      stockholders' equity in 1998 because it was mandatorily redeemable upon
      the eighth anniversary of its issuance (the Series B was converted into
      common stock upon the closing of our initial public offering); and

    - we do not present 2,015,625 shares of common stock held by three officers
      as part of our stockholders' equity in 1998 because we would have been
      obligated to repurchase these shares at fair market value if any of these
      officers had died or had become disabled before our initial public
      offering. See Note 11 of the Notes to USI's Consolidated Financial
      Statements. These provisions terminated upon the consummation of our
      initial public offering.

                                       24
<PAGE>
                            USINTERNETWORKING, INC.

<TABLE>
<CAPTION>
                                         PERIOD FROM                 PERIOD FROM
                                      JANUARY 14, 1998             JANUARY 14, 1998           NINE MONTHS
                                     (DATE OF INCEPTION)         (DATE OF INCEPTION)             ENDED
                                  THROUGH DECEMBER 31, 1998   THROUGH SEPTEMBER 30, 1998   SEPTEMBER 30, 1999
                                  -------------------------   --------------------------   ------------------
                                                                     (UNAUDITED)              (UNAUDITED)
                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>                         <C>                          <C>
STATEMENT OF OPERATIONS DATA:
Revenue.........................          $  4,122                     $    515                 $ 20,852
Costs and expenses:
  Direct cost of services.......             3,425                          343                   13,898
  Network and infrastructure
    costs.......................             2,186                           --                   11,360
  Selling, general and
    administrative..............            25,240                       12,469                   42,400
  Non-cash stock compensation
    expense.....................               231                           90                    6,805
  Depreciation and
    amortization................             3,179                          269                   14,794
                                          --------                     --------                 --------

  Total costs and expenses......            34,261                       13,171                   89,257
                                          --------                     --------                 --------
Operating loss..................           (30,139)                     (12,656)                 (68,405)
Other income (expense):
  Interest income...............               367                          307                    2,147
  Interest expense..............            (2,681)                         (74)                  (2,794)
                                          --------                     --------                 --------
Net loss........................          $(32,453)                    $(12,423)                $(69,052)
                                          ========                     ========                 ========
Basic and diluted loss per
  common
  share attributable to common
  stockholders..................          $ (40.64)                    $ (15.72)                $  (2.49)
                                          ========                     ========                 ========
</TABLE>

<TABLE>
<CAPTION>
                                                              DECEMBER 31,   SEPTEMBER 30,
                                                                  1998           1999
                                                              ------------   -------------
                                                                              (UNAUDITED)
                                                                     (IN THOUSANDS)
<S>                                                           <C>            <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................    $ 43,802       $ 28,577
Available-for-sale securities...............................          --         40,425
Working capital.............................................      22,551         46,736
Total assets................................................     106,516        205,072
Current portion of long-term debt and capital lease
  obligations...............................................       3,262         13,805
Short-term obligations expected to be refinanced............       5,282             --
Long-term debt and capital lease obligations, excluding
  current portion...........................................       8,659         34,572
Series B Convertible Redeemable Preferred Stock.............      62,242             --
Common stock subject to repurchase..........................       4,145             --
Stockholders' (deficit) equity..............................      (2,467)       132,859
</TABLE>

                                       25
<PAGE>
    On September 8, 1998, we acquired I.I.T. Holding, Inc. and its two
wholly-owned subsidiaries, International Information Technology Inc., a U.S.
subsidiary, and International Information Technology IIT, C.A., a Venezuelan
subsidiary. We refer to these businesses collectively as IIT. IIT's operations
commenced on May 20, 1994 upon the incorporation of the U.S. subsidiary. The
Venezuelan subsidiary was formed on March 6, 1996. For accounting purposes, IIT
is the predecessor of USI, which was incorporated in January 1998.

    The following table summarizes:

    - the historical consolidated financial data of IIT for the period from May
      20, 1994, its date of inception, through December 31, 1994 and for the
      fiscal years ended December 31, 1995, 1996 and 1997 and as of December 31,
      1994, 1995, 1996 and 1997; and

    - the historical consolidated operating statement data of IIT for the period
      from January 1, 1998 through September 7, 1998.

    The financial statement data for periods prior to 1996 and eight months
ended August 31, 1997 have been derived from the unaudited financial statements
of IIT. The selected financial data as of December 31, 1996 and 1997 and for the
years then ended and the selected financial data for the period from January 1,
1998 through September 7, 1998, has been derived from, and is qualified by
reference to, the audited consolidated financial statements of IIT included
elsewhere in this prospectus. You should also read "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes of USI, ACR and IIT included in this prospectus.

                                       26
<PAGE>
                       PREDECESSOR--I.I.T. HOLDING, INC.

<TABLE>
                                     PERIOD
                                      FROM
                                    MAY 20,                                                        PERIOD
                                      1994                                                          FROM
                                    (DATE OF                                          EIGHT      JANUARY 1,
                                    INCEPTION)                                        MONTHS        1998
                                       TO            YEAR ENDED DECEMBER 31,          ENDED          TO
                                    DECEMBER     --------------------------------   AUGUST 31,   SEPTEMBER
                                    31, 1994      1995       1996         1997         1997       7, 1998
                                    ----------   --------   --------   ----------   ----------   ----------
                                                 (IN THOUSANDS, EXCEPT PER SHARE
<S>                                 <C>          <C>        <C>        <C>          <C>          <C>
                                                              DATA)
STATEMENT OF OPERATION DATA:
Revenue...........................   $   156     $   801    $   747    $    2,812   $    1,499   $    4,406
                                     -------     -------    -------    ----------   ----------   ----------
Costs and expenses
  Cost of revenue.................       108         613        519         1,881        1,112        2,976
  Selling, general and
    administrative expenses.......        32          77        204         1,844        1,260        1,809
  Depreciation and amortization...         3           7         14            30           15           28
                                     -------     -------    -------    ----------   ----------   ----------
    Total costs and expenses......       143         697        737         3,755        2,387        4,813
                                     -------     -------    -------    ----------   ----------   ----------
Operating (loss) income...........        13         104         10          (943)        (888)        (407)
Interest expense..................        --          (5)        (3)           (9)          (1)         (17)
                                     -------     -------    -------    ----------   ----------   ----------
Income (loss) before income
  taxes...........................        13          99          7          (952)        (889)        (424)
Provision (benefit) for income
  taxes...........................        --          28         15           (58)         (58)          --
Net income (loss).................   $    13     $    71    $    (8)   $     (894)  $     (831)  $     (424)
                                     =======     =======    =======    ==========   ==========   ==========
Basic and diluted income (loss)
  per common share attributable to
  common stockholders.............   $136.84     $747.37    $(84.21)   $(9,410.53)  $(8,747.37)  $(4,464.37)
                                     =======     =======    =======    ==========   ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                         AS OF DECEMBER 31,
                                                              -----------------------------------------
                                                                1994       1995       1996       1997
                                                              --------   --------   --------   --------
                                                                           (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................    $ --      $  --       $ 70       $ 14
Working capital (deficit)...................................     (15)        70         14         42
Total assets................................................      40        147        348        769
Long-term debt and capital lease obligations, excluding
  current position..........................................      25         47         11         16
Stockholder's equity........................................       2         66         45        132
</TABLE>

                                       27
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

    THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ TOGETHER WITH THE
FINANCIAL STATEMENTS AND RELATED NOTES OF USI, ACR AND IIT INCLUDED IN THIS
PROSPECTUS. THE DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF OUR
PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE CAUTIONARY STATEMENTS MADE
IN THIS PROSPECTUS APPLY TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY
APPEAR IN THIS PROSPECTUS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS," AS WELL AS
THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS PROSPECTUS ARE MADE AS OF THE DATE OF THIS PROSPECTUS, AND WE
ASSUME NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS OR TO UPDATE THE
REASONS ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS. SEE "RISK FACTORS."

OVERVIEW

    I.I.T. Holding, Inc., the predecessor of USI for accounting purposes,
specialized in systems analysis and design and systems integration solutions.
IIT provided PeopleSoft human resource management and financial system
implementation. IIT's consulting professionals have expertise in human resource
management as well as accounting and financial systems.

    We acquired IIT in September 1998 as a part of our program to develop a new
Internet-based service offering. IIT provides implementation capabilities that
enable us to provide human resource and financial management functionality as
part of our IMAP offerings.

    We have developed an advanced, integrated service offering that provides our
clients the ability to use leading business software applications through our
state-of-the-art Internet-based network. Since our inception in January 1998, we
have devoted substantially all of our efforts to developing our network
infrastructure, recruiting and training personnel, establishing strategic
business partnerships with application software providers, completing three
strategic acquisitions and raising capital. We have incurred a cumulative net
loss since inception and expect to incur additional losses for at least the next
twelve months, due primarily to additional start-up costs related to
implementation of our services and the continued expansion and enhancement of
our network. As of September 30, 1999, we had an accumulated deficit of
approximately $101.5 million.

    In October 1999, USI purchased the assets of Conklin & Conklin, Inc. a
comprehensive provider of Lawson financial and human resources system
implementation services and a certified reseller of Lawson software licenses.
The purchase price consisted of cash of $8.0 million, assumed liabilities of
$0.6 million, and a $2.0 million secured note. The secured note is due on
October 8, 2001, and bears interest at 10%, with interest payable monthly until
the maturity date. In addition, the purchase price consists of a contingent
payment of up to $4.6 million in cash, portions of which will be earned upon
attainment of certain performance objectives by shareholders of Conklin working
for us between the date the acquisition of Conklin closed and January 7, 2001,
when a portion of the contingent payment earned prior to that date will be paid,
and January 7, 2002, when the remainder of the contingent payment that has been
earned will be paid.

    In April 1999, we completed an initial public offering of our common stock.
The net proceeds from the sale of the 10,350,000 shares of common stock were
approximately $132.7 million. The initial public offering of common stock met
the criteria for the automatic conversion of our outstanding Series A
Convertible Preferred Stock and Series B Redeemable Convertible Preferred Stock
into common stock. In addition, the repurchase rights lapsed with respect to all
common stock subject to repurchase.

    In November 1999, we completed the sale of our 7% convertible promissory
notes for net proceeds of approximately $120.1 million.

    REVENUE.  We currently generate revenue from both IMAP services and
traditional IT services. We expect that as IMAP services grow, they will
represent an increasing proportion of our revenue. Revenue from IMAP services
consists of monthly recurring fees from ongoing services and is

                                       28
<PAGE>
recognized ratably as earned over the contract term. Non-refundable client
deposits, if any, are recognized as revenue ratably over the contract term.
Revenue from the delivery of professional information technology services not
included in IMAP solutions is recognized as the services are performed.

    COSTS AND EXPENSES.  We incur operating costs and expenses related to the
delivery of IMAP services.

    Costs and expenses include product development, network and data center
support, marketing, and selling, general and administrative expenses. Since
inception, we have incurred expenses consisting primarily of compensation and
benefits, recruiting, occupancy and consulting. We have expensed all start-up
costs as incurred.

    We incur up-front costs related to the delivery of IMAP services. Product
development costs and the cost to operate our network and data centers are
recognized as period costs. Costs related to the acquisition of hardware are
capitalized and depreciated over the estimated useful life of the hardware of
five years. Costs related to the acquisition of software licenses are
capitalized and amortized over either the term of the license agreement, or the
term of the individual client contract, depending on the nature of the software
license agreement. Amortization is based on current and future revenue from each
product and annual amortization will not be less than that computed on a
straight-line basis over the remaining useful life. Direct costs related to the
integration of software applications for a client on our network are capitalized
and amortized over the related contract period.

HISTORICAL RESULTS OF OPERATIONS--USINTERNETWORKING

COMPARISON OF THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 TO THE PERIOD ENDED
  SEPTEMBER 30, 1998

    REVENUE.  For the nine months ended September 30, 1999, we generated $11.3
million in IMAP revenue and $9.5 million in professional IT services revenue. We
generated $0.5 million in professional IT services revenue for the period
January 14, 1998, our date of inception, through September 30, 1998 primarily
from our newly acquired subsidiary, IIT.

    GROSS MARGINS, DIRECT COSTS OF SERVICES, NETWORK AND INFRASTRUCTURE
COSTS.  For the nine months ended September 30, 1999, we incurred $7.6 million
and $6.3 million of direct costs related to the delivery of our IMAP and
professional IT services, respectively. For the period from January 14, 1998,
our date of inception, through September 30, 1998, we incurred no and $0.3
million of direct costs related to the delivery of our IMAP and professional IT
services, respectively. Additionally, we also incurred $11.3 million of costs
related to the maintenance of our network and infrastructure for the nine months
ended September 30, 1999 and no related costs during the same period in 1998.
Gross margins, including IMAP network and infrastructure costs, for the nine
months ended September 30, 1999 were (67.8)% and 33.5% for IMAP and professional
IT services, respectively.

    GENERAL AND ADMINISTRATIVE EXPENSES.  For the nine months ended
September 30, 1999, we incurred $15.8 million of general and administrative
expenses compared to $10.4 million for the period from January 14, 1998, our
date of inception, through September 30, 1998. The increase of $5.4 million
reflects the costs required to support three full quarters of operations in 1999
that were not incurred during the same period in 1998, offset by one time
start-up costs incurred in 1998.

    SALES AND MARKETING EXPENSES.  For the nine months ended September 30, 1999,
we incurred $24.6 million of sales and marketing expenses compared to $1.8
million for the period from January 14, 1998, our date of inception, through
September 30, 1998. The increase of $22.8 million reflects the costs associated
with the sales and marketing initiatives required to support our IMAP services
during three quarters of operations in the period ended September 30, 1999,
compared to start-up sales activities during 1998.

    PRODUCT RESEARCH AND DEVELOPMENT EXPENSES.  For the nine months ended
September 30, 1999, we incurred $2.0 million of product research and development
expenses compared to $0.3 million for the period from January 14, 1998, our date
of inception, through September 30, 1998. The increase of $1.7

                                       29
<PAGE>
million reflects the costs associated with the continued development of our new
products and infrastructure during a full quarter of operation in the period
ended September 30, 1999, compared to start-up activities during 1998.

    NON-CASH STOCK COMPENSATION EXPENSE.  For the nine months ended
September 30, 1999, we incurred $6.8 million in non-cash compensation expense.
Of this amount, $6.2 million reflects the period's expense in connection with
employee stock options issued at an exercise price of $4.00 and an estimated
fair market value of $13.33 to $22.33 per share at the date of grant. The
remaining amount of $0.6 million reflects our contribution of common stock to
the employee benefit plan and the amortization of unearned compensation. There
was minimal non-cash stock compensation expense for the comparable period in
1998.

    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization for the nine
months ended September 30, 1999 totaled $14.8 million. Of this amount, $4.1
million represents the amortization of the goodwill recorded upon our
acquisitions of ACR and IIT; the remaining $10.7 million represents depreciation
of our property and equipment and the amortization of our prepaid software
licenses. There was minimal depreciation and no amortization expense for the
comparable period in 1998.

    INTEREST INCOME AND EXPENSE.  For the three months ended September 30, 1999,
we incurred $2.1 million in interest expense and generated $2.8 million of
interest income. We had minimal interest income and expense during the period
ended September 30, 1998.

HISTORICAL RESULTS OF OPERATIONS--PREDECESSOR

COMPARISON OF THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 OF USI TO THE
  PERIOD FROM JANUARY 1, 1998 THROUGH SEPTEMBER 7, 1998 OF PREDECESSOR

    REVENUE.  For the nine months ended September 30, 1999, we generated $11.3
million in IMAP revenue and $9.5 million in professional IT services revenue.
For the period from January 1, 1998, through September 7, 1998, IIT generated
$4.4 million in professional IT services revenue and no IMAP revenue. The
increase in professional IT services revenue is attributable to the acquisition
of ACR in October 1998, and the inclusion of its professional IT services
revenue in the period ended September 30, 1999.

    GROSS MARGINS, DIRECT COSTS OF SERVICES, NETWORK AND INFRASTRUCTURE
COSTS.  For the nine months ended September 30, 1999, we incurred $13.9 million
of direct costs related to the delivery of our IMAP and professional IT
services. For the period from January 1, 1998, through September 7, 1998, IIT
incurred $3.0 million of direct costs related to the delivery of professional IT
services. Additionally, we also incurred $11.3 million of costs related to the
maintenance of our network and infrastructure. Our gross margin, including IMAP
network and infrastructure costs, for the nine months ended September 30, 1999
was (67.8)%. The gross margin for IIT for the period from January 1, 1998,
through September 7, 1998, was 32.4%.

    GENERAL AND ADMINISTRATIVE EXPENSES.  For the nine months ended
September 30, 1999, we incurred $15.8 million of general and administrative
expenses compared to IIT's $1.8 million for the period from January 1, 1998,
through September 7, 1998. The significant increase reflects costs associated
with the continued development and maintenance of a much larger infrastructure
required to support our IMAP services in the period ended September 30, 1999.

    SALES AND MARKETING EXPENSES.  For the nine months ended September 30, 1999,
we incurred $24.6 million of sales and marketing expenses compared to IIT's $0.1
million for the period from January 1, 1998, through September 7, 1998. The
significant difference reflects costs associated sales and marketing efforts
required to support our IMAP services in the period ended September 30, 1999.

    PRODUCT RESEARCH AND DEVELOPMENT EXPENSES.  For the nine months ended
September 30, 1999, we incurred $2.0 million of product research and development
expenses. IIT incurred no related expenses for the period from January 1, 1998,
through September 7, 1998. The difference reflects the costs

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associated with the continued development of our new products and infrastructure
during three full quarters of operations for the period ended September 30,
1999.

    NON-CASH STOCK COMPENSATION EXPENSE.  For the nine months ended
September 30, 1999, we incurred $6.8 million in non-cash compensation expense.
IIT had no non-cash stock compensation expense for the period from January 1,
1998, through September 7, 1998.

    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization for the nine
months ended September 30, 1999 totaled $14.8 million. Of this amount, $4.1
million represents the amortization of the goodwill created through our
acquisitions of ACR and IIT; the remaining $10.7 million represents depreciation
of our property and equipment and the amortization of our prepaid software
licenses. IIT incurred approximately $28,000 in depreciation expense for the
period from January 1, 1998, through September 7, 1998.

    INTEREST INCOME AND EXPENSE.  For the nine months ended September 30, 1999,
we incurred $2.1 million in interest expense and generated $2.8 million of
interest income. IIT had minimal interest expense and no interest income during
the period from January 1, 1998, through September 7, 1998.

ACQUIRED COMPANIES

    The acquisitions of IIT, ACR and Conklin were made primarily with cash and
were accounted for using the purchase method of accounting. The assets and
liabilities of the acquired companies have been recorded at their fair market
value as of the acquisition closing date. The excess of the purchase price over
the fair market value of the identifiable net assets of IIT, ACR and Conklin has
been accounted for as goodwill, which is being amortized over its estimated
useful life of 5 years.

LIQUIDITY AND CAPITAL RESOURCES

    At September 30, 1999, we had cash and cash equivalents of $28.6 million and
available-for-sale securities of $40.4 million.

    For the nine months ended September 30, 1999, we have used $56.4 million in
operating activities, $100.1 million in investing activities and generated
$141.2 million through financing activities. Included in financing activities
was $132.7 million raised from an initial public offering in April 1999.

    We have used debt and capital leases to partially finance our capital
purchases. As of September 30, 1999, we had obtained commitments for secured
financing from several sources, including Cisco System Capital Corporation
($10.0 million), Venture Lending & Leasing II, Inc. ($10.0 million), Finova
Capital Corporation ($11.7 million), Transamerica Business Credit Corporation
($4.0 million) and EMC Corporation ($6.4 million). At September 30, 1999, the
total of our secured financing commitments was $73.3 million, of which $56.5
million had been funded.

    In the fourth quarter of 1999, we issued $125 million in principal amount of
the subordinated convertible notes. The net proceeds from the issuance were
approximately $120.1 million. The subordinated convertible notes pay interest at
7% and are convertible into common stock at the holder's option at a price of
$24.85 per common share.

    In April 1999 we purchased an office building for $11.8 million. The seller
financed $7.1 million of the purchase price through a first mortgage note due
May 2006 bearing interest at 7.5% per annum. We spent approximately $12 million
in 1999 on improvements to the building and have obtained financing for $4.75
million of these improvements.

    We believe that these resources together with the net proceeds received from
the issuance of our common stock in this offering will be sufficient to fund our
operations for the next twelve months. The majority of the base infrastructure
required to provide our IMAP services has been purchased. As a result, our
capital expenditures for the next several years will now largely be
success-based, consisting of software licenses and hardware required to
implement IMAP solutions for our new customers. These new customer contracts are
expected to have an average term of three to five years; however, we

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<PAGE>
anticipate that many of our customers will renew their contracts due to the cost
and complexity of switching service providers.

    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. We cannot be sure that
we will be able to obtain the additional financing to satisfy our cash
requirements or to implement our growth strategy on acceptable terms or at all.
If we cannot obtain such financing on terms acceptable to us, we may be forced
to curtail our planned business expansion and may be unable to fund our ongoing
operations. We are presently pursuing a variety of sources of other debt
financing, but no additional commitments have been obtained to date.

RECENT ACCOUNTING PRONOUNCEMENTS

    In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED FOR OR OBTAINED FOR INTERNAL USE (SOP 98-1). This SOP requires the
capitalization of costs to purchase or develop internal-use software, including
external direct costs of materials and services, payroll and payroll related
costs for employees who are directly associated with and devote time to an
internal-use software development project. Allocations of overhead to
capitalized costs are not permitted. Computer software costs related to research
and development are expensed as incurred, as are training and maintenance costs.
SOP 98-1 is effective for years beginning after December 15, 1998 and
application is prospective. Through December 31, 1998, approximately $1 million
of costs related to the implementation of internal use software were expensed.
We have adopted SOP 98-1 in 1999, and have capitalized $1.5 million of costs in
implementing our internal use software.

    In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES (SOP
98-5). This SOP requires that start-up costs and organizational costs be
expensed as incurred. Start-up activities include one-time activities related to
opening a new facility, introducing a new product or service, conducting
business in a new territory, conducting business with a new class of customer,
initiating new process in an existing facility, or commencing some new
operation. SOP 98-5 is effective for years beginning after December 15, 1998. We
currently expense the costs of all start-up and organizational activities.

YEAR 2000 COMPLIANCE

    YEAR 2000 ISSUE.  The Year 2000 issue is a result of computer programs or
systems, which store or process date-related information using only two digits
to represent the year. These programs or systems may not be able to properly
distinguish between a year in the 1900's and a year in the 2000's. Failure of
these programs or systems to distinguish between the two centuries could cause
the programs or systems to yield erroneous results or even to fail.

    EFFECT ON USI.  To date, we have not experienced any material difficulties
associated with the Year 2000 and we have not incurred any material liability or
costs due to the Year 2000 issue. Our total expenses related to Year 2000
compliance through the end of 1999 were $1.0 million. We do not anticipate that
we will incur additional costs due to Year 2000 compliance in 2000.

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                                    BUSINESS

ABOUT USI

    USI's service offerings integrate leading packaged software applications
with computing hardware, network security and operational support to meet the
needs of middle market companies for business functions such as e-commerce,
sales force automation and customer support, messaging and collaboration and
professional services automation. We implement these applications in our data
centers and enable our clients to access and utilize the applications over the
Internet. We take full responsibility for providing these services to our
clients, freeing them from the need to own and manage related computer systems,
networks and software.

MARKET TRENDS

    We believe that there are four key market trends that drive our business
opportunity:

    - the increased acceptance of the applications hosting model;

    - the rapid growth of e-commerce and Internet-based communications;

    - the competitive need of middle market and global 1000 enterprises to
      automate key business processes; and

    - the availability of Internet-enabled packaged software applications.

THE INCREASED ACCEPTANCE OF THE APPLICATION SERVICE PROVIDER MODEL.

    The Application Service Provider model is being increasingly validated by
the emergence of new entrants into this market. The "pure play" applications
hosting companies today include companies such as Aristasoft, Breakaway
Solutions, Corio, FutureLink, Interliant, Interpath and Telecomputing. KPMG, a
leading systems integrator has announced a partnership with Qwest to provide
application hosting solutions. USWeb/CKS, another systems integrator, also
provides application hosting solutions. The leading enterprise application
companies such as Oracle, Siebel and SAP are either in the process of or are
already providing application hosting solutions. The Web hosting companies such
as Concentric, Digex and Verio, either by themselves or in partnership with
other companies are expected to be participants in the Application Service
Provider market. International Data Corporation estimates that the market
opportunity in the high-end Application Service Provider market will reach $2
billion by 2003, representing a four-year compound annual growth rate of 91%.

THE RAPID GROWTH OF E-COMMERCE AND INTERNET-BASED COMMUNICATIONS.

    An increasing number of companies use the Internet to enable fast and
efficient communications between various constituents of their enterprises. The
following examples illustrate this trend.

    - E-commerce is becoming a critical element of many businesses' strategies.
      Companies increasingly demand that their vendors communicate ordering,
      invoicing and payment transactions through Internet-enabled applications.
      International Data Corporation estimates that commerce on the Internet
      will be more than $1 trillion by 2003, reflecting a four-year compound
      annual growth rate of 85%.

    - Enterprises are relying on the Internet to communicate with employees who
      are increasingly dispersed due to globalization and the development of
      alternative workplaces. According to Forrester Research, Inc. there are
      between 30 and 40 million telecommuters or home-based workers in the
      United States.

    - To interact with customers, suppliers and remote employees efficiently, an
      increasing number of businesses are implementing mission-critical
      applications over intranets and extranets rather than

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<PAGE>
      through dedicated private networks. Forrester Research, Inc. forecasts
      that the increasing demand for corporate intranets and extranets will fuel
      growth rates in excess of 30% in distributed infrastructure services
      resulting in a $140 billion market in 2002.

    As more companies implement mission-critical business applications on the
Internet, the demand for the outsourced provision of key Internet infrastructure
and services, or Web hosting, has significantly increased. The outsourcing of
Web sites is occurring because businesses recognize that they do not have an
infrastructure sufficient to ensure reliable and responsive deployment of
mission-critical applications on the Internet. Web site hosting providers
address these concerns by building substantial redundancy and capacious network
bandwidth into their facilities. Moreover, they provide a physically secure data
center environment, which helps to address businesses' security concerns as they
begin to move proprietary business information over the Internet.

THE COMPETITIVE NEED OF MIDDLE MARKET ENTERPRISES TO AUTOMATE KEY BUSINESS
  PROCESSES.

    Middle market enterprises increasingly face competitive demands to automate
business processes, but they have frequently not been able to afford the
functionality available to their larger competitors. This has been exacerbated
by the shortage of IT professionals. We believe that these enterprises have a
significant need for packaged application software to improve core business
processes, reduce costs and enhance their global competitive position.

    We believe that many of the leading enterprise resource planning software
packages remain too complex and too costly to be effective solutions for middle
market companies. While many enterprise resource planning providers have begun
offering products that are targeted for the middle market, implementation of
these packages generally still requires specialized skill sets and frequently
takes three to twelve months. In addition, the infrastructure required to
support these packages, once implemented, is also beyond the capabilities of
many middle market businesses. Faced with these costs and time frames, many
middle market companies choose to forgo the capabilities of leading enterprise
resource planning packages in favor of less functional products. We believe that
a lower cost, more easily implemented approach would allow these middle market
businesses to capitalize on the functionality of leading enterprise resource
planning packages and better position these businesses against larger
competitors.

THE AVAILABILITY OF INTERNET-ENABLED PACKAGED SOFTWARE APPLICATIONS.

    Until recently, companies wanting to implement Internet applications had to
develop their own software applications or customize existing packages. This
made each implementation unique and costly. It also made implementation time
frames and costs unpredictable. Over the past two years, however, major packaged
application providers, such as Siebel, PeopleSoft, Lawson, Oracle, J.D. Edwards
and others, have released versions of their software which can be accessed and
used over the Internet. Internet-enabled software is becoming an increasingly
common offering of providers of applications for distributed users such as
e-commerce, enterprise resource planning applications, and sales force
automation, where the increasing ubiquity of the Internet makes it a
cost-efficient mechanism for implementing distributed functions.

    We believe that the availability of Internet-enabled packaged software makes
it possible, for the first time, to implement these applications on the Internet
in predictable time frames, with predictable costs, and without writing custom
code.

THE USI SOLUTION

    We believe that we are well positioned to take advantage of these trends. We
have established our IMAP services as a leading single-source solution for the
Internet-enabled application software needs of middle market enterprises. We
take responsibility for the deployment and maintenance of the IMAP

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<PAGE>
best-of-breed packaged software applications. This allows our clients to focus
on their core competencies without mediating among disparate vendors. Our IMAP
solutions enable clients to buy these mission-critical functions as a service
from a single vendor, rather than as a collection of technologies from multiple
vendors.

    We have teamed with major packaged application software providers to
implement our IMAP solutions. We have built a network of EDCs through which our
clients' business software applications are deployed. The network offers fast,
reliable and secure access to the client application web sites that we manage,
which serve as the "Internet gateways" for enterprises and their employees,
customers and partners to access and use business application software and data.
The servers are generally procured and maintained by us and dedicated to
specific clients. Clients can define specific groups, such as their sales force,
customers, or investors, to have full or limited access to their web sites.
Because our network is deployed globally, access to client applications can be
equally responsive in North America, Europe and Asia. Moreover, geographically
dispersed backup is designed to ensure high reliability and data integrity. We
provide packaged application software and support along with our services on the
basis of multi-year contracts paid on a monthly basis. We believe that the
combination of our Internet communications capability along with
Internet-enabled software applications makes our IMAP offerings the first truly
integrated Internet communications and computing solution.

OPERATE A SPECIALIZED GLOBAL NETWORK

    We have constructed a highly reliable, fully redundant, global network
specifically designed to support our IMAP solutions. Our network is designed to
provide the fastest possible response time, the highest level of security and
99.9% availability to our clients. We have EDCs in Annapolis, Silicon Valley,
Amsterdam and Tokyo. These EDCs are monitored and managed from our Global
Enterprise Management Center in Annapolis and a remote back-up GEMC in Silicon
Valley. The network is designed around dual primary backbones connecting our
EDCs and GEMCs. Our dedicated network is linked to the Internet in North America
via eight major backbone providers, allowing our clients to bypass congested
public exchange points. In addition, our network is linked with two backbone
providers in each of Europe and Asia, enabling us to provide global connectivity
to our clients. Large storage arrays in Annapolis and Silicon Valley can provide
real-time back-up of North American client sites, enabling us to provide an
unusually high level of data integrity. We use our network operations platform,
USIView, to proactively manage and monitor our network systems,
telecommunications hardware, network connectivity, operating systems and
applications software.

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                                     [LOGO]

    This specialized network enables us to provide very high levels of
reliability, security and responsiveness to client constituents, whether they
access our applications through the Internet or from behind a client LAN (as
illustrated above).

DELIVER INTEGRATED SERVICE OFFERINGS AROUND BUSINESS PROCESSES

    We have expert product teams that specialize in implementing IMAP solutions
to support specific business processes. Our consulting and implementation teams
have specific expertise in implementing our IMAP solutions for e-commerce, sales
force automation and customer support, human resource and financial management,
messaging and collaboration and professional services automation. Each team can
integrate a specific application software package and the required Internet
communications services, which together provide a total solution for a specific
business process. These teams can implement applications and generate value for
customers very quickly. For example, our typical implementation of Siebel
technology is designed to be completed in 45 days. We believe that this provides
a competitive advantage over a more conventional implementation which requires
six months to more than a year for completion. The consulting and implementation
teams hand off the implemented application to our operations group, which runs
and maintains the application as well as provides ongoing support to the client
through our client care organization.

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<PAGE>
LEVERAGE STRATEGIC RELATIONSHIPS WITH LEADING SOFTWARE APPLICATION PROVIDERS

    We have established relationships in key application areas with vendors,
including BroadVision and Microsoft in e-commerce; Ariba in business-to-business
e-commerce; Siebel in sales force automation, customer service and enterprise
marketing; PeopleSoft and Lawson in human resources and financials; Microsoft
Exchange in messaging and collaboration; Niku in professional services
automation; and Sagent in decision-making support. We are the exclusive
Application Service Provider of Siebel enterprise relationship management
applications for customers of SiebelNet, Inc. which is headquartered in North
America and are one of two currently certified PeopleSoft Application Service
Providers. The agreements with software providers generally enable us to deploy
the applications as a service, without the need to establish a separate
licensing arrangement for each client. The agreements also enable us to provide
our clients with an economically attractive service offering, and afford us co-
marketing and co-branding opportunities. These agreements provide us with an
initial software portfolio that can meet a broad range of our clients'
enterprise resource planning, e-commerce and communication needs. In addition,
the agreements provide us with an accelerated path to developing our expert
product teams around the software applications and business processes these
applications support.

IMPLEMENT SERVICES-BASED BUSINESS MODEL

    We sell our IMAP solutions as a service, not as a technology. Accordingly,
our clients sign long-term contracts with fixed monthly payments made as the
service is delivered. We believe that selling our IMAP solutions as a service
reduces our clients' initial capital expenditures and makes it easier for
non-technical executives to purchase our products.

THE USI STRATEGY

    The focus of our strategy is to deliver timely, reliable and secure IMAP
services to our clients. We believe that by doing so we will rapidly build our
client base and secure long-term relationships, especially with those clients in
the middle market. We intend to continue investing to maintain a value advantage
over our competitors and to capitalize on our first mover advantages, as
follows:

    - DEVELOP NEW BUSINESS. We will continue to develop new business by
      soliciting potential clients through joint marketing campaigns with our
      hardware, software and integration partners, advertising in industry
      specific periodicals and newspapers, sponsoring seminars and trade shows
      in selected markets, and conducting targeted mass mailings of marketing
      material.

    - CROSS-SELL PRODUCTS TO INCREASE PENETRATION OF ACCOUNTS. We are able to
      provide a range of packaged software applications and complex web hosting
      services to our clients. We actively seek to increase our sales to clients
      by cross-selling our products and services. Our aim is to increase our
      implementation and provision of our clients' mission-critical business
      processes.

    - EXPAND OUR PORTFOLIO OF IMAP SOLUTIONS. We have entered into strategic
      partnerships with numerous application software vendors. These vendors are
      offering or developing additional applications in specific vertical market
      segments which we expect to deploy in order to expand our portfolio of
      IMAP solutions.

    - ENHANCE THE CAPACITY AND FUNCTIONALITY OF OUR GLOBAL NETWORK. We will
      continue to deploy enhanced value features into our network. In addition,
      as we begin to address clients located in Europe and Asia, we will expand
      our capacity in those regions. Today, we provide European and Asian mirror
      sites to our clients from collocated EDCs in Amsterdam and Tokyo.

    - EMPHASIZE THE IMAP BRAND. We have focused our sales and marketing efforts
      to distinguish IMAP as a branded product offering focused on the middle
      market and selected divisions of larger multi-national organizations. Our
      direct sales organization allows our sales representatives

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<PAGE>
      to understand each client's specific business needs better and provide the
      ongoing support that facilitates effective cross-selling.

IMAP OFFERINGS

    Our current IMAP offerings provide integrated solutions to meet the needs of
middle market clients implementing distributed business functions, whether based
on applications we provide or where we are hosting existing applications
provided by the client. These solutions encompass four elements.

    - LEADING PACKAGED APPLICATION SOFTWARE. Our application packages address
      major business process areas including e-commerce, sales force automation
      and customer support, human resource and financial management, messaging
      and collaboration and professional services automation. We have chosen to
      focus on mission-critical business processes that serve distributed users.
      These processes can gain maximum value from Internet implementations and
      from our infrastructure.

    - USI-MANAGED CLIENT APPLICATION WEB SITES AVAILABLE VIA OUR GLOBAL NETWORK.
      USI-managed client application Web sites are housed on dedicated
      USI-managed servers and available via a reliable, high-performance and
      secure global Internet network. Our network architecture is designed to
      ensure responsiveness and allows clients to define which groups will have
      full or limited access to the Web site or the server.

    - CONSULTING AND SYSTEMS INTEGRATION SERVICES. IMAP consulting and systems
      integration services define, develop and offer a service that provides
      access to a combination of our network services, application software and
      related hardware necessary to provide our service and meet a specific
      client's needs. Within the IMAP solutions, we do not develop software nor
      do we implement substantial customization of existing packages. Rather,
      modular packages applications are configured to meet a client's
      requirements.

    - INTEGRATED CLIENT SERVICE. Once implemented, IMAP solutions are
      efficiently managed in our network of EDCs. We provide client support
      twenty-four hours a day, seven days a week, from dedicated teams with
      specific knowledge of each client implementation.

    In addition to the specific application areas that we support, we allow
clients to host their own software applications in our highly reliable and
secure data center environment. In this context, the IMAP offering consists of
all of the above elements other than the provision of application layer
software. Clients for this complex Web hosting realize all the reliability,
security and responsiveness benefits of our network; however, we take no
responsibility for the application itself. We believe that many of our complex
Web site management clients intend to migrate to a USI-supported application
over time.

    Most of our IMAP contracts, including our contracts for complex Web hosting,
provide for a modest initial payment and are generally not less than three years
in length. However, client contracts signed under our agreement with Siebel may
have a term as short as six months and we foresee that some Web hosting
contracts may also have shorter terms. Several of our earliest IMAP contracts
permit early termination without substantial penalty. Our contracts provide for
prospective payment reductions in the event that agreed service levels, as
measured and quantified by system performance benchmarks, are not met.

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<PAGE>
USI'S SPECIAL APPLICATIONS NETWORK

    We designed our global network specifically to provide superior performance
for the IMAP offerings. By maintaining architectural and operational control
over our network up to the point at which the client's traffic leaves its ISP
backbone or corporate LAN, our network is designed to:

    - provide uptime of 99.9% or better to the entire network, which includes
      the dedicated customer server;

    - provide fast and predictable response time and access to customer content
      globally; and

    - provide reliable and customized network security.

NETWORK UPTIME

    Our global network is designed to ensure 99.9% uptime by following four
specific principles:

    - avoiding incompatibility through standardization;

    - utilizing redundant components;

    - offering the ability to mirror client servers in separate EDCs; and

    - implementing USIView, our global end-to-end network management system.

    Our network is designed around Cisco networking hardware, which minimizes
multi-vendor integration and reduces the risks of hardware incompatibility and
implementation delay. Cisco has designated our network as a Cisco Powered
Network, indicating that Cisco has reviewed and approved the network design. Our
network architecture relies on redundancy of network hardware, facilities
infrastructure such as power supplies and telecommunications circuits, which
maximizes the network availability. In addition, we have redundant EDCs, GEMCs
and wide area networks connecting our EDCs. The wide-area network connection can
be used to dynamically mirror or provide a duplicate site for each client at an
alternative EDC location. This mirroring feature protects the site from downtime
resulting from catastrophic failure at a specific geographic location. For
clients requiring real time disaster recovery, we use storage arrays that enable
real time data mirroring and are designed to maintain the integrity of data to
within minutes.

    The GEMC staff manages and monitors the network systems environment,
telecommunications hardware and data content servers in all of our EDCs, both
domestic and international, using USIView, our global network operations
technology, an end-to-end network management platform. USIView consists of an
integrated suite of scalable software tools that allow the GEMC staff to
proactively monitor systems-level events, processes and thresholds. USIView is
the foundation of our systems and operations management strategy, providing us
with:

    - a unified configuration and change management method;

    - an event correlation facility that collects, processes and responds to
      management event information from a variety of sources; and

    - a central repository for inventory and asset management information.

FAST RESPONSE TIME

    In order to facilitate the faster response time, we have designed our
PriorityPeering network to avoid congestion areas on the Internet and have
specifically designed our primary GEMC to support our integrated network. We
seek to avoid the known Internet congestion points at the Metro Area Exchanges
and at the network access points. In order to bypass the MAEs and network access
points, our network in North America connects directly with eight major Internet
Service Providers' backbones,

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<PAGE>
which carry about 85% of all the traffic on the Internet today. Client data is
routed directly over an ISP's network to our network, bypassing congested public
exchange points.

NETWORK SECURITY

    Each EDC features multiple levels of security to isolate private information
from public information. Private network infrastructure is physically isolated
with cabling, switches and routers separately maintained from the hardware for
the public network infrastructure. In addition, access to the EDCs and GEMCs is
restricted to authorized personnel by hand scan readers, which also monitor and
record entrances and departures. The public network and the private network have
minimal electronic or logical interconnection and are connected only through a
redundant firewall. The network also includes firewall products that enforce
data security and policy-based routing for clients who prefer secure access to
server resources. We believe that these measures ensure complete separation and
security between its public and private networks.

STRATEGIC SOFTWARE VENDOR RELATIONSHIPS

    In developing our IMAP solutions, we have formed relationships with some of
the market-leading software providers whose applications support critical
business processes. These application providers include BroadVision, Ariba,
Siebel, PeopleSoft, Lawson, Microsoft, Niku and Sagent. We believe that we have
proven to be an attractive partner for these software companies because of our
strategy to deliver integrated solutions to middle market enterprises in a
cost-effective service model. Each of our software agreements is unique, but
most allow us to deploy packaged application software as a service without the
need to establish a separate licensing arrangement for each client. The
agreements also generally include co-marketing, specialized product training and
preferred pricing on the licenses to the software. We plan to enter into
additional agreements with other software vendors over time.

    Each of our key application software relationships is described below.

    BROADVISION.  We have agreed with BroadVision to offer BroadVision's
e-commerce application as an IMAP solution. BroadVision's e-commerce application
has been adopted by enterprises across a broad range of industries. The
agreement with BroadVision allows us to offer a robust set of e-commerce
solutions for business-to-business and business-to-consumer commerce.
BroadVision has named us as its first certified e-commerce application service
provider worldwide.

    Our agreement with BroadVision allows for attractive discounts on licenses.
Our arrangement with BroadVision also provides for flexible use of licenses
worldwide, sharing of development methodology, technical support, joint sales
activity and co-marketing. We maintain IMAP solutions engineers, trained and
certified on BroadVision applications, in nine major metropolitan areas.

    ARIBA.  Ariba is a leading provider of intranet- and Internet-based
business-to-business electronic commerce solutions. The company's products
efficiently connect requestors to approvers and buyers to suppliers to deliver
an automated solution for improving the acquisition and management of the goods
and services required to operate a company.

    Our comprehensive partnership with Ariba includes product development,
application implementation and management services, as well as cooperative sales
and marketing. Under terms of the agreement, USI is a preferred ASP for the
Ariba ORMX solution. Our arrangement with Ariba enables us to not only offer
buyers the Ariba ORMX solution as part of our IMAP portfolio, but it also allows
us the opportunity to provide other IMAP solutions to the suppliers that want to
connect to the Ariba Network.

    SIEBEL.  Siebel is the recognized leader in providing enterprise
relationship management applications, a range of product offerings that includes
sales force automation, customer service/help

                                       40
<PAGE>
desk and enterprise marketing. We have entered into an agreement with
SiebelNet, Inc., a wholly owned subsidiary of Siebel Systems, Inc., pursuant to
which we serve as the exclusive application service provider of Siebel
enterprise relationship management applications for customers of SiebelNet that
are headquartered in North America. Under this agreement, SiebelNet pays us a
monthly fee for services including ready-to-service hardware, network
connectivity and client support.

    Our agreement with Siebel establishes a joint program in which the Siebel
sales force will offer outsourcing as a product option. While Siebel, in most
instances, retains control of the application licensing, we implement the
application in our EDCs, provide on-going management and support, and provide
our consulting and implementation services. Enterprise relationship management
opportunities identified by our sales force are handled in the same manner. In
return for the exclusivity of this relationship, we have agreed not to offer any
competing enterprise relationship management applications as part of our IMAP
solutions. The agreement mandates joint marketing programs, joint oversight of,
and agreement on, the program to sell enterprise relationship management
application outsourcing services, and commissioning of both Siebel's and our
sales representatives participating in each sale.

    LAWSON.  Lawson is an established leader in the enterprise resource planning
software industry and one of the pioneers of fully Internet-enabling its
software products. Lawson is also a recognized leader in selling its enterprise
applications on a worldwide basis. Lawson's product functionality includes human
resources, financial management, supply chain, collaborative commerce,
enterprise budgeting and procurement. Lawson has selected USI as a global
Application Service Provider.

    Our agreement with Lawson provides that qualified new outsourcing leads
identified by Lawson will be referred to USI for hosting and application
management. Outsourcing leads identified by USI or Lawson will be jointly
marketed and quoted. USI has committed to provide marketing support and
resources for our Lawson offering. The term of the Lawson agreement is one year,
and will renew annually for up to five years unless either party provides notice
of termination prior to the end of any given year. In October 1999, we purchased
Conklin & Conklin, Inc. a comprehensive provider of Lawson financial and human
resources system implementation services and a certified reseller of Lawson
software licenses.

    PEOPLESOFT.  We have agreed with PeopleSoft to offer PeopleSoft human
resource and core financial applications as IMAP solutions. PeopleSoft is an
established leader in the enterprise resource planning software industry and the
recognized leader in human resource management solutions. We are one of 10
currently certified PeopleSoft Application Service Providers.

    Our agreement with PeopleSoft provides that opportunities identified by our
sales force be jointly marketed and quoted. Opportunities identified by the
PeopleSoft sales force may be jointly marketed and quoted with us. Customers who
elect outsourcing through us will purchase our IMAP solutions. The agreement
also provides for the sharing of rapid deployment methodologies, complete
software support, the ability to joint market products and services, shared
visibility at industry events, sharing of sales leads and joint training
efforts.

    MICROSOFT.  We have agreed with Microsoft to offer Microsoft's Exchange and
Site Server products as IMAP solutions. Microsoft Exchange is the recognized
leader in messaging and collaboration management solutions. Microsoft Site
Server is a leading e-commerce platform.

    Our multi-year Exchange agreement with Microsoft grants us the right to
distribute the Exchange software as part of our IMAP solution on a pay-per-user
licensing fee basis. Under our other licensing agreement with Microsoft we
implement, host and manage e-commerce solutions based on Microsoft Site Server.

    NIKU.  Niku is a leading developer of Professional Services Automation
solutions.

                                       41
<PAGE>
    Our agreement with Niku allows us to offer, as an IMAP solution, up-front
installation, training and conversion services for Niku's PSA solutions. Under
our agreement, we pay a discounted fee for each Niku license included in any
IMAP solution.

    SAGENT.  We have agreed with Sagent to offer Sagent Internet Enterprise
Intelligence applications as an IMAP solution. Sagent is currently fully
prepared to service the emerging Internet Enterprise Intelligence market with
its single, integrated, fully Internet-enabled, data warehousing solution.
Oracle and Siebel have selected Sagent as the exclusive data modeling and data
movement technology upon which their data warehouse products are based.

    Our agreement with Sagent allows for attractive discounts on licenses and
services and grants us the right to distribute the software as part of our IMAP
solutions without the need to establish a separate licensing arrangement for
each client. The agreement also provides for flexible use of the licenses
worldwide, access to rapid deployment methodology, software support, joint
marketing and visibility as a Sagent Premier Partner at industry events, shared
training resources and sharing of sales leads.

SALES AND MARKETING

    We offer our products and services through a direct sales organization based
in the U.S. Each sales representative is responsible for a limited number of
client relationships. We believe this approach enables our sales representatives
to understand each client's specific business needs thoroughly and to provide
top quality ongoing support. We currently have 45 sales representatives located
throughout the U.S.. We intend to expand our sales organization into all major
U.S. markets.

    Our sales teams target medium-sized enterprises based in the U.S. with
annual revenues ranging from $50 million to $1 billion and selected divisions of
larger multinational organizations. Our sales strategy emphasizes that IMAP
solutions enable clients to avoid extensive initial capital outlays, maintain
focus on their core businesses, reduce technical and integration risks and
shorten implementation time for software applications.

    We have developed programs to attract and retain high quality, motivated
sales representatives that have the technical skills and consultative selling
experience necessary to sell our IMAP solutions. In addition, our acquisitions
have augmented our sales and technical team and have created opportunities for
more rapid market penetration in their geographic region and access to
established business relationships for cross-selling.

    We have established a marketing communications organization that is
responsible for the branding and marketing of all our IMAP solutions and for
distinguishing IMAP as a branded product offering. The marketing organization is
responsible for all new service launches to ensure both internal execution and
marketplace acceptance. The marketing organization has developed cooperative
marketing and trade show participation programs in conjunction with our
strategic software and hardware partners.

    We are a party to a marketing agreement with U S WEST Communications, Inc.,
the incumbent local exchange carrier in fourteen western states. By the terms of
that agreement, U S WEST gained exclusive rights to market some of our IMAP
products in its fourteen-state region. We make our products available to U S
WEST at a discount and provide technical support during the sales process. On
account of the pending acquisition of U S WEST by Qwest, a competitor of USI's,
U S WEST and USI have mutually agreed to transition out of the marketing
agreement. See "Risk Factors--The markets we serve are highly competitive and
many of our competitors have much greater resources."

CLIENT CARE

    A central element of the IMAP solution is a high level of responsive
personalized service, referred to as client care. Through our client care
process, a specific technical account manager is assigned to

                                       42
<PAGE>
each client and support teams are designated to back up the account managers.
This structure is designed to ensure service is available twenty-four hours a
day, seven days a week. Assigned support teams comprise senior client support
specialists, network engineers, and packaged application engineers. The teams
have further support from a group of product-specific application engineers who
are trained in the specific software applications that we offer.

CLIENTS

    We target primarily North American-based middle market enterprises and
divisions of larger multinational organizations. We believe that these
organizations will gain the most competitive advantage from IMAP solutions and
that they provide the greatest opportunity for the outsourcing of information
technology operations. Currently, business software application vendors are
providing software predominantly to larger organizations. Historically, attempts
to market to middle market enterprises have generally been unsuccessful due to
the high up-front costs to obtain the required software, the long lead time to
integrate the software into the specific business process and the competition
for and shortage of IT resources in middle market companies.

    We currently have clients for both our IMAP offerings and traditional
information technology services. Revenues from IMAP services comprise 61% of
total revenue for the year ended December 31, 1999. As of December 31, 1999 we
had 109 signed contracts with 88 clients for our IMAP services, representing
over $140.0  million in expected contract revenue (assuming payments over the
full contract terms) and approximately $43.1 million of 12 month backlog, which
we define as revenue under contract expected to be recognized in the next 12
months. As of December 31, 1999, selected clients of ours include:

Actuate Software
AllBooks4Less.com
Baltimore Sun
Bike.com
Clarus
CornerStone Brands
DEBTCOLLECT.COM
Franklin Covey
GE Capital Investments
Health Care Online
Herman Miller
Hershey Foods
HP Shopping Village
  (hpshopping.com)
INSLAW

Intraware
Knoll Pharmaceutical
Lattice Partners
Legg Mason
Liberty Financial Companies
liveprint.com
LHS Communications
Loan Market Resources
LocalVoice.com
NetGift Registry
Niku
Perfumania.com
PSDI
rdental.com
Rhythms NetConnections

Sagent
Samsung
Service Hub
Star Telecommunications
Sunburst Hospitality
TeleChoice
The Luggage Center
U S WEST
V Technologies
Ventana
WeTheShoppers.com
XL Capital

COMPETITION

    The market for Internet-related services is extremely competitive. We
anticipate that competition will continue to intensify as the use of the
Internet grows. The tremendous growth and potential market size of the Internet
market have attracted many start-ups as well as extensions of existing
businesses from different industries. In the market for Internet-enabled
application software and network solutions, we compete on the basis of
performance, price, software functionality and overall network design. While our
competition comes from many industry segments, we believe that no single segment
provides the integrated, single-source solution that we provide.

    Our current and potential competitors include Applications Service Providers
and companies focused on the application hosting business such as Aristasoft,
Breakaway Solutions, Corio, FutureLink,

                                       43
<PAGE>
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.
While we believe that our network of proprietary EDCs together with our level of
service, support and targeted business focus distinguish us from these
competitors, some of these competitors have significantly greater market
presence, brand recognition, and financial, technical and personnel resources
than we do, and have extensive coast-to-coast Internet networks.

    We compete with national, regional and local commercial systems integrators
who bundle their services with software and hardware providers and perform a
facilities management outsourcing role for the customer. These competitors
generally have greater name recognition or more extensive experience than we do.
Andersen Consulting, EDS and PricewaterhouseCoopers, among others, provide
professional consulting services in the use and integration of software
applications in single-project client engagements. Large systems integrators may
establish strategic relationships with software vendors to offer services
similar to our IMAP offerings. We expect that regional systems integrators are
likely to compete with us based on local customer awareness and relationships
with hardware and software companies. Additionally, regional systems integrators
may align themselves with ISPs to offer complex Web site management combined
with professional implementation services.

    We compete with hardware and software companies in providing packaged
application solutions as well as network infrastructure. In order to build
market share, both hardware and software providers may establish strategic
relationships to enhance their service offerings. IBM currently provides
applications outsourcing for its Lotus Notes products and other non-IBM software
applications. J.D. Edwards & Company, a developer of enterprise resource
planning software, is offering its software in an outsourced model. Oracle is
offering Oracle Business Online, a hosted enterprise resource planning
application software solution. SAP has formed an outsourcing organization which
is developing key partnerships with leading consulting firms to offer SAP
software. We believe that additional hardware and software providers,
potentially including our strategic partners, may enter the outsourcing market
in the future.

    All of the major long distance companies, including AT&T, MCI WorldCom,
Qwest Communications and Sprint, offer Internet access services. Qwest has
partnered with KPMG to deliver hosted enterprise resource planning solutions
over the Internet, and Qwest has agreed to acquire our customer and substantial
stockholder, U S WEST. In order to address the Internet connectivity
requirements of the current business customers of long distance and local
carriers, we believe that there is a move toward horizontal integration through
acquisitions of, joint ventures with, and purchasing connectivity from, ISPs.
Accordingly, we expect that we will experience increased competition from the
traditional telecommunications carriers. Many of these telecommunications
carriers, in addition to their substantially greater network coverage, market
presence, and financial, technical and personnel resources, also have large
existing commercial customer bases. We believe that our local presence, our
strong technical and data-oriented sales force and our offering of branded
software applications are important features distinguishing us from the
telecommunications companies.

    It is possible that new competitors or alliances may emerge and gain market
share. Such competitors could materially affect our ability to obtain new
contracts. Further, competitive pressure could require us to reduce the price of
our products and services thus affecting our business, financial condition and
results from operations.

                                       44
<PAGE>
PROPERTIES

    We are headquartered in Annapolis, Maryland. Our training and conference
facilities are located in a building we own in Annapolis, Maryland. We believe
that the building we own, due to its age, may contain limited amounts of
asbestos containing materials. We do not believe that the limited asbestos
presence would subject us to any material liability.

    On April 30, 1999, we purchased land and a building in Annapolis, Maryland
for $11.8 million. The seller financed $7.1 million of the purchase price
through a first mortgage note and will lend us an additional $1.5 million for
construction costs if we meet certain conditions. We are primarily finished
renovating this building, which became our headquarters in November of 1999.
Total cost of these renovations are anticipated to be $12 million.

    In December of 1999, we obtained additional financing for the acquisition
and renovations to our headquarters in the amount of $4.75 million from a major
institutional lender.

    We lease space in a number of other locations, primarily for EDC and GEMC
installations and to house our consulting and implementation staff. We believe
that our leased facilities are adequate to meet our current needs in the markets
in which we have begun to deploy our services, and that additional facilities
are available to meet our expansion needs in our target markets for the
foreseeable future.

    Our leases are for terms varying from 30 to 84 months and generally contain
renewal options of two to three years as well as rent escalation clauses. During
1999 we incurred approximately $3.1 million in rent expense.

EMPLOYEES

    As of December 31, 1999, we employed approximately 980 people, including
full-time and part-time employees at our corporate headquarters, our GEMCs and
EDCs and at our subsidiaries. We consider our employee relations to be good.
None of our employees is covered by a collective bargaining agreement.

LEGAL PROCEEDINGS

    From time to time we may be involved in litigation that arises in the normal
course of business operations. As of the date of this prospectus, we are not a
party to any litigation that we believe could reasonably be expected to have a
material adverse effect on our business or results of operations.

                                       45
<PAGE>
                                   MANAGEMENT

    The following sets forth certain information regarding our current directors
and executive officers as of December 31, 1999.

<TABLE>
<CAPTION>
NAME                                          AGE                       POSITION
- ----                                        --------   ------------------------------------------
<S>                                         <C>        <C>
Christopher R. McCleary(1)................     47      Chief Executive Officer and Chairman of
                                                       the Board
Stephen E. McManus........................     50      President--E-Commerce Business Unit and
                                                         Director
Jeffery L. McKnight.......................     56      Executive Vice President of Operations
Andrew A. Stern...........................     42      Executive Vice President
Harold C. Teubner, Jr.....................     53      Executive Vice President and Chief
                                                       Financial Officer
Gary J. Rogers............................     49      Senior Vice President, Worldwide Sales
R. Dean Meiszer(2)........................     43      Director
Benjamin Diesbach(1)......................     53      Director
David J. Poulin(2)........................     41      Director
Ray A. Rothrock(2)........................     44      Director
Frank A. Adams(1).........................     54      Director
William F. Earthman(1)....................     48      Director
John H. Wyant.............................     53      Director
Joseph R. Zell............................     40      Director
Michael C. Brooks(1)(2)...................     54      Director
Cathy M. Brienza..........................     51      Director
</TABLE>

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

(1) Member of the compensation committee

(2) Member of the audit committee

    CHRISTOPHER R. MCCLEARY is a co-founder of USI and has served as the
Chairman and Chief Executive Officer of USI since January 1998. Prior to
founding USI, he was the Chairman and Chief Executive Officer of DIGEX, Inc.
from January 1996 to December 1997. Prior to serving at DIGEX, Mr. McCleary
served as Vice President and General Manager for Satellite Telephone Service at
American Mobile Satellite Corporation, a satellite communications company, from
October 1990 to January 1996.

    STEPHEN E. MCMANUS is a co-founder of USI and has served as a director since
April 1998. He served as President of USI until June 1999, at which time he
became President of our E-Commerce Business Unit. Prior to joining USI,
Mr. McManus was Director of U.S. Sales for the telecommunications unit of Data
General Corporation from January 1998 to March 1998. From June 1995 to
December 1997 Mr. McManus served as a Branch Manager for Silicon Graphics. Prior
to joining Silicon Graphics, Mr. McManus held several positions at Data General
Corporation from June 1988 to May 1995, including District Manager for
Distributor Sales, VAR District Manager and Branch Manager.

    JEFFERY L. MCKNIGHT has been Executive Vice President of Operations since
December 1998. He originally joined USI in June of 1998 as Senior Vice President
of Client Care. Previously, he held senior marketing and operations positions
with Aeronautical Radio, Inc., or ARINC, the communications arm of all of the
domestic airlines from May 1989 to July 1997. Prior to ARINC, he held senior
operations positions with System One, Inc. from February 1963 to April 1989.

    ANDREW A. STERN has been Executive Vice President of USI since June of 1999.
He originally joined USI on July 24, 1998 as Executive Vice President and Chief
Financial Officer. Prior to joining USI,

                                       46
<PAGE>
Mr. Stern held positions at USF&G Corporation, an insurance company, from
May 1993 to July 1998, most recently as Executive Vice President, Strategic
Planning and Reinsurance Operations. In addition, Mr. Stern was a partner of
Booz Allen & Hamilton, an international management and technology consulting
firm with whom he was employed from August 1981 to May 1993.

    HAROLD C. TEUBNER, JR.  has been Executive Vice President and Chief
Financial Officer of USI since October 1999. From July 1998 until joining USI,
Mr. Teubner worked as an independent consultant in the technology industry.
Mr. Teubner served as the Executive Vice President and Chief Operating Officer
at Concept Five Technologies from July 1997 to July 1998. During September 1996,
Mr. Teubner served as COO of Nat Systems International, a French software
company. Prior to joining Concept Five Technologies, Mr. Teubner was President
and CEO of Visix Software, a company that builds high-end, object oriented,
application development tools. Mr. Teubner was with Visix from July 1995 to
June 1996. Mr. Teubner held positions with Sybase Inc. from January 1988 to
April 1995. While at Sybase, Mr. Teubner served as the Senior Vice President of
North American Operations from July 1992 to April 1995.

    GARY J. ROGERS joined USI in October 1999 as Vice President, Worldwide
Sales. Prior to joining USI, Mr. Rogers was with CMS/Data, a division of PC Docs
Group International, Inc. from September 1997 to September 1999. While at
CMS/Data, Rogers served in various capacities including: Vice President, Sales
and Marketing and President, Chief Operating Officer. From May 1994 to July
1997, Mr. Rogers was with SQL Financials International, Inc. where he worked as
Vice President of Sales and Regional Sales Manager. Mr. Rogers was an Area Sales
Manager with The ASK Group/ Ingres from August 1990 to April 1994.

    R. DEAN MEISZER has been a director of USI since it was founded. Currently,
Mr. Meiszer serves as the President of Lattice Communications, Ltd. Lattice
Communications was formed in October 1997 by the principals and associates of
Crisler Company to own, operate, and manage wireless transmission towers and
related businesses. Meiszer has been President and Managing Director of The
Crisler Company, a Cincinnati-based investment firm, since May 1989. Prior to
Crisler, Mr. Meiszer was Senior Vice President of Society Bank from March 1978
to May 1989.

    BENJAMIN DIESBACH was appointed to the board of directors in May 1998 as a
designee of Mr. McCleary in his role as Chief Executive Officer of USI. He has
been President of Midwest Research, Inc., a consulting firm, since he formed it
in January 1995. Prior to forming Midwest Research, Mr. Diesbach was Chief
Executive Officer of Continental Broadcasting, Ltd., a broadcasting company,
from September 1993 to January 1995.

    DAVID J. POULIN was appointed to the board of directors in May 1998 as a
designee of Mr. McCleary in his role as Chief Executive Officer. He has been the
head hockey coach at the University of Notre Dame since May 1995. Prior to
joining Notre Dame as hockey coach, Mr. Poulin played in the National Hockey
League for 13 years.

    RAY A. ROTHROCK was appointed to the board of directors in June 1998 as a
designee of the Venrock Group. He has been a General Partner of Venrock
Associates, the high technology venture capital investment firm of the
Rockefeller Family, since June 1988. Mr. Rothrock serves on the boards of
directors of CheckPoint Software Technology and several private companies
including Qpass, Rights Exchange, Appliant, Inc., Sbyn Technology and Simba
Technology.

    FRANK A. ADAMS was appointed to the board of directors in June 1998 as a
designee of the Grotech Group. He is the President and Chief Executive Officer
of Grotech Capital Group, which he co-founded in August 1984. Mr. Adams has
served as President of the Mid-Atlantic Venture Association since July 1985. He
has served on the board of directors of a number of technology companies
including Thunderbird Technologies, Inc. and EPIC Therapeutics, Inc.

                                       47
<PAGE>
    WILLIAM F. EARTHMAN was appointed to the board of directors in June 1998 as
a designee of the Massey Burch Group. He has been a Partner of Massey Burch
Capital Corporation since January 1994. Prior to becoming a Partner at Massey
Burch Capital Corporation, Mr. Earthman served from January 1990 as a Vice
President of Massey Burch Investment Group. Prior to Massey Burch, he worked for
the investment banks J.C. Bradford & Co. from September 1975 to October 1981,
Prudential-Bache Securities from October 1981 to November 1985 and First
Nashville Corp. from December 1985 to December 1989. He currently serves on the
board of directors of Intellivoice Communications, Inc. and Legal Technologies
Network, Inc.

    JOHN H. WYANT was appointed to the board of directors in June 1998 as a
designee of the Blue Chip Group. He is the Managing Partner and President of
Blue Chip Venture Company, which he founded in 1990. Mr. Wyant is currently a
director of Regent Communications, Inc., Zaring Homes, Inc., Delicious Brands,
Inc. and Ciao Cucina Corporation. He previously served as a director of DIGEX.

    JOSEPH R. ZELL was appointed to the board of directors in July 1998 as a
designee of U S WEST. Since December 1991, he has held several positions with
the !NTERPRISE Networking division of U S WEST Communications, Inc., including
Director of Product Development for !NTERPRISE, Executive Director of
Applications Innovation, President of U S WEST's Wholesale Division and Vice
President of Markets and innovation at !NTERPRISE. He has been President of the
division since March 1997.

    MICHAEL C. BROOKS was appointed to the board of directors in December 1998
as a designee of the Whitney Group. He has been a general partner of J. H.
Whitney & Co. since 1984. He is also a director of SunGard Data Systems, Inc.,
Pegasus Communications, Inc., Media Metrix, Inc., Homestore.Com and various
other private companies.

    CATHY M. BRIENZA was appointed to the board of directors in May 1999. Since
July 1997, Ms. Brienza has been a member of Waller-Sutton Media, L.L.C., the
general partner of Waller-Sutton Media Partners, L.P. Prior to joining
Waller-Sutton Media, she was a principal of Sutton Capital Associates, Inc., and
its affiliated companies, which engaged in the ownership and operation of cable
television and cellular telephone systems.

CLASSIFICATION OF THE BOARD OF DIRECTORS

    Each director holds office until his or her successor has been elected and
qualified. In April 1999, the board of directors divided itself into three
classes. Messrs. Brooks, Earthman and Zell and Ms. Brienza serve in the class
whose term expires in 2000; Messrs. Adams, McManus, Rothrock and Wyant serve in
the class whose term expires in 2001; and Messrs. Diesbach, Meiszer, Poulin and
McCleary serve in the class whose terms expires in 2002. Upon the expiration of
the term of each class of directors, the stockholders will at their next annual
meeting elect directors to serve in that class for a three-year term.

COMMITTEES OF THE BOARD OF DIRECTORS

    In June 1998, the board of directors established a compensation committee
and an audit committee. The compensation committee makes recommendations
concerning salaries and incentive compensation of our employees and consultants
and administers our stock option plan. The audit committee reviews, acts on and
reports to the board of directors with respect to various auditing and
accounting matters, including reviewing our audit policies, overseeing the
engagement of our independent auditors and developing our financial strategies.
In December 1999, the Securities and Exchange Commission adopted new rules to
improve disclosure relating to the functioning of corporate audit committees. We
are currently evaluating the impact of these new rules; however, we believe
these rules will not have a significant impact.

                                       48
<PAGE>
COMPENSATION OF DIRECTORS

    All non-employee directors are reimbursed for travel and other related
expenses incurred in attending meetings of the board of directors. In addition,
each non-employee director then serving on the board of directors is eligible to
receive option grants under our stock option plan. The shares of common stock
purchased pursuant to these options will be subject to repurchase by us as
described in " --Stock Option Plan."

EMPLOYMENT AGREEMENTS

    We have entered into the following employment agreements with our executive
officers.

<TABLE>
<CAPTION>
OFFICER                                  TERM             SALARY               POSITION
- -------                         ----------------------   --------   ------------------------------
<S>                             <C>                      <C>        <C>
Christopher R. McCleary.......  January 1998-            $250,000   Chairman and Chief Executive
                                December 2000                         Officer
Stephen E. McManus............  April 1998-April 2003    $175,000   President, E-Commerce Business
                                                                      Unit
Andrew A. Stern...............  July 1998-July 2001      $175,000   Executive Vice President
Jeffery L. McKnight...........  July 1998-July 2001      $175,000   Executive Vice President of
                                                                      Operations
Harold C. Teubner, Jr.........  September 1999-          $250,000   Executive Vice President and
                                September 2002                        Chief Financial Officer
Gary J. Rogers................  September 1999-          $225,000   Senior Vice President,
                                September 2002                      Worldwide Sales
</TABLE>

    Mr. McCleary's agreement also provides for:

    - automatic renewal for subsequent one year terms unless either party elects
      not to renew prior to 90 days from the end of the then current term of the
      agreement;

    - a bonus to be determined based on his meeting established management
      objectives with a minimum of $250,000 in the second year of the agreement
      and $500,000 in the third year of the agreement;

    - the right to terminate him for cause upon a vote of two-thirds of the
      board of directors preceded by a finding by the compensation committee or
      executive committee that he has breached the agreement;

    - the payment of his full salary for the term of the agreement if he
      terminates the agreement because:

      -- we breach the agreement;

      -- there is a material adverse change in his job responsibilities, duties,
        function or reporting relationships; or

      -- he is required to travel more than 50 miles to a relocated office;

    - the payment of his full salary for the term of the agreement if he is
      terminated without cause; and

    - the payment of his bonus after he terminates the agreement for other than
      the reasons described above if its amount had already been determined by
      the compensation committee.

Mr. McManus, Mr. McKnight and Mr. Stern's agreements all provide for:

    - No obligation to pay salary after a termination for cause due to:

                                       49
<PAGE>
      -- a breach of the agreement by the officer;

      -- engaging in illegal or immoral practices or activities which can
        reasonably be expected to be materially detrimental to our reputation;

      --being dishonest, disloyal, or fraudulent in performing his duties;

      --willful misconduct or dereliction of his duties;

      --using, possessing, selling or delivering illegal drugs; or

      --in the case of Mr. McManus, substantial failure to perform his duties;

if the action giving rise to the termination is not cured within 60 days and an
arbitrator finds the termination to be valid.

    Mr. Stern's agreements provide for:

    - the right, which he has exercised, to purchase 937,500 shares of our
      common stock;

    - a life insurance policy provided by us in an amount equal to twice his
      salary less the amount of any group insurance he selects as part of our
      standard group insurance plan;

    - our right to repurchase the 937,500 shares of stock, for the total tax
      liability incurred by Mr. Stern as a result of his purchase, if he is
      terminated for cause or if he terminates the agreement on or before May
      30, 2000, unless it is a termination for good reason;

    - our obligation to register the 937,500 shares of stock for sale under the
      Securities Act as soon as practicable in the event the officer's
      employment is terminated due to death or disability; and

    - the obligation to pay the officer's full salary for the remainder of the
      term of the agreement or one year, if longer, and a bonus pro rated for
      the remaining term of the agreement if we terminate one of them without
      cause.

    Mr. McManus' agreement provides for:

    - the right, which he has exercised, to purchase 750,000 shares of our
      common stock;

    - a life insurance policy provided by us in an amount equal to twice his
      salary less the amount of any group insurance he selects as part of our
      standard group insurance plan;

    - our right to repurchase 187,500 shares of stock for $100 if he is
      terminated for cause or if he terminates the agreement on or before May
      31, 2000; and

    - our right to repurchase all or part of 562,500 shares of stock for $100.00
      if he is terminated for cause (including substantial failure to perform
      his duties) or if he terminates the agreement before April 1, 2003.

    Mr. McKnight's agreement also provides for:

    - the grant of an option to purchase 562,500 shares of common stock under
      our stock option plan; and

    - the termination of our right to repurchase his shares under the option
      plan 24 hours before any termination of his employment without cause.

    If Mr. Rogers is terminated without cause, we must pay him an amount equal
to his annual base salary until the end of the term or for twelve months
whichever is greater, accelerate all unvested stock options and pay any sales
commissions or bonuses owned.

                                       50
<PAGE>
    Mr. Rogers' agreement also provides for:

    - the grant of an option to purchase 150,000 shares of our common stock
      under our stock option plan; and

    - the grant of 27,000 shares of common stock, half of which vests
      immediately upon the execution of the agreement and the balance vests upon
      the first anniversary of Mr. Rogers' employment.

    Mr. Teubner's agreement provides for:

    - the grant of an option to purchase 450,000 shares of our common stock
      under our stock option plan; and

    - the termination of our right to repurchase his shares under the option
      plan upon termination of his employment without cause.

    Some of the agreements provide for the termination of our right to
repurchase shares held by the officers upon a change in control of the company.
All of the agreements provide for review of the salary and bonus terms by our
compensation committee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    Prior to June 1998, we had no separate compensation or stock option
committee or other board committee performing equivalent functions, and these
functions were performed by our board of directors. Both Mr. McCleary and Mr.
McManus were members of the board of directors during that period. In June 1998,
we established compensation and audit committees of our board of directors. The
compensation committee is composed of non-employee directors. See "--Committees
of the Board of Directors."

EXECUTIVE COMPENSATION

    SUMMARY COMPENSATION.  The following table provides summary information
concerning compensation that we paid to or accrued on behalf of our "Named
Executive Officers," which are our Chief Executive Officer and each of the three
most highly compensated executive officers of USI other than the Chief Executive
Officer who earned more than $100,000, in salary and bonus, for all services
rendered in all capacities during the fiscal year ended December 31, 1999. The
aggregate amount of perquisites and other personal benefits, securities or
property received by each of the Named Executive Officers was less than either
$50,000 or 10% of the total annual salary and bonus reported for that Named
Executive Officer:

                                       51
<PAGE>
                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                   ANNUAL COMPENSATION
                                              ------------------------------    LONG TERM COMPENSATION
NAME AND PRINCIPAL POSITION                     YEAR      SALARY     BONUS     SHARES UNDERLYING OPTIONS
- ---------------------------                   --------    ------     -----     -------------------------
<S>                                           <C>        <C>        <C>        <C>
Christopher R. McCleary
  Chief Executive Officer and Chairman of
  the Board.................................    1998     $131,250   $ 75,000                  --
                                                1999      250,000     (a)                562,500
Stephen E. McManus
  President--E-Commerce Business Unit and
  Director..................................    1998      131,250     75,000                  --
                                                1999      175,000     (a)                     --
Jeffery L. McKnight,
  Executive Vice President of Operations....    1998       75,962    125,000             562,500
                                                1999      175,000     (a)                     --
Andrew A. Stern
  Executive Vice President..................    1998       78,076     75,000                  --
                                                1999      175,000     (a)                     --
</TABLE>

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

(a) We have not yet determined bonus amounts for 1999

    STOCK OPTIONS.  The following table contains information concerning the
stock option grants made to each of the Named Executive Officers during the
fiscal year ended December 31, 1999:

    - The options described in the table below are immediately exercisable and
      expire on the tenth anniversary of the date of grant. Shares of common
      stock purchased pursuant to these options will be subject to our right to
      repurchase them at the option exercise price upon the termination of the
      holder's employment or business relationship with us. The repurchase right
      will lapse with respect to one-third of the shares purchasable upon
      exercise of an option on the first anniversary of the date of grant of the
      option. The repurchase right with respect to the remainder of the shares
      purchasable upon exercise of an option will lapse in equal quarterly
      installments over the subsequent eight calendar quarters.

    - The 5% and 10% assumed annual rates of compounded stock price appreciation
      are mandated by the rules of the SEC. There can be no assurance that the
      actual stock price appreciation over the ten-year option term will be at
      the assumed 5% and 10% levels or at any other defined level. Unless the
      market price of the common stock appreciates over the option term, no
      value will be realized from the option grants. The potential realizable
      value is calculated by assuming that the fair market value of the common
      stock on the date of grant of the options appreciates at the indicated
      rate for the entire term of the option and that the option is exercised at
      the exercise price and sold on the last day at the appreciated price.

                                       52
<PAGE>
                       OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                            POTENTIAL REALIZABLE
                                                                                              VALUE AT ASSUMED
                                                                                                ANNUAL RATES
                                                                                               OF STOCK PRICE
                          NUMBER OF SHARES OF     % OF TOTAL                                    APPRECIATION
                             COMMON STOCK       OPTIONS GRANTED   EXERCISE                     FOR OPTION TERM
                          UNDERLYING OPTIONS    TO EMPLOYEES IN     PRICE     EXPIRATION    --------------------
NAME                            GRANTED              1999         PER SHARE      DATE          5%          10%
- ----                      -------------------   ---------------   ---------   ----------       --          ---
<S>                       <C>                   <C>               <C>         <C>          <C>          <C>
Christopher R.                  562,500               8.0%         $ 4.00       3/19/09    $3,665,013   $5,835,921
  McCleary..............
Stephen E. McManus......              0                --              --            --            --           --
Jeffery L. McKnight.....              0                --              --            --            --           --
Andrew A. Stern.........              0                --              --            --            --           --
</TABLE>

    OPTION EXERCISES AND YEAR-END OPTION VALUES.  The following table sets forth
information concerning each option exercise by the Named Executive Officers in
fiscal 1999 and option holdings through December 31, 1999 by the Named Executive
Officers who held options at the end of fiscal 1999:

    - "Exercisable" refers to those options which will be vested and exercisable
      immediately upon completion of this offering, while "Unexercisable" refers
      to those options which will be unvested at such time.

    - Value is determined by subtracting the exercise price from the fair market
      value of the common stock multiplied by the number of shares underlying
      the options.

                         FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                          NUMBER OF SHARES OF
                                                             COMMON STOCK              VALUE OF UNEXERCISED
                                                              UNDERLYING                   IN-THE-MONEY
                                                          OPTIONS AT YEAR END           OPTIONS AT YEAR END
                       SHARES ACQUIRED     VALUE          -------------------          --------------------
NAME                     ON EXERCISE      REALIZED    EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
- ----                   ---------------   ----------   -----------   -------------   -----------   -------------
<S>                    <C>               <C>          <C>           <C>             <C>           <C>
Christopher R.
  McCleary...........      562,500       $7,689,350(1)        --            --               --           --
Jeffery L. McKnight..           --               --     562,500              0      $38,314,687(2)         --
</TABLE>

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

(1) Fair market value is based on the last reported sale price of the common
    stock on September 24, 1999, the date Mr. McCleary exercised his shares, of
    $13.67 per share.

(2) Fair market value is based on the last reported sale price of the common
    stock on December 31, 1999 of $69.875 per share.

STOCK OPTION PLAN

    Our 1998 Stock Option Plan, approved by the board of directors in July 1998,
amended and restated in February 1999 and further amended in October and
December of 1999, provides for the issuance of up to 16,773,375 shares of common
stock pursuant to the grant of stock options, both nonqualified stock options
and incentive stock options, as defined in our option plan, stock appreciation
rights, restricted stock awards, deferred stock awards, dividend equivalents and
other stock-related benefits to independent directors, employees and
consultants. As of September 30, 1999, options to purchase 6,978,033 shares of
common stock were outstanding, each with a weighted average exercise price of
$6.36 per share and no options are available for future grant. Of these, options
to purchase 4,878,605 shares of common stock are intended to qualify as
Incentive Stock Options, or ISOs. The remaining options to purchase 2,099,428
shares of common stock are nonqualified stock options, or NSOs. The options vest
immediately upon the date of grant.

                                       53
<PAGE>
    Shares of common stock purchased pursuant to options under our option plan
will be subject to our right to repurchase them at the option exercise price
upon the termination of the holder's employment or business relationship with
us. Generally the repurchase right will lapse with respect to one-third of the
shares purchasable upon exercise of an option on the first anniversary of the
date of grant of the option. The repurchase right with respect to the remainder
of the shares purchasable upon exercise of an option will lapse in equal
quarterly installments over the subsequent eight calendar quarters. Our
repurchase right with respect to shares held by any particular employee will
lapse completely if there is a change in control of USI and the employee's
employment is terminated within 12 months of the change of control.

    The compensation committee appointed to administer our option plan has
discretion to determine which employees and consultants will be granted stock
options, the number of shares to be optioned, and the terms and conditions of
such options. The full board of directors conducts the administration of the
option plan with respect to options granted to independent directors or to
officers subject to section 16 of the Exchange Act. The compensation committee,
or the board of directors, as applicable, also has discretion to make
adjustments to options in the event of a change in control or other corporate
event including, without limitation, the discretion to accelerate the vesting of
options or waive our repurchase right.

    The federal income tax consequences, in general, of the grant and exercise
of an ISO under our option plan are as follows.

    - In general, an employee will not recognize taxable income upon the grant
      or exercise of an ISO and we will not be entitled to any business expense
      deduction with respect to the grant or exercise of an ISO.

    - If the employee holds the shares for at least two years after the date of
      grant and for at least one year after the date of exercise, the
      difference, if any, between the sales price of the shares and the exercise
      price of the option will be treated as long-term capital gain or loss upon
      subsequent disposition of the shares.

    - If the employee disposes of the shares prior to satisfying the holding
      period requirements, the employee will recognize ordinary income at the
      time of the disposition, generally in an amount equal to the excess of the
      fair market value of the shares at the time the option was exercised over
      the exercise price of the option. Generally, we will be allowed a business
      expense deduction to the extent an employee recognizes ordinary income.
      The balance of the gain realized, if any, will be short-term or long-term
      capital gain, depending upon whether the shares have been held for at
      least twelve months after the date of exercise.

    The federal income tax consequences, in general, of the grant and exercise
of an NSO under our option plan are as follows.

    - In general, a recipient who receives a NSO will recognize no income at the
      time of the grant of the option.

    - Upon exercise of an NSO, a recipient will recognize ordinary income in an
      amount equal to the excess of the fair market value of the shares on the
      date of exercise over the exercise price of the option. Generally, we will
      be entitled to a business expense deduction in the amount and at the time
      the recipient recognizes ordinary income.

    - The basis in shares acquired upon exercise of an NSO will equal the fair
      market value of the shares at the time of exercise, and the holding period
      of the shares, for capital gain purposes, will begin on the date of
      exercise.

                                       54
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN

    Our Board of Directors has adopted the 2000 Employee Stock Purchase Plan, or
the Purchase Plan. The Purchase Plan is intended to be an "employee stock
purchase plan" as described in Section 423 of the Code. The Purchase Plan is
administered by the compensation committee of our Board of Directors. A total of
1,500,000 shares of our common stock are reserved and available for purchase
under the Purchase Plan, subject to antidilution and other adjustment
provisions.

    The Purchase Plan permits eligible employee participants to purchase our
common stock through payroll deductions at a price per share which is equal to
the lesser of eight-five percent (85%) of the fair market value of the common
stock on the first or the last day of an offering period. The Purchase Plan
provides for two offering periods each calendar year. The first is March 1
through August 31 and the second is September 1 through February 28 (or, each
leap year, February 29). On the last day of each offering period, each
participant's accrued payroll deductions are automatically applied to the
purchase of common stock.

    Employees eligible to participate in the Purchase Plan consist of all
persons employed for at least 90 days by us or by certain of our subsidiaries
described in the Purchase Plan, except that the Purchase Plan excludes from
participation any employee whose customary employment is for less than 20 hours
per week or for not more than 5 months during a calendar year and any employee
who owns stock representing 5% or more of the total combined voting power or
value of all classes of our stock or the stock of our subsidiaries. No
participant may purchase shares of common stock in any calendar year under the
Purchase Plan with an aggregate fair market value (generally determined as of
the beginning of the plan year) in excess of $25,000.

401(K) PLAN

    In 1998, we adopted a 401(k) plan covering substantially all of our
employees. Under the plan, eligible employees may elect to reduce their current
compensation and have the amount of the reduction contributed to the plan on the
employee's behalf as salary deferral contributions. Beginning as of June 30
1999, we have begun to make matching contributions to the plan on behalf of our
employees in the amounts equal to 50 percent of the first six percent of an
employee's earnings contributed to the plan. Matching contributions are in the
form of our common stock and not in cash. All contributions to the plan by or on
behalf of employees are subject to aggregate annual limits prescribed by the
Internal Revenue Code.

                                       55
<PAGE>
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PURCHASES OF SERIES A PREFERRED STOCK

    On May 31, 1998, pursuant to an agreement dated May 13, 1998, Blue Chip
Capital Fund II Limited Partnership; Miami Valley Venture Fund L.P.; Grotech
Partners IV L.P.; Grotech Partners V L.P.; Southern Venture Fund SBIC, L.P.;
Southern Venture Fund II, L.P.; Venrock Associates; and Venrock
Associates II, L.P., a group we refer to as the Initial Series A Purchasers,
purchased, in the aggregate, 38,333.33 shares of Series A Preferred Stock for an
aggregate purchase price of $23.0 million.

    In connection with the issuance of the shares to the Initial Series A
Purchasers, we issued 1,666.67 shares of Series A Preferred Stock to
Christopher R. McCleary, in exchange for the cancellation of $1.0 million of
debt that we owed to Mr. McCleary.

    In an agreement dated June  18, 1998, we issued an additional 5,000 shares
of Series A Preferred Stock to certain of the Initial Series A Purchasers for an
aggregate purchase price of $3.0 million.

    In an agreement dated June 18, 1998, we issued 5,833.33 shares of Series  A
Preferred Stock to U S WEST for $3.5 million.

    In agreements dated June 19, 1998, we issued 3,000 shares of Series A
Preferred Stock to HAGC Partners; Chris Horgan, who later transferred his
interest to his affiliate, Southeastern Technology Fund, L.P.; and a series of
purchasers represented by Account Management Corporation, a group we refer to as
the Account Management Purchasers; for an aggregate purchase price of
$1.8 million. Also on June 19, 1998, 1,166.67 shares of Series  A Preferred
Stock were sold to USI Partners, Ltd. for $700,002.

    Upon the closing of our initial public offering in April 1999, each holder
of Series A Preferred Stock received on conversion the number of shares of
common stock arrived at by dividing the aggregate purchase price for the
holder's shares of Series A Preferred Stock by the conversion price of $1.77.

BRIDGE FINANCINGS AND PURCHASES OF SERIES B PREFERRED STOCK

    In agreements dated September 8, 1998, all of the existing holders of
Series A Preferred Stock, other than Southern Venture Fund SBIC, L.P., HAGC
Partners, Christopher McCleary and two of the Account Management Purchasers,
purchased our convertible promissory notes in the aggregate principal amount of
$9,095,000, together with warrants to purchase 1,461,675 shares of common stock
for $.053 per share. Each note was convertible into preferred stock of USIhaving
an aggregate fair market value equal to the principal amount of the note. The
principal amount of these notes was converted into Series B Convertible
Preferred Stock on December 31, 1998 at a conversion price equal to the $1,050
per share purchase price of the Series B Preferred Stock, and the accrued
interest was paid in cash.

    On December 16, 1998, Blue Chip Capital Fund II, L.P. lent us $1.0 million,
which was repaid with interest, in cash, as of December 31, 1998.

    In an agreement dated December 16, 1998, Grotech Partners V L.P.; Southern
Venture Fund II, L.P.; Venrock Associates; Venrock Associates II, L.P.; USI
Partners, Ltd.; and Siebel Systems, Inc. purchased our convertible promissory
notes in the aggregate amount of $8.0 million. Each note was convertible into
preferred stock of USI having an aggregate fair market value equal to the
principal amount of the note. The principal amount of these notes was converted
into Series B Preferred Stock on December 31, 1998 at a conversion price equal
to the $1,050 per share purchase price of the Series B Preferred Stock, and the
accrued interest was paid in cash.

                                       56
<PAGE>
    In an agreement dated December  29, 1998, U S WEST purchased our convertible
promissory note in the amount of $5.0 million. Each note was convertible into
preferred stock of USI having an aggregate fair market value equal to the
principal amount of the note. The principal amount of this note was converted
into Series B Preferred Stock on December 31, 1998, at a conversion price equal
to the $1,050 per share purchase price of the Series B Preferred Stock, and the
accrued interest was paid in cash.

    On December 31, 1998, the principal amount of all of our outstanding
convertible promissory notes, $22,095,000, was converted into 21,042 shares of
Series B Preferred Stock with a purchase price of $1,050 per share. The accrued
interest on these notes was paid in cash. In addition, the warrants we issued in
connection with the issuance of our convertible promissory notes were exchanged
for otherwise identical warrants having an exercise price of $2.29 per share.

    In an agreement dated December 31, 1998, we issued 59,278.56 shares of
Series B Preferred Stock for an aggregate purchase price of $62,242,500, of
which $22,095,000 was paid by conversion of the convertible promissory notes
identified above, to the holders of the convertible promissory notes described
above and J. H. Whitney III, L.P.; Whitney Strategic Partners III, L.P.;
Waller-Sutton Media Partners, L.P.; Arbor Venture Partners, L.L.C.; Southeastern
Technology Fund, L.P.; PNC Bank, N.A., Trustee; PNC Bank, N.A., Custodian; AEH
Profit Sharing Trust; Castellini Management Company; and all of the holders of
Series A Preferred Stock except Southern Venture Fund SBIC, L.P.; HAGC Partners;
and two of the Account Management Purchasers. Upon the closing of our initial
public offering in April 1999, each holder of Series B Preferred Stock received
on conversion the number of shares of common stock arrived at by dividing the
aggregate purchase price for the holder's shares of Series B Preferred Stock by
the conversion price of $2.24.

    The agreement in which we issued the Series B Preferred Stock includes a
repurchase requirement. In the event that we become an "Affiliate" of
U S WEST, as that term is defined in Section 3(1) of the Communications Act of
1934, and we are also providing services that an Affiliate of U S WEST would be
prohibited from providing, then U S WEST can require us to purchase, and we can
require U S WEST to sell to us, the minimum number of our shares needed to
prevent us from being deemed an Affiliate of U S WEST. The repurchase price, in
either instance, would be the last reported price on the Nasdaq National Market,
or as determined by the board of directors if we are no longer publicly traded.
We are not presently an Affiliate of U S WEST.

AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT

    REGISTRATION RIGHTS.  According to the terms of the Amended and Restated
Stockholders' Agreement, the holders of the Preferred Stock, together referred
to as the investors, have rights to register shares of our capital stock. At any
time 90 days after the effective date of the first registration statement that
we filed under the Securities Act, holders of at least 33% of the Registrable
Securities, as defined in the Stockholders' Agreement, may require us to effect
registration under the Securities Act of their registrable securities, subject
to the board of directors' right to defer the registration for a period of up to
180 days. The investors also have the right to cause us to register their
securities on Form S-3 when it becomes available to us if they propose to
register securities having a value of at least $10 million. In addition, if we
propose to register securities under the Securities Act, other than
registrations on Form S-4 or Form S-8, then any of the investors has a right,
subject to quantity limitations we determine, or determined by underwriters if
this offering involves an underwriting, to request that we register such
holder's registrable securities. We will bear all registration expenses incurred
in connection with registrations. We have agreed to indemnify the investors
against liabilities related to the accuracy of the registration statement used
in connection with any registration effected pursuant to the foregoing.

                                       57
<PAGE>
    GOVERNANCE PROVISIONS.  The Stockholders' Agreement gives the Whitney Group
the continuing right to designate one member of our board of directors.

IMAP AGREEMENT WITH U S WEST

    USI and U S WEST entered into an agreement on January 15, 1999 in which USI
grants to U S WEST and its affiliates a limited, nontransferable, non-exclusive
license to use the IMAP solution. The agreement has an initial term of three
years. After the end of the initial three year term, the agreement will
automatically be extended on the same terms for an additional 24 months. After
the first extension term, the agreement may be extended by mutual written
agreement. After the initial term, the agreement may be terminated by U S WEST
for convenience if it pays a termination fee ranging from $1,800,000 to
$360,000, depending on how many months are left in the term of the agreement.
U S WEST will pay USI a total of $4,121,250 in thirty-six monthly installments
for use of the IMAP solution for up to 1,000 users. For more than 1,000 users,
U S WEST will pay USI an additional monthly installment amount per user. The
amount payable to USI under the agreement will be reduced if USI does not
provide U S WEST with agreed upon service levels. The agreement contains
standard warranty, limitation of liability and indemnity provisions. On
March 31, 1999, we amended the agreement to allow twenty-five additional users
of U S WEST's affiliate, U S WEST Business and Government Services, to use the
IMAP solution for an additional $3,125 per month. On May 14, 1999, we further
amended the agreement to include architectural changes in the production of the
IMAP solution for an additional fee of $9,750 per month.

MARKETING AGREEMENT WITH U S WEST

    USI entered into a marketing agreement on January 30, 1999 with U S WEST
Communications Services, Inc. and U S WEST Enterprise America, Inc. The
agreement establishes a contractual teaming arrangement for the creation and
distribution of network services, some of our IMAP services, system integration
services and comprehensive customer service. The agreement provides U S WEST
with the exclusive rights to market some of our IMAP services in U S WEST's
fourteen-state service region and to some of U S WEST's existing customers and
other customers as mutually agreed to by U S WEST and USI. USI is prohibited
from entering into similar agreements within U S WEST's fourteen-state region
with competitors of U S WEST. USI will make its IMAP services, including
consultation and implementation services, available to U S WEST at discounted
prices. USI will also provide U S WEST with training and technical support
during the term of the agreement. Training and technical support will be
provided at no cost for the first twelve months of the agreement. U S WEST will
pay the current rates for such training and support beginning in the thirteenth
month of the agreement's term. If a U S WEST customer terminates its contract
for IMAP services prematurely, U S WEST will be obligated to make an accelerated
payment to USI of an amount equal to up to 36 months of contract payments under
that customer's contract. U S WEST will provide USI with favorable pricing and
terms on U S WEST's services used to deliver USI's IMAP services. The agreement
may be terminated for cause upon 90 days notice. USI can terminate U S WEST's
overall exclusivity if U S WEST fails to reach performance levels equal to at
least 75% of established sales quotas for the IMAP services. USI can terminate
U S WEST's exclusivity with respect to a particular IMAP product if U S WEST
fails to reach performance levels for that product equal to at least 50% of
established sales quotas so long as USI has performance levels with respect to
that product comparable to the performance required from U S WEST. The
exclusivity provisions will also terminate upon an acquisition or change of
control of USI. Either party may terminate the agreement upon a change in
control of the other. U S WEST has publicly announced its acquisition by Qwest
Communications International, Inc., one of our competitors. On account of the
pending acquisition of U S WEST by Qwest, a competitor of USI's, U S WEST and
USI have mutually agreed to transition out of the marketing agreement.

                                       58
<PAGE>
LOAN FROM CHRISTOPHER R. MCCLEARY TO USI

    In April 1998, Christopher R. McCleary loaned USI $1.0 million pursuant to a
short-term non-interest-bearing loan. As disclosed above, we repayed this loan
by issuing 1,666.67 shares of Series A Preferred Stock to Mr. McCleary in May
1998.

PROPERTY SALE BETWEEN CHRISTOPHER R. MCCLEARY AND USI

    On July 21, 1998 Christopher R. McCleary sold USI real property located in
Anne Arundel County, Maryland for a purchase price of $220,000. The property is
used by USI for housing transferring executives, summer interns and corporate
guests.

IMAP AGREEMENT WITH MMP, LLC

    USI and MMP, LLC entered into an agreement in March 1999 in which MMP, LLC
became an IMAP customer of USI. The agreement expires in three years unless
terminated earlier in a manner consistent with the agreement or unless extended
by mutual written agreement. MMP, LLC has agreed to pay USI a total of $48,400
in thirty-six equal monthly installments. The agreement contains standard
warranty, limitation of liability and indemnity provisions. Christopher R.
McCleary is a member and officer of MMP, LLC.

IMAP AGREEMENT WITH LATTICE PARTNERS, LTD.

    USI and Lattice Partners, Ltd. entered into an agreement on December 14,
1998 in which Lattice Partners, Ltd. became an IMAP customer of USI. The
agreement expires in three years unless terminated earlier in a manner
consistent with the agreement or unless extended by mutual written agreement.
Lattice Partners, Ltd. will pay USI a total of $108,000 in thirty-six equal
monthly installments. The agreement contains standard warranty, limitation of
liability and indemnity provisions. R. Dean Meiszer, a member of our board of
directors, is also a director of Lattice Partners, Ltd.

LOAN FROM USI TO CHRISTOPHER R. MCCLEARY

    During the third quarter of 1999, we loaned Christopher R. McCleary
$2.25 million pursuant to a note bearing interest at 5% per annum, payable on or
before July 31, 2000 and secured by shares of Mr. McCleary's USI common stock.
The purpose of the loan was to finance Mr. McCleary's exercise of his option to
purchase 562,500 shares of our common stock. During the fourth quarter of 1999,
we loaned Christopher R. McCleary approximately $2 million pursuant to a note
bearing interest at 7% per annum, payable within 90 days of demand and secured
by shares of Mr. McCleary's USI common stock. The purpose of the loan was to
fund Mr. McCleary's tax liability resulting from the exercise of his option
described above.

                                       59
<PAGE>
                       PRINCIPAL AND SELLING STOCKHOLDERS

    The table below sets forth, as of January 15, 2000, information with respect
to the beneficial ownership of our common stock by (1) each person who we know
to be the beneficial owner of more than 5% of our outstanding common stock; (2)
each of the directors and Named Executive Officers individually; and (3) all
directors and executive officers as a group. The table also sets forth
information regarding the beneficial ownership of each of the selling
stockholders before and after this offering. Except as otherwise indicated, each
of the stockholders has sole voting and investment power with respect to the
shares beneficially owned. The address of each executive officer and director is
c/o USINTERNETWORKING, Inc., One USI Plaza, Annapolis, MD 21401-7478.

<TABLE>
<CAPTION>
                                             NUMBER OF SHARES     PERCENTAGE OF                NUMBER OF SHARES    PERCENTAGE OF
                                            BENEFICIALLY OWNED      OWNERSHIP                 BENEFICIALLY OWNED     OWNERSHIP
                                              PRIOR TO THIS       PRIOR TO THIS     SHARES        AFTER THIS         AFTER THIS
NAMED EXECUTIVE OFFICERS AND DIRECTORS        OFFERING(1)(2)     OFFERING(1)(2)    OFFERED      OFFERING(1)(2)     OFFERING(1)(2)
- --------------------------------------      ------------------   ---------------   --------   ------------------   --------------
<S>                                         <C>                  <C>               <C>        <C>                  <C>
EXECUTIVE OFFICERS
Christopher R. McCleary(3)................
Andrew A. Stern(4)........................
Stephen E. McManus........................
Jeffery L. McKnight(5)....................

DIRECTORS
R. Dean Meiszer(6)........................
Ray A. Rothrock(7)........................
Frank A. Adams(8).........................
William F. Earthman(9)....................
John H. Wyant(10).........................
Benjamin Diesbach(11).....................
David J. Poulin(12).......................
Michael C. Brooks(13).....................
Joseph Zell(14)...........................
Cathy M. Brienza(15)......................
All Executive Officers and Directors as a
  group (16 persons)......................

BENEFICIAL OWNERS OF 5% OR MORE OF THE
  OUTSTANDING COMMON STOCK OF USI
Blue Chip Group(16).......................
  c/o Blue Chip Venture Company, Ltd.
  2000 PNC Center
  201 East Fifth Street
  Cincinnati, Ohio 45202
Grotech Capital Group(17).................
  9690 Deereco Road, Suite 800
  Timonium, Maryland 21093
Venrock Group(18).........................
  c/o Venrock Associates
  Room 5506
  30 Rockefeller Plaza
  New York, New York 10112
Whitney Group(19).........................
  c/o J.H. Whitney & Co.
  177 Broad Street
  Stamford, CT 06901
U S WEST Communications, Inc.(20).........
  1801 California Street
  Denver, Colorado 80202
</TABLE>

                                       60
<PAGE>
- ------------------------

*   Less than one percent.

(1) Beneficial ownership is determined in accordance with the rules of the
    Securities and Exchange Commission. Except where community property laws
    apply or as indicated in the footnotes of this table, to our knowledge, each
    stockholder identified in the table possesses sole voting and investment
    power with respect to all shares of common stock shown as beneficially owned
    by the stockholder. The number of shares beneficially owned by a person
    includes shares of common stock subject to options and warrants held by that
    person that are currently exercisable within 60 days of January 15, 2000.
    Shares issuable pursuant to options and warrants are deemed outstanding for
    computing the percentage ownership of the person holding the options and
    warrants but are not deemed outstanding for the purposes of computing the
    percentage ownership of any other person.

(2) For purposes of this table, the number of shares of common stock outstanding
    as of January 15, 2000 is deemed to be         . For purposes of calculating
    the percentage beneficially owned by any person, shares of common stock
    issuable to such person upon the exercise of any options or warrants
    exercisable within 60 days of January 15, 2000 are also assumed to be
    outstanding.

(3) Includes 446,427 shares of common stock held by The CRM Childrens' Trust I
    of which Christopher McCleary is grantor.

(4) Includes 1,500 shares held by an irrevocable trust for the benefit of
    Mr. Stern's children. Mr. Stern's spouse is the trustee of the trust.

(5) Includes options to purchase 562,500 shares of common stock exercisable
    within 60 days of January 15, 2000.

(6) Includes 678,346 shares of common stock owned by USI Partners, Ltd.
    Mr. Meiszer is a general partner of USI Partners, Ltd. Mr. Meiszer disclaims
    beneficial ownership in the common stock except to the extent of his general
    partner interest in USI Partners, Ltd. Also includes options to purchase
    11,250 shares of common stock and warrants to purchase 22,250 shares of
    common stock each exercisable within 60 days of January 15, 2000.

(7) Includes 1,648,437 shares of common stock owned by Venrock Associates and
    2,159,596 shares of common stock owned by Venrock Associates II, L.P.
    Mr. Rothrock is a general partner of Venrock Associates and Venrock
    Associates II, L.P. and as such shares voting and investment power with
    other general partners. Mr. Rothrock disclaims beneficial ownership in the
    common stock except to the extent of his general partner interests in
    Venrock Associates and Venrock Associates II, L.P. Also includes options to
    purchase 5,625 shares of common stock and warrants to purchase 197,677
    shares of common stock each exercisable within 60 days of January 15, 2000.

(8) Includes 4,151,785 shares of common stock owned by Grotech Partners IV, L.P.
    and 7,723,212 shares of common stock owned by Grotech Partners V L.P.
    Mr. Adams is a member of the general partner of Grotech Partners IV L.P. and
    Grotech Partners V, L.P. and as such shares voting and investment power with
    other members of the general partner. Mr. Adams disclaims beneficial
    ownership of the shares owned by Grotech Partners IV L.P. and Grotech
    Partners V L.P. Also includes options to purchase 11,250 shares of common
    stock and warrants to purchase 642,855 shares of common stock each
    exercisable within 60 days of January 15, 2000.

(9) Includes 1,124,998 shares of common stock owned by Southern Venture Fund
    SBIC, L.P. and 964,284 shares of common stock owned by Southern Venture Fund
    II, L.P. Mr. Earthman is a general partner of both Southern Venture Fund
    SBIC, L.P. and Southern Venture Fund II, L.P. and as such shares voting and
    investment power. Mr. Earthman disclaims beneficial ownership in the shares
    owned by Southern Venture Fund SBIC, L.P. and Southern Venture Fund II,
    L.P., except to

                                       61
<PAGE>
    the extent of his interests in the general partnerships of Southern Venture
    Fund SBIC, L.P. and Southern Venture Fund II, L.P. Also includes options to
    purchase 11,250 shares of common stock and warrants to purchase 24,106
    shares of common stock each exercisable within 60 days of January 15, 2000.
    Southern Venture Fund SBIC, L.P. and Southern Venture Fund II, L.P. are part
    of an affiliated group of investment partnerships and are collectively
    referred to as the Massey Burch Group.

(10) Includes 4,583,931 shares of common stock owned by Blue Chip Capital Fund
    II Limited Partnership and 808,921 shares of common stock owned by Miami
    Valley Venture Fund L.P. Mr. Wyant is the founder and president of Blue Chip
    Venture Co., which manages both Blue Chip Capital Fund II Limited
    Partnership and Miami Valley Venture Fund L.P. Mr. Wyant disclaims
    beneficial ownership of the shares owned by Blue Chip Capital Fund II
    Limited Partnership and Miami Valley Venture Fund L.P. Also includes options
    to purchase 11,250 shares of common stock and warrants to purchase 321,426
    shares of common stock each exercisable within 60 days of January 15, 2000.

(11) Includes options to purchase 11,250 shares of common stock exercisable
    within 60 days of January 15, 2000.

(12) Includes options to purchase 11,250 shares of common stock exercisable
    within 60 days of January 15, 2000.

(13) Includes 8,718,448 shares of common stock owned by J.H. Whitney III, L.P.
    and 210,084 shares of common stock owned by Whitney Strategic Partners III,
    L.P. Mr. Brooks is a general partner of J.H. Whitney & Co. and a Managing
    Member of J.H. Whitney Equity Partners III, L.L.C. which is the general
    partner of J.H. Whitney III, L.P. and Whitney Strategic Partners III, L.P.
    Mr. Brooks disclaims beneficial ownership of the shares owned by J.H.
    Whitney III, L.P and Whitney Strategic Partners III, L.P. Also includes
    options to purchase 5,625 shares of common stock exercisable within 60 days
    of January 15, 2000.

(14) Mr. Zell transferred options to purchase 11,250 shares of common stock
    which he received under our option plan to U S WEST. U S WEST policy
    prevents Mr. Zell from exercising these options for his own benefit.

(15) Includes 2,232,139 shares of common stock owned by Waller-Sutton Media
    Partners, L.P. Ms. Brienza is a member of Waller-Sutton Media, L.L.C. the
    general partner of Waller-Sutton Media Partners, L.P. Ms. Brienza disclaims
    beneficial ownership of the shares held by Waller-Sutton Media Partners,
    L.P. Also includes options to purchase 5,625 shares of common stock
    exercisable within 60 days of January 15, 2000.

(16) Includes 4,583,931 shares of common stock owned by Blue Chip Capital Fund
    II Limited Partnership and 808,921 shares of common stock owned by Miami
    Valley Venture Fund, L.P. Blue Chip Capital Fund II Limited Partnership and
    Miami Valley Venture Fund, L.P. are part of an affiliated group of
    investment partnerships commonly controlled by Blue Chip Venture Company and
    are collectively referred to as the Blue Chip Group. Also includes warrants
    to purchase 321,426 shares of common stock exercisable within 60 days of
    January 15, 2000.

(17) Includes 4,151,785 shares of common stock owned by Grotech Partners IV,
    L.P. and 7,723,212 shares of Common Stock owned by Grotech Partners V, L.P.,
    Grotech Partners IV, L.P. and Grotech Partners V, L.P. are part of an
    affiliated group of investment partnerships commonly controlled by Grotech
    Capital Group and are collectively referred to as the Grotech Capital Group.
    Also includes warrants to purchase 642,855 shares of common stock
    exercisable within 60 days of January 15, 2000.

                                       62
<PAGE>
(18) Includes 1,648,437 shares of common stock owned by Venrock Associates and
    2,159,596 shares of common stock owned by Venrock Associates II, L.P.,
    Venrock Associates and Venrock Associates II, L.P. are affiliated entities
    collectively referred to as the Venrock Group. Also includes warrants to
    purchase 197,677 shares of common stock within 60 days of January 15, 2000.

(19) Includes 8,718,488 shares of common stock owned by J.H. Whitney III, L.P.
    and 210,084 shares of common stock owned by Whitney Strategic Partners III,
    L.P., J.H. Whitney III, L.P and Whitney Strategic Partners III, L.P. are
    affiliated entities collectively referred to as the Whitney Group.

(20) Includes warrants to purchase 152,677 shares of common stock and options to
    purchase 5,625 shares of common stock exercisable within 60 days of
    January 15, 2000.

                                       63
<PAGE>
                    DESCRIPTION OF CERTAIN CREDIT FACILITIES

    As of December 31, 1999, USI has obtained numerous secured financing
commitments for capital leases and real estate and equipment loans to finance
real estate and various types of capital equipment, including computer hardware,
software, furniture and fixtures and leasehold improvements. These secured
financing arrangements are collectively called the Credit Facilities. The Credit
Facilities allow us to finance an aggregate amount of up to $88.0 million, of
which an aggregate amount of $72.9 million had been drawn at December 31, 1999.
A description follows of the Credit Facilities with financing commitments of
$10.0 million or more.

    VENTURE LENDING & LEASING TECHNOLOGIES INTERNATIONAL, INC.  USI has a
commitment from Venture Lending & Leasing providing for a line of credit to
enable USI to finance up to $10.0 million of various types of equipment as
described above. As of December 31, 1999, $9.6 million of this commitment has
been funded. This facility is not available for further funding.

    FINOVA CAPITAL CORPORATION.  USI has a commitment from Finova providing for
a line of credit to enable USI to lease up to $11.7 million of various types of
equipment. As of December 31, 1999, all of this commitment has been funded. Each
schedule of this facility has a term of 36 months.

                                       64
<PAGE>
                          DESCRIPTION OF CAPITAL STOCK

    The following description of our capital stock is only a summary and is
qualified in its entirety 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 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 January 15, 2000, there were 61,929,932 shares of
common stock issued and outstanding and no shares of preferred stock issued and
outstanding. As of January 15, 2000, there were 11,739 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 January 15, 2000, there were warrants outstanding to purchase a total of
1,481,324 shares of common stock. Warrants to purchase 1,425,521 shares at $2.29
per share will expire in September 2008, and warrants to purchase 55,803 shares
at $2.24 per share will expire in September 2005.

CONVERTIBLE NOTES

    At January 15, 2000 there were subordinated convertible notes outstanding
convertible into a total of 5,030,181 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.

                                       65
<PAGE>
REGISTRATION RIGHTS

    The holders of 46,349,289 shares of common stock and 1,429,533 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 Act described at "Certain Relationship and Related
Transactions--Amended and Restated Stockholder Agreement." The holders of
warrants to purchase 195,536 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 2,015,625 shares held by officers of USI in
the event an officer's employment is terminated due to death or disability.

    USI has agreed to file a registration statement under the Securities Act to
register resales of the notes and the shares of common stock into which the
notes are convertible. USI has filed a registration statement relating to these
registration rights. USI will use reasonable efforts to have such registration
statement declared effective as soon as practicable but in no event later than
April 3, 2000.

RESTRICTIONS ON SALE

    Certain of our stockholders have agreed with us that, upon the expiration of
the agreement they have with the underwriters not to dispose of their shares of
common stock for a period ending ninety days after the date of this offering,
they will not sell, pledge or otherwise dispose of their shares of common stock
until December 31, 2000. Pursuant to their agreement with us the stockholders
will be allowed to dispose of 1/7th of the shares subject to the agreement each
month beginning May 15, 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.

    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

                                       66
<PAGE>
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,

    - 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

                                       67
<PAGE>
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.

                                       68
<PAGE>
                                  UNDERWRITING

    Under the terms and subject to the conditions contained in an underwriting
agreement dated             , 2000, we and the selling stockholders have agreed
to sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., Legg Mason Wood Walker Incorporated, C.E. Unterberg, E*OFFERING
Corp., Towbin, Wasserstein Perella Securities, Inc. are acting as
representatives, have severally but not jointly agreed to purchase from us the
following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
                                                               NUMBER
                        UNDERWRITER                           OF SHARES
                        -----------                           ---------
<S>                                                           <C>
Credit Suisse First Boston Corporation......................
Merrill Lynch, Pierce, Fenner & Smith.......................
           Incorporated
J.P. Morgan Securities Inc..................................
Legg Mason Wood Walker Incorporated.........................
E*OFFERING Corp.............................................
C.E. Unterberg, Towbin......................................
Wasserstein Perella Securities, Inc.........................
    Total...................................................
</TABLE>

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

    The selling stockholders have granted to the underwriters a 30-day option to
purchase on a pro rata basis up to 900,000 additional outstanding shares at the
initial public offering price less the underwriting discounts and commissions.
The option may be exercised only to cover any over-allotments of common stock.

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

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

<TABLE>
<CAPTION>
                                                     PER SHARE                           TOTAL
                                          -------------------------------   -------------------------------
                                             WITHOUT            WITH           WITHOUT            WITH
                                          OVER-ALLOTMENT   OVER-ALLOTMENT   OVER-ALLOTMENT   OVER-ALLOTMENT
                                          --------------   --------------   --------------   --------------
<S>                                       <C>              <C>              <C>              <C>
Underwriting discounts and commissions
  paid by us............................        $                $                $                $
Expenses payable by us..................        $                $                $                $
Underwriting discounts and commissions
  paid by selling stockholders..........        $                $                $                $
Expenses payable by the selling
  stockholders..........................        $                $                $                $
</TABLE>

                                       69
<PAGE>
    We and the selling stockholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or to contribute to payments which
the underwriters may be required to make in that respect.

    We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, or publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 90 days after the date of this prospectus
except in limited circumstances, including the grant of additional employee
stock options or the exercise of employee stock options outstanding on the date
of this prospectus.

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

    In the ordinary course of business, the underwriters and their affiliates
have provided financial advisory, investment banking and general financing and
banking services for us and our affiliates for customary fees. Credit Suisse
First Boston Corporation, and Legg Mason Wood Walker Incorporated acted as
representatives for the underwriters in our initial public offering, which we
closed on April 14, 1999. In addition, Credit Suisse First Boston Corporation,
Legg Mason Wood Walker Incorporated, Wasserstein Perella Securities, Inc. and
C.E. Unterberg, Towbin were the initial purchasers in our convertible debt
offering which we closed October 24, 1999.

    The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Securities Exchange Act of 1934 (the
"Exchange Act").

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

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

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

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

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

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

    A prospectus in electronic format is being made available on the Web site
maintained by E*OFFERING Corp., www.eoffering.com.

                                       70
<PAGE>
                          NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

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

REPRESENTATIONS OF PURCHASERS

    Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling shareholders and the
dealer from whom such purchase confirmation is received that (1) such purchaser
is entitled under applicable provincial securities laws to purchase such common
stock without the benefit of a prospectus qualified under such securities laws,
(2) where required by law, that such purchaser is purchasing as principal and
not as agent, and (3) such purchaser has reviewed the text above under "Resale
Restrictions".

RIGHTS OF ACTION (ONTARIO PURCHASERS)

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

ENFORCEMENT OF LEGAL RIGHTS

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

NOTICE TO BRITISH COLUMBIA RESIDENTS

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

TAXATION AND ELIGIBILITY FOR INVESTMENT

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

                                       71
<PAGE>
                                 LEGAL MATTERS

    The validity of the issuance of the common stock being offered hereby will
be passed upon for USI by Latham & Watkins, Washington, D.C. and, for the
underwriters, by Cahill Gordon & Reindel, New York, New York. 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.

                                    EXPERTS

    Ernst & Young LLP, independent auditors, has audited our consolidated
financial statements at December 31, 1998, and for the period January 14, 1998
(date of inception) through December 31, 1998, as set forth in their report.
We've included our consolidated financial statements in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.

    Ernst & Young LLP has also audited I.I.T. Holding, Inc. and subsididaries'
consolidated financial statements at December 31, 1996 and 1997, and September
7, 1998, and for each of the two years in the year ended December 31, 1997, and
for the period from January 1, 1998 through September 7, 1998, as set forth in
their report, as to the years 1996 and 1997, their report is based in part on
the report of Bassan & Associates S.C., independent auditors. We've included
IIT's consolidated financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

    The financial statements of ACR as of September 30, 1998, December 31, 1997
and 1996 and for the nine months ended September 30, 1998 and for each of the
two years ended December 31, 1997 included in this Prospectus, have been audited
by Mahoney Cohen & Company, CPA, P.C., independent auditors, as stated in their
report appearing herein.

                             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
at the Commission's public reference rooms located at 450 5th Street, N.W.,
Washington, D.C. 20549, at Seven World Trade Center, 13th Floor, New York, New
York 10048 and at Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. 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

                                       72
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                           <C>
CONSOLIDATED FINANCIAL STATEMENTS OF USINTERNETWORKING, INC.
Report of Independent Auditors..............................   F-2
Consolidated Balance Sheets as of December 31, 1998 and as
  of September 30, 1999 (unaudited).........................   F-3
Consolidated Statements of Operations for the period January
  14, 1998 (date of inception) through December 31, 1998 and
  for the period January 14, 1998 (date of inception)
  through September 30, 1998 (unaudited) and the nine months
  ended September 30, 1999 (unaudited)......................   F-4
Consolidated Statements of Stockholders' Equity (Deficit)
  for the period January 14, 1998 (date of inception)
  through December 31, 1998 and for the nine months ended
  September 30, 1999 (unaudited)............................   F-5
Consolidated Statements of Cash Flows for the period January
  14, 1998 (date of inception) through December 31, 1998 and
  for the period January 14, 1998 (date of inception)
  through September 30, 1998 (unaudited) and the nine months
  ended September 30, 1999 (unaudited)......................   F-7
Notes to Consolidated Financial Statements..................   F-8
CONSOLIDATED FINANCIAL STATEMENTS OF I.I.T. HOLDING, INC.
  AND SUBSIDIARIES
Report of Independent Auditors..............................  F-27
Report of Independent Auditors..............................  F-28
Consolidated Balance Sheets as of December 31, 1997 and 1996
  and as of September 7, 1998...............................  F-29
Consolidated Statements of Operations for the years ended
  December 31, 1997 and 1996 and for the period from January
  1, 1998 through September 7, 1998.........................  F-30
Consolidated Statements of Stockholders' Equity for the
  years ended December 31, 1997 and 1996 and for the period
  from January 1, 1998 through September 7, 1998............  F-31
Consolidated Statements of Cash Flows for the years ended
  December 31, 1997 and 1996 and for the period from January
  1, 1998 through September 7, 1998.........................  F-32
Notes to Consolidated Financial Statements..................  F-33
FINANCIAL STATEMENTS OF ADVANCED COMMUNICATION RESOURCES,
  INC.
Independent Auditor's Report................................  F-39
Balance Sheets as of December 31, 1997 and 1996 and
  September 30, 1998........................................  F-40
Statements of Operations for the years ended December 31,
  1997 and 1996 and for the nine months ended September 30,
  1998......................................................  F-41
Statements of Stockholders' Equity for the years ended
  December 31, 1997 and 1996 and for the nine months ended
  September 30, 1998........................................  F-42
Statements of Cash Flows for the years ended December 31,
  1997 and 1996 and for the nine months ended September 30,
  1998......................................................  F-43
Notes to Financial Statements...............................  F-44
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
  THE TWELVE MONTHS ENDED DECEMBER 31, 1998.................   P-1
</TABLE>

                                      F-1
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
USINTERNETWORKING, Inc.

    We have audited the accompanying consolidated balance sheet of
USINTERNETWORKING, Inc. ("the Company") as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the period from January 14, 1998 (date of inception) through December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
USINTERNETWORKING, Inc. as of December 31, 1998, and the consolidated results of
its operations and its cash flows for the period from January 14, 1998 (date of
inception) through December 31, 1998, in conformity with accounting principles
generally accepted in the United States.

                                        /s/ Ernst & Young LLP

Baltimore, Maryland
May 13, 1999,
except for Note 21 and paragraph 3 of Note 22, as to which the date is
December 3, 1999

                                      F-2
<PAGE>
                            USINTERNETWORKING, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              DECEMBER 31,    SEPTEMBER 30,
                                                                  1998            1999
                                                              ------------    -------------
                                                                               (UNAUDITED)
<S>                                                           <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 43,802,465    $ 28,577,208
  Restricted cash...........................................       581,712         506,712
  Available-for-sale securities.............................            --      40,424,676
  Accounts receivable, less allowance of $142,000 and
    $341,012 in 1998 and 1999, respectively.................     2,882,119       9,875,202
  Prepaid expenses and other current assets.................     2,436,247       4,993,163
                                                              ------------    ------------
Total current assets........................................    49,702,543      84,376,961
Deferred IMAP costs.........................................            --       5,370,347
Software licenses, net of accumulated amortization of
  $2,525,573 in 1999........................................     9,596,760      11,035,810
Property and equipment, net of accumulated depreciation of
  $1,567,885 and $9,710,162 in 1998 and 1999,
  respectively..............................................    21,640,145      81,672,820
Goodwill, net of accumulated amortization of $1,611,763 and
  $5,694,763 in 1998 and 1999, respectively.................    25,137,296      22,133,603
Other assets................................................       439,734         482,113
                                                              ------------    ------------
Total assets................................................  $106,516,478    $205,071,654
                                                              ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable..........................................  $  6,571,767    $ 12,094,324
  Accrued compensation......................................     4,870,690       7,074,536
  Other accrued expenses....................................     1,569,570       1,065,275
  Deferred revenue..........................................        51,247       3,601,823
  Due to former shareholders of acquired businesses.........    10,826,735              --
  Current portion of capital lease obligations..............     1,503,947       3,749,318
  Current portion of long-term debt.........................     1,757,588      10,055,592
                                                              ------------    ------------
Total current liabilities...................................    27,151,544      37,640,868
Short-term obligations expected to be refinanced............     5,282,450              --
Capital lease obligations, less current portion.............     3,427,254       8,086,680
Long-term debt, less current portion........................     5,231,794      26,485,049
Dividends payable...........................................     1,503,004              --
                                                              ------------    ------------
Total liabilities...........................................    42,596,046      72,212,597
Series B Convertible Redeemable Preferred Stock, $.01 par
  value, 115,000 shares authorized, 59,279 shares issued and
  outstanding in 1998, none in 1999.........................    62,242,500              --
Common stock subject to repurchase, 2,015,625 shares issued
  and outstanding in 1998, none in 1999.....................     4,145,000              --
Commitments and contingent liabilities......................            --              --
Stockholders' equity (deficit):
  Series A Convertible Preferred Stock, $.01 par value,
    110,000 shares authorized, 55,000 shares issued and
    outstanding in 1998, none in 1999.......................           550              --
  Common stock, $.001 par value, 75,000,000 shares
    authorized, 937,500 shares issued and outstanding in
    1998, 60,813,704 shares outstanding in 1999.............           938          60,814
  Additional paid-in capital................................    29,984,756     236,631,079
  Note receivable from officer for purchase of common
    stock...................................................            --      (2,250,000)
  Unearned compensation.....................................            --        (361,822)
  Accumulated deficit.......................................   (32,453,312)   (101,505,381)
  Accumulated other comprehensive income....................            --         284,367
                                                              ------------    ------------
  Total stockholders' equity (deficit)......................    (2,467,068)    132,859,057
                                                              ------------    ------------
Total liabilities and stockholders' equity (deficit)........  $106,516,478    $205,071,654
                                                              ============    ============
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-3
<PAGE>
                            USINTERNETWORKING, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                             FOR THE PERIOD FROM   FOR THE PERIOD FROM
                                              JANUARY 14, 1998      JANUARY 14, 1998
                                             (DATE OF INCEPTION)   (DATE OF INCEPTION)
                                                   THROUGH               THROUGH         NINE MONTHS ENDED
                                              DECEMBER 31, 1998    SEPTEMBER 30, 1998    SEPTEMBER 30, 1999
                                             -------------------   -------------------   ------------------
                                                                                 (UNAUDITED)
<S>                                          <C>                   <C>                   <C>
Revenue....................................     $  4,122,449          $    515,488          $ 20,851,714
Costs and expenses:
  Direct cost of services..................        3,425,111               342,917            13,897,698
  Network and infrastructure costs.........        2,185,893                    --            11,360,299
  General and administrative...............       19,426,575            10,407,416            15,841,863
  Sales and marketing......................        5,123,334             1,802,383            24,552,985
  Product research and development.........          690,388               259,181             2,005,107
  Non-cash stock compensation expense......          231,135                90,455             6,805,486
  Depreciation and amortization............        3,179,648               269,134            14,793,756
                                                ------------          ------------          ------------
Total costs and expenses...................       34,262,084            13,171,486            89,257,194
                                                ------------          ------------          ------------
Operating loss.............................      (30,139,635)          (12,655,998)          (68,405,480)
Other income (expense):
  Interest income..........................          367,411               307,335             2,146,810
  Interest expense.........................       (2,681,088)              (74,551)           (2,793,399)
                                                ------------          ------------          ------------
                                                  (2,313,677)              232,784              (646,589)
                                                ------------          ------------          ------------
Net loss...................................      (32,453,312)          (12,423,214)          (69,052,069)
Dividends accrued on Series A and Series B
  Convertible Preferred Stock..............       (1,503,004)             (843,004)           (2,328,150)
Accretion of common stock subject to
  repurchase to fair value.................       (3,903,865)           (1,475,000)          (23,938,069)
Accretion of Series B Convertible
  Redeemable
  Preferred Stock to fair value............         (236,991)                   --               (99,252)
                                                ------------          ------------          ------------
Net loss attributable to common
  stockholders.............................     $(38,097,172)         $(14,741,218)         $(95,417,540)
                                                ============          ============          ============
Basic and diluted loss per common share
  attributable to common stockholders......     $     (40.64)         $     (15.72)         $      (2.49)
                                                ============          ============          ============
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-4
<PAGE>
                            USINTERNETWORKING, INC.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
                                     SERIES A CONVERTIBLE
                                        PREFERRED STOCK           COMMON STOCK         ADDITIONAL        NOTE
                                     ---------------------   ----------------------     PAID-IN       RECEIVABLE      UNEARNED
                                      SHARES     PAR VALUE     SHARES     PAR VALUE     CAPITAL      FROM OFFICER   COMPENSATION
                                     ---------   ---------   ----------   ---------   ------------   ------------   ------------
<S>                                  <C>         <C>         <C>          <C>         <C>            <C>            <C>
Balance at January 14, 1998........        --      $  --             --    $    --    $         --   $        --      $      --
  Issuance of common stock to
    founder upon inception.........        --         --        937,500        938           4,062            --             --
  Issuance of Series A Convertible
    Preferred Stock on May 28, 1998
    for cash.......................    38,333        383             --         --      22,999,617            --             --
  Issuance of Series A Convertible
    Preferred Stock on May 28, 1998
    in exchange for $1,000,000
    note...........................     1,667         17             --         --         999,983            --             --
  Issuance of Series A Convertible
    Preferred Stock on June 22,
    1998 for cash..................     6,167         62             --         --       3,699,938            --             --
  Issuance of Series A Convertible
    Preferred Stock on July 2, 1998
    for cash.......................     5,833         58             --         --       3,499,942            --             --
  Issuance of Series A Convertible
    Preferred Stock on July 30,
    1998 for cash..................     3,000         30             --         --       1,799,970            --             --
  Transaction costs associated with
    the issuance of Series A
    Convertible Preferred Stock....        --         --             --         --        (205,225)           --             --
  Issuance of warrants to purchase
    75,000 shares of common stock
    associated with the acquisition
    of IIT on September 8, 1998....        --         --             --         --          40,000            --             --
  Issuance of warrants to purchase
    1,461,675 shares of common
    stock in connection with
    $9,095,000 of debt on September
    7, 1998........................        --         --             --         --       1,948,930            --             --
  Issuance of warrants to purchase
    111,606 shares of common stock
    in connection with a $5,000,000
    financing commitment on
    September 22, 1998.............        --         --             --         --         148,810            --             --
  Issuance of warrants to purchase
    971 shares of Series B
    Convertible Redeemable
    Preferred Stock in connection
    with a $10,000,000 financing
    commitment on September 30,
    1998...........................        --         --             --         --         606,875            --             --
  Issuance of warrants to purchase
    93,750 shares of common stock
    associated with the acquisition
    of ACR on October 2, 1998......        --         --             --         --          50,000            --             --
  Issuance of warrants to purchase
    26,786 shares of common stock
    in connection with a $2,000,000
    financing commitment on
    December 18, 1998..............        --         --             --         --          35,714            --             --
  Dividends accrued on Series A
    Convertible Preferred Stock....        --         --             --         --      (1,503,004)           --             --
  Accretion of common stock subject
    to repurchase to fair value....        --         --             --         --      (3,903,865)           --             --
  Accretion of Series B Convertible
    Redeemable Preferred Stock to
    fair value.....................        --         --             --         --        (236,991)           --             --
  Net loss for the period January
    14, 1998 through December 31,
    1998...........................        --         --             --         --                            --             --
                                      -------      -----     ----------    -------    ------------   -----------      ---------
Balance at December 31, 1998.......    55,000        550        937,500        938      29,984,756            --             --
                                      -------      -----     ----------    -------    ------------   -----------      ---------

<CAPTION>
                                                      ACCUMULATED        TOTAL
                                                         OTHER       STOCKHOLDERS'
                                      ACCUMULATED    COMPREHENSIVE      EQUITY
                                        DEFICIT         INCOME         (DEFICIT)
                                     -------------   -------------   -------------
<S>                                  <C>             <C>             <C>
Balance at January 14, 1998........  $          --     $      --     $         --
  Issuance of common stock to
    founder upon inception.........             --            --            5,000
  Issuance of Series A Convertible
    Preferred Stock on May 28, 1998
    for cash.......................             --            --       23,000,000
  Issuance of Series A Convertible
    Preferred Stock on May 28, 1998
    in exchange for $1,000,000
    note...........................             --            --        1,000,000
  Issuance of Series A Convertible
    Preferred Stock on June 22,
    1998 for cash..................             --            --        3,700,000
  Issuance of Series A Convertible
    Preferred Stock on July 2, 1998
    for cash.......................             --            --        3,500,000
  Issuance of Series A Convertible
    Preferred Stock on July 30,
    1998 for cash..................             --            --        1,800,000
  Transaction costs associated with
    the issuance of Series A
    Convertible Preferred Stock....             --            --         (205,225)
  Issuance of warrants to purchase
    75,000 shares of common stock
    associated with the acquisition
    of IIT on September 8, 1998....             --            --           40,000
  Issuance of warrants to purchase
    1,461,675 shares of common
    stock in connection with
    $9,095,000 of debt on September
    7, 1998........................             --            --        1,948,930
  Issuance of warrants to purchase
    111,606 shares of common stock
    in connection with a $5,000,000
    financing commitment on
    September 22, 1998.............             --            --          148,810
  Issuance of warrants to purchase
    971 shares of Series B
    Convertible Redeemable
    Preferred Stock in connection
    with a $10,000,000 financing
    commitment on September 30,
    1998...........................             --            --          606,875
  Issuance of warrants to purchase
    93,750 shares of common stock
    associated with the acquisition
    of ACR on October 2, 1998......             --            --           50,000
  Issuance of warrants to purchase
    26,786 shares of common stock
    in connection with a $2,000,000
    financing commitment on
    December 18, 1998..............             --            --           35,714
  Dividends accrued on Series A
    Convertible Preferred Stock....             --            --       (1,503,004)
  Accretion of common stock subject
    to repurchase to fair value....             --            --       (3,903,865)
  Accretion of Series B Convertible
    Redeemable Preferred Stock to
    fair value.....................             --            --         (236,991)
  Net loss for the period January
    14, 1998 through December 31,
    1998...........................    (32,453,312)           --      (32,453,312)
                                     -------------     ---------     ------------
Balance at December 31, 1998.......    (32,453,312)           --       (2,467,068)
                                     -------------     ---------     ------------
</TABLE>

                                      F-5
<PAGE>
                            USINTERNETWORKING, INC.
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
<TABLE>
<CAPTION>
                                     SERIES A CONVERTIBLE
                                        PREFERRED STOCK           COMMON STOCK         ADDITIONAL        NOTE
                                     ---------------------   ----------------------     PAID-IN       RECEIVABLE      UNEARNED
                                      SHARES     PAR VALUE     SHARES     PAR VALUE     CAPITAL      FROM OFFICER   COMPENSATION
                                     ---------   ---------   ----------   ---------   ------------   ------------   ------------
<S>                                  <C>         <C>         <C>          <C>         <C>            <C>            <C>
  Dividends accrued on Series A and
    Series B Convertible Preferred
    Stock..........................        --         --             --         --      (2,328,150)           --             --
  Accretion of common stock subject
    to repurchase to fair value....        --         --             --         --     (23,938,069)           --             --
  Accretion of Series B Convertible
    Redeemable Preferred Stock to
    fair value.....................        --         --             --         --         (99,252)           --             --
  Conversion of Series A
    Convertible Preferred Stock to
    common stock...................   (55,000)      (550)    18,562,491     18,562         (18,012)           --             --
  Conversion of Series B
    Convertible Redeemable
    Preferred Stock to common
    stock..........................        --         --     27,786,798     27,787      62,214,713            --             --
  Reclassification of common stock
    subject to repurchase to common
    stock..........................        --         --      2,015,625      2,016      28,714,237            --       (633,184)
  Issuance of common stock upon
    initial public offering........        --         --     10,350,000     10,350     144,889,650            --             --
  Initial public offering issuance
    costs..........................        --         --             --         --     (12,190,627)           --             --
  Issuance of common stock upon
    exercise of stock options......        --         --        315,506        315         554,842            --             --
  Issuance of common stock upon
    exercise of stock options in
    exchange for note..............        --         --        562,500        563       2,249,437    (2,250,000)            --
  Issuance of common stock upon
    exercise of warrants...........        --         --        487,298        487       1,092,773            --             --
  Contribution of common stock to
    employee benefit plan..........        --         --         25,674         26         378,636            --             --
  Repurchase of common stock.......        --         --       (229,688)      (230)     (1,029,317)           --             --
  Amortization of unearned
    compensation...................        --         --             --         --         135,681            --        271,362
  Stock compensation expense for
    issuance of common stock
    options at below fair market
    value..........................        --         --             --         --       6,019,781            --             --
  Comprehensive income:............        --         --             --         --              --            --             --
  Net loss for the period January
    1, 1999 through September 30,
    1999...........................        --         --             --         --              --            --             --
    Other comprehensive
      income--unrealized gain on
      marketable securities........        --         --             --         --              --            --             --
    Total comprehensive income
      (loss).......................        --         --             --         --              --            --             --
                                      -------      -----     ----------    -------    ------------   -----------      ---------
Balance at September 30, 1999
(unaudited)........................        --         --     60,813,704    $60,814    $236,631,079   $(2,250,000)     $(361,822)
                                      =======      =====     ==========    =======    ============   ===========      =========

<CAPTION>
                                                      ACCUMULATED        TOTAL
                                                         OTHER       STOCKHOLDERS'
                                      ACCUMULATED    COMPREHENSIVE      EQUITY
                                        DEFICIT         INCOME         (DEFICIT)
                                     -------------   -------------   -------------
<S>                                  <C>             <C>             <C>
  Dividends accrued on Series A and
    Series B Convertible Preferred
    Stock..........................             --            --       (2,328,150)
  Accretion of common stock subject
    to repurchase to fair value....             --            --      (23,938,069)
  Accretion of Series B Convertible
    Redeemable Preferred Stock to
    fair value.....................             --            --          (99,252)
  Conversion of Series A
    Convertible Preferred Stock to
    common stock...................             --            --               --
  Conversion of Series B
    Convertible Redeemable
    Preferred Stock to common
    stock..........................             --            --       62,242,500
  Reclassification of common stock
    subject to repurchase to common
    stock..........................             --                     28,083,069
  Issuance of common stock upon
    initial public offering........             --            --      144,900,000
  Initial public offering issuance
    costs..........................             --            --      (12,190,627)
  Issuance of common stock upon
    exercise of stock options......             --            --          555,157
  Issuance of common stock upon
    exercise of stock options in
    exchange for note..............             --            --               --
  Issuance of common stock upon
    exercise of warrants...........             --            --        1,093,260
  Contribution of common stock to
    employee benefit plan..........             --            --          378,662
  Repurchase of common stock.......             --            --       (1,029,547)
  Amortization of unearned
    compensation...................             --            --          407,043
  Stock compensation expense for
    issuance of common stock
    options at below fair market
    value..........................             --            --        6,019,781
  Comprehensive income:............             --            --
  Net loss for the period January
    1, 1999 through September 30,
    1999...........................    (69,052,069)           --      (69,052,069)
    Other comprehensive
      income--unrealized gain on
      marketable securities........             --       284,367          284,367
                                                                     ------------
    Total comprehensive income
      (loss).......................             --            --      (68,767,702)
                                     -------------     ---------     ------------
Balance at September 30, 1999
(unaudited)........................  $(101,505,381)    $ 284,367     $132,859,057
                                     =============     =========     ============
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-6
<PAGE>
                            USINTERNETWORKING, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                       FOR THE PERIOD FROM   FOR THE PERIOD FROM
                                                        JANUARY 14, 1998      JANUARY 14, 1998
                                                       (DATE OF INCEPTION)   (DATE OF INCEPTION)
                                                             THROUGH               THROUGH         NINE MONTHS ENDED
                                                        DECEMBER 31, 1998    SEPETEMBER 30, 1998   SEPTEMBER 30, 1999
                                                       -------------------   -------------------   ------------------
                                                                                           (UNAUDITED)
<S>                                                    <C>                   <C>                   <C>
OPERATING ACTIVITIES
Net loss.............................................     $(32,453,312)         $(12,423,214)         $(69,052,069)
Adjustments to reconcile net loss to net cash used in
  operating activities:
    Depreciation.....................................        1,567,885               269,134            10,710,756
    Amortization.....................................        1,611,763                    --             4,083,000
    Amortization of unearned compensation related to
      the issuance of common stock...................          231,135                90,455               407,043
    Non-cash stock compensation expense..............               --                    --             6,398,443
    Non-cash interest expense........................        2,011,904                    --               188,921
    Changes in operating assets and liabilities:
      Accounts receivable............................           43,293            (1,309,469)           (6,993,083)
      Prepaid expenses and other current assets......       (2,470,745)             (834,533)           (2,556,916)
      Deferred IMAP costs............................               --                    --            (5,370,347)
      Accounts payable...............................        4,333,579             2,659,047               522,557
      Accrued compensation...........................        4,287,023               457,203             2,203,846
      Accrued expenses and other current
        liabilities..................................          234,800             3,297,804             3,046,281
                                                          ------------          ------------          ------------
Net cash used in operating activities................      (20,602,675)           (7,793,573)          (56,411,568)

INVESTING ACTIVITIES
Purchases of property and equipment..................      (20,127,849)          (16,219,463)          (58,867,670)
Change in restricted cash............................         (581,712)             (581,712)               75,000
Purchases of available-for-sale securities...........               --                    --           (40,140,309)
Acquisitions, net of cash acquired...................      (16,899,991)          (14,193,796)           (1,079,307)
Change in other assets...............................          (59,080)             (262,616)              (42,379)
                                                          ------------          ------------          ------------
Net cash used in investing activities................      (37,668,632)          (31,257,587)         (100,054,665)

FINANCING ACTIVITIES
Proceeds from issuance of Series A Convertible
  Preferred Stock....................................       31,794,775            31,905,907                    --
Proceeds from loan from officer, subsequently
  converted into Series A Convertible Preferred
  Stock..............................................        1,000,000             1,000,000                    --
Proceeds (expenses) from issuance of Series B
  Convertible Redeemable Preferred Stock.............       39,910,509                    --               (99,252)
Proceeds from issuance of common stock and common
  stock subject to repurchase........................           15,000                15,000                    --
Proceeds from issuance of common stock upon initial
  public offering, net of issuance costs.............               --                    --           132,709,373
Proceeds from exercise of stock options and
  warrants...........................................               --                    --               628,870
Proceeds from issuance of long-term debt.............        9,486,969            17,385,179            27,124,538
Proceeds from issuance of notes, subsequently
  converted into Series B Convertible Redeemable
  Preferred Stock....................................       22,095,000                    --                    --
Dividends paid to preferred stockholders.............               --                    --            (3,831,154)
Payment to former shareholders of acquired
  businesses.........................................               --                    --           (10,826,735)
Payments on long-term debt...........................       (1,804,876)              (16,190)           (3,054,650)
Payments on capital lease obligations................         (423,605)               (8,301)           (1,410,014)
                                                          ------------          ------------          ------------
Net cash provided by financing activities............      102,073,772            50,281,595           141,240,976
                                                          ------------          ------------          ------------
Net increase (decrease) in cash and cash
  equivalents........................................       43,802,465            11,230,435           (15,255,257)
Cash and cash equivalents at beginning of period.....               --                    --            43,802,465
                                                          ------------          ------------          ------------
Cash and cash equivalents at end of period...........     $ 43,802,465          $ 11,230,435          $ 28,577,208
                                                          ============          ============          ============
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-7
<PAGE>
                            USINTERNETWORKING, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

    USINTERNETWORKING, Inc., (the "Company") was incorporated on January 14,
1998 principally to provide clients the ability to use leading business software
applications through the Company's Internet-based network. The Company is an
"Internet Managed Application Provider.(SM)" The Company's IMAP services
integrate Internet communications, data center management and packaged software
applications implementation and support to meet the technology needs of business
in a number of business process areas including sales force automation, customer
support, e-commerce, and human resource and financial systems. The Company also
makes its infrastructure available to clients who want to run their own
applications in a highly reliable and secure Internet environment and provides
information technology consulting services.

UNAUDITED INTERIM FINANCIAL INFORMATION

    The unaudited interim financial information as of and for the nine months
ended September 30, 1999, has been prepared in accordance with generally
accepted accounting principles for interim financial information and with
instructions to Article 10 of Regulation S-X. In the opinion of management, such
information contains all adjustments, consisting only of normal recurring
adjustments, considered necessary for a fair presentation of such periods. The
operating results for any interim period are not necessarily indicative of
results for any future periods.

    All financial information contained in these notes related to periods
subsequent to December 31, 1998 is unaudited.

BASIS OF PRESENTATION

    The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. Intercompany transactions and
balances have been eliminated.

USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

CASH AND CASH EQUIVALENTS

    The Company considers all money market accounts and all other investments
with a maturity of three months or less when purchased to be cash equivalents.
The carrying value of cash equivalents approximates fair value.

RESTRICTED CASH

    At December 31, 1998, $581,712 of cash was pledged as collateral on
outstanding letters of credit related to an operating lease for certain office
space ($400,000), and as security for other obligations ($181,712). These
amounts have been classified as restricted cash in the accompanying consolidated
balance sheets.

                                      F-8
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENTS

    Available-for-sale securities are carried at fair value with the unrealized
gains and losses, net of tax, reported as other comprehensive income. Realized
gains and losses and declines in value judged to be other than temporary on
available-for-sale securities are included in investment income. The cost of
securities sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included in
investment income.

    At September 30, 1999, available-for-sale securities consisted principally
of corporate and government agency obligations. These investments are classified
as current as all maturities are less than one year.

SOFTWARE LICENSES

    The Company capitalizes the costs associated with the purchase of licenses
for major business process application software used in providing IMAP services.
During 1998, the Company was obligated to purchase and purchased $9.6 million of
perpetual licenses from 4 software application vendors. The agreements to
purchase these licenses specify the maximum number of users permitted to utilize
the license in connection with the Company's service, and whether the licenses
may be later transferred to subsequent users by the Company. All amounts paid to
the vendors are non-refundable, regardless of the actual number of users
assigned a license in connection with IMAP services.

    Transferrable licenses will be amortized over their estimated useful life of
three years. Non-transferrable licenses will be amortized over the lesser of the
minimum contract period for IMAP clients subject to these licenses, or three
years. Amortization commenced in January 1999, the date that transferrable and
non-transferrable licenses were first available to generate revenue, and the
average amortization period is expected to be three years.

    The Company also purchases maintenance services from its software vendors
under agreements that require annual payments for software maintenance,
including technical support and software upgrades. These payments are included
in prepaid expenses and amortized ratably over the annual service period.

PROPERTY AND EQUIPMENT AND ACCOUNTING CHANGE

    Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed for owned assets using the straight-line method over
estimated useful lives of the assets. Assets under capital leases are amortized
using the straight-line method over the lesser of the lease term or the
estimated useful life of the assets.

    Estimated useful lives for all depreciable assets other than a building and
leasehold improvements range from three to seven years. Computer hardware, and
software purchased for internal use, is depreciated over three to five years.
The building is depreciated over 25 years and leasehold improvements are
depreciated over the term of the related lease.

    On July 1, 1999, the Company changed its estimate of the useful life of its
computer equipment from three to five years. The change in estimate will be
accounted for prospectively, with depreciation expense for periods subsequent to
June 30, 1999 calculated so as to depreciate the remaining book value of the
equipment at June 30, 1999 equally over the revised estimated useful life.

                                      F-9
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

    The effect of this change was to decrease depreciation expense and net loss
by $1,316,000 for the nine months ended September 30, 1999. Basic and diluted
loss per share for the nine months ended September 30, 1999 was lower by $0.03
per share as a result of the change.

INCOME TAXES

    The Company uses the liability method in accounting for income taxes. Under
this method, deferred income tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

REVENUE RECOGNITION

    The Company generates revenue from IMAP services and information technology
services. Revenues from professional IT services are recognized as services are
provided.

    IMAP revenues consist of monthly recurring fees for services, which
generally include internet access to the Company's network of Enterprise Data
Centers hosting application software, and the implementation and management of
that software. Payment for services is generally received monthly over a two to
five year contract term, and revenues are recognized ratably as earned over the
contract term. Payments received in advance of revenue recognition, even if
non-refundable, are recorded as deferred revenue. Some contracts permit
termination without cause by the clients. Contracts permitting termination
without cause may provide for termination payments to the Company that will be
recognized as revenue when collectibility is assured.

DEFERRED IMAP COSTS

    Direct costs related to the implementation of software under IMAP contracts
are deferred and expensed ratably over the term of the related contract.

GOODWILL AMORTIZATION

    The Company amortizes goodwill arising from certain purchase business
combinations on a straight-line basis over its estimated useful life of 5 years.

ADVERTISING COSTS

    The Company expenses advertising as incurred. Advertising expense totaled
approximately $700,000 in 1998.

IMPAIRMENT OF LONG-LIVED ASSETS

    Long-lived assets, consisting principally of property and equipment and
goodwill, are evaluated for possible impairment through a review of undiscounted
expected future cash flows. If the sum of the undiscounted expected future cash
flows is less than the carrying amount of the asset, an impairment loss is
recognized.

                                      F-10
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK OPTIONS

    The Company records compensation expense for all stock-based compensation
plans using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"). Under
APB No. 25, if the exercise price of the Company's employee stock options equals
or exceeds the estimated fair value of the underlying stock on the date of
grant, no compensation expense is generally recognized.

    Financial Accounting Standards Board Statement No. 123, Accounting for
Stock-Based Compensation ("Statement No. 123") encourages companies to recognize
expense for stock-based awards based on their estimated value on the date of
grant. Statement No. 123 requires the disclosure of pro forma net income or loss
in the notes to the financial statements if the fair value method is not
elected. The Company accounts for its stock-based compensation using the
intrinsic value method, and has determined that the use of the fair value method
to record compensation expense would have no effect on the reported net loss in
1998.

STOCK SPLIT

    In February 1999, the Company's Board of Directors approved an 8 for 1
reverse stock split of common stock, options and warrants which became effective
on April 8, 1999. Accordingly, all share and per share data including stock
option, warrant and loss per share information have been restated in the
consolidated financial statements to retroactively reflect the stock split. (See
also Note 22.)

ACCOUNTING PRONOUNCEMENTS ADOPTED IN 1999

    In March 1998, the AICPA issued Statement of Position 98-1, ACCOUNTING FOR
THE COSTS OF COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE (SOP
98-1). SOP 98-1 requires the capitalization of costs to purchase or develop
internal-use software, including external direct costs of materials and
services, and payroll and payroll related costs for employees who are directly
associated with and devote time to an internal use software development project.
Allocations of overhead and capitalized costs are not permitted. Computer
software costs related to research and development are expensed as incurred, as
are training and maintenance costs. SOP 98-1 was adopted in 1999, and
application is prospective. In 1998, the Company expensed approximately $1
million of costs related to the implementation of internal use software. The
Company capitalized approximately $1.5 million of costs in implementing internal
use software for the nine months ended September 30, 1999.

    In April 1998, the AICPA issued Statement of Position 98-5, REPORTING THE
COSTS OF START-UP ACTIVITIES (SOP 98-5). SOP 98-5 requires that start-up costs
and organization costs be expensed as incurred. Start-up activities include
one-time activities related to opening a new facility, including a new product
or service, conducting business in a new territory, conducting business with a
new class of customer, initiating a new process in an existing facility, or
commencing some new operation. SOP 98-5 was adopted in 1999. All start-up and
organizational costs of the Company have been expensed; therefore, adoption of
this new standard had no effect on the consolidated financial statements.

2. ACQUISITIONS

    On September 8, 1998, the Company acquired all of the outstanding common
stock of I.I.T. Holding, Inc. (IIT), a provider of Internet and intranet
consulting, integration and support services

                                      F-11
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITIONS (CONTINUED)

principally to commercial companies located throughout the United States and
South America. The initial purchase price consisted of cash of $12,887,000 and
warrants to purchase 75,000 shares of common stock for $10.67 per share valued
at $40,000. Direct acquisition costs of $394,968 were also incurred. The
acquisition was accounted for using the purchase method of accounting, and the
results of operations of IIT are included in the accompanying consolidated
statements of operations commencing September 8, 1998. At the acquisition date,
$14,131,788 of goodwill was recorded.

    Additional contingent consideration was payable to the former shareholders
of IIT to the extent that defined amounts of revenue, earnings before interest,
income taxes, depreciation and amortization (EBITDA), and employee retention
percentages (as related to the operations of IIT) in 1998 were exceeded. The
maximum amount of contingent consideration payable to the sellers was
$3,799,999. At December 31, 1998, the Company determined that the amount of
additional consideration due to the sellers was $2,326,735, and therefore
recorded that amount as additional goodwill. The contingent consideration was
paid in May 1999.

    On October 2, 1998, the Company acquired all of the outstanding common stock
of Advanced Communication Resources, Inc. (ACR), a New York based systems
integrator focused on the financial services industry. The initial purchase
price aggregated $6,050,000, consisting of cash of $2,500,000, a $3,500,000
secured promissory note bearing interest at 8.25%, and warrants to purchase
93,750 shares of common stock for $10.67 per share valued at $50,000. Direct
acquisition costs of $338,916 were also incurred. The acquisition was accounted
for using the purchase method of accounting, and the results of operations of
ACR are included in the accompanying consolidated statements of operations
commencing October 2, 1998. At the acquisition date, $5,290,535 of goodwill was
recorded.

    Additional contingent consideration was payable to the former shareholders
of ACR to the extent that defined amounts of revenue, EBITDA, and employee
retention percentages (as related to the operations of ACR) in 1998 were
exceeded. The maximum amount of contingent consideration payable to the sellers
was $5,000,000. At December 31, 1998, the Company determined that the amount of
additional consideration due to the sellers was $5,000,000, and therefore
recorded that amount as additional goodwill. The contingent consideration was
paid in January 1999.

    The following summarizes unaudited pro forma consolidated results of
operations for 1998 assuming the IIT and ACR acquisitions had occurred at the
beginning of 1998. The results are not necessarily indicative of what would have
occurred had these transactions been consummated as of the beginning of 1998, or
of future operations of the Company (in thousands):

<TABLE>
<CAPTION>
                                                               PRO FORMA
                                                              -----------
                                                              (UNAUDITED)
<S>                                                           <C>

Revenue.....................................................    $ 13,938
Net loss....................................................    $(36,140)
Basic and diluted loss per common share.....................    $ (38.55)
</TABLE>

                                      F-12
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. LOSS PER SHARE

    The following table sets forth the computation of basic and diluted loss per
common share:

<TABLE>
<CAPTION>
                                           FOR THE PERIOD FROM   FOR THE PERIOD FROM
                                            JANUARY 14, 1998      JANUARY 14, 1998
                                           (DATE OF INCEPTION)   (DATE OF INCEPTION)
                                                 THROUGH               THROUGH         NINE MONTHS ENDED
                                            DECEMBER 31, 1998    SEPTEMBER 30, 1998    SEPTEMBER 30, 1999
                                           -------------------   -------------------   ------------------
                                                                               (UNAUDITED)
<S>                                        <C>                   <C>                   <C>
Numerator:
  Net loss...............................      $(32,453,312)        $(12,423,214)         $(69,052,069)
  Dividends on Series A Convertible
    Preferred Stock......................        (1,503,004)            (843,004)           (2,328,150)
  Accretion of common stock subject to
    repurchase to fair value.............        (3,903,865)          (1,475,000)          (23,938,069)
  Accretion of Series B Convertible
    Redeemable Preferred Stock to fair
    value................................          (236,991)                  --               (99,252)
                                               ------------         ------------          ------------
                                               $(38,097,172)        $(14,741,218)         $(95,417,540)
                                               ============         ============          ============
Denominator:
  Weighted-average number of shares of
    common stock outstanding and not
    subject to repurchase during the
    period...............................           937,500              937,500            38,362,926
                                               ------------         ------------          ------------
Basic and diluted loss per common
  share..................................      $     (40.64)        $     (15.72)         $      (2.49)
                                               ============         ============          ============
</TABLE>

    Basic loss per share is based upon the average number of shares of common
stock outstanding during the periods. The 1998 computations exclude 2,015,625
shares of common stock subject to repurchase.

    Diluted loss per common share is equal to basic loss per common share
because if potentially dilutive securities were included in the computation, the
result would be anti-dilutive. These potentially dilutive securities consist of
common stock subject to repurchase, convertible preferred stocks, stock options
and warrants in the 1998 periods, and stock options and warrants in the 1999
periods.

4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

    The Company acquired equipment totaling $5,188,489 and $1,281,703 under
leases classified as capital leases for the period from January 14, 1998 (date
of inception) through December 31, 1998 and for the nine months ended September
30, 1999, respectively. The Company also acquired $7,500,000 of equipment in
1998 that was included in accounts payable and short-term obligations expected
to be refinanced at December 31, 1998.

    Interest paid was approximately $368,000 and $3,085,000 for the period from
January 14, 1998 (date of inception) through December 31, 1998 and for the nine
months ended September 30, 1999, respectively.

    In December 1998, $22,095,000 of notes payable and a $1,000,000 loan from an
officer of the Company were converted into Series B Convertible Redeemable
Preferred Stock.

                                      F-13
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (CONTINUED)

    The Company purchased all of the capital stock of IIT and ACR for
approximately $27.8 million. In conjunction with these acquisitions, assets with
a fair market value of approximately $30.8 million were acquired and liabilities
of approximately $3.0 million were assumed.

    In July 1998, the Company sold 937,500 shares of common stock to an
executive officer for $5,000. The common stock at the date of issuance had an
appraised estimated fair value of $1.07 per share, or $1,000,000. The difference
between the estimated fair value of the common stock of $1,000,000 and the
amount paid of $5,000 ($995,000) was recorded as unearned compensation and is
being amortized over the 22 month period in which it is earned. Other non-cash
compensation of $5,000 related to common stock issuances was also recorded in
1998.

5. PROPERTY AND EQUIPMENT

    Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                               DECEMBER 31,    SEPTEMBER 30,
                                                   1998             1999
                                              --------------   --------------
                                                                (UNAUDITED)
<S>                                           <C>              <C>

Building and land...........................   $   959,124      $14,458,390
Furniture and fixtures......................       779,332        2,336,762
Equipment and automobiles...................     2,151,877        3,241,954
Computers and software......................    16,018,565       63,343,718
Leasehold improvements......................     3,299,132        8,002,158
                                               -----------      -----------
                                                23,208,030       91,382,982
Accumulated depreciation....................    (1,567,885)      (9,710,162)
                                               -----------      -----------
Total.......................................   $21,640,145      $81,672,820
                                               ===========      ===========
</TABLE>

    Substantially all property and equipment is collateralized under financing
arrangements.

6. CAPITAL LEASE OBLIGATIONS

    The Company has entered into capital lease agreements to acquire certain
equipment. Property and equipment includes the following amounts for leases that
have been capitalized.

<TABLE>
<CAPTION>
                                                     DECEMBER 31,   SEPTEMBER 30,
                                                         1998           1999
                                                     ------------   -------------
                                                                     (UNAUDITED)
<S>                                                  <C>            <C>
Computers and software.............................   $5,188,489     $13,618,834
Accumulated amortization...........................     (349,716)     (2,102,220)
                                                      ----------     -----------
Total..............................................   $4,838,773     $11,516,614
                                                      ==========     ===========
</TABLE>

    Amortization of leased property is included in depreciation and amortization
expense.

                                      F-14
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. CAPITAL LEASE OBLIGATIONS (CONTINUED)

    Future minimum payments under capital lease obligations consist of the
following at September 30, 1999 (unaudited):

<TABLE>
<S>                                                           <C>
October 1, 1999 through December 31, 1999...................  $ 1,795,672
2000........................................................    5,265,287
2001........................................................    4,895,478
2002........................................................    2,231,941
2003........................................................       91,098
Thereafter..................................................       14,663
                                                              -----------
Total minimum lease payments................................   14,294,139
Amounts representing interest...............................   (2,458,141)
                                                              -----------
Present value of capital lease obligations..................   11,835,998
Current portion.............................................   (3,749,318)
                                                              -----------
Capital lease obligations, non-current                        $ 8,086,680
                                                              ===========
</TABLE>

7. DUE TO FORMER SHAREHOLDERS OF ACQUIRED BUSINESSES

    In connection with the acquisition of ACR in October 1998, the Company
issued to the sellers a $3,500,000 note bearing interest at 8.25% per annum. The
note, including accrued interest, was due and was paid in January 1999.

    As more fully disclosed in Note 2, the Company paid additional consideration
related to the acquisitions of ACR and IIT in the aggregate amount of
$7,326,735. The additional consideration was paid in April 1999.

                                      F-15
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. LONG-TERM DEBT

    Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31, 1998   SEPTEMBER 30, 1999
                                                              -----------------   ------------------
                                                                                     (UNAUDITED)
<S>                                                           <C>                 <C>
Note payable to a bank due June 30, 2001 and bearing
  interest at 9.0% per annum. The note is payable in monthly
  installments of principal and interest of $6,644 with all
  unpaid principal and interest due at maturity. The note is
  secured by a mortgage on the real property purchased with
  the proceeds and with a $79,929 letter of credit pledged
  as additional security....................................     $  639,517           $   623,352
Note payable to a bank due July 21, 2001 and bearing
  interest at 9.0% per annum. The note is payable in monthly
  installments of principal and interest of $2,249 with all
  unpaid principal and interest due at maturity. The note is
  secured by a mortgage on the property purchased with the
  proceeds and with a $26,984 letter of credit pledged as
  additional security.......................................        217,689               212,306
Notes payable due on August 1, 2001 and bearing interest at
  13.0% per annum. The notes are payable in monthly
  installments of principal and interest of $77,429 and are
  collateralized by certain furniture, fixtures, equipment
  and software..............................................      2,081,563             1,567,264
Note payable due on September 1, 2001 and bearing interest
  at 13.0% per annum. The note is payable in monthly
  installments of principal and interest of $4,868 and is
  collateralized by certain furniture, fixtures, equipment
  and software..............................................        134,519               102,427
Note payable due on October 1, 2001 and bearing interest at
  17.1% per annum. The note is payable in monthly
  installments of principal and interest of $158,000 with
  all unpaid principal and interest due at maturity. This
  note is collateralized by certain software licenses.......      4,501,175             3,606,628
Notes payable due on February 1, 2002 and bearing interest
  at 15.0% per annum. The note is payable in monthly
  installments of principal and interest ranging from
  $35,730 to $40,348 and is collateralized by certain
  furniture, fixtures, equipment and software...............             --             1,840,915
Note payable due on October 1, 2002 and bearing interest at
  13.6% per annum. The note is payable in monthly
  installments of principal and interest of $58,522 and is
  collateralized by certain furniture, fixtures and
  equipment.................................................             --             1,850,736
Note payable due on April 1, 2002 and bearing interest at
  17.1% per annum. The note is payable in monthly
  installments of principal and interest of $78,650 and is
  collateralized by certain furniture, fixtures, equipment
  and software..............................................             --             2,127,287
</TABLE>

                                      F-16
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. LONG-TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                              DECEMBER 31, 1998   SEPTEMBER 30, 1999
                                                              -----------------   ------------------
                                                                                     (UNAUDITED)
<S>                                                           <C>                 <C>
Note payable due on January 1, 2002 and bearing interest at
  11.9% per annum. The note is payable in monthly
  installments of principal and interest of $209,028 and is
  collateralized by certain software licenses...............     $       --           $ 1,911,653
Notes payable due on July 1, 2003 and bearing interest at
  14.1% per annum. The notes are payable in monthly
  installments of principal and interest of $94,894 and are
  collateralized by certain equipment and software..........             --             2,743,634
Notes payable due on June 1, 2002 and bearing interest at
  14% per annum. The note is payable in monthly installments
  of principal and interest of $396,694 and is
  collateralized by certain equipment and software..........             --            10,680,130
Note payable due on September 1, 2002 and bearing interest
  at 13.4% per annum. The note is payable in monthly
  installments of principal and interest of $68,614 and is
  collateralized by certain furniture, fixtures, equipment
  and software..............................................             --             2,022,312
Note payable due on May 1, 2006 and bearing interest at 7.5%
  per annum. The note is payable in monthly installments of
  principal and interest of $44,063 with all unpaid
  principal and interest due at maturity. The note is
  secured by a mortgage on the real property purchased with
  the proceeds..............................................             --             7,028,874
Note payable due on March 1, 2001 and bearing interest at
  6.6% per annum. The note is payable in monthly
  installments of principal and interest ranging from
  $19,908 to $28,237 and is collateralized by the general
  assets of the Company.....................................             --               633,688
Notes payable due between February 28, 2003 and March 11,
  2004 and bearing interest at rates ranging from 8.25% to
  9.99% per annum. The notes are payable in monthly
  installments of principal and interest ranging from $542
  to $1,274 and are secured by automobiles purchased with
  the proceeds..............................................        107,630                93,225
                                                                 ----------           -----------
Total.......................................................      7,682,093            37,044,431
Less: current portion.......................................      1,757,588            10,055,592
Less: discounts.............................................        692,711               503,790
                                                                 ----------           -----------
                                                                 $5,231,794           $26,485,049
                                                                 ==========           ===========
</TABLE>

                                      F-17
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. LONG-TERM DEBT (CONTINUED)

    Aggregate maturities of long-term debt at September 30, 1999 are as follows
(unaudited):

<TABLE>
<S>                                                           <C>
October 1, 1999 through December 31, 1999...................  $ 2,319,476
2000........................................................   11,294,001
2001........................................................   11,892,297
2002........................................................    4,439,325
2003........................................................      390,045
2004 and thereafter.........................................    6,709,287
                                                              -----------
Total.......................................................  $37,044,431
                                                              ===========
</TABLE>

    At December 31, 1998 and September 30, 1999, the fair value of long-term
debt approximates its carrying value.

9. SHORT-TERM OBLIGATIONS EXPECTED TO BE REFINANCED

    At December 31, 1998, the Company had outstanding current liabilities for
the purchase of fixed assets of $7,500,000, for which the Company had
outstanding commitments to finance on a long-term basis. The Company executed
the financings in early 1999, and therefore classified at December 31, 1998
$5,282,450, or the portion of the $7,500,000 financing that is due after 1999,
as long-term. The remaining $2,217,550, which is due in 1999, is included in
accounts payable at December 31, 1998. These obligations bear interest at rates
from 9% to 17% per annum, and will mature in varying installments through
January 2002. The balance sheet at September 30, 1999 includes these amounts in
long-term debt.

10. INITIAL PUBLIC OFFERING

    In April 1999 the Company completed an initial public offering of 10,350,000
shares of common stock which resulted in net proceeds of approximately
$132,810,000, after deducting underwriting discounts, commissions and offering
expenses. Upon the closing of the offering, the Series A Preferred Stock and
Series B Preferred Stock automatically converted into 46,349,289 shares of
common stock, and the common stock subject to repurchase no longer became
mandatorily redeemable by the Company upon the occurrence of certain events.
(See Notes 11 and 12.)

11. PREFERRED STOCK

    The Company has authorized the issuance of up to 225,000 shares of preferred
stock, par value $.01 per share, of which 110,000 has been designated Series A
Convertible Preferred Stock ("Series A") and 115,000 has been designated Series
B Convertible Redeemable Preferred Stock ("Series B"). During 1998, the Company
issued 55,000 shares of Series A for a total aggregate purchase price of $33
million, and 59,279 shares of Series B for a total aggregate purchase price of
$62.2 million, including $22.1 million of Series B issued upon conversion of
notes payable. Upon the conversion of notes payable with a face value of
$9,095,000 into Series B, unamortized debt discount of approximately $1,350,000
was recorded as additional interest expense.

                                      F-18
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. PREFERRED STOCK (CONTINUED)

SERIES A:

CONVERSION

    The Series A outstanding at December 31, 1998 automatically converted into
shares of common stock upon the closing of the initial public offering in April
1999. Each share of Series A was converted into 337.5 shares of common stock.

DIVIDENDS

    The holders of the Series A were entitled to receive cumulative quarterly
dividends at the annual rate of $48 per share. All accrued dividends were paid
at the closing of the initial public offering in April 1999.

VOTING RIGHTS

    Each share of Series A had substantially the same voting rights as the
number of shares of common stock into which it was converted. In addition,
certain corporate actions required the consent of two-thirds of the outstanding
shares of Series A.

SERIES B:

CONVERSION

    The Series B outstanding at December 31, 1998 automatically converted into
shares of common stock upon the closing the initial public offering in April
1999. Each share of Series B was converted into 468.75 shares of common stock.

DIVIDENDS

    The holders of the Series B were entitled to receive cumulative quarterly
dividends at the annual rate of $84 per share. All accrued dividends were paid
at the closing of the initial public offering in April 1999.

VOTING RIGHTS

    Each share of Series B had substantially the same voting rights as the
number of shares of common stock into which it was converted.

12. COMMON STOCK SUBJECT TO REPURCHASE

    The Company sold 2,015,625 shares of common stock to three officers that at
December 31, 1998 required the Company to repurchase the common stock at fair
value in the event of disability or death. The Company also has the option to
repurchase 1,078,125 shares of common stock sold to two officers for an
aggregate purchase price of $200, if the officers owning the shares are
terminated for cause, and has the option to repurchase 937,500 shares of common
stock sold to another officer for approximately $350,000, if that officer is
terminated for cause. All of the shares of common stock subject to repurchase
may be repurchased by the Company for an aggregate purchase price of
approximately $350,000 if the officers owning the shares terminate their
employment prior to May 2000. These agreements were amended on February 25, 1999
to void the repurchase obligation upon death or disability upon the closing of
an initial public offering of the common stock.

                                      F-19
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. COMMON STOCK SUBJECT TO REPURCHASE (CONTINUED)

    The Company initially recorded the common stock subject to repurchase at an
amount equal to the consideration received of $1,010,000 (purchase price of
$1,057,500, less $47,500 represented by notes receivable). The common stock
subject to repurchase has been accreted to its estimated fair value during all
periods the common stock was subject to repurchase through charges to additional
paid-in capital. The estimated value per share of $2.08 at December 31, 1998 was
determined through an independent appraisal of the Company's common stock.
Additional accretion in 1999 prior to the April initial public offering was
recorded based on valuations consistent with the expected initial public
offering price. As a result of the initial public offering in April 1999, these
shares are no longer subject to mandatory repurchase by the Company, and their
accreted value of $28,083,069 has been reclassified to stockholders' equity.

13. STOCK WARRANTS

    In 1998, in connection with the issuance of debt or capital leases, the
Company issued warrants to purchase 1,600,067 shares of common stock and
warrants to purchase 971 shares of Series B. The warrants to purchase Series B
converted into warrants to purchase 455,156 shares of common stock in April 1999
upon the closing of the initial public offering. The warrants expire from 2003
through 2008, and are exerciseable for $2.24 or $2.29 per share.

    Upon issuance, the Company estimated the fair value of the warrants using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 5.50%, dividend yield of 0%; volatility
factor of the expected market price of the Company's common stock of 40%; and a
weighted-average expected life of the warrant of 10 years. The range of values
assigned to the warrants was $.53 to $1.39 per share, and the total value
assigned was $2,740,329. This amount was recorded as additional paid-in capital,
and a corresponding debt discount was recorded that is being recognized as
additional interest expense over the term of the related debt or capital lease.

    Also, as discussed in Note 2, the Company issued warrants to purchase
168,750 shares of common stock in connection with the acquisition of IIT and
ACR. These warrants expire in 2008 and are exerciseable for $10.67 per share.
The Company estimated the value of these warrants considering the various terms,
including the exercise price of the warrants, the estimated fair value of the
Company's common stock, and the length of time the warrants are exercisable. The
aggregate value assigned to these warrants was $90,000.

    During 1999, warrants to purchase 487,298 shares of common stock were
exercised for proceeds of $1,093,260. A summary of warrants outstanding at
September 30, 1999 is as follows (unaudited):

<TABLE>
<CAPTION>
NUMBER OF SHARES   EXERCISE PRICE   EXPIRATION DATE
- ----------------   --------------   ---------------
 COMMON STOCK:
<S>                <C>              <C>
       26,786          $ 2.24        December 2003
      111,607          $ 2.24            June 2004
    1,429,533          $ 2.29       September 2008
       75,000          $10.67       September 2008
       93,750          $10.67         October 2008
</TABLE>

                                      F-20
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. SHARES RESERVED FOR FUTURE ISSUANCE

    As of December 31, 1998, the Company had reserved 18,562,491 shares and
27,786,798 shares of common stock for issuance upon the conversion of the Series
A and Series B, respectively. These shares were issued in April 1999 upon
conversion. In addition, the Company at December 31, 1998 had reserved 7,023,375
shares of common stock for future issuance upon the exercise of stock options
eligible for granting under the 1998 Stock Option Plan (see Note 15), and
2,223,972 shares of common stock attributable to outstanding warrants issued in
1998.

15. STOCK COMPENSATION PLAN

    Effective July 2, 1998, the Company adopted the 1998 Stock Option Plan of
USINTERNETWORKING, Inc. ("the Plan") which is administered by the Compensation
Committee of the Board of Directors. The Plan, as amended, provides for the
granting of either qualified or non-qualified options to purchase an aggregate
of up to 7,023,375 shares of common stock to eligible employees, officers,
directors and consultants of the Company.

    A summary of the Company's stock option activity follows:

<TABLE>
<CAPTION>
                                                       FOR THE PERIOD FROM
                                                         JANUARY 1, 1998
                                                       (DATE OF INCEPTION)
                                                             THROUGH           NINE MONTHS ENDED
                                                        DECEMBER 31, 1998      SEPTEMBER 30, 1999
                                                       --------------------   --------------------
                                                                   WEIGHTED               WEIGHTED
                                                                   AVERAGE                AVERAGE
                                                       NUMBER OF   EXERCISE   NUMBER OF   EXERCISE
                                                        OPTIONS     PRICE      OPTIONS     PRICE
                                                       ---------   --------   ---------   --------
                                                                                  (UNAUDITED)
<S>                                                    <C>         <C>        <C>         <C>
Outstanding at beginning of year.....................         --    $  --     2,523,375    $1.76
Granted..............................................  2,563,688     1.76     5,801,850     7.12
Exercised............................................         --               (877,850)    3.20
Forfeited............................................    (40,313)    1.76      (469,343)    3.21
Outstanding at end of year...........................  2,523,375     1.76     6,978,033     6.36
Exercisable at end of year...........................  2,523,375              6,978,033
</TABLE>

    The exercise price for all options outstanding as of December 31, 1998 is
$1.76. These options vested immediately upon the date of grant. Shares of common
stock purchased pursuant to these options will be subject to the Company's right
to repurchase them at the option exercise price upon the termination of the
holder's employment or business relationship with the Company. The repurchase
right will lapse with respect to one-third of the shares purchasable upon
exercise of an option on the first anniversary of the date of grant of the
option. The repurchase right with respect to the remainder of the shares
purchasable upon exercise of an option will lapse in equal quarterly
installments over the subsequent eight calendar quarters. The options expire 10
years from the date of issuance. At December 31, 1998, the weighted-average
remaining contractual life of outstanding options is 9.7 years.

    For the year ended December 31, 1998, pro forma net loss and loss per share
information required by Statement No. 123 was determined using the minimum value
method. The minimum value method calculates the fair value of options as the
excess of the estimated fair value of the underlying stock at the date of grant
over the present value of both the exercise price and the expected dividend
payments, each discounted at the risk-free rate, over the expected life of the
option. In determining the estimated fair value of granted stock options under
the minimum value method, the risk-free interest rate was

                                      F-21
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. STOCK COMPENSATION PLAN (CONTINUED)

assumed to be 5.50%, the dividend yield was estimated to be 0% and the expected
life of granted options was assumed to be four years.

    Because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the minimum value method and
other methods prescribed by Statement No. 123 do not necessarily provide a
single measure of the fair value of its employee stock options.

    The grant-date fair value of all options granted during 1998 using the
minimum value method was less than $.01, thus no pro forma information has been
presented. The exercise price at the grant-date of all options granted through
December 31, 1998 was greater than the market value of the underlying common
stock on the grant date, as determined by independent appraisal. As a result,
the Company has not recognized compensation expense related to these options.

    Certain options granted in 1999 are exercisable at prices less than the fair
market value of the Company's common stock at the date of grant. The Company
will record stock compensation expense of approximately $40.0 million as a
result of these 1999 option grants that will be recognized ratably over the
four-year period that the employees earn the right to retain the shares obtained
upon exercise of the stock options without regard to continued employment.

16. INCOME TAXES

    At December 31, 1998, the Company has a U.S. federal net operating loss
carryforward of $20 million. This carryforward expires in 2013. The amount
available to be used in any given year will be limited by operation of certain
provisions of the Internal Revenue Code. The Company also has state net
operating loss carryforwards available, the utilization of which will be
similarly limited. The Company has established a valuation allowance with
respect to these federal and state carryforwards.

<TABLE>
<S>                                                           <C>
Deferred tax assets:
  Net operating loss carryforwards..........................  $  7,855,560
  Start-up and organizational costs capitalized for tax
    purposes................................................     3,632,867
  Other.....................................................       192,230
Total deferred tax assets...................................    11,680,657
                                                              ------------
Deferred tax liabilities:
  Tax over book depreciation................................       314,930
  Other.....................................................       467,169
                                                              ------------
Total deferred tax liability................................       782,099
                                                              ------------
Net future income tax benefit...............................    10,898,558
Valuation allowance for net deferred tax assets.............   (10,898,558)
                                                              ------------
Net deferred tax assets.....................................  $         --
                                                              ============
</TABLE>

                                      F-22
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. INCOME TAXES (CONTINUED)

    The reconciliation of the reported income tax expense to the amount that
would result by applying the U.S. federal statutory rate to net loss during the
development stage is as follows:

<TABLE>
<S>                                                           <C>
Tax benefit at U.S. statutory rate..........................  $(11,358,659)
State income taxes, net of federal benefit..................      (984,188)
Non-deductible goodwill.....................................       559,839
Non-deductible interest expense.............................       704,166
Non-deductible transactions costs...........................       154,777
Other.......................................................        25,507
Valuation allowance.........................................    10,898,558
                                                              ------------
Total.......................................................  $         --
                                                              ============
</TABLE>

    The Company expects that its effective income tax rate in 1999 will be zero.

17. OPERATING LEASES

    The Company conducts primarily all of its operations from leased facilities
under operating leases that have terms of up to five years and generally contain
renewal options of two to three years and rent escalation clauses. Future
minimum payments under noncancelable operating leases with initial terms of one
year or more consist of the following at December 31, 1998:

<TABLE>
<S>                                                           <C>
1999........................................................  $1,441,681
2000........................................................   1,402,328
2001........................................................     954,563
2002........................................................     684,799
2003........................................................     158,549
                                                              ----------
                                                              $4,641,920
                                                              ==========
</TABLE>

    The Company incurred rent expense of $718,416 during the period from January
14, 1998 (date of inception) through December 31, 1998.

18. EMPLOYEE BENEFIT PLAN

    The Company established a defined contribution benefit plan effective July
1, 1998. The plan covers substantially all employees who have 30 days of service
with the Company. Participants may contribute from 1% to 15% of their annual
compensation to the plan. In addition, the Company may make discretionary
matching and profit-sharing contributions to the plan. No contributions were
made by the Company in 1998.

19. RELATED PARTY TRANSACTIONS

    During 1998, the Company received a non-interest bearing loan from an
officer in the amount of $1,000,000. The loan was subsequently converted into
1,667 shares of Series A Convertible Preferred Stock.

    In January 1999, the Company entered into an agreement with U S WEST, a
common stockholder, which provides U S WEST with the exclusive rights to market
iMAP services in their fourteen-state service region. The Company will make its
iMAP services available to U S WEST at discounted prices

                                      F-23
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19. RELATED PARTY TRANSACTIONS (CONTINUED)

which U S WEST can in turn sell to the end user. Under this agreement revenue
will be recognized as the iMAP services are provided, the Company will invoice U
S WEST for their services, in accordance with the terms of this agreement. In
addition, under the terms of the agreement, the Company provides U S WEST with
training and technical support. For the first year of the agreement, these
training and technical support services will be provided at no cost to U S WEST;
beginning in the thirteenth month the Company will invoice U S WEST for these
services at prevailing rates. The Company will expense the cost of these
services as incurred.

    In September 1999, the Company loaned $2,250,000 to an officer to purchase
562,500 shares of common stock. The loan is evidenced by a full recourse note
that bears interest at 5% per annum, is payable on or before July 31, 2000. The
Company has classified the note as a reduction of stockholders' equity at
September 30, 1999.

20. BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION

    During 1998 and through June 1999, the Company was organized into two
business units -- IMAP and Professional IT Services. In the third quarter of
1999, the Company changed the manner in which it manages its operations and
reports the activities of those operations. The Company is now organized into
seven business units that offer unique software solutions. These operating
segments have been aggregated for reporting purposes into two segments, as
follows:

    - ENTERPRISE WIDE SOLUTIONS -- provides enterprise relationship management,
      financial management, human resource, and professional services automation
      software product offerings; and

    - E-COMMERCE AND WEB BASED SOLUTIONS -- provides electronic commerce,
      enhanced messaging and decision support product offerings.

    Management believes that the aggregation of the operating segments helps
users of the financial statements better understand performance. The combined
operating segments have similar economic characteristics and products and meet
other criteria for aggregation. Both business units utilize an Internet-based
network, which enables clients to use leading business software applications
without the burden of owning, or managing the underlying technology. These
services are delivered to customers through a network of Enterprise Data Centers
located in Maryland, California, Amsterdam and Tokyo.

    The Company evaluates the performance of its new operating segments based on
contriubtion margin, or revenues less variable direct costs. This contribution
margin excludes an allocation of network and infrastructure costs, selling,
general and administrative costs, non-cash stock compensation expense, and
depreciation and amortization.

    The Company does not prepare information regarding segment assets. The
accounting policies used by the reportable segments are the same as those used
by the Company as described in Note 1 to the consolidated financial statements.

                                      F-24
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20. BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION (CONTINUED)

    The following table sets forth information on the Company's reportable
segments. The 1998 data has been restated to conform to the new segment
classifications.

<TABLE>
<CAPTION>
                                             FOR THE PERIOD FROM   FOR THE PERIOD FROM
                                              JANUARY 14, 1998      JANUARY 14, 1998
                                             (DATE OF INCEPTION)   (DATE OF INCEPTION)
                                                   THROUGH               THROUGH         NINE MONTHS ENDED
                                              DECEMBER 31, 1998    SEPTEMBER 30, 1998    SEPTEMBER 30, 1999
                                             -------------------   -------------------   ------------------
                                                                                 (UNAUDITED)
<S>                                          <C>                   <C>                   <C>
Revenue:
  Enterprise Wide Solutions................      $2,138,290             $515,488            $10,774,249
  E-Commerce and Web Based Solutions.......       1,984,159                   --             10,077,465
                                                 ----------             --------            -----------
  Consolidated.............................      $4,122,449             $515,488            $20,851,714
                                                 ==========             ========            ===========
Segment operating profit:
  Enterprise Wide Solutions................      $  (20,876)            $172,571            $ 5,610,255
  E-Commerce and Web Based Solutions.......         718,214                   --              1,343,761
                                                 ----------             --------            -----------
  Consolidated.............................      $  697,338             $172,571            $ 6,954,016
                                                 ==========             ========            ===========
</TABLE>

    A reconciliation of segment operating loss to net loss during the periods
presented is as follows:

<TABLE>
<CAPTION>
                                             FOR THE PERIOD FROM   FOR THE PERIOD FROM
                                              JANUARY 14, 1998      JANUARY 14, 1998
                                             (DATE OF INCEPTION)   (DATE OF INCEPTION)
                                                   THROUGH               THROUGH         NINE MONTHS ENDED
                                              DECEMBER 31, 1998    SEPTEMBER 30, 1998    SEPTEMBER 30, 1999
                                             -------------------   -------------------   ------------------
<S>                                          <C>                   <C>                   <C>
Segment operating profit for all
  segments.................................     $    697,338          $    172,571          $  6,954,016
Network and infrastructure costs...........       (2,185,893)                   --           (11,360,299)
General and administrative.................      (19,426,575)          (10,407,416)          (15,841,863)
Sales and marketing........................       (5,123,334)           (1,802,383)          (24,552,985)
Product research and development...........         (690,388)             (259,181)           (2,005,107)
Non-cash stock compensation expense........         (231,135)              (90,455)           (6,805,486)
Depreciation and amortization..............       (3,179,648)             (269,134)          (14,793,756)
Interest income............................          367,411               307,335             2,146,810
Interest expense...........................       (2,681,088)              (74,551)           (2,793,399)
                                                ------------          ------------          ------------
Net loss...................................     $(32,453,312)         $(12,423,214)         $(69,052,069)
                                                ============          ============          ============
</TABLE>

    Revenues from one customer of the Company's Enterprise Wide Solutions
segment accounted for approximately 16% of the Company's consolidated revenue
for the nine months ended September 30, 1999.

21. COMMITMENTS

    As of March 1999, the Company had entered into forward looking commitments
to purchase software and advertising totaling $22.5 million. The agreement
provided for eight minimum payments of $2.5 million to be paid over eight fiscal
quarters commencing on March 31, 1999, for the purchase of software licenses.
Additionally, the agreement provided for eight quarterly minimum payments of
$312,500 commencing in March 1999 for co-marketed print advertising campaigns.
These commitments

                                      F-25
<PAGE>
                            USINTERNETWORKING, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21. COMMITMENTS (CONTINUED)

when paid were recorded by the Company in accordance with its software licenses
and advertising cost policies as more fully described in Note 1.

    In June 1999, the Company renegotiated this agreement to terminate upon
payment of the June 1999 quarterly payments.

22. SUBSEQUENT EVENTS

    On October 8, 1999, the Company purchased the assets of Conklin & Conklin,
Inc. ("Conklin"), a comprehensive provider of Lawson financial and human
resources system implementation services and a certified reseller of Lawson
software licenses. The purchase price consisted of cash of $8.0 million, assumed
liabilities of $0.6 million, and a $2.0 million secured note. The secured note
is due on October 8, 2001, and bears interest at 10% payable monthly. In
addition, Conklin's stockholders will be entitled to cash contingent payments of
up to $4.6 million. The contingent consideration will be payable based on the
achievement of specified financial milestones over a 26 month period, and any
such payment will result in the recording of additional goodwill. Goodwill of
approximately $9.4 million was recorded at the acquisition date, and is being
amortized over its estimated useful life of 5 years.

    In October and November 1999, the Company issued $125,000,000 of convertible
subordinated notes, due November 1, 2004. The net proceeds from the issuance
were approximately $120,l00,000. The notes pay interest semi-annually on May 1
and November 1 at 7% per annum, and are convertible into common stock at a price
of $24.85 per common share.

    In November 1999, the Board of Directors approved a 3 for 2 stock split of
common stock, options and warrants for holders of record on December 3, 1999.
Accordingly, all share and per share data including stock option, warrant and
loss per share information have been restated in the consolidated financial
statements to retroactively reflect the stock split.

                                      F-26
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
I.I.T. Holding, Inc.

    We have audited the accompanying consolidated balance sheets of I.I.T.
Holding, Inc. and subsidiaries as of December 31, 1996 and 1997, and
September 7, 1998, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years ended December 31,
1996 and 1997, and for the period from January 1, 1998 through September 7,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the 1996 and 1997 financial
statements of International Information Technology IIT, C.A., a wholly-owned
subsidiary, which statements reflect total assets of $68,247 and $76,361 as of
December 31, 1996 and 1997, respectively, and total revenues of $3,336 and
$147,797 for the period from March 6, 1996 (inception) through December 31, 1996
and for the year ended December 31, 1997, respectively. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for International Information
Technology IIT, C.A., is based solely on the report of the other auditors.

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

    In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of I.I.T. Holding, Inc.
and subsidiaries as of December 31, 1996 and 1997, and September 7, 1998 and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1996 and 1997, and for the period from January 1, 1998
through September 7, 1998, in conformity with generally accepted accounting
principles.

Baltimore, Maryland                                        /s/ Ernst & Young LLP

March 23, 1999

                                      F-27
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
USINTERNETWORKING, Inc.

    We have audited the accompanying balance sheets of International Information
Technology IIT, C.A., at December 31, 1997 and for the period from March 5, 1996
(date of inception) through December 31, 1996, and the related statements of
operations, changes in stockholders' equity and cash flows for the years then
ended (not presented separately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of International Information
Technology IIT, C.A. at December 31, 1997 and for the period from March 5, 1996
(date of inception) through December 31, 1996, and the results of its operations
and its cash flows for the years then ended in conformity with U.S. generally
accepted accounting principles.

    At December 31, 1997 and 1996, the accompanying financial statements have
been prepared assuming that the Company will continue its ongoing operations,
despite of the negative stockholder's equity, which shows uncertainty about the
Company's ability to continue in operation. These financial statements do not
include any adjustments that could result as a consequence of this uncertainty.

BASSAN & ASSOCIADOS S.C.
Ana Escudero de D'Aguiar
Certified Public Accountant
CPA D.F. Venezuela No. 7558
August 20, 1998

                                      F-28
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                                         ---------------------
                                                           1996        1997      SEPTEMBER 7, 1998
                                                         --------   ----------   -----------------
<S>                                                      <C>        <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents............................  $ 69,563   $   14,443       $  331,013
  Accounts receivable --trade, less allowance of
    $50,000 in 1998....................................   225,500      634,215        1,299,469
  Other current assets.................................     2,451       13,902           68,799
                                                         --------   ----------       ----------
Total current assets...................................   297,514      662,560        1,699,281
Equipment and vehicles:
  Computer equipment...................................    30,407      116,850          161,449
  Vehicles.............................................    45,119       45,119               --
                                                         --------   ----------       ----------
                                                           75,526      161,969          161,449
  Less: accumulated depreciation.......................   (25,831)     (56,084)         (55,700)
                                                         --------   ----------       ----------
                                                           49,695      105,885          105,749
Other assets...........................................       654          618               --
                                                         --------   ----------       ----------
Total assets...........................................  $347,863   $  769,063       $1,805,030
                                                         ========   ==========       ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Bank overdraft.......................................  $     --   $  157,056       $       --
  Accounts payable.....................................    13,899        7,162           53,787
  Accrued expenses.....................................    60,000      366,685        1,974,395
  Current portion of note payable......................     4,443       10,036               --
  Current portion of capital lease obligations.........        --       18,230            9,803
  Unsecured demand note payable to stockholder, non-
    interest bearing...................................    99,951       62,160            8,500
  Client advances......................................    55,824           --               --
  Current deferred income taxes........................    49,270           --               --
                                                         --------   ----------       ----------
Total current liabilities..............................   283,387      621,329        2,046,485
Note payable...........................................    10,676           --               --
Capital lease obligations, net of current portion......        --       15,953            8,596
Deferred income taxes..................................     9,103           --               --
Commitments and contingent liabilities.................        --           --               --
Stockholders' equity (deficit):
  Common stock.........................................     2,724        3,197              475
  Additional paid-in capital...........................        --    1,001,843        1,004,565
  Accumulated other comprehensive income (loss)........       835      (20,918)          21,365
  Retained earnings (deficit)..........................    41,138     (852,341)      (1,276,456)
                                                         --------   ----------       ----------
                                                           44,697      131,781         (250,051)
                                                         --------   ----------       ----------
Total liabilities and stockholders' equity.............  $347,863   $  769,063       $1,805,030
                                                         ========   ==========       ==========
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-29
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                      FOR THE PERIOD
                                                        YEAR ENDED DECEMBER 31        JANUARY 1, 1998
                                                       ------------------------           THROUGH
                                                         1996           1997         SEPTEMBER 7, 1998
                                                       --------      ----------      -----------------
<S>                                                    <C>           <C>             <C>
Consulting revenue...................................  $747,023      $2,812,011          $4,405,560
Cost of revenue......................................   519,261       1,881,031           2,976,499
                                                       --------      ----------          ----------
Gross profit.........................................   227,762         930,980           1,429,061
Operating expenses:
  General and administrative.........................   131,037         778,342           1,803,611
  Sales and marketing................................    73,305          62,943               4,632
  Stock compensation expense.........................        --       1,002,316                  --
  Depreciation.......................................    13,556          30,253              27,580
                                                       --------      ----------          ----------
                                                        217,898       1,873,854           1,835,823
                                                       --------      ----------          ----------
Income (loss) from operations........................     9,864        (942,874)           (406,762)
Interest expense.....................................    (2,917)         (8,977)            (17,353)
                                                       --------      ----------          ----------
Income (loss) before provision for income taxes......     6,947        (951,851)           (424,115)
Provision (benefit) for income taxes.................    14,832         (58,372)                 --
                                                       --------      ----------          ----------
Net income (loss)....................................  $ (7,885)     $ (893,479)         $ (424,115)
                                                       ========      ==========          ==========
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-30
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                              ACCUMULATED
                                                ADDITIONAL       OTHER        RETAINED
                                      COMMON     PAID-IN     COMPREHENSIVE    EARNINGS
                                      STOCK      CAPITAL        INCOME        (DEFICIT)      TOTAL
                                     --------   ----------   -------------   -----------   ----------
<S>                                  <C>        <C>          <C>             <C>           <C>
Balances at January 1, 1996........   $1,000    $       --      $     --     $    49,023   $   50,023
  Issuance of common stock.........    1,724            --            --              --        1,724
  Comprehensive income:
    Net loss.......................       --            --            --          (7,885)      (7,885)
    Other comprehensive income--
      translation adjustment.......       --            --           835              --          835
                                                                                           ----------
  Total comprehensive income
    (loss).........................       --            --            --              --       (7,050)
                                      ------    ----------      --------     -----------   ----------
Balances at December 31, 1996......    2,724            --           835          41,138       44,697
  Stock grant to employees for no
    consideration..................      473     1,001,843            --              --    1,002,316
  Comprehensive income:
    Net loss.......................       --            --            --        (893,479)    (893,479)
    Other comprehensive income--
      translation adjustment.......       --            --       (21,753)             --      (21,753)
                                                                                           ----------
  Total comprehensive income
    (loss).........................       --            --            --              --     (915,232)
                                      ------    ----------      --------     -----------   ----------
Balances at December 31, 1997......    3,197     1,001,843       (20,918)       (852,341)     131,781
  Corporate reorganization.........   (2,722)        2,722            --              --           --
  Comprehensive income:
    Net loss.......................       --            --            --        (424,115)    (424,115)
    Other comprehensive income--
      translation adjustment.......       --            --        42,283              --       42,283
  Total comprehensive income
    (loss).........................       --            --            --              --     (381,832)
                                      ------    ----------      --------     -----------   ----------
Balances at September 7, 1998......   $  475    $1,004,565      $ 21,365     $(1,276,456)  $ (250,051)
                                      ======    ==========      ========     ===========   ==========
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-31
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               FOR THE PERIOD
                                                   YEAR ENDED DECEMBER 31      JANUARY 1, 1998
                                                   -----------------------         THROUGH
                                                     1996         1997        SEPTEMBER 7, 1998
                                                   ---------   -----------   -------------------
<S>                                                <C>         <C>           <C>
OPERATING ACTIVITIES
Net income (loss)................................  $ (7,885)   $ (893,479)       $ (424,115)
Adjustments to reconcile net loss to net cash
  (used in) provided by operating activities:
  Non-cash compensation expense..................        --     1,002,316                --
  Depreciation...................................    13,556        30,253            27,580
  Deferred taxes.................................    14,832       (58,372)               --
  Change in assets and liabilities:
    Accounts receivable..........................   (72,937)     (408,715)         (665,254)
    Other current assets.........................    (1,655)      (11,415)          (54,897)
    Other assets.................................        --            --               618
    Accounts payable.............................    13,899        (6,737)           46,625
    Accrued expenses.............................    59,200       306,685         1,607,710
    Client advances..............................    55,824       (55,824)               --
                                                   --------    ----------        ----------
Net cash provided by (used in) operating
  activities.....................................    74,834       (95,288)          538,267
INVESTING ACTIVITIES
Acquisition of equipment and vehicle.............   (19,989)      (41,779)          (44,948)
Sale of vehicle..................................        --            --            17,504
                                                   --------    ----------        ----------
Net cash used in investing activities............   (19,989)      (41,779)          (27,444)
FINANCING ACTIVITIES
Issuance of common stock.........................     1,724            --                --
Proceeds (repayments) from note payable to
  stockholder....................................    68,890       (37,791)          (53,660)
Bank overdraft...................................   (50,733)      157,056          (157,056)
Repayments of note payable.......................    (5,998)       (5,083)          (10,036)
Repayments of capital leases.....................        --       (10,482)          (15,784)
                                                   --------    ----------        ----------
Net cash provided by (used in) financing
  activities.....................................    13,883       103,700          (236,536)
Effect of exchange rate changes on cash..........       835       (21,753)           42,283
                                                   --------    ----------        ----------
Net increase (decrease) in cash and cash
  equivalents....................................    69,563       (55,120)          316,570
Cash and cash equivalents at beginning of year...        --        69,563            14,443
                                                   --------    ----------        ----------
Cash and cash equivalents at end of year.........  $ 69,563    $   14,443        $  331,013
                                                   ========    ==========        ==========
SUPPLEMENTAL INFORMATION
Interest paid....................................  $  2,917    $    8,977        $   19,735
                                                   ========    ==========        ==========
SCHEDULE OF NONCASH INVESTING ACTIVITIES
Property and equipment acquired under capital
  leases.........................................  $     --    $   44,465        $       --
                                                   ========    ==========        ==========
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-32
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REORGANIZATION AND BASIS OF PRESENTATION

    I.I.T. Holding, Inc. and subsidiaries ("the Company") provides internet
consulting, integration, and support services to commercial companies in the
United States and South America. I.I.T. Holding, Inc. was formed in February
1998 when the shareholders of International Information Technology Inc. and
International Information Technology IIT, C.A., enterprises under common
control, exchanged their stock for 100% of the stock of I.I.T. Holding, Inc. The
accompanying consolidated financial statements for all periods presented include
the combined financial position and results of operations of the companies
previously under common control. All significant intercompany transactions have
been eliminated in preparation of the consolidated financial statements.

CONVERSION TO U.S. DOLLARS

    The financial information for a Venezuelan subsidiary includes financial
information converted from Venezuelan Bolivares to U.S. Dollars.

    Assets and liabilities were converted at the rate in effect at the balance
sheet date and the statement of operations was converted at the average rate
during the periods.

USE OF ESTIMATES

    The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

    For purposes of the statement of cash flows, the Company considers all
highly-liquid instruments, including certificates of deposit, purchased with a
maturity of three months or less to be cash equivalents.

CONCENTRATION OF CREDIT RISK

    Financial instruments that subject the Company to concentrations of credit
risk consist primarily of accounts receivable. The Company grants credit in the
normal course of business to its clients. As part of this ongoing procedure, the
Company monitors the creditworthiness of its clients. The Company does not
believe that it is subject to any unusual credit risk beyond the normal credit
risk inherent in its business.

    For the period ended September 7, 1998, two customers accounted for 24%
($1,042,674), and 10% ($457,784) of total revenue, and three customers accounted
for 38% ($508,212), 13% ($177,874) and 10% ($139,758) of accounts receivable at
September 7, 1998.

    For the year ended December 31, 1997, three clients accounted for 33%
($927,964), 17% ($478,042), and 11% ($309,321) of total revenues, and three
clients accounted for 44% ($279,055), 16% ($101,474), and 11% ($69,764) of
accounts receivable at December 31, 1997. For the year ended December 31, 1996,
three clients accounted for 57% ($425,803), 29% ($216,637), and 11% ($82,173) of

                                      F-33
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

total revenues, and three clients accounted for 42% ($94,710), 24% ($54,120),
and 11% ($24,805) of accounts receivable at December 31, 1996.

REVENUE RECOGNITION

    Revenue is recognized in the period the services are performed.

ADVERTISING COSTS

    The Company expenses advertising costs as incurred. Advertising expense was
approximately $73,000 and $30,000 in 1997 and 1996, respectively. Advertising
expense was approximately $27,000 for the period ended September 7, 1998.

NEW ACCOUNTING PRONOUNCEMENTS

    In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS No.
130). SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components. SFAS No. 130 only impacts display as
opposed to actual amounts recorded. Comprehensive income includes net income and
all other non-owner changes in equity that are excluded from net income, such as
foreign currency translation adjustments. SFAS No. 130 was adopted in 1998.

    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS No. 131). This Statement requires that
public business enterprises report certain information about operating segments
in complete sets of financial statements of the enterprise and in condensed
financial statements of interim periods issued to shareholders. It also requires
that public business enterprises report certain information about their product
and services, the geographic areas in which they operate, and their major
customers. The Company adopted the provisions of SFAS No. 131 in 1998 which did
not have a significant impact on the Company's definition of operating segments
and related disclosures.

2. LEASES

    The Company has entered into various capital leases for computer equipment
during 1997. Computer equipment acquired under capital lease obligations was
approximately $44,000. Depreciation expense was $11,116 and $6,000 for the
period ended September 7, 1998 and for the year ended December 31, 1997,
respectively.

                                      F-34
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. LEASES (CONTINUED)

    Future lease payments under capital and operating leases are summarized as
follows:

<TABLE>
<CAPTION>
                                                          CAPITAL LEASES   OPERATING LEASES
                                                          --------------   ----------------
<S>                                                       <C>              <C>
Four months ended December 31, 1998.....................     $ 3,703           $ 14,884
  1999..................................................      13,503             54,454
  2000..................................................       5,844             39,165
  2001..................................................          --                517
                                                             -------           --------
    Total minimum lease payments........................      23,050           $109,020
                                                                               ========
Less amounts representing interest......................       4,651
                                                             -------
Present value of minimum lease payments (including
  current portion of $9,803)............................     $18,399
                                                             =======
</TABLE>

    Rent expense was $47,476, $32,000 and $17,000 for the period ended September
7, 1998, and for the years ended December 31, 1997 and 1996, respectively.

    Capital leases have effective interest rates which range from 6% to 25%.

3. ACCRUED EXPENSES

    Accrued expenses are comprised of the following:

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                                 ---------------------
                                                    1996        1997     SEPTEMBER 7, 1998
                                                 ----------   --------   -----------------
<S>                                              <C>          <C>        <C>
Accrued bonuses, payroll and payroll taxes.....   $60,000     $287,120       $1,763,891
Accrued consulting.............................        --       67,965          124,236
Accrued expenses...............................        --       11,600           86,268
                                                  -------     --------       ----------
    Total accrued expenses.....................   $60,000     $366,685       $1,974,395
                                                  =======     ========       ==========
</TABLE>

4. EMPLOYEE BENEFIT PLAN

    The Company has established a defined contribution benefit plan effective
January 1, 1998. The plan covers substantially all employees of the Company who
are 21 years of age or older. Participants may contribute up to 15% of their
annual compensation to the plan, and the Company matches up to 3% of annual
compensation. In 1998, the Company recorded contributions to the plan of
$37,502.

5. NOTE PAYABLE

    The note payable, which matured in 1997, was due to a financing
organization, and required monthly installments of $552, including interest at
9.90%.

6. COMMON STOCK

    Upon reorganization in February 1998, the Company was authorized to issue
100 shares of common stock with a par value of $5.00 per share. At September 7,
1998, 95 shares were issued and outstanding.

                                      F-35
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCK COMPENSATION EXPENSE

    In August 1997, the sole stockholder of the Company transferred 473 shares
of the outstanding common stock to management employees for no consideration. An
independent appraisal was obtained which estimated the fair value of the shares
on the date of transfer at $1,002,316. This transfer was treated as a
contribution to additional paid-in capital by the sole stockholder, with an
offsetting charge to compensation expense. In 1997, the Company recorded
compensation expense of $1,002,316 relating to the transfer of these shares.

8. INCOME TAXES

    Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and the tax basis of assets and
liabilities and are measured using the enacted tax rate and laws that will be in
effect when the differences are expected to reverse.

    The components of the income tax provision are as follows:

<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                                               -----------------------         PERIOD ENDED
                                                 1996           1997         SEPTEMBER 7, 1998
                                               --------       --------       -----------------
<S>                                            <C>            <C>            <C>
Current......................................  $    --        $     --           $      --
Deferred.....................................   14,832         (58,372)                 --
                                               -------        --------           ---------
    Total....................................  $14,832        $(58,372)          $      --
                                               =======        ========           =========
</TABLE>

    Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
net deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                                       DECEMBER 31,             SEPTEMBER 7,
                                                  -----------------------       ------------
                                                    1996           1997             1998
                                                  --------       --------       ------------
<S>                                               <C>            <C>            <C>
Deferred tax assets:
  Payroll accrual...............................  $ 23,964       $ 71,734         $ 53,801
  Bonus accrual.................................        --         30,934          365,395
  Other accruals................................     5,239         40,537           50,849
  Contributions.................................        40             --               --
  Stock compensation............................        --        219,150
  U.S. net operating loss carryforward..........    11,871        163,092          143,267
                                                  --------       --------         --------
  Total deferred tax assets.....................    41,114        525,447          613,312
  Valuation allowance for deferred tax assets...        --       (279,506)        (431,882)
                                                  --------       --------         --------
  Net deferred tax assets.......................    41,114        245,941          181,430
Deferred tax liabilities:
  Accounts receivable...........................   (90,065)      (235,744)        (176,808)
  Depreciation..................................    (9,103)        (9,570)          (3,995)
  Other.........................................      (319)          (627)            (627)
                                                  --------       --------         --------
                                                   (99,487)      (245,941)        (181,430)
                                                  --------       --------         --------
    Total net deferred tax liability............  $(58,373)      $     --         $     --
                                                  ========       ========         ========
</TABLE>

                                      F-36
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES (CONTINUED)

    At September 7, 1998 the Company's U.S. subsidiary has net operating loss
carryforwards of approximately $359,000 available to offset future taxable
income of the U.S. operations. These carryforwards begin to expire in 2012.

    The Company's Venezuelan subsidiary had cumulative net operating losses in
the amount of $110,000 through December 31, 1997. These net operating losses
resulted in net deferred tax assets of approximately $23,000 and $5,000 at
December 31, 1997 and 1996, respectively. Management has determined that it is
more likely than not that these net operating losses will not be utilized;
therefore, a full valuation allowance was recorded against these deferred tax
assets at December 31, 1997 and 1996. During the period from January 1, 1998
through September 7, 1998, the subsidiary utilized approximately $92,000 of the
net operating loss carryforward, and increased the valuation allowance by
approximately $2,500 to $25,500, which fully offsets the net deferred tax asset
of $25,500 at September 7, 1998. The remaining net operating loss carryforward
of approximately $18,000 will expire in 2000.

9. GEOGRAPHIC SEGMENT INFORMATION

    The Company is engaged in one business segment. This segment includes
providing internet consulting, integration, and support services principally to
commercial companies located throughout the United States and South America. The
following table presents information regarding geographic segments for the
period from January 1, 1998 through September 7, 1998 and the years ended
December 31, 1997 and 1996. There were no service transfers between the United
States and South America. Operating profit (loss) is total service revenue less
cost of service revenue, general and administrative expenses, sales and
marketing and depreciation.

<TABLE>
<CAPTION>
                                                              UNITED STATES   SOUTH AMERICA     TOTAL
                                                              -------------   -------------   ----------
<S>                                                <C>        <C>             <C>             <C>
Consulting revenue:..............................    1998      $3,896,502        $509,058     $4,405,560
                                                     1997       2,664,214         147,797      2,812,011
                                                     1996         743,687           3,336        747,023
Depreciation:....................................    1998      $   21,819        $  5,761     $   27,580
                                                     1997          26,919           3,334         30,253
                                                     1996          12,720             836         13,556
Operating profit (loss):.........................    1998      $ (382,361)       $(24,401)    $ (406,762)
                                                     1997        (844,036)        (98,838)      (942,874)
                                                     1996          39,481         (29,617)         9,864
Interest expense:................................    1998      $    5,420        $ 11,933     $   17,353
                                                     1997           4,782           4,195          8,977
                                                     1996           2,345             572          2,917
Identifiable assets:.............................    1998      $1,646,768        $158,262     $1,805,030
                                                     1997         692,702          76,361        769,063
                                                     1996         279,616          68,247        347,863
</TABLE>

10. IMPACT OF YEAR 2000 (UNAUDITED)

    Some older computer programs were written using two digits rather than four
to define the applicable year. As a result, those computer programs have
time-sensitive software that recognize a date using "00" as the year 1900 rather
than the year 2000. This could cause a system failure or

                                      F-37
<PAGE>
                     I.I.T. HOLDING, INC. AND SUBSIDIARIES
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. IMPACT OF YEAR 2000 (UNAUDITED) (CONTINUED)

miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.

    The Company is assessing the modifications or replacement of its software
that may be necessary for its computer systems to function properly with respect
to the dates in the year 2000 and thereafter. The Company does not believe that
the cost of either modifying existing software or converting to new software
will be significant or that the year 2000 issue will pose significant
operational problems for its computer systems.

                                      F-38
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

The Board of Directors
Advanced Communication Resources, Inc.

    We have audited the accompanying balance sheets of Advanced Communication
Resources, Inc. as of September 30, 1998 and December 31, 1997 and 1996, and the
related statements of operations, stockholders' equity and cash flows for the
years ended December 31, 1997 and 1996 and the nine months ended September 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

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

/s/ Mahoney Cohen & Company, CPA, P.C.

New York, New York
March 3, 1999

                                      F-39
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                                 BALANCE SHEETS

                                ASSETS (NOTE 5)

<TABLE>
<CAPTION>
                                                          DECEMBER 31,   DECEMBER 31,   SEPTEMBER 30,
                                                              1996           1997           1998
                                                          ------------   ------------   -------------
<S>                                                       <C>            <C>            <C>
Current assets:
  Cash..................................................   $   34,204     $  179,982     $   28,317
  Accounts receivable, net of allowance for
    uncollectible accounts of $81,050 in 1996, $50,000
    in 1997 and 1998 (Note 3)...........................      817,803      1,559,330      1,550,942
  Other current assets..................................       26,584         40,447         25,526
  Due from stockholders (Note 9)........................                          --         43,570
  Due from affiliate (Note 9)...........................      342,994             --             --
                                                           ----------     ----------     ----------
      Total current assets..............................    1,221,585      1,779,759      1,648,355
Property and equipment, net (Note 4)....................      144,190        110,857        180,026
Other assets............................................       20,360          6,788        167,278
                                                           ----------     ----------     ----------
                                                           $1,386,135     $1,897,404     $1,995,659
                                                           ==========     ==========     ==========

                                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable (Note 5)................................   $  725,000     $  525,000     $  400,000
  Accounts payable and accrued expenses.................      366,372        435,998        462,914
  Deferred income taxes (Note 7)........................       50,000        117,000        118,000
  Due to stockholders (Note 9)..........................        4,850        120,000             --
                                                           ----------     ----------     ----------
      Total current liabilities.........................    1,146,222      1,197,998        980,914
Commitments and contingencies (Note 10)
Stockholders' equity (Note 6):
Common stock, no par value:
  Authorized--200 shares
  Issued and outstanding--150 shares as of December 31,
    1996 and 1997; 100 shares as of September 30,
    1998................................................        1,500          1,500          1,000
  Retained earnings.....................................      288,413        747,906      1,013,745
                                                           ----------     ----------     ----------
                                                              289,913        749,406      1,014,745
  Less: Treasury stock, at cost.........................       50,000         50,000             --
                                                           ----------     ----------     ----------
      Total stockholders' equity........................      239,913        699,406      1,014,745
                                                           ----------     ----------     ----------
                                                           $1,386,135     $1,897,404     $1,995,659
                                                           ==========     ==========     ==========
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-40
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                     -----------------------------   NINE MONTHS ENDED
                                                     DECEMBER 31,    DECEMBER 31,      SEPTEMBER 30,
                                                         1996            1997              1998
                                                     -------------   -------------   -----------------
<S>                                                  <C>             <C>             <C>
Net revenue (Note 3)...............................   $4,848,112      $6,646,245         $5,416,982
Direct costs (Notes 6 and 9).......................    3,768,134       4,230,576          3,536,404
                                                      ----------      ----------         ----------
Gross margin.......................................    1,079,978       2,415,669          1,880,578
Operating expenses (Note 9):
  Selling..........................................      545,251         377,783            371,511
  General and administrative.......................    1,470,758       1,499,654          1,152,228
                                                      ----------      ----------         ----------
    Total operating expenses.......................    2,016,009       1,877,437          1,523,739
                                                      ----------      ----------         ----------
Income (loss) before provision for (benefit from)
  income taxes.....................................     (936,031)        538,232            356,839
Provision for (benefit from) income taxes..........      (86,947)         78,739             41,500
                                                      ----------      ----------         ----------
Net income (loss)..................................   $ (849,084)     $  459,493         $  315,339
                                                      ==========      ==========         ==========
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-41
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                      COMMON     RETAINED    TREASURY
                                                      STOCK      EARNINGS     STOCK       TOTAL
                                                     --------   ----------   --------   ----------
<S>                                                  <C>        <C>          <C>        <C>
Balance, January 1, 1996...........................   $1,500    $1,137,497   $     --   $1,138,997
Purchase of treasury stock (Note 6)................       --            --    (50,000)     (50,000)
Net loss...........................................       --      (849,084)        --     (849,084)
                                                      ------    ----------   --------   ----------
Balance, December 31, 1996.........................    1,500       288,413    (50,000)     239,913
Net income.........................................       --       459,493         --      459,493
                                                      ------    ----------   --------   ----------
Balance, December 31, 1997.........................    1,500       747,906    (50,000)     699,406
Retirement of treasury stock (Note 6)..............     (500)      (49,500)    50,000           --
Net income.........................................       --       315,339         --      315,339
                                                      ------    ----------   --------   ----------
Balance, September 30, 1998........................   $1,000    $1,013,745   $     --   $1,014,745
                                                      ======    ==========   ========   ==========
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                      F-42
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             YEAR ENDED            NINE MONTHS ENDED
                                                     ---------------------------   -----------------
                                                     DECEMBER 31,   DECEMBER 31,     SEPTEMBER 30,
                                                         1996           1997             1998
                                                     ------------   ------------   -----------------
<S>                                                  <C>            <C>            <C>
Cash flows from operating activities:
  Net income (loss)................................    $(849,084)     $ 459,493        $ 315,339
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating
    activities:
    Depreciation and amortization..................      101,480         80,062          100,681
    Deferred income taxes..........................      (90,000)        67,000            1,000
    Change in assets and liabilities:
      Accounts receivable..........................      903,600       (741,527)           8,388
      Other current assets.........................       (9,509)       (13,863)          14,921
      Accounts payable and accrued expenses........      (88,006)        69,626           26,916
                                                       ---------      ---------        ---------
        Net cash provided by (used in) operating
          activities...............................      (31,519)       (79,209)         467,245
                                                       ---------      ---------        ---------
Cash flows from investing activities:
  Purchase of property and equipment...............      (55,995)       (33,157)        (162,882)
  Payments for software development................           --             --         (167,278)
                                                       ---------      ---------        ---------
        Cash used in investing activities..........      (55,995)       (33,157)        (330,160)
                                                       ---------      ---------        ---------
Cash flows from financing activities:
  Proceeds from (repayments of) notes payable......      225,000       (200,000)        (125,000)
  Proceeds from (repayments of) loans from
    stockholders...................................           --        120,000         (120,000)
  Repayments of (advances to) loans to
    stockholders...................................       88,850         70,150          (43,750)
  Repayments from (advances to) affiliates.........     (213,668)       267,994               --
  Purchase of common stock for treasury............      (50,000)            --               --
                                                       ---------      ---------        ---------
        Net cash provided by (used in) financing
          activities...............................       50,182        258,144         (288,750)
                                                       ---------      ---------        ---------
Net increase (decrease) in cash....................      (37,332)       145,778         (151,665)
Cash, beginning of year............................       71,536         34,204          179,982
                                                       ---------      ---------        ---------
Cash, end of year/period...........................    $  34,204      $ 179,982        $  28,317
                                                       =========      =========        =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year/period for:
  Interest.........................................    $  60,421      $   6,132        $  23,047
  Income taxes.....................................    $  10,093      $  14,414        $  10,715
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

    In connection with the retirement of 50 shares of treasury stock, $500 was
charged against common stock and $49,500 was offset against retained earnings.

                            SEE ACCOMPANYING NOTES.

                                      F-43
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1--THE COMPANY

    Advanced Communication Resources, Inc. (the "Company") provides computer
consulting services, including consultation to Fortune 500, financial services
and other companies located in the New York metropolitan area.

    On October 2, 1998, 100% of the Company's stock was acquired by
USinternetworking, Inc.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

PROPERTY AND EQUIPMENT

    Property and equipment is recorded at cost. Machinery and equipment and
furniture and fixtures are depreciated by the straight-line method over
estimated useful lives ranging from three to five years. Leasehold improvements
are amortized over the shorter of the term of the lease or their estimated
useful life. Major additions and betterments are capitalized, and repairs and
maintenance are charged to operations in the period incurred.

INCOME TAXES

    The Company, with the consent of its stockholders, elected treatment as a
small business corporation under Subchapter S of the Internal Revenue Code and
the corresponding provisions of the New York State Franchise Tax law. Under the
aforementioned provisions, corporate income or loss and any tax credits earned
are included in the stockholders' individual income tax returns. The provision
for income taxes represents New York State Subchapter S and New York City
corporation taxes.

    The Company reports on a cash basis for income tax purposes. Deferred state
and local taxes are provided for the differences between the cash basis of
accounting and the accrual basis of accounting utilized in the preparation of
these financial statements. Pursuant to the cash method of accounting, revenue
is recorded when received, rather than when earned, and expenses are recorded
when paid, rather than when incurred.

    In connection with the sale of the Company's stock, the subchapter S status
for both federal and state purposes was technically terminated.

REVENUE RECOGNITION

    The Company recognizes revenue as professional services are performed. On
fixed fee engagements, which historically have not been material, revenue is
recognized as earned in accordance with the contract.

                                      F-44
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COMPUTER SOFTWARE COSTS

    Pursuant to Statement of Financial Accounting Standards No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
issued by the Financial Accounting Standards Board, the Company is required to
capitalize certain software development and production costs once technological
feasibility has been achieved. Software development costs incurred prior to
achieving technological feasibility as well as certain licensing costs are
charged to research and development expense as incurred. Computer software costs
of $207,997 at September 30, 1998 and $40,719 at December 31, 1997 and 1996,
included in other assets, are recorded at cost and amortized by the
straight-line method over three years. Amortization expense for the nine months
ended September 30, 1998 and the years ended December 31, 1997 and 1996 amounted
to $6,788, $6,786 and $6,877, respectively. Accumulated amortization amounted to
$40,719, $33,931, and $26,359 at September 30, 1998, December 31, 1997 and
December 31, 1996, respectively.

    Capitalized software development and purchased software costs are reported
at the lower of unamortized cost or net realizable value. Commencing upon
initial product release, these costs are amortized based on the straight-line
method over the estimated life, generally one year for internal software
development costs and twelve to thirty-six months for purchased software. Fully
amortized software costs are removed from the financial records.

ADVERTISING EXPENSES

    Advertising expenses amounting to approximately $7,600 and $20,500 for the
years ended December 31, 1997 and 1996, respectively, are charged to operations
during the period in which they are incurred.

NOTE 3--CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

    The Company provides consulting services to companies in the financial
services industry, primarily located in the New York metropolitan area. In the
normal course of business, payment for the Company's services is due generally
within thirty days of invoicing. Management's credit evaluation process and the
reasonably short collection terms help mitigate any risks. At September 30,
1998, three customers comprised approximately 8% ($124,000), 10% ($155,000) and
13% ($202,000) of the Company's outstanding accounts receivable. These same
three customers accounted for approximately 16% ($867,000), 12% ($650,000) and
11% ($596,000) of net revenue for the nine months ended September 30, 1998. At
December 31, 1997, two customers comprised approximately 17% ($265,000) and 21%
($327,000) of the Company's outstanding accounts receivable. These same two
customers accounted for approximately 23% ($1,529,000) and 19% ($1,263,000) of
net revenue for the year ended December 31, 1997. Additionally, three customers
accounted for approximately 26% ($1,261,000), 14% ($679,000) and 12% ($582,000)
of net revenue for the year ended December 31, 1996.

    The Company places its cash with financial institutions. Accounts are
insured by the Federal Deposit Insurance Corporation up to $100,000.

                                      F-45
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 4--PROPERTY AND EQUIPMENT

    Property and equipment is comprised of:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------   SEPTEMBER 30,
                                                                1996       1997         1998
                                                              --------   --------   -------------
<S>                                                           <C>        <C>        <C>
Machinery and equipment.....................................  $247,047   $280,204     $313,318
Furniture and fixtures......................................    45,042     45,042       65,528
Leasehold improvements......................................    57,079     57,079       68,742
                                                              --------   --------     --------
                                                               349,168    382,325      447,588
Less: Accumulated depreciation and amortization.............   204,978    271,468      267,562
                                                              --------   --------     --------
                                                              $144,190   $110,857     $180,026
                                                              ========   ========     ========
</TABLE>

NOTE 5--NOTES PAYABLE

    Notes payable consists of:

<TABLE>
<CAPTION>
                                                          DECEMBER 31,   DECEMBER 31,   SEPTEMBER 30,
                                                              1996           1997           1998
                                                          ------------   ------------   -------------
<S>                                                       <C>            <C>            <C>
Bank credit facility providing for a $750,000 line of
credit. Borrowings for advances under the line bear
interest at 1% above the prime rate (9.5% at December
31, 1997). The line is collateralized by substantially
all of the Company's assets and is personally guaranteed
by the Company's stockholders...........................    $     --       $400,000       $400,000

Demand note payable to a commercial bank which bore
interest at 1% in excess of the bank's prime lending
rate (9.75% at December 31, 1996); the note was
collateralized by all of the assets of the Company and
was personally guaranteed by the Company's
stockholders............................................     500,000             --             --

Installment note payable to a former stockholder which
bears interest at 75% of the prime lending rate of a
commercial bank (6.37% at December 31, 1997). The note
is collateralized by fifty shares of the Company's
treasury stock held in escrow by the former stockholder
and subordinated to the Company's bank debt. Principal
payments in the amount of $25,000 are to be made
quarterly through March 1, 1999 (A).....................     225,000        125,000             --
                                                            --------       --------       --------

                                                            $725,000       $525,000       $400,000
                                                            ========       ========       ========
</TABLE>

    On October 2, 1998 the credit facility was paid in full.

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

(A) The note contains provisions for minimum working capital, current ratio and
    stockholders' equity. The arrangement also limits compensation to the
    officers of the Company. At December 31, 1997 and 1996, the Company was in
    violation of certain financial covenants. Accordingly, the entire balance
    outstanding as of December 31, 1997 and 1996 has been classified as a
    current liability.

                                      F-46
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 6--STOCKHOLDERS' EQUITY

TREASURY STOCK

    On December 13, 1995, the Company entered into a stock purchase agreement to
purchase a stockholder's 33.3% common stock interest in the Company. The
purchase price for the stock was $50,000, paid upon execution of the purchase
agreement. The transaction was consummated during 1996.

    During September 1998, the Company retired 50 shares of treasury stock.

    In connection with the stock purchase agreement, the Company entered into a
one year $350,000 consulting agreement with the former stockholder with $50,000
payable upon closing and $25,000 per quarter payable over three years. In
addition, the Company entered into a non-compete agreement with the stockholder
covering one year for which the former stockholder was paid $100,000. The
amounts related to the above agreements were charged to operations in 1996 and
are included in the accompanying statement of operations.

NOTE 7--INCOME TAXES

    The provision for (benefit from) state and local income taxes for the
periods ended consists of:

<TABLE>
<CAPTION>
                                                          DECEMBER 31,   DECEMBER 31,   SEPTEMBER 30,
                                                              1996           1997           1998
                                                          ------------   ------------   -------------
<S>                                                       <C>            <C>            <C>
Current.................................................    $  3,053        $11,739        $40,500
Deferred................................................     (90,000)        67,000          1,000
                                                            --------        -------        -------
                                                            $(86,947)       $78,739        $41,500
                                                            ========        =======        =======
</TABLE>

    The Company's provision for local income taxes for the nine months ended
September 30, 1998 and for the years ended December 31, 1997 and 1996 was
determined under the alternative tax method.

    The Company's effective state and local tax rate for the nine months ended
September 30, 1998 and the years ended December 31, 1997 and 1996 was 11.6%,
17%, and 13.6%, respectively.

    Deferred state and local income taxes arise from the difference in the
amount of revenue and expenses reported on the accrual method of accounting for
financial statement reporting and the cash method of accounting for income tax
purposes.

NOTE 8--RETIREMENT PLAN

    The Company formed an IRS approved 401(k) plan during 1996, covering all
eligible full-time employees. Contributions to the plan are based upon a
matching contribution of 50% of employee contributions limited to 3% of salary.
For the nine months ended September 30, 1998 and years ended December 31, 1997
and 1996, 401(k) expense amounted to approximately $35,000, $45,000 and $47,000,
respectively.

NOTE 9--RELATED PARTY TRANSACTIONS

CONSULTING SERVICES

    The Company subcontracts the consulting services of two companies affiliated
through common minority ownership interests. For the year ended December 31,
1997, fees incurred and paid to these

                                      F-47
<PAGE>
                     ADVANCED COMMUNICATION RESOURCES, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 9--RELATED PARTY TRANSACTIONS (CONTINUED)

companies amounted to $125,000. There were no fees incurred during the year
ended December 31, 1996.

RENT EXPENSE

    The Company occupies office space leased by an affiliate. Total rent charged
to operations for the years ended December 31, 1997 and 1996 was approximately
$90,000 and $75,000, respectively. For the nine months ended September 30, 1998,
total rent expense charged to operations was approximately $71,000. These
amounts will not be repaid.

DUE FROM AFFILIATE

    During 1996, the Company made non-interest bearing advances to an affiliate.
These advances were repaid in full during 1997.

DUE TO/FROM STOCKHOLDERS

    Advances to and from the Company's stockholders are non-interest bearing and
are due (payable) on demand.

NOTE 10--COMMITMENTS AND CONTINGENCIES

LETTER OF CREDIT

    At December 31, 1997, the Company is contingently liable pursuant to a
letter of credit in the amount of $10,000 in favor of a trade organization's
legal defense fund. A certificate of deposit in the amount of $10,000
collateralizes the Company's obligation and is included in other current assets
in the accompanying balance sheets.

ASSIGNMENT OF LEASE

    On October 2, 1998, the Company assumed the lease obligation of an
affiliate. Future minimum lease payments, excluding escalation charges, are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S>                                                           <C>
1998-Remainder..............................................  $ 29,000
1999........................................................   120,000
2000........................................................   124,000
2001........................................................   128,000
2002........................................................   131,000
Thereafter..................................................    33,000
                                                              --------
                                                              $565,000..
                                                              ========
</TABLE>

EMPLOYEE AND CONTRACTOR AGREEMENTS

    The Company executes agreements with all technical employees and contractors
which contain certain provisions designed to protect the Company's intellectual
property. The agreements provide for an indefinite term, cancellable by either
party upon ten days written notice.

                                      F-48
<PAGE>
            UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

    The following Unaudited Pro Forma Consolidated Statement of Operations is
based on the historical consolidated financial statements of USI and the
historical financial statements of ACR and IIT during the periods presented,
adjusted to give effect to those acquisitions.

    The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1998 gives effect to the acquisitions as if they had occurred
as of January 1, 1998. The pro forma adjustments are described in the
accompanying notes and are based upon available information and certain
assumptions that management believes are reasonable.

    The Unaudited Pro Forma Consolidated Statement of Operations does not
purport to represent what USI's results of operations would actually have been
had the acquisitions in fact occurred on such dates or to project USI's results
of operations for any future date or period. The Unaudited Pro Forma
Consolidated Statement of Operations should be read in conjunction with the
consolidated financial statements of USI, ACR and IIT, and the related notes
thereto, included elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

    IIT was purchased in September 1998 and ACR was purchased in October 1998
and have been accounted for under the purchase method of accounting. The total
purchase price for each of the acquisitions has been allocated to the
identifiable tangible and intangible assets and liabilities of the applicable
acquired business based upon their fair values with the remainder allocated to
goodwill.

                                      P-1
<PAGE>
                            USINTERNETWORKING, INC.

            UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

                          YEAR ENDED DECEMBER 31, 1998

                 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                        HISTORICAL     PRO FORMA        PRO FORMA
                                        USI(1)      ACR        IIT        TOTAL      ADJUSTMENTS(2)    CONSOLIDATED
                                       --------   --------   --------   ----------   --------------    ------------
<S>                                    <C>        <C>        <C>        <C>          <C>               <C>
Revenues.............................  $    119    $7,489     $6,900     $ 14,508       $  (570)(a)      $ 13,938
                                       --------    ------     ------     --------       -------          --------
Costs and expenses:
  Cost of sales and services.........     3,111     4,868      3,781       11,760            --            11,760
  Selling, general and administrative
    expenses.........................    27,524     2,172      2,299       31,995         3,738 (b)        35,733
  Non-cash stock compensation
    expense..........................       231        --         --          231            --               231
                                       --------    ------     ------     --------       -------          --------
  Operating income (loss)............   (30,747)      449        820      (29,478)       (4,308)          (33,786)
  Interest income....................      (365)       --         --         (365)           --              (365)
  Interest expense...................     2,675        24          6        2,705            --             2,705
                                       --------    ------     ------     --------       -------          --------
Income (loss) before income taxes....   (33,057)      425        814      (31,818)       (4,308)          (36,126)
Provision for income taxes...........        --        14         --           14            --                14
                                       --------    ------     ------     --------       -------          --------
Net (loss) income....................  $(33,057)   $  411     $  814     $(31,832)      $(4,308)         $(36,140)
                                       ========    ======     ======     ========       =======          ========
Basic and diluted loss per common
  share attributable to common
  stockholders.......................                                                                    $ (38.55)
                                                                                                         --------
</TABLE>

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

(1) For the period from inception, January 14, 1998, to December 31, 1998.

(2) Pro forma adjustments to the unaudited consolidated statement of operations
    for the twelve months ended December 31, 1998 are made to reflect the
    following:

    (a) To record the elimination of intercompany revenue.

    (b) To record amortization of goodwill related to the acquisitions over the
       estimated useful life of 5 years. This additional amortization is not
       deductible for income tax purposes.

                                      P-2
<PAGE>
                                     [LOGO]
<PAGE>
                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

    The following table sets forth the various expenses, all of which will be
borne by the Company, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.

<TABLE>
<S>                                                           <C>
SEC Registration Fee........................................  $  102,692.70
NASD Filing Fee.............................................      30,500.00
Nasdaq National Market Listing Fee..........................               *
Transfer Agent Fee..........................................               *
Accounting Fees and Expenses................................               *
Legal Fees and Expenses.....................................               *
Printing and Mailing Expenses...............................               *
Miscellaneous...............................................               *
                                                              =============
Total.......................................................  $1,000,000.00*
                                                              -------------
</TABLE>

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

*   To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

    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.

                                      II-1
<PAGE>
    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.

    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 by 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 shareholders
that such indemnification is appropriate under the standard set forth in the
preceding sentence.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

    Set forth in chronological order is information regarding all securities
sold and employee stock options granted by the Company since January 14, 1998.
Further included is the consideration, if any, received by the Company for such
securities, and information relating to the section of the Securities Act of
1933, as amended (the "Securities Act"), and the rules of the Securities and
Exchange Commission under which exemption from registration was claimed. All
awards of options did not involve any sale under the Securities Act. None of
these securities were registered under the Securities Act. Except as described
below, no sale of securities involved the use of an underwriter and no
commissions were paid in connection with the sales of any securities.

                                      II-2
<PAGE>
1.  At various times during the period from January 1998 through March 22, 1999,
    the Company granted to employees and directors options to purchase an
    aggregate of 3,426,869 shares of Common Stock with exercise prices ranging
    from $2.64 per share to $6.00 per share. The issuance of these securities
    were not registered under the Securities Act in reliance upon Rule 701 of
    the rules promulgated under the Securities Act.

2.  On January 14, 1998, the Company issued 625,000 shares of Common Stock to
    Christopher R. McCleary for $5,000 in cash.

3.  On April 1, 1998, the Company issued 718,750 shares of Common Stock to
    Stephen E. McManus and Christopher Poelma for an aggregate purchase price of
    $57,500. The purchase price for the Common Stock was paid with cash and
    notes payable to the Company.

4.  On May 31, 1998, the Company issued 38,333.33 shares of Series A Preferred
    Stock for an aggregate purchase price of $23 million to the Initial
    Series A Investors. The purchase price for such shares was paid in cash at
    the time of the issuance. The Company simultaneously issued 1,666.67 shares
    of Series A Preferred Stock for an aggregate purchase price of $1 million to
    Christopher R. McCleary. The purchase price for such shares was paid by the
    forgiveness by Mr. McCleary of $1 million of debt that the Company owed him.

5.  On June 18, 1998, the Company issued 5,000 shares of Series A Preferred
    Stock for an aggregate purchase price of $3 million to certain of the
    Initial Series A Purchasers. The Company simultaneously issued 5,833.33
    shares of Series A Preferred Stock for $3.5 million to U S WEST. The
    purchase price for such shares was paid in cash at the time of issuance.

6.  On June 19, 1998, the Company issued 3,000 shares of Series A Preferred
    Stock for an aggregate purchase price of $1.6 million to HAGC Partners,
    Chris Horgan (who later transferred his interest to his affiliate,
    Southeastern Technology Fund, L.P.) and the Account Management Purchasers.
    The purchase price for such shares was paid in cash at the time of issuance.
    The Company simultaneously issued 1,166.67 shares of Series A Preferred
    Stock for a purchase price of $700,002 to USI Partners. The purchase price
    for such shares was paid in cash at the time of issuance.

7.  On July 27, 1998, the Company issued to Andrew A. Stern 625,000 shares of
    Common Stock with a fair market value of $1,000,000. Mr. Stern paid $5,000
    in cash for these shares, and the remainder was recorded as a compensation
    expense to the Company.

8.  On September 8, 1998, the Company issued convertible promissory notes in the
    aggregate amount of $9,095,000, together with warrants to purchase 974,450
    shares of Common Stock for $3.44 per share, to certain of the existing
    holders of the Series A Preferred Stock. The purchase price for such notes
    and warrants was paid in cash at the time of issuance. The Company also
    issued warrants to purchase 50,000 shares of Common Stock for $16.00 per
    share, to IIT as part of the purchase price paid in the acquisition of IIT.

9.  On September 22, 1998, the Company issued warrants to purchase 74,404 shares
    of Common Stock for $3.36 per share to Trans America Business Credit in
    connection with loans the Company obtained from it.

10. On September 30, 1998, the Company issued warrants to purchase 971 shares of
    Series B Preferred Stock for $1,050.00 per share, to Venture Lending and
    Leasing in connection with loans the Company obtained from it.

11. On October 2, 1998, the Company issued warrants to purchase 50,000 shares of
    Common Stock for $16.00 per share, to ACR as part of the purchase price paid
    in the acquisition of ACR.

12. On December 16, 1998, the Company issued convertible promissory notes in the
    aggregate amount of $8 million to certain of the existing holders of the
    Series A Preferred Stock. The purchase price for such notes was paid in cash
    at the time of issuance.

                                      II-3
<PAGE>
13. On December 18, 1998, the Company issued warrants to purchase 17,857 shares
    of Common Stock for $3.36 per share, to Leasing Technology, Inc. in
    connection with loans the Company obtained from it.

14. On December 24, 1998, the Company issued convertible promissory notes in the
    amount of $5 million to U S WEST. The purchase price for such notes was paid
    in cash at the time of issuance.

15. On December 31, 1998, the Company issued 59,278.56 shares of Series B
    Preferred Stock for an aggregate purchase price of $62,242,500 to certain
    holders of the convertible promissory notes described above, certain holders
    of Series A Preferred Stock, and a number of new investors. Of the total
    purchase price for such shares, $40,147,500 was paid in cash and $22,095,000
    was paid by conversion of outstanding convertible promissory notes with an
    equivalent principal amount, all at the time of issuance.

16. On October 29, 1999 the Company issued $100,000,000 7% Convertible
    Subordinated Notes Due November 1, 2004. The purchase price of such notes
    was paid in cash at the time of issuance. The issuance of these notes was
    not registered under the Securities Act in reliance on the exemption from
    registration provided by Section 4(2) of the Securities Act, and resales of
    these Notes have been exempt from registration under Rule 144A.

17. On November 5, 1999 the Company issued $25,000,000 7% Convertible
    Subordinated Notes Due November 1, 2004. The purchase price of such notes
    was paid in cash at the time of issuance. The issuance of these notes was
    not registered under the Securities Act in reliance on the exemption from
    registration provided by Section 4(2) of the Securities Act, and resales of
    these Notes have been exempt from registration under Rule 144A.

    The issuances and resales of the securities above were made in reliance on
one or more exemptions from registration under the Securities Act, including
those provided by Section 4(2) and Rules 144A and 701 thereunder. The purchasers
of these securities represented that they had adequate access, through their
employment with the Company or otherwise, to information about the Company.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

    (a) Exhibits

<TABLE>
<CAPTION>
       EXHIBIT
         NO.            DESCRIPTION
       -------          -----------
<C>                     <S>
      1.1(*)            Form of Underwriting Agreement

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

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

      3.3(*)            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.

      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.

     10.1(b)            Stock Purchase Agreement between the Company and the Initial
                        Series A Purchasers dated June 18, 1998.

     10.2(b)            Stock Purchase Agreement between the Company and certain of
                        the Initial Series A Purchases dated September 18, 1998.
</TABLE>

                                      II-4
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
         NO.            DESCRIPTION
       -------          -----------
<C>                     <S>
     10.3(b)            Stock Purchase Agreement between the Company and US WEST
                        dated June 18, 1998.

     10.4(b)            Stock Purchase Agreement between the Company and the Account
                        Management Purchasers dated June 19, 1998.

     10.5(b)            Stock Purchase Agreement between the Company and HAGC
                        Partners dated June 19, 1998.

     10.6(b)            Stock Purchase Agreement between the Company and Chris
                        Horgen dated June 19, 1998.

     10.7(b)            Stock Purchase Agreement between the Company and USI
                        Partners, Ltd. dated June 19, 1998.

     10.8(b)            Stock Purchase Agreement among the Company, IIT Holding,
                        Inc., Luis Sebastian Alegrett, Michael Mai, Carlos E. Bravo,
                        and Vicente Perez de Tudela dated August 28, 1998.

     10.9(b)            Amended and Restated Stock Purchase Agreement among the
                        Company, Advanced Communication Resources, Inc., Matthew D.
                        Kanter, The Benjamin Kanter 1997 QSST Trust, the Ronald
                        Kanter 1997 QSST Trust and David S. Walden dated October 2,
                        1998.

     10.10(b)           Stock Purchase Agreement between the Company and certain
                        other parties dated December 31, 1998.

     10.11(b)           Amended and Restated Stockholders Agreement between the
                        Company and certain other parties dated December 31, 1998.

     10.12(b)           Employment Agreement between the Company and Christopher R.
                        McCleary dated May 29, 1998.

     10.13(b)           Employment Agreement between the Company and Stephen E.
                        McManus dated June 2, 1998.

     10.14(b)           Employment Agreement between the Company and Andrew A. Stern
                        dated July 27, 1998.

     10.15(b)           Employment Agreement between the Company and Jeffrey L.
                        McKnight dated December 15, 1998.

     10.16(b)(f)        iMAP Agreement between the Company and US WEST, Inc. dated
                        January 15, 1999.

     10.17(b)           Note Purchase Agreement among the Company and the Account
                        Management Purchasers dated September 8, 1998.

     10.18(b)           Note Purchase Agreement between the Company and Southeastern
                        Technology Fund, L.P. dated September 8, 1998.

     10.19(b)(f)        Software License and Services Agreement between the Company
                        and Broadvision, Inc. dated July 22, 1998.

     10.20(e)           Note Purchase Agreement among the Company and the Account
                        Management Purchasers dated September 8, 1998.

     10.21(e)           Note Purchase Agreement between the Company and the
                        Southeastern Technology Fund, L.P. dated September 8, 1998.

     10.22(b)           Note Purchase Agreement between the Company and certain
                        other parties dated September 8, 1998.
</TABLE>

                                      II-5
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
         NO.            DESCRIPTION
       -------          -----------
<C>                     <S>
     10.23(e)           Note Purchase Agreement between the Company and US WEST,
                        Inc. dated September 8, 1998.

     10.24(b)           Note Purchase Agreement between the Company and certain
                        other parties dated December 16, 1998.

     10.25(b)           Note Purchase Agreement between the Company and US WEST
                        dated December 29, 1998.

     10.26(b)(f)        SiebelNet Agreement between the Company and SiebelNet, Inc.
                        dated January 31, 1999.

     10.27(b)(f)        Marketing Services Agreement by and between the Company, and
                        US West Communications Services, Inc. and US WEST Interprise
                        America, Inc. dated January 31, 1999.

     10.28(b)           Lease Agreement between Consortium One--Annapolis, LLC and
                        the Company dated April 3, 1998.

     10.29(b)           Amended and Restated Stock Option Plan.

     10.30(b)           Nonqualified Stock Option Agreement between USI and
                        Christopher McCleary dated March 19, 1999.

     21.1(d)            Subsidiaries of the Company.

     23.1(a)            Consent of Mahoney Cohen & Company, P.C., independent
                        auditors (regarding ACR financial statements).

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

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

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

     23.5(*)            Consent of Latham & Watkins (included in Exhibit 5.1).

     24.1(a)            Power of Attorney (included on signature page).
</TABLE>

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

*   To be filed by amendment.

(a) Filed herewith.

(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 the Company's Registration Statement on Form
    S-1, as amended (Reg. No. 333-93299).

(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.

                                      II-6
<PAGE>
    (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

    Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions contained in the Articles of Incorporation, as
amended, and By-Laws, as amended, of the Company and the laws of the State of
Delaware or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company 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 Company will, unless in the
opinion of its counsel the matters have been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

    The undersigned Company hereby undertakes:

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

    (2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.

                                      II-7
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of the Securities Act of 1933, as amended,
Usinternetworking, Inc. has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Annapolis,
Maryland on January 27, 2000.

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

                                                       By:         /s/ CHRISTOPHER R. MCCLEARY
                                                            -----------------------------------------
                                                                     Christopher R. McCleary
                                                                    CHAIRMAN OF THE BOARD AND
                                                                     CHIEF EXECUTIVE OFFICER
</TABLE>

                               POWER OF ATTORNEY

    KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Christopher R. McCleary, Harold C. Teubner, Jr.
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.

<TABLE>
<CAPTION>
                        NAME                                      TITLE                    DATE
                        ----                                      -----                    ----
<S>                                                    <C>                          <C>
                                                       Chairman of the Board and
             /s/ CHRISTOPHER R. MCCLEARY                 Chief Executive Officer
     -------------------------------------------         (Principal Executive        January 27, 2000
               Christopher R. McCleary                   Officer)

               /s/ STEPHEN E. MCMANUS                  President--E-Commerce
     -------------------------------------------         Business Unit and           January 27, 2000
                 Stephen E. McManus                      Director

                                                       Executive Vice President
             /s/ HAROLD C. TEUBNER, JR.                  and Chief Financial
     -------------------------------------------         Officer (Principal          January 27, 2000
               Harold C. Teubner, Jr.                    Financial and Accounting
                                                         Officer)
</TABLE>

                                      II-8
<PAGE>

<TABLE>
<CAPTION>
                        NAME                                      TITLE                    DATE
                        ----                                      -----                    ----
<S>                                                    <C>                          <C>
                 /s/ R. DEAN MEISZER
     -------------------------------------------       Director                      January 27, 2000
                   R. Dean Meiszer

                /s/ BENJAMIN DIESBACH
     -------------------------------------------       Director                      January 27, 2000
                  Benjamin Diesbach

                 /s/ RAY A. ROTHROCK
     -------------------------------------------       Director                      January 27, 2000
                   Ray A. Rothrock

     -------------------------------------------       Director                      January   , 2000
                   Frank A. Adams

               /s/ WILLIAM F. EARTHMAN
     -------------------------------------------       Director                      January 27, 2000
                 William F. Earthman

                  /s/ JOHN H. WYANT
     -------------------------------------------       Director                      January 27, 2000
                    John H. Wyant

     -------------------------------------------       Director                      January   , 2000
                   Joseph R. Zell

                /s/ MICHAEL C. BROOKS
     -------------------------------------------       Director                      January 27, 2000
                  Michael C. Brooks

                 /s/ DAVID J. POULIN
     -------------------------------------------       Director                      January 27, 2000
                   David J. Poulin

     -------------------------------------------       Director                      January   , 2000
                  Cathy M. Brienza
</TABLE>

                                      II-9
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
       EXHIBIT
         NO.               DESCRIPTION
       -------             -----------
<C>                        <S>
      1.1(*)               Form of Underwriting Agreement

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

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

      3.3(*)               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.

      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.

     10.1(b)               Stock Purchase Agreement between the Company and the Initial
                           Series A Purchasers dated June 18, 1998.

     10.2(b)               Stock Purchase Agreement between the Company and certain of
                           the Initial Series A Purchases dated September 18, 1998.

     10.3(b)               Stock Purchase Agreement between the Company and US WEST
                           dated June 18, 1998.

     10.4(b)               Stock Purchase Agreement between the Company and the Account
                           Management Purchasers dated June 19, 1998.

     10.5(b)               Stock Purchase Agreement between the Company and HAGC
                           Partners dated June 19, 1998.

     10.6(b)               Stock Purchase Agreement between the Company and Chris
                           Horgen dated June 19, 1998.

     10.7(b)               Stock Purchase Agreement between the Company and USI
                           Partners, Ltd. dated June 19, 1998.

     10.8(b)               Stock Purchase Agreement among the Company, IIT Holding,
                           Inc., Luis Sebastian Alegrett, Michael Mai, Carlos E. Bravo,
                           and Vicente Perez de Tudela dated August 28, 1998.

     10.9(b)               Amended and Restated Stock Purchase Agreement among the
                           Company, Advanced Communication Resources, Inc., Matthew D.
                           Kanter, The Benjamin Kanter 1997 QSST Trust, the Ronald
                           Kanter 1997 QSST Trust and David S. Walden dated October 2,
                           1998.

     10.10(b)              Stock Purchase Agreement between the Company and certain
                           other parties dated December 31, 1998.

     10.11(b)              Amended and Restated Stockholders Agreement between the
                           Company and certain other parties dated December 31, 1998.

     10.12(b)              Employment Agreement between the Company and Christopher R.
                           McCleary dated May 29, 1998.

     10.13(b)              Employment Agreement between the Company and Stephen E.
                           McManus dated June 2, 1998.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
         NO.               DESCRIPTION
       -------             -----------
<C>                        <S>
     10.14(b)              Employment Agreement between the Company and Andrew A. Stern
                           dated July 27, 1998.

     10.15(b)              Employment Agreement between the Company and Jeffrey L.
                           McKnight dated December 15, 1998.

     10.16(b)(f)           iMAP Agreement between the Company and US WEST, Inc. dated
                           January 15, 1999.

     10.17(b)              Note Purchase Agreement among the Company and the Account
                           Management Purchasers dated September 8, 1998.

     10.18(b)              Note Purchase Agreement between the Company and Southeastern
                           Technology Fund, L.P. dated September 8, 1998.

     10.19(b)(f)           Software License and Services Agreement between the Company
                           and Broadvision, Inc. dated July 22, 1998.

     10.20(e)              Note Purchase Agreement among the Company and the Account
                           Management Purchasers dated September 8, 1998.

     10.21(e)              Note Purchase Agreement between the Company and the
                           Southeastern Technology Fund, L.P. dated September 8, 1998.

     10.22(b)              Note Purchase Agreement between the Company and certain
                           other parties dated September 8, 1998.

     10.23(e)              Note Purchase Agreement between the Company and US WEST,
                           Inc. dated September 8, 1998.

     10.24(b)              Note Purchase Agreement between the Company and certain
                           other parties dated December 16, 1998.

     10.25(b)              Note Purchase Agreement between the Company and US WEST
                           dated December 29, 1998.

     10.26(b)(f)           SiebelNet Agreement between the Company and SiebelNet, Inc.
                           dated January 31, 1999.

     10.27(b)(f)           Marketing Services Agreement by and between the Company, and
                           US West Communications Services, Inc. and US WEST Interprise
                           America, Inc. dated January 31, 1999.

     10.28(b)              Lease Agreement between Consortium One--Annapolis, LLC and
                           the Company dated April 3, 1998.

     10.29(b)              Amended and Restated Stock Option Plan.

     10.30(b)              Nonqualified Stock Option Agreement between USI and
                           Christopher McCleary dated March 19, 1999.

     21.1(d)               Subsidiaries of the Company.

     23.1(a)               Consent of Mahoney Cohen & Company, P.C., independent
                           auditors (regarding ACR financial statements).

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

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

     23.4(a)               Consent of Ernst & Young LLP, independent auditors
                           (regarding the Company's financial statements).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
         NO.               DESCRIPTION
       -------             -----------
<C>                        <S>
     23.5(*)               Consent of Latham & Watkins (included in Exhibit 5.1).

     24.1(a)               Power of Attorney (included on signature page).
</TABLE>

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

*   To be filed by amendment.

(a) Filed herewith.

(b) Incorporated by reference to the Company's Registration Statement of 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 the Company's Registration Statement on Form
    S-1, as amended (Reg. No. 333-93299).

(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.

<PAGE>

                                                                 EXHIBIT 23.1

                         CONSENT OF INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 3, 1999, with respect to the financial
statements of Advanced Communication Resources, Inc., included in the
registration statement and related prospectus of USinternetworking, Inc.
dated January 26, 2000.

                                       /s/ Mahoney Cohen & Company, CPA, P.C.
                                       --------------------------------------
                                         Mahoney Cohen & Company, CPA, P.C.

New York, New York
January 26, 2000


<PAGE>

                                                                 EXHIBIT 23.2

                         CONSENT OF INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated August 20, 1998, with respect to the financial
statements of International Information Technology IIT, C.A., included in the
registration statement and related prospectus of USinternetworking, Inc.
dated January 26, 2000.

                                       /s/ Bassan & Associados S.C.
                                       -----------------------------
                                          Bassan & Associados S.C.

Caracas, Venezuela
January 26, 2000


<PAGE>

                                                                 EXHIBIT 23.3

                         CONSENT OF INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 23, 1999, with respect to the consolidated
financial statements of I.I.T. Holding, Inc., included in the registration
statement (Form S-1 No. 333-_____) and related prospectus of
USinternetworking, Inc. dated January 26, 2000.

                                         /s/ Ernst & Young LLP



Baltimore, Maryland
January 24, 2000


<PAGE>

                                                                 EXHIBIT 23.4

                         CONSENT OF INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 13, 1999, except for Note 21 and paragraph 3
of Note 22, as to which the date is December 3, 1999, with respect to the
consolidated financial statements of USinternetworking, Inc., included in the
registration statement (Form S-1 No. 333-_____) and related prospectus of
USinternetworking, Inc. dated January 26, 2000.

                                         /s/ Ernst & Young LLP



Baltimore, Maryland
January 24, 2000




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