ENGAGE TECHNOLOGIES INC, PRES14A, 2000-03-23

ENGAGE TECHNOLOGIES INC
PRES14A, 2000-03-23
BUSINESS SERVICES, NEC

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<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]

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

Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

ENGAGE TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transactions apply:

2) Aggregate number of securities to which transactions apply:

3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined).

4) Proposed maximum aggregate value of transactions:

5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
<PAGE> 2

ENGAGE TECHNOLOGIES, INC.
100 BRICKSTONE SQUARE
ANDOVER, MASSACHUSETTS 01810
(978) 684-3884

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD , 2000

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of Engage Technologies, Inc., a Delaware corporation (the "Company"),
will be held at 100 Brickstone Square, 5th Floor, Andover, Massachusetts on
, 2000 at 10:00 a.m., local time, for the following purposes:

1. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation increasing from 150,000,000 to 350,000,000 the
number of authorized shares of the Company's Common Stock.

2. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation changing the name of the Company to Engage,
Inc.

3. To approve (i) the continuance of the Company's 1995 Equity
Incentive Plan (the "Plan") and (ii) an amendment to the Plan to increase
from 30,000,000 to 36,000,000 the number of shares of the Company's Common
Stock reserved for issuance under the Plan.

4. To approve the issuance of shares of the Company's Common Stock in
two concurrent interested party transactions (collectively, the
"Transactions") between the Company and CMGI, Inc., the majority
stockholder of the Company, pursuant to which the Company will acquire, in
exchange for shares of the Company's Common Stock, Adsmart Corporation, a
subsidiary of CMGI, and Flycast Communications Corporation, a wholly-owned
subsidiary of CMGI.

5. To transact such other business as may properly come before the
Meeting or any adjournments thereof.

The Board of Directors currently has no knowledge of any other business to
be transacted at the Meeting.

Only stockholders of record at the close of business on Monday, March 20,
2000 will be entitled to notice of and to vote at the Meeting and any
adjournments or postponements thereof.

All of the information in this Notice, including share and per share
information, reflects the proposed two-for-one stock split of the Company's
Common Stock announced on March 7, 2000, to be effected in the form of a 100%
stock dividend, to be paid on or about April 3, 2000 to stockholders of record
at the close of business on March 20, 2000.

By order of the Board of Directors,

Michael K. Baker, Secretary

Andover, Massachusetts
April , 2000
<PAGE> 3

All stockholders are cordially invited to attend the Meeting. To ensure
your representation at the Meeting, you are urged to mark, sign and return the
enclosed proxy card in the accompanying envelope, whether or not you expect to
attend the Meeting. No postage is required if mailed in the United States. Any
stockholder attending the Meeting may vote in person even if that stockholder
has returned a proxy.

YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
<PAGE> 4

ENGAGE TECHNOLOGIES, INC.
100 BRICKSTONE SQUARE
ANDOVER, MASSACHUSETTS 01810

PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS

, 2000

GENERAL

This Proxy Statement and Notice of Special Meeting of Stockholders are
being provided and the accompanying proxy is being solicited by the Board of
Directors of Engage Technologies, Inc. (the "Company" or "Engage") for use at
the Company's Special Meeting of Stockholders (the "Meeting") to be held at 100
Brickstone Square, 5th Floor, Andover, Massachusetts on , 2000 at
10:00 a.m., local time, or at any adjournments or postponements of the Meeting,
for the purposes set forth in this Proxy Statement and the foregoing Notice of
Special Meeting of Stockholders. This Proxy Statement and accompanying proxy
card are being mailed on or about April , 2000 to all stockholders entitled to
notice of and to vote at the Meeting. The principal executive offices of the
Company are located at 100 Brickstone Square, Andover, Massachusetts 01810, and
the Company's telephone number is (978) 684-3884.

Except as specifically noted, all of the information in this Proxy
Statement, including share and per share information, reflects the proposed
two-for-one stock split (the "Stock Split") of the Company's Common Stock, $0.01
par value per share (the "Common Stock"), to be effected in the form of a 100%
stock dividend to be distributed on or about April 3, 2000 to stockholders of
record at the close of business on March 20, 2000.

SOLICITATION

The cost of solicitation of proxies, including expenses in connection with
preparing and mailing this Proxy Statement will be borne by the Company. Copies
of solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians to forward to beneficial owners of Common Stock of the Company held
in their names.

VOTING RIGHTS AND VOTES REQUIRED

Only holders of record at the close of business on Monday, March 20, 2000,
will be entitled to notice of, and to vote at, the Meeting. As of Monday, March
20, 2000, the Company had 108,630,062 shares of Common Stock outstanding and
entitled to vote. Each share of Common Stock is entitled to one vote on each
proposal that will come before the Meeting. Under the Company's Amended and
Restated Certificate of Incorporation and By-laws, the presence, in person or by
proxy, of the holders of a majority of the outstanding shares of Common Stock is
necessary to constitute a quorum at the Meeting. Votes withheld, abstentions and
broker non-votes (where a broker or nominee does not exercise discretionary
authority to vote on a matter) are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions and
broker non-votes are not counted, however, for purposes of tabulating the votes
cast. Accordingly, abstentions and broker non-votes will have the same effect as
a vote against the two proposed amendments to the Company's Amended and Restated
Certificate of Incorporation, which requires the affirmative vote of a majority
of the outstanding shares. Abstentions and broker non-votes will have no effect
on the other proposals scheduled to be considered at the Meeting.

The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding on the record date is required to approve the proposed
amendments to the Company's Amended and Restated Certificate of Incorporation.
The stockholders of the Company will also vote on a proposal to approve the
continuance of and to amend the Company's 1995 Equity Incentive Plan as well as
a proposal to approve the issuance of shares of Common Stock in two concurrent
interested party transactions (the "Transactions") between the Company and CMGI,
Inc., the majority stockholder of the Company ("CMGI"). The
<PAGE> 5

affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy and voting at the Meeting is required
to approve each of these matters.

REVOCABILITY OF PROXY AND VOTING OF SHARES

Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised. It may be revoked by filing with the Secretary of the
Company, at the principal executive offices of the Company, 100 Brickstone
Square, 1st Floor, Andover, Massachusetts 01810, an instrument of revocation or
a duly executed proxy bearing a later date. It may also be revoked by attendance
at the Meeting and an election given to the Secretary of the Company to vote in
person. If not revoked, the proxy will be voted at the Meeting in accordance
with the stockholder's instructions indicated on the proxy card. If no
instructions are indicated, the proxy will be voted FOR the approval of each of
the matters scheduled to be voted on at the Meeting and in accordance with the
judgment of the proxies as to any other matter that may be properly brought
before the Meeting or any adjournments or postponements thereof.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of March 1, 2000 by (i) each person
known by the Company to beneficially own more than 5% of the outstanding shares
of Common Stock, (ii) each of the directors of the Company, (iii) each of the
Named Executive Officers (as defined below under the heading "Executive
Compensation") and (iv) all directors and Named Executive Officers as a group.
Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares shown as
beneficially owned by them. The Named Executive Officers represent all of the
Company's executive officers.

The share information set forth below (i) reflects the proposed Stock
Split, and (ii) does not reflect the issuance of shares of the Company's Common
Stock pursuant to the Transactions. All share information with respect to CMGI's
common stock has been adjusted to reflect all stock splits of CMGI common stock
effected prior to the date of this Proxy Statement.

<TABLE>
<CAPTION>
SHARES OF PERCENTAGE SHARES OF CMGI PERCENTAGE
ENGAGE COMMON OWNERSHIP COMMON STOCK OWNERSHIP
STOCK BENEFICIALLY OF ENGAGE BENEFICIALLY OF CMGI
NAME AND ADDRESS# OWNED(1) OUTSTANDING(2) OWNED(1) OUTSTANDING(3)
- ----------------- ------------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
CMGI, Inc. ...................... 87,083,572 80.37% -- --
100 Brickstone Square
Andover, MA 01810
Paul L. Schaut................... 731,568(4) * 16,334(5) **
David A. Fish.................... 378,496(6) * 4,499(7) **
Daniel J. Jaye................... 1,275,900(8) 1.16% 12,666(9) **
Stephen A. Royal................. 192,260(10) * 2,001(11) **
David S. Wetherell............... 87,089,572(12) 80.38% 35,553,656(13) 12.58%
100 Brickstone Square
Andover, MA 01810
Edward A. Bennett................ 35,416(14) * 0 **
Christopher A. Evans............. 145,000 * 575,794 **
Craig D. Goldman................. 104,166(15) * 50,119(16) **
Andrew J. Hajducky, III.......... 87,083,572(17) 80.37% 323,595(18) **
100 Brickstone Square
Andover, MA 01810
Fredric D. Rosen................. 25,000(19) * 12,000 **
</TABLE>

2
<PAGE> 6

- ---------------
# Addresses are given for beneficial owners of more than 5% of the Common
Stock only.

* Percentage is less than 1% of the total number of outstanding shares of
Common Stock.

** Percentage is less than 1% of the total number of outstanding shares of
common stock of CMGI.

(1) Beneficial ownership of Common Stock and CMGI common stock is determined in
accordance with the rules of the Securities and Exchange Commission (the
"SEC"), and includes shares for which the holder has sole or shared voting
or investment power. Shares of Common Stock and CMGI common stock subject
to options currently exercisable or which become exercisable 60 days after
March 1, 2000 are deemed to be beneficially owned and outstanding by the
person holding such options and are included for purposes of computing the
percentage ownership of the person holding such options, but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. The inclusion of any shares of Common Stock or CMGI common stock
deemed beneficially owned does not constitute admission of beneficial
ownership of those shares.

(2) Percentage ownership is based on 108,353,086 shares issued and outstanding
on March 1, 2000, plus any shares subject to issuance upon exercise of
stock options held by the person or entity in question that were
exercisable on or exercisable within 60 days after March 1, 2000.

(3) Percentage ownership is based on 279,884,110 shares issued and outstanding
on March 1, 2000, plus any shares subject to issuance upon exercise of
stock options held by the person or entity in question that were
exercisable on or exercisable within 60 days after March 1, 2000.

(4) Includes 224,998 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1995 Equity Incentive
Plan.

(5) Consists of 16,334 shares of CMGI common stock issuable upon exercise of
outstanding stock options granted under CMGI's 1986 Stock Option Plan.

(6) Includes 362,496 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1995 Equity Incentive
Plan. Includes 8,000 shares held by Mr. Fish's spouse for which Mr. Fish
disclaims beneficial ownership.

(7) Consists of 4,499 shares of CMGI common stock issuable upon exercise of
outstanding stock options granted under CMGI's 1986 Stock Option Plan.

(8) Includes 1,274,998 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1995 Equity Incentive
Plan.

(9) Consists of 12,666 shares of CMGI common stock issuable upon exercise of
outstanding stock options granted under CMGI's 1986 Stock Option Plan.

(10) Includes 174,998 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1995 Equity Incentive
Plan.

(11) Consists of 2,001 shares of CMGI common stock issuable upon exercise of
outstanding stock options granted under CMGI's 1986 Stock Option Plan.

(12) Includes 6,000 shares of Common Stock owned by Mr. Wetherell and 87,083,572
shares of Common Stock owned by CMGI. Mr. Wetherell serves as Chairman of
the Board of Directors, President, Chief Executive Officer and Secretary of
CMGI. Mr. Wetherell disclaims beneficial ownership of the 87,083,572 shares
of Common Stock owned by CMGI.

(13) Includes 2,691,776 shares of CMGI common stock issuable upon exercise of
outstanding stock options granted under CMGI's 1986 Stock Option Plan that
are exercisable within 60 days of March 1, 2000. Also includes 16,932,672
shares held by a limited liability company of which Mr. Wetherell is a
manager, as to which Mr. Wetherell disclaims beneficial ownership, and
388,244 shares of CMGI

3
<PAGE> 7

common stock held by Mr. Wetherell and his wife as trustees for the David
S. Wetherell Charitable Trust, for which Mr. Wetherell disclaims beneficial
ownership.

(14) Consists of 35,416 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1995 Equity Incentive
Plan.

(15) Consists of 104,166 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1995 Equity Incentive
Plan.

(16) Consists of 50,119 shares of CMGI common stock issuable upon exercise of
outstanding stock options granted under CMGI's 1995 Stock Option Plan for
non-employee directors.

(17) Consists of shares of Common Stock owned by CMGI. Mr. Hajducky serves as
Executive Vice President, Chief Financial Officer and Treasurer of CMGI.
Mr. Hajducky disclaims beneficial ownership of all 87,083,572 shares of
Common Stock.

(18) Includes 281,997 shares of CMGI common stock issuable upon exercise of
outstanding stock options granted under CMGI's 1986 Stock Option Plan.

(19) Consists of 25,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1999 Stock Option
Plan for Non-Employee Directors.

(20) Includes 2,202,072 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1995 Equity Incentive
Plan and the Company's 1999 Stock Option Plan for Non-Employee Directors.

(21) Includes 3,059,392 shares of CMGI common stock issuable upon exercise of
outstanding stock options granted under CMGI's 1986 Stock Option Plan and
1995 Stock Option Plan for Non-Employee Directors.

4
<PAGE> 8

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE. The table below sets forth certain
compensation information for the Chief Executive Officer of the Company and the
other most highly compensated executive officers of the Company whose salary and
bonus for the fiscal year ended July 31, 1999 exceeded $100,000 (collectively,
with Mr. Schaut, the "Named Executive Officers"). All share information with
respect to the Company's Common Stock reflects the proposed Stock Split. All
share information provided with respect to CMGI's common stock has been adjusted
to reflect all stock splits of CMGI common stock effected prior to the date of
this Proxy Statement.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
--------------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
----------------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($)(1) OPTIONS(2)(3) ($)(4)
- --------------------------- ---- ------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Paul L. Schaut.............. 1999 $168,364 $ 60,000 800,000 (ENGA) $1,383
Chief Executive Officer 36,000 (CMGI)
and President 1998 109,375 37,500 1,200,000 (ENGA) --
160,000 (CMGI)
David A. Fish(5)............ 1999 $166,667 $ 38,000 600,000 (ENGA) --
Chief Operating Officer 24,000 (CMGI)
1998 48,296 8,333 400,000 (ENGA) --
0 (CMGI)
Daniel J. Jaye.............. 1999 $131,430 $ 19,233 400,000 (ENGA) $2,303
Chief Technology Officer 32,000 (CMGI)
1998 118,295 115,500(6) 0 (ENGA) $3,529
0 (CMGI)
Stephen A. Royal(7)......... 1999 $126,776 $ 25,167 100,000 (ENGA) $1,375
Chief Financial Officer 24,000 (CMGI)
and Treasurer 1998 42,500 7,083 300,000 (ENGA) --
0 (CMGI)
</TABLE>

- ---------------
(1) Any compensation that was deferred at the Named Executive Officer's election
is included in the salary or bonus column for the year in which it was
earned. Bonuses indicated as earned in any fiscal year were generally paid
early in the following fiscal year.

(2) Stock option grants reflect elements of compensation earned during the
fiscal year indicated. However, in certain instances, such stock options
were not granted until the beginning of the next fiscal year.

(3) All Named Executive Officers received stock options to purchase the
Company's Common Stock (designated in the table as ENGA) and CMGI common
stock (designated in the table as CMGI).

(4) All Other Compensation in 1999 represents the amount of matching
contributions made by the Company under the CMGI 401(k) plan.

(5) Mr. Fish commenced employment with the Company in April 1998.

(6) Includes $100,000 bonus paid to Mr. Jaye for his contribution in the sale of
certain of the Company's technology to Red Brick Systems, Inc.

(7) Mr. Royal commenced employment with the Company in March 1998.

5
<PAGE> 9

OPTION GRANT TABLE. The following table sets forth certain information
regarding stock options granted during the fiscal year ended July 31, 1999 by
the Company to the Named Executive Officers. All share information with respect
to the Company's Common Stock has been adjusted to reflect the proposed Stock
Split. All share information provided with respect to CMGI's common stock has
been adjusted to reflect all CMGI stock splits effected prior to the date of
this Proxy Statement.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
TOTAL OPTIONS ASSUMED ANNUAL RATES OF STOCK
GRANTED TO PRICE APPRECIATION FOR OPTION
NUMBER OF SECURITIES EMPLOYEES IN EXERCISE OR TERM (3)
UNDERLYING OPTIONS FISCAL YEAR BASE PRICE EXPIRATION ------------------------------
NAME GRANTED (#) 1999(1)(2) ($/SHARE) DATE 5% ($) 10% ($)
- ---- --------------------- ------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul L. Schaut....... 800,000(4) (ENGA) 6.36% $5.50(5) 6/11/04 $1,215,639 $2,686,244
36,000(4) (CMGI) 0.54% $5.00(6) 9/14/03 $ 49,731 $ 109,892
David A. Fish........ 200,000(4) (ENGA) 1.59% $2.43(5) 1/18/04 $ 133,997 $ 296,097
400,000(4) (ENGA) 3.18% $5.50(5) 6/11/04 $ 607,819 $1,343,122
24,000(4) (CMGI) 0.36% $5.00(6) 9/14/03 $ 33,154 $ 73,261
Daniel J. Jaye....... 400,000(4) (ENGA) 3.18% $5.50(5) 6/11/04 $ 607,819 $1,343,122
32,000(4) (CMGI) 0.48% $5.00(6) 9/14/03 $ 44,205 $ 97,682
Stephen A. Royal..... 100,000(4) (ENGA) 0.80% $5.50(5) 6/11/04 $ 151,955 $ 335,781
24,000(4) (CMGI) 0.36% $5.00(6) 9/14/03 $ 33,154 $ 73,261
</TABLE>

- ---------------
(1) Calculated based on an aggregate of 12,577,020 stock options granted under
the Company's 1995 Equity Incentive Plan to employees during the fiscal year
ended July 31, 1999.

(2) Calculated based on an aggregate of 6,626,500 stock options granted under
CMGI's 1986 Stock Option Plan to employees during the fiscal year ended July
31, 1999.

(3) Potential realizable value is based on an assumption that the market price
of the stock will appreciate at the stated rate, compounded annually, from
the date of grant until the end of the 5-year term. These values are
calculated based on rules promulgated by the SEC and do not reflect the
Company's estimate or projection of future stock prices. Actual gains, if
any, on stock option exercises will be dependent upon the future performance
of the price of the Company's Common Stock and the price of CMGI common
stock.

(4) Option vests as to 25% of the shares after the first year and as to the
remaining 75% of the shares in equal monthly installments for the next 36
months thereafter.

(5) The exercise price represents the fair market value of Common Stock on the
date of grant as determined by the Company's Board of Directors.

(6) The exercise price represents the fair market value of CMGI's common stock
on the date of grant based on the closing price of the common stock on the
Nasdaq National Market.

OPTION EXERCISES AND YEAR-END VALUES. The following table sets forth
certain information concerning option exercises by the Named Executive Officers
during the fiscal year ended July 31, 1999 and exercisable and unexercisable
stock options held by the Named Executive Officers as of July 31, 1999. No Named
Executive Officer exercised or held any stock appreciation rights during the
year ended July 31, 1999. All share information with respect to the Company's
Common Stock has been adjusted to reflect the proposed Stock Split. All share
information provided with respect to CMGI's common stock has been adjusted to
reflect all stock splits of CMGI common stock effected prior to the date of this
Proxy Statement.

6
<PAGE> 10

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

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
NAME COMPANY EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------- ------------ ---------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Paul L. Schaut....... ENGA 500,000 $2,703,750 0/1,500,000 0/21,457,500
CMGI 66,666 1,940,262 3,332/126,002 149,732/5,523,849
David A. Fish........ ENGA -- -- 124,998/875,002 2,145,153/12,403,847
CMGI -- -- 0/24,000 0/986,256
Daniel J. Jaye....... ENGA -- -- 1,066,662/533,338 18,379,853/6,999,547
CMGI 32,000 1,566,875 11,998/36,002 543,383/1,496,257
Stephen A. Royal..... ENGA -- -- 93,748/306,252 1,579,946/4,639,904
CMGI -- -- 0/24,000 0/986,256
</TABLE>

- ---------------
(1) Value Realized represents the difference between the aggregate exercise
price of the option and the aggregate fair market value of the underlying
Common Stock on the date of exercise.

(2) Based on the difference between the option exercise price and the closing
price of the underlying common stock on July 31, 1999, which closing price
was $17.28 for Engage and $46.09 for CMGI. In addition, these values have
not and may never be realized. Actual gains, if any, on exercise will depend
on the value of the Common Stock and CMGI's common stock on the date of sale
of any shares acquired upon exercise.

EMPLOYMENT AGREEMENTS

The Company is not a party to any employment agreement with any of the
Named Executive Officers.

COMPENSATION OF DIRECTORS

Directors who are not employees of the Company are entitled to participate
in the Company's 1999 Stock Option Plan for Non-Employee Directors (the "1999
Directors' Plan") which is administered by the Compensation Committee of the
Board of Directors. Under the terms of the 1999 Directors' Plan, directors who
are not (i) employees of the Company or any subsidiary of the Company, or (ii)
affiliates of an institutional investor that owns shares of the Company's Common
Stock, are eligible to receive non-statutory options to purchase shares of the
Company's Common Stock. Any director who becomes such an employee shall cease to
be eligible for any further option grants under the 1999 Directors' Plan while
such an employee, but shall not, by reason of becoming such an employee, cease
to be eligible to retain options previously granted under the 1999 Directors'
Plan. All options granted under the 1999 Directors' Plan have an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant. As of March 1, 2000, the Company had granted Messrs. Evans and Rosen each
under the 1999 Directors' Plan an option to purchase 100,000 shares of its
Common Stock, to vest over a four-year period, at an exercise price of $5.50 per
share. Under the Company's 1995 Equity Incentive Plan, Mr. Goldman was granted
an option to purchase 200,000 shares of the Company's Common Stock, vesting over
a four-year period, at an exercise price of $0.12 per share and Mr. Bennett was
granted an option to purchase 100,000 shares of Common Stock, vesting over a
four-year period, at an exercise price of $2.10 per share.

In general, the Company does not compensate directors for service as
directors but reimburses non-employee directors for reasonable expenses incurred
in connection with attendance at meetings of the Board of Directors and
committees thereof. Pursuant to the terms of a consulting, invention and
non-disclosure agreement with the Company, Mr. Evans received $26,400 for
programming and other technical services rendered to the Company during the
fiscal year ended July 31, 1999.

7
<PAGE> 11

In October 1999, the Company's Board of Directors established a Special
Committee of the Board (the "Special Committee"), consisting of Messrs. Bennett,
Evans and Rosen. The purpose of the Special Committee was to evaluate the merits
of and negotiate the terms of the proposed Transactions and to make a
recommendation to the full Engage Board of Directors on whether to approve the
Transactions. Members of the Special Committee are each paid $20,000 per month
for their services on the Special Committee.

PROPOSAL 1

APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED SHARES OF COMMON STOCK

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), currently authorizes the issuance of
150,000,000 shares of Common Stock. On February 24, 2000, the Board of Directors
adopted resolutions, subject to stockholder approval, proposing that the
Certificate of Incorporation be amended to increase the authorized number of
shares of Common Stock to 350,000,000 shares. As of March 1, 2000, the Company
had 108,353,086 shares of Common Stock outstanding, and approximately 29,865,000
shares of Common Stock reserved for future issuance in connection with the
Company's stock option and stock purchase plans.

PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION

On February 24, 2000, the Board of Directors adopted resolutions setting
forth the proposed amendment to the first paragraph of Article Fourth of the
Certificate of Incorporation (the "Authorized Capital Amendment"), the
advisability of the Authorized Capital Amendment, and a request that the
Authorized Capital Amendment be submitted for approval of the stockholders at
the Meeting. The following is the text of the first paragraph of Article Fourth
of the Certificate of Incorporation, as proposed to be amended:

FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 355,000,000 shares, consisting
of (i) 350,000,000 shares of Common Stock, $.01 par value per share
("Common Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01 par
value per share ("Preferred Stock").

PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT

If the Authorized Capital Amendment is approved, some of the additional
shares of Common Stock will be issued pursuant to Transactions, subject to
stockholder approval. See "Approval of the Issuance of Shares of Common Stock
Pursuant to the Transactions."

The Board believes that the availability of additional shares of Common
Stock will provide the Company with the flexibility to issue shares for a
variety of other purposes that the Board of Directors may deem advisable without
further action by the Company's stockholders, unless required by law, regulation
or stock market rule. These purposes could include, among other things, stock
splits, stock dividends, financings, acquisitions, various equity compensation
and other employee benefit plans, and other bona fide corporate purposes. In
some situations, the issuance of additional shares of Common Stock could have a
dilutive effect on earnings per share, and, for a person who does not purchase
additional shares to maintain his or her pro rata interest, on a stockholder's
percentage voting power in the Company. In addition, depending upon the nature
and terms thereof, such issuances could enable the Board to render more
difficult or discourage an attempt to obtain a controlling interest in the
Company or the removal of the incumbent Board and may discourage unsolicited
takeover attempts which might be desirable to stockholders. For example, the
issuance of shares of Common Stock in a public or private sale, merger or
similar transaction would increase the number of the Company's outstanding
shares, thereby diluting the interest of a party seeking to take over the
Company. Furthermore, many companies have issued warrants or other rights to
acquire additional shares to the holders of common stock to discourage or defeat
unsolicited stock accumulation programs and acquisition proposals. If this
amendment is adopted, more shares of Common Stock of the Company would be
available for such purposes than is currently available.
8
<PAGE> 12

The Board of Directors is not proposing the Authorized Capital Amendment in
response to any effort to accumulate the Company's Common Stock or to obtain
control of the Company by means of a merger, tender offer or solicitation in
opposition to management. In addition, the Authorized Capital Amendment is not
part of any plan by management to recommend a series of similar amendments to
the Board of Directors and the stockholders. Finally, the Board of Directors
does not currently contemplate recommending the adoption of any other amendments
to the Certificate of Incorporation which could be construed to affect the
ability of third parties to take over or change control of the Company.

Holders of Common Stock do not have preemptive rights to subscribe for
additional securities that may be issued by the Company. This means that current
stockholders do not have a prior right to purchase shares in any new issuance of
Common Stock.

If the proposed Authorized Capital Amendment is authorized by the
stockholders at the Meeting, the change will become effective when an amendment
to the Company's Certificate of Incorporation is filed with the Secretary of
State for the State of Delaware, which would be expected to occur as soon as
practicable following the Meeting.

CMGI, which as of March 1, 2000 beneficially owns 80.37% of the outstanding
voting power of the Company, has agreed to vote in favor of the Authorized
Capital Amendment.

THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE AUTHORIZED CAPITAL
AMENDMENT IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE FOR APPROVAL OF THE AUTHORIZED CAPITAL AMENDMENT.

PROPOSAL 2

APPROVAL OF AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO CHANGE THE COMPANY'S NAME

On February 24, 2000, the Board of Directors adopted resolutions, subject
to stockholder approval, proposing that the Certificate of Incorporation be
amended to change the Company's name to Engage, Inc.

PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION

The Board of Directors has adopted resolutions setting forth the proposed
amendment to Article First of the Certificate of Incorporation (the "Name Change
Amendment"), the advisability of the Name Change Amendment, and a request that
the Name Change Amendment be submitted for approval of the stockholders at the
Meeting. The following is the text of Article First of the Certificate of
Incorporation, as proposed to be amended:

FIRST. The name of the Corporation is:

Engage, Inc.

The Company was founded in 1995 as Engage Technologies, Inc., primarily as
a provider of software products and services. Since that time, the Company has
evolved from a provider of technology to a technology-driven media company. A
change in the name of the Company to Engage, Inc. is intended to reflect the
Company's broader range of solutions for online marketers. The Company believes
that the proposed name change to Engage, Inc. will create a stronger association
between Engage and its products and services in the minds of the investment
community, potential customers and others.

If the proposed Name Change Amendment is approved by the stockholders at
the Meeting, the change will become effective when an amendment to the Company's
Certificate of Incorporation is filed with the Secretary of State for the State
of Delaware, which would be expected to occur as soon as practicable following
the Meeting. Stock certificates representing shares of the Company's Common
Stock need not be exchanged for certificates containing the Company's new name
if the proposed Name Change Amendment is approved.

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<PAGE> 13

THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE NAME CHANGE
AMENDMENT IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE FOR APPROVAL OF THE NAME CHANGE AMENDMENT.

PROPOSAL 3

APPROVAL OF CONTINUANCE OF THE 1995 EQUITY INCENTIVE PLAN AND
AMENDMENT TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S
COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN

GENERAL

On August 1, 1995 the Company's Board of Directors and stockholders
approved the Company's 1995 Equity Incentive Plan (as amended, the "Plan"). The
Plan was subsequently amended by the Board of Directors on June 11, 1999 and by
the Company's stockholders on July 3, 1999. A total of 30,000,000 shares of
Common Stock were initially reserved for issuance under the Plan. As of March 1,
2000, 7,660,278 shares of Common Stock remain eligible for grant under the Plan.
On February 24, 2000, the Board of Directors recommended continuance of the Plan
and adopted an amendment to the Plan, subject to stockholder approval, to
increase to 36,000,000 shares the aggregate number of shares of Common Stock for
which stock options or stock awards may be granted under the Plan. The Board of
Directors believes that the increase is advisable to give the Company the
flexibility needed to attract, retain and motivate employees and consultants.

SECTION 162(M) AND CONTINUANCE OF THE PLAN

Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for certain
compensation in excess of $1.0 million paid to a company's Chief Executive
Officer and the four other most highly compensated executive officers. Certain
compensation, including qualified performance-based compensation, will not be
subject to the deduction limit if certain requirements are met. In order for
awards granted under the Plan to comply with Section 162(m) after the Meeting,
the continuance of the Plan must be approved by the stockholders. If the
stockholders do not vote to continue the Plan, the Company will not make any
further awards under the Plan. Even if the stockholders do vote to continue the
Plan, however, awards granted thereunder will only be treated as qualified
performance-based compensation under Section 162(m) if the grant of such awards
complies with all other requirements of Section 162(m).

MATERIAL FEATURES OF THE PLAN

The Plan is intended to provide eligible employees and consultants,
including employees and consultants of some of the Company's subsidiaries or
affiliates, with an incentive to achieve long-range performance goals and to
enable them to participate in the Company's long term growth. All employees and
consultants of the Company and certain of its subsidiaries and affiliates are
eligible to participate in the Plan. The Plan is currently administered by the
Company's Compensation Committee. The Plan provides for the grant of stock
options, restricted stock awards and stock appreciation rights. Subject to the
provisions of the Plan, the Compensation Committee determines the persons to
whom stock options or stock awards will be granted, the number of shares to be
covered by each stock option or stock award and the terms and conditions upon
which a stock option or stock award may be granted. The terms of stock awards
may include conditions relating to the right of the Company to reacquire the
shares subject to the stock award, including the time and events upon which such
rights shall accrue and the purchase price of the shares.

Stock Options and Stock Awards. Stock options granted under the Plan may
be either (i) options intended to qualify as "incentive stock options" under
Section 422 of the Code, or (ii) non-qualified stock options. Incentive stock
options may be granted under the Plan to employees of the Company and certain of
its subsidiaries and affiliates. Non-qualified stock options may be granted to
consultants and employees of the Company and its subsidiaries and affiliates.

10
<PAGE> 14

The aggregate fair market value (determined at the time of grant) of shares
issuable pursuant to incentive stock options for any one employee of the Company
which become exercisable in any calendar year under any incentive stock option
granted under the Plan may not exceed $100,000. Incentive stock options granted
under the Plan may not be granted at a price less than the fair market value of
the Common Stock on the date of grant, or 110% of the fair market value in the
case of options granted to an employee holding 10% or more of the voting stock
of the Company. Incentive stock options granted under the Plan expire not more
than ten years from the date of grant, or not more than five years from the date
of grant in the case of incentive stock options granted to an employee holding
10% or more of the voting stock of the Company. A stock option granted under the
Plan is exercisable, during the optionholder's lifetime, only by the
optionholder and is not transferable by him or her except by will or by the laws
of descent and distribution.

The Compensation Committee shall determine the effect on a stock option or
stock award resulting from the disability, death, retirement or other
termination of employment of a participant and the extent to which, and the
period during which, the participant or his or her legal representative,
guardian or beneficiary may receive payment of an award or exercise rights
thereunder. In the event of the optionholder's death, both incentive stock
options and non-qualified stock options generally may be exercised, to the
extent exercisable on the date of death, by the optionholder's survivors at any
time prior to the earlier of the stock option's specified expiration date or one
year from the date of the optionholder's death. In the event of the
optionholder's disability, stock options generally may be exercised, to the
extent exercisable on the date of disability, by the optionholder at any time
prior to the earlier of the stock option's specified expiration date or six
months from the date of the disability. Generally, in the event of the
optionholder's termination for "cause", all outstanding and unexercised stock
options are forfeited.

In the event of termination of service, other than by reason of death,
disability or termination for "cause", except as otherwise provided, in the
pertinent stock option grant agreement, the Company generally has the right to
repurchase that number of shares subject to a stock option grant as to which the
Company's repurchase rights, as set forth in the stock option grant agreement,
have not lapsed. In the event of a stock grant holder's death or disability, the
Company's rights of repurchase generally are exercisable, to the extent that
they have not lapsed on the date of death or disability. Generally, in the event
of termination for "cause", all shares subject to any stock grant are
immediately subject to repurchase by the Company at the purchase price, if any.

In the event of a stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares or other
transaction that affects the Company's Common Stock, the number of shares
approved for the Plan, the number of shares underlying outstanding awards and
the exercise price of awards will be adjusted proportionately, and other
adjustments will be made as may be deemed equitable by the Company's Board of
Directors or Compensation Committee. In the event of any other change affecting
the Common Stock, such adjustments will be made as may be deemed equitable by
the Board of Directors or Compensation Committee to give proper effect to the
event.

In the event of a change in control of the Company, the Compensation
Committee in its discretion may, at the time an award is made or at any time
thereafter, take one or more of the following actions: (i) provide for the
acceleration of any time period relating to the exercise or payment of the
award, (ii) provide for payment to the participant of cash or other property
with a fair market value equal to the amount that would have been received upon
the exercise or payment of the award had the award been exercised or paid upon
the change in control, (iii) adjust the terms of the award in a manner
determined by the Compensation Committee to reflect the change in control, (iv)
cause the award to be assumed, or new rights substituted therefor, by another
entity or (v) make such other provision as the Compensation Committee may
consider equitable to participants and in the best interests of the Company.

The Company's Board of Directors may amend, modify or terminate any
outstanding award. The participant's consent shall not be required to effect an
amendment or modification unless the Board of Directors determines that such
action would materially and adversely affect the participant. The Plan may be
amended, modified or terminated at any time by the Board of Directors, subject
to stockholder approval in certain instances.

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<PAGE> 15

Stock Appreciation Rights. Under the Plan, the Company's Board of
Directors may grant a participant rights to receive any excess in value of
shares of the Company's Common Stock over the exercise price in tandem with a
stock option or alone and unrelated to a stock option. Stock appreciation rights
granted in tandem with an option shall terminate to the extent the related stock
option is exercised, and the related stock option shall terminate to the extent
the tandem stock appreciation rights are exercised. The Board of Directors or
Compensation Committee shall fix the exercise price of each stock appreciation
right. A stock appreciation right granted in tandem with a stock option shall
have an exercise price of not less than the exercise price of the related stock
option. A stock appreciation right granted alone and unrelated to a stock option
may not have an exercise price less than 100% of the fair market value of the
Company's Common Stock on the date of grant. A limited stock appreciation right
related to a stock option may be granted. Such stock appreciation right can only
be exercised upon or during limited periods following a change in control of the
Company and may entitle the participant to receive an amount based upon the
highest price paid or offered for the Company's Common Stock in any transaction
relating to a change in control or paid during a specified period immediately
prior to the occurrence of the change in control.

OPTION INFORMATION

The following table sets forth as of March 1, 2000, all stock options
granted pursuant to the Plan to (i) the Named Executive Officers, (ii) all
current executive officers of the Company as a group, (iii) all current
directors of the Company who are not executive officers as a group and (iv) all
employees, including all current officers who are not executive officers, as a
group. All share information with respect to the Company's Common Stock has been
adjusted to reflect the proposed Stock Split.

<TABLE>
<CAPTION>
NUMBER OF
NAME TITLE OPTIONS GRANTED
- ---- ------------------------------------- ---------------
<S> <C> <C>
Paul L. Schaut....................... Chief Executive Officer and President 2,000,000
David A. Fish........................ Chief Operating Officer 1,000,000
Daniel J. Jaye....................... Chief Technology Officer 1,600,000
Stephen A. Royal..................... Chief Financial Officer and Treasurer 400,000
All current executive officers of the
Company as a group (4 persons)..... 5,000,000
All current directors of the Company
who are not executive officers as a
group (6 persons).................. 780,000
All employees who are not executive
officers, as a group............... 17,339,722
</TABLE>

On March 1, 2000, the closing market price per share of the Company's
Common Stock was $92.50, as reported on the Nasdaq National Market System.

FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the United States federal income tax
consequences that generally will arise with respect to awards granted under the
Plan and with respect to the sale of Common Stock acquired under the Plan.

Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of Common Stock acquired through the exercise of the
option ("ISO Stock"). The exercise of an incentive stock option, however, may
subject the participant to the alternative minimum tax.

Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the

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<PAGE> 16

option was exercised (the "Exercise Date"), then the participant will recognize
long-term capital gain in an amount equal to the excess of the sale price of the
ISO Stock over the exercise price.

If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.

If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.

Nonstatutory Stock Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the Common Stock acquired through the exercise of the option ("NSO
Stock") on the Exercise Date over the exercise price.

With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
NSO Stock for more than one year prior to the date of the sale.

Stock Appreciation Rights. A participant will not recognize taxable income
upon the grant of a stock appreciation right under the Plan. Instead, a
participant generally will recognize as ordinary compensation income any cash
delivered and the fair market value of any Common Stock delivered in payment of
an amount due under a stock appreciation right.

Upon selling any Common Stock received by a participant in payment of an
amount due under a stock appreciation right, the participant generally will
recognize a capital gain or loss in an amount equal to the difference between
the sale price of the Common Stock and the participant's tax basis in the Common
Stock. This capital gain or loss will be a long-term capital gain or loss if the
participant has held the Common Stock for more than one year prior to the date
of the sale.

Restricted Stock. A participant will not recognize taxable income upon the
grant of a restricted stock award unless the participant makes an election under
Section 83(b) of the Code (a "Section 83(b) Election"). If the participant makes
a Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.

Upon the disposition of the Common Stock acquired pursuant to a restricted
stock award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin just after the date on which
the forfeiture provisions or restrictions lapse if a Section 83(b) Election is
not made, or just after the award is granted if a Section 83(b) Election is
made.

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<PAGE> 17

Tax Consequences to the Company. The grant of an award under the Plan will
have no tax consequences to the Company. Moreover, in general, neither the
exercise of an incentive stock option nor the sale of any Common Stock acquired
under the Plan will have any tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the Plan, including in connection with a restricted stock award or as a result
of the exercise of a nonstatutory stock option or a Disqualifying Disposition.
Any such deduction will be subject to the limitations of Section 162(m) of the
Code.

THE BOARD OF DIRECTORS BELIEVES THAT EACH OF THE CONTINUANCE OF THE
COMPANY'S 1995 EQUITY INCENTIVE PLAN AND THE AMENDMENT TO THE COMPANY'S 1995
EQUITY INCENTIVE PLAN TO INCREASE THE AGGREGATE NUMBER OF SHARES AVAILABLE FOR
ISSUANCE UNDER THE PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND RECOMMENDS A VOTE FOR APPROVAL OF THE CONTINUANCE OF THE PLAN
AND APPROVAL OF THE INCREASE.

PROPOSAL 4

APPROVAL OF THE ISSUANCE
OF SHARES OF COMMON STOCK PURSUANT TO
THE TRANSACTIONS

SUMMARY

This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
proposal presented in this Proxy Statement with respect to the approval of the
issuance of shares of common stock pursuant to the transactions, you should read
carefully this entire document and the documents to which we have referred you.
Page references have been provided to direct you to a more complete description
of the topics in this summary.

THE TRANSACTIONS

You are being asked to consider a proposal for approval of the issuance of
shares of Engage's Common Stock in two concurrent interested party transactions
(collectively, the "Transactions") between Engage and CMGI, Inc., the majority
stockholder of the Company, pursuant to which the Company will acquire, in
exchange for shares of the Company's Common Stock, Adsmart Corporation, a
subsidiary of CMGI, and Flycast Communications Corporation, a wholly-owned
subsidiary of CMGI.

VOTES REQUIRED
(PAGES 1 AND 18)

Pursuant to the NASD Marketplace Rules, the proposed issuance of the shares
of Common Stock pursuant to the Transactions requires approval of the Company's
stockholders because CMGI, a substantial stockholder of the Company, will have a
5% or greater interest in each of Adsmart and Flycast immediately prior to the
closing of the Transactions and because in connection with the Transactions, the
Company will be issuing a number of shares of its Common Stock equal to more
than 20% of its outstanding Common Stock as of January 19, 2000. The affirmative
vote of the holders of a majority of Common Stock present in person or
represented by proxy and voting at the Meeting is required to approve such
issuances.

The issuance of the shares of Common Stock in the Transactions also
requires approval of an increase in the number of authorized shares of Common
Stock. See "Approval of Amendment to the Company's Amended and Restated
Certificate of Incorporation to Increase the Authorized Shares of Common Stock."

CMGI, which beneficially owns approximately 80.37% of the outstanding
Common Stock of Engage, has agreed to vote in favor of the issuance of shares of
Common Stock in the Transactions.

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<PAGE> 18

RECOMMENDATION TO STOCKHOLDERS WITH RESPECT TO THE TRANSACTIONS
(PAGE 27)

The Special Committee and the Board of Directors believe that the
Transactions are in the best interests of the Company and its stockholders and
recommend a vote FOR approval of the issuance of the shares of Common Stock in
the Transactions.

OPINION OF FINANCIAL ADVISOR
(PAGE 28)

Bear, Stearns & Co. Inc. acted as financial advisor to the Company and the
Special Committee. Bear Stearns has rendered an opinion to the Special Committee
to the effect that, as of the date of such opinion, based upon and subject to
the assumptions made, matters considered and limits of the review undertaken by
Bear Stearns, the purchase price for the Transactions was fair, from a financial
point of view, to the stockholders of the Company, excluding CMGI and its
affiliates.

ACCOUNTING TREATMENT
(PAGE 18)

The Transactions will be accounted for as a combination of entities under
common control, (i.e., an "as if pooling") which means that the assets and
liabilities of Adsmart and Flycast, including intangible assets, will be carried
forward at their old book value and the results of operations of Adsmart and
Flycast will be included in the Company's results from the inception of Adsmart
and from January 13, 2000 (the date CMGI acquired Flycast) of Flycast.

MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS (PAGE 19)

The Company will not recognize gain or loss with respect to the issuance of
the shares of Common Stock in the Transactions. There are no tax consequences to
the Company's stockholders with respect to the Transactions.

THE TRANSACTIONS

OVERVIEW

The Company entered into an Agreement and Plan of Merger and Contribution,
dated January 19, 2000 (the "Merger Agreement"), among the Company, FCET Corp.,
a wholly-owned subsidiary of the Company ("Merger Sub"), CMGI, the majority
stockholder of the Company, Adsmart Corporation ("Adsmart"), a subsidiary of
CMGI, and Flycast Communications Corporation, a wholly-owned subsidiary of CMGI
("Flycast"). A copy of the Merger Agreement is attached as Annex A to this Proxy
Statement.

The Merger Agreement provides for (i) the merger (the "Merger") of Adsmart
with and into Merger Sub, and (ii) the contribution (the "Contribution") of all
of the outstanding capital stock of Flycast by CMGI to the Company. As a result
of the Merger, Adsmart would become a wholly-owned subsidiary of the Company.
Under the Merger Agreement, (i) at the effective time of the Merger, all of the
outstanding shares of Adsmart will be converted into and represent the right to
receive such number of shares of the Company's Common Stock as is determined by
dividing 11,223,704 by the sum of the number of shares of Adsmart common stock
outstanding and the number of shares of Adsmart common stock subject to stock
options (the "Merger Shares"), and (ii) at the time of the closing of the
Contribution, the Company will issue to CMGI a maximum of 53,773,930 shares (the
"Contribution Shares") of the Company's Common Stock (as adjusted to reflect the
proposed Stock Split). As of April , 2000, there were shares of Adsmart
common stock outstanding and subject to stock options. Based on the number of
outstanding shares of the Company's Common Stock on March 1, 2000, upon the
closing of the Transactions, CMGI's beneficial ownership of the outstanding
Common Stock of the Company will increase from 80.37% to 87.73%.

15
<PAGE> 19

CMGI, the majority stockholder of the Company, is the sole stockholder of
Flycast and the majority stockholder of Adsmart. Because CMGI is a substantial
stockholder of Engage, and because under the Merger Agreement the Company is
issuing a number of shares of Common Stock equal to more than 20% of the number
of outstanding shares of Common Stock, under applicable rules of the Nasdaq
National Market, the issuance of Common Stock pursuant to the Merger Agreement
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy and voting at the
meeting.

The issuance of the Merger Shares and the Contribution Shares also requires
approval of an increase in the number of authorized shares of the Company's
Common Stock. See "Approval of Amendment to the Company's Amended and Restated
Certificate of Incorporation to Increase the Authorized Shares of Common Stock."

The terms of the Merger Agreement and the issuance of the Common Stock and
certain other matters are described below.

THE PARTIES

The Company. The Company offers solutions that enable Web advertisers,
merchants and sites to target the delivery of advertisements, content and
e-commerce offerings to their audiences. At the core of Engage's solutions is
its Engage Knowledge database containing over 52 million anonymous profiles of
Web users. An Engage profile is an anonymous collection of information about an
individual Web user's consumer interests, demographic characteristics and
geographic location. These profiles are developed through a combination of a
user's browsing behavior on participating sites on the Internet and information
the user has voluntarily declared at those sites, such as information provided
on an online registration form. Each anonymous profile omits information that
would permit the personal identification of the user, such as name, address and
e-mail address. Each profile contains numerical scores that rank a Web user's
preference level in hundreds of standard categories and subcategories, such as
books, business, computers, fashion, sports and travel. Categories can be
further customized to meet the needs of a specific customer or market. These
profiles are continuously updated and refined based on a visitor's browsing
behavior across multiple Web sites, including pages selected by the user, the
duration of the user's visits and the responses of the user to specific
advertisements and promotions. See "-- Description of Engage."

The Company's address is 100 Brickstone Square, Andover, Massachusetts
01810. Its telephone number is (978) 684-3884.

CMGI. With more than 65 companies, CMGI represents the largest, most
diverse network of Internet businesses in the world. This network includes both
CMGI operating companies and a growing number of synergistic investments through
its venture capital affiliate, CMGI@Ventures. CMGI leverages the technologies,
content and market reach of its extended family of companies to foster rapid
growth and industry leadership across its network, and the larger Internet
economy. Compaq, Intel, Microsoft, Pacific Century Cyberworks and Sumitomo hold
minority positions in CMGI. CMGI's majority-owned operating companies include
the Company, NaviSite, 1ClickBrands, 1stUp.com, Activate.net, AdForce, Adsmart,
AltaVista, CMGI Solutions, Equilibrium, Flycast, iCAST, MyWay.com, NaviNet,
SalesLink, yesmail.com and Tribal Voice. In addition, CMGI@Ventures has
ownership interests in 49 Internet companies, including Lycos, Inc., Critical
Path, Silknet, Chemdex, MotherNature.com, Ventro and Vicinity.

CMGI's address is 100 Brickstone Square, Andover, Massachusetts 01810. Its
telephone number is (978) 684-3600.

Adsmart. Adsmart is an online advertising network for the
business-to-consumer and business-to-business markets, comprised of more than
400 Web sites totaling three billion monthly impressions. Adsmart's mission is
to combine the branding power of traditional media with the precision and
interactivity of new media to provide effective marketing opportunities for
advertisers and an advertising revenue stream for Web publishers. Adsmart has
more than 65 full-time salespeople in the six major advertising markets: New
York,

16
<PAGE> 20

Chicago, Detroit, Los Angeles, Boston and San Francisco. CMGI beneficially owns
approximately 96% of the outstanding capital stock of Adsmart. See
"-- Description of Adsmart."

Adsmart's address is 100 Brickstone Square, 4th Floor, Andover,
Massachusetts 01810. Its telephone number is (888) 559-8222.

FLYCAST. Flycast is a leading provider of Internet direct response
advertising solutions. Flycast is focused on maximizing the return on investment
("ROI") for response-oriented advertisers, direct marketers and e-commerce
companies. Flycast's flagship offering, the Flycast Network, reaches over 25
million people a month and provides a comprehensive system for planning, buying,
selling, managing, evaluating and administering Web advertising. Flycast's
customers include e-commerce companies, direct response marketers and
interactive agencies who are interested in generating site traffic and
increasing Web-based sales through ROI-focused advertising. Flycast, a
wholly-owned subsidiary of CMGI, was acquired by CMGI in a stock-for-stock
merger on January 13, 2000. See "-- Description of Flycast."

Flycast's address is 181 Fremont Street, San Francisco, California 94105.
Its telephone number is (415) 977-1000.

EFFECT OF TRANSACTIONS ON CERTAIN STOCKHOLDERS

The following table sets forth certain information showing beneficial
ownership of the Common Stock as of March 1, 2000, on a pro forma basis, as
adjusted to reflect the Stock Split and the issuance of approximately 11,223,704
Merger Shares and approximately 53,773,930 Contribution Shares in the
Transactions, by (i) each person known by the Company to own more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company and (iii)
all directors and executive officers as a group as follows:

<TABLE>
<CAPTION>
SHARES OF
ENGAGE PERCENTAGE
COMMON STOCK OWNERSHIP
BENEFICIALLY OF ENGAGE
OWNED OUTSTANDING
AFTER THE AFTER THE
NAME AND ADDRESS TRANSACTIONS(1)(3) TRANSACTIONS(2)
- ---------------- ------------------ ---------------
<S> <C> <C>
CMGI, Inc................................................... 152,081,206 87.73%
Paul L. Schaut.............................................. 731,568 *
David S. Wetherell.......................................... 152,087,206 87.73%
Edward A. Bennett........................................... 35,416 *
Christopher A. Evans........................................ 145,000 *
Craig D. Goldman............................................ 104,166 *
Andrew J. Hajducky, III..................................... 152,081,206 87.73%
Fredric D. Rosen............................................ 25,000 *
All directors and executive officers as a group (10
persons).................................................. 154,975,012 88.27%
</TABLE>

- ---------------
* Percentage is less than 1% of the total number of outstanding shares of
Common Stock.

(1) Beneficial ownership of Common Stock is determined in accordance with the
rules of the SEC, and includes shares for which the holder has sole or
shared voting or investment power. Shares of Common Stock subject to options
currently exercisable or which become exercisable within 60 days after March
1, 2000 are deemed to be beneficially owned and outstanding by the person
holding such options and are included for purposes of computing the
percentage ownership of the person holding such options, but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. The inclusion of any shares of Common Stock deemed beneficially
owned does not constitute admission of beneficial ownership of those shares.

(2) Percentage ownership is based on 173,350,720 shares which will be issued and
outstanding after the issuance of the Merger Shares and Contribution Shares
in the Transactions pursuant to the Merger Agreement, plus any shares
subject to issuance upon exercise of options held by such person or entity
that were exercisable on or exercisable within 60 days after March 1, 2000.

17
<PAGE> 21

(3) See Notes to table titled "Security Ownership of Certain Beneficial Owners
and Management" above.

As of the date of this Proxy Statement, the Company has no commitments to
issue any capital stock to any of the persons listed above except as
contemplated by the Merger Agreement and pursuant to the exercise of stock
options.

VOTES REQUIRED

The Company. Pursuant to the NASD Marketplace Rules, the proposed issuance
of the Merger Shares and the Contribution Shares requires approval of the
Company's stockholders because CMGI, a substantial stockholder of the Company,
will have a 5% or greater interest in each of Adsmart and Flycast immediately
prior to the closing of the Transactions and because in connection with the
Transactions, the Company will be issuing a number of shares of its Common Stock
equal to more than 20% of its outstanding Common Stock as of January 19, 2000.
The affirmative vote of the holders of a majority of Common Stock present in
person or represented by proxy and voting at the Meeting is required to approve
such issuances. CMGI, which currently beneficially owns approximately 80.37% of
the outstanding voting power of the Company, has agreed to vote in favor of the
issuance of the Merger Shares and the Contribution Shares.

The issuance of the Merger Shares and the Contribution Shares also requires
approval of an increase in the number of authorized shares of Common Stock. See
"Approval of Amendment to the Company's Amended and Restated Certificate of
Incorporation to Increase the Authorized Shares of Common Stock."

Adsmart. Approval of the Merger requires the approval of a majority of the
outstanding shares of Adsmart common stock. CMGI, which beneficially owns
approximately 98% of the outstanding shares of Adsmart common stock, has agreed
to vote in favor of the Merger.

Flycast. CMGI, which beneficially owns all of the outstanding shares of
Flycast common stock, has agreed to contribute the outstanding shares of Flycast
common stock to Engage.

BOARD APPROVALS

The respective boards of directors of the Company, CMGI, Adsmart and
Flycast have voted to approve the Merger Agreement and the Transactions.

REGULATORY APPROVAL

It is a condition to the closing of the Transactions that the Merger Shares
and the Contribution Shares be listed on the Nasdaq National Market.

LEGAL PROCEEDINGS

On March 16, 2000 a derivative action was filed in the Court of Chancery of
the State of Delaware against all of the directors of the Company, CMGI and the
Company, as nominal defendant. The complaint alleges that, in connection with
the proposed Transactions, CMGI and the directors of the Company violated their
fiduciary duties of loyalty and good faith. The plaintiff is seeking an
injunction against the proposed Transactions, rescission if the proposed
Transactions are completed, unspecified damages, costs and disbursements,
including attorneys' and experts fees. CMGI and the Company believe the claims
are without merit and intend to contest the claims vigorously.

ACCOUNTING TREATMENT

18
<PAGE> 22

INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS

Mr. Wetherell, a director of the Company, serves as Chairman of the Board,
President and Chief Executive Officer of CMGI, as a director of Adsmart and as
President of Flycast.

Mr. Goldman, a director of the Company, is a director of CMGI.

Mr. Hajducky, a director of the Company, serves as Executive Vice
President, Chief Financial Officer and Treasurer of CMGI, as a director of
Adsmart and as Vice President, Treasurer and a director of Flycast.

Except as described above, no director or executive officer of the Company
who has served in such capacity since August 1, 1998, no nominee for director of
the Company, nor any associate of any of the foregoing persons, has any direct
or indirect substantial interest in the Transactions. No affiliate of CMGI and
the Company (other than each other) has any direct or indirect material interest
in the Transactions.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion summarizes the material federal income tax
consequences relevant to the Company and its stockholders in connection with (i)
the merger of Adsmart with the Merger Sub and the issuance of the Merger Shares
pursuant to the Merger and (ii) the contribution of Flycast Common Shares to the
Company for the Contribution Shares pursuant to the Contribution. This
discussion is based on currently existing provisions of the Code, existing and
proposed Treasury Regulations thereunder, and current administrative rulings and
court decisions, all of which are subject to change. Any such change, which may
or may not be retroactive, could alter the tax consequences to the Company and
its stockholders as described herein. The Company is not requesting and will not
request a ruling from the Internal Revenue Service nor an opinion of counsel
regarding the tax consequences of the Transactions in connection with the
Transactions.

The Company will not recognize gain or loss with respect to the issuance of
the Merger Shares or the Contribution Shares. There are no tax consequences to
the Company's stockholders with respect to the Transactions.

TIMING AND CLOSING OF THE TRANSACTIONS

The closing of the Merger and the Contribution will occur concurrently and
is expected to occur on or about April , 2000 (the "Closing").

COMPARISON OF STOCKHOLDER RIGHTS

The completion of the Transactions will not change the existing rights of
the Company's stockholders; however, some dilution will result.

MARKET INFORMATION

The Common Stock is quoted on the Nasdaq National Market under the symbol
"ENGA." Prior to July 20, 1999, the Common Stock was not publicly traded. The
following table sets forth, for the fiscal periods indicated, the high and low
intraday sale prices for the Common Stock as reported on the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1999
Fourth Quarter (beginning July 20, 1999)................... $23.50 $11.56

2000
First Quarter.............................................. $21.00 $11.88
Second Quarter............................................. $85.00 $17.66
Third Quarter (through April , 2000)..................... $ $
</TABLE>

19
<PAGE> 23

On January 19, 2000, the last full trading day prior to the public
announcement of the proposed Transactions, the last reported sale price of the
Common Stock on the Nasdaq National Market was $38.50 per share. The last
reported sale price of the Common Stock on the Nasdaq National Market on April
1, 2000 was $ per share.

The Company has never declared or paid cash dividends on its Common Stock.
The Company currently does not anticipate paying any cash dividends in the
foreseeable future. Any payment of future dividends will be at the discretion of
the Board of Directors and will depend upon, among other things, the Company's
earnings, financial condition, capital requirements, level of indebtedness,
contractual restrictions with respect to the payment of dividends and other
factors that the Company's Board of Directors deems relevant.

There is no public trading market for the Adsmart common stock. As of April
1, 2000, the outstanding shares of Adsmart capital stock were
held by a total of approximately stockholders. Adsmart has never paid
cash dividends on the Adsmart common stock and its management does not
anticipate paying cash dividends in the near future.

There is no public market for the Flycast common stock. As of April 1,
2000, all of the outstanding shares of Flycast common stock were held by CMGI.
Flycast has never paid cash dividends on the Flycast common stock and its
management does not anticipate paying cash dividends in the near future.

AUDITORS

It is expected that a representative of KPMG LLP, the Company's independent
auditors, will be present at the Meeting and will be available to respond to
appropriate stockholders' questions with respect to the Transactions and to make
a statement if he or she desires to do so.

20
<PAGE> 24

BACKGROUND OF THE TRANSACTIONS

Since the Company completed its initial public offering in July 1999, its
management has sought opportunities to bring together complementary Internet
marketing and advertising properties to create a single, more powerful
organization that will create and deliver the next generation in online
marketing solutions. The Company believes those solutions must be designed to
connect marketers with specific online audiences and then propel those audiences
through the entire customer life cycle -- simply described as moving prospects
to buyers, to repeat buyers, and finally to long-standing, loyal customers. The
implementation of the Company's strategic plan accelerated in late 1999, after
CMGI announced on September 30, 1999 that it had agreed to acquire Flycast.

In October 1999, management of the Company began to evaluate with CMGI how
Engage might integrate the businesses of the Company with Flycast and Adsmart,
complementary Internet advertising and media companies controlled by CMGI.
Contemporaneously with that evaluation, the Company's Board of Directors
established the Special Committee, consisting of Messrs. Bennett, Evans and
Rosen, each of whom was and is independent of CMGI. The purpose of the Special
Committee was to act on behalf of the Company's stockholders, other than CMGI,
in evaluating the merits and negotiating the terms of a possible transaction
with CMGI involving the combination of the Company with Flycast and one or more
other complementary Internet companies controlled by CMGI. The Special Committee
was also directed to make a recommendation to the Company's full Board of
Directors as to whether to approve any such transaction. The Company's Board of
Directors authorized the Special Committee to retain independent financial and
legal advisors and any other professional the Special Committee deemed necessary
to assist it in carrying out its responsibilities. The Company's Board of
Directors also directed management to give the Special Committee and its
advisors complete access to the Company's personnel and all information and
materials in the Company's control, including its books, records, financial
statements and projections. The Company's Board of Directors also instructed
management to arrange for the Special Committee's advisors to have comparable
access to the personnel and records of Flycast and any other CMGI business that
might potentially be combined with the Company.

By November 1999, management of the Company and CMGI had completed their
preliminary evaluation of the strategic benefits of combining the businesses of
the Company, Adsmart and Flycast. Management recommended to the Company's Board
of Directors that the Special Committee proceed to evaluate and, if desired,
negotiate the terms of the proposed Transactions. After receiving that
recommendation, the Company's Board of Directors and the Special Committee
retained Nutter, McClennen & Fish, LLP, Boston, Massachusetts, as counsel to
represent both the Company and the Special Committee in the Transactions.

On December 6, 1999, the Special Committee met with counsel to review the
Special Committee's duties and responsibilities in connection with the proposed
Transactions and to interview several investment banking firms to serve as the
Special Committee's financial advisor. The Special Committee met on December 9,
1999 and December 14, 1999 to consider the proposals it received from the
prospective advisors. On December 16, after the Special Committee had
tentatively selected one of those firms, that firm notified the Special
Committee that another CMGI subsidiary had very recently engaged the firm to
assist with an underwriting of a public offering of equity securities and the
firm therefore had to withdraw its proposal to represent the Special Committee.

On December 17, the Special Committee asked several other investment
banking firms, including Bear, Stearns & Co. Inc. ("Bear Stearns"), to submit
proposals to the Special Committee describing the following:

- their experience in evaluating the business, financial condition and
operating results of Internet marketing and advertising companies
comparable to the Company, Adsmart and Flycast;

- their experience representing those types of Internet companies in merger
and acquisitions;

- their experience representing special committees in transactions between
a publicly traded company and its affiliate; and

21
<PAGE> 25

- any existing, previous or contemplated relationship between the firm and
CMGI or any company controlled by CMGI that might affect, or appear to
affect, the ability of the firm to render independent advice to the
Special Committee.

The Special Committee met on December 21, 1999 to review the proposals
from, and interview representatives of, those investment banking firms and to
discuss preliminarily CMGI's proposed terms for the Transactions that CMGI's
financial advisor, Goldman, Sachs & Co., had provided to the Special Committee
in mid-December. After those interviews, the Special Committee voted unanimously
to retain Bear Stearns as the Special Committee's financial advisor, subject to
counsel's negotiation of engagement terms acceptable to the Special Committee.
In deciding to retain Bear Stearns, the Special Committee was influenced
primarily by the following factors: (i) the experience of the Bear Stearns team
in evaluating Internet marketing and advertising companies comparable to the
Company, Adsmart and Flycast, (ii) the familiarity of the Bear Stearns team with
the Company's business and management as a consequence of Bear Stearns having
acted as a co-managing underwriter for the Company's initial public offering,
and (iii) the experience, depth of personnel and reputation of Bear Stearns
generally, and the proposed engagement team in particular, in merger and
acquisition advisory engagements. By the end of December, the Special Committee
and Bear Stearns had agreed in principle on the terms of the Bear Stearns
engagement.

Specifically, Bear Stearns's role was to

- assist the Special Committee and the Company's management in evaluating
the financial condition and operating results of Adsmart and Flycast;

- assist the Special Committee in evaluating and negotiating the financial
terms of the Transactions with CMGI and its advisors; and

- express its opinion, if requested by the Special Committee, as to whether
or not the Transactions were fair from a financial point of view to the
Company's stockholders other than CMGI.

On January 5, 2000, representatives from Bear Stearns and Nutter, McClennen
& Fish, LLP met with senior executives of the Company, Adsmart and Flycast to
review general business information regarding the Company, Adsmart and Flycast,
with a particular focus on their recent operating results and near-term
prospects and the potential risks of integrating their businesses.

The Special Committee met on January 11, 2000 with the Company's management
and representatives of Bear Stearns and Nutter, McClennen & Fish, LLP. At that
meeting, the Special Committee received a presentation from the Company's senior
management, including Paul Schaut, the Company's Chief Executive Officer and
President, regarding the strategic importance to the Company of the proposed
Transactions. See "-- Reasons for the Transactions."

Management also noted that the biggest challenge in integrating Adsmart and
Flycast would be to unify three different sales cultures, so that each
salesperson would be familiar with all of the Company's core products, and
management described the planning the Company had undertaken during the past
several months in an effort to mitigate that risk. In response to questions from
the Special Committee, management also represented that it believed it would be
more advantageous for the Company to acquire both Adsmart and Flycast as part of
a single transaction rather than to acquire any one of those companies. The
Special Committee concurred with management's conclusions that the acquisitions
of Adsmart and Flycast would significantly improve the Company's strategic
position and that the integration and other risks to the Company inherent in the
Transactions were reasonable in light of management's planning and the potential
benefits to the Company of the Transactions.

22
<PAGE> 26

After management's presentation, the Special Committee met with
representatives of Bear Stearns and counsel without management present. During
that portion of the meeting, Bear Stearns reviewed its preliminary assessment of
the following:

- the recent operating results of the Company, Adsmart and Flycast and
their prospects for 2000;

- the various methodologies used by market analysts and investors during
recent periods to value the publicly traded stock of comparable Internet
advertising and marketing companies;

- how the Committee might utilize different valuation methodologies to
negotiate with CMGI regarding the value to be paid for Adsmart and
Flycast; and

- the range of CMGI's pro forma ownership of the Company after the
Transactions.

During its presentation, Bear Stearns emphasized that the valuation of
Adsmart and Flycast would be highly dependent on the projected revenue of those
companies for the year ending December 31, 2000. In response, the Special
Committee asked the Company's management to review closely the preliminary
revenue projections for the year ending December 31, 2000 that management and
Bear Stearns had recently received from Adsmart and Flycast and to provide to
Bear Stearns management's own revenue projections for the year ending December
31, 2000 for those two companies.

The Special Committee then reviewed in detail with Bear Stearns and counsel
the proposed terms of the proposed Transactions that CMGI's financial advisor
had previously provided to the Special Committee. According to that proposal,
CMGI offered to sell Adsmart and Flycast to the Company in return for
approximately 67.7 million additional shares of the Common Stock, which would
increase CMGI's ownership of the Company to 87.78% from 80.37%. CMGI proposed to
sell Adsmart for $425 million of Common Stock, valued using a five-day average
for the period ending two days prior to the date of the Merger Agreement. With
respect to Flycast, CMGI offered to fix the number of shares that the Company
would issue for Flycast based on (i) the number of shares of CMGI stock issued
to Flycast stockholders and reserved for issuance under stock options to Flycast
employees that CMGI assumed (an aggregate of approximately 16,676,000 shares of
CMGI Common Stock) and (ii) the ratio of the closing prices of the Common Stock
and CMGI common stock on September 29, 1999, the day before CMGI announced its
acquisition of Flycast. Those closing prices were $16.97 and $50.16,
respectively. Applying that ratio of 1:2.956 and assuming CMGI ultimately would
issue the maximum number of shares purchasable under existing Flycast stock
options (net of option shares tendered to satisfy the exercise price of those
options), the CMGI proposal called for the Company to issue approximately 53.9
million shares of Common Stock to purchase Flycast, having a value of
approximately $1.7 billion, using a five-day average for the period ended
January 5, 2000.

The Special Committee and its advisors discussed at length the proposed
valuations of Adsmart and Flycast under the CMGI proposal. Among other things,
the advisors explained that Adsmart's accountants were in the process of
auditing its financial statements and therefore Adsmart's historical financial
results were subject to change. Counsel noted that the Company's obligation to
close the Transactions should be conditioned on the receipt of audited Adsmart
financial statements. Bear Stearns and counsel also advised the Special
Committee that the Special Committee should take into account, when considering
the proposed valuation of Adsmart, the employee stock options and debt that the
Company would assume in the proposed Merger.

In the case of Flycast, the Special Committee considered the increase of
$817.2 million, or 102%, in Flycast's valuation, comparing the implied value of
Flycast on September 30, 1999, when CMGI's acquisition of Flycast was announced,
of $834.4 million, valuing CMGI stock as of September 29, 1999, and the then
current value of approximately $1.7 billion under CMGI's proposal. Although the
Special Committee acknowledged the rationale underlying CMGI's proposed formula
for calculating the number of shares of Common Stock to be issued for Flycast,
the Special Committee concluded that it must assess the value of Flycast, and
negotiate with CMGI, based upon various methodologies that an independent party
could reasonably be expected to utilize if it were then negotiating the
acquisition of Flycast. In that regard, the Special Committee instructed Bear
Stearns to develop and present to CMGI's financial advisors a counterproposal
for the proposed Transactions, taking into account prevailing valuation
parameters for
23
<PAGE> 27

Internet companies comparable to Flycast and Adsmart and the 2000 revenue
projections for Adsmart and Flycast that the Company's management was to provide
to Bear Stearns.

The Special Committee also considered that Flycast employees would continue
to hold stock options to purchase CMGI stock after the Transactions and that
those options would not terminate if the employee voluntarily resigned from the
Company to accept a job with CMGI or another CMGI subsidiary. Noting the
retention risk presented by that arrangement, the Special Committee concurred
with the suggestion of the Company's management that counsel should negotiate
for a commitment from CMGI that neither it nor any of its other subsidiaries
would specifically solicit Adsmart or Flycast employees to terminate their
employment with the Company, Flycast or Adsmart.

The Special Committee also discussed with Bear Stearns and counsel various
implications of the increase in CMGI's percentage ownership of the Company as a
result of the Transactions. In particular, the Special Committee considered that
CMGI would have the right, if it ever owned at least 90% of the shares of Common
Stock then outstanding, to effect a so-called "short-form" merger of the Company
under Section 253 of the Delaware General Corporation Law. Counsel explained
that this provision would permit the CMGI Board of Directors to cause CMGI to
acquire the minority interest in the Company without being required either to
obtain the approval of the Company's stockholders or to file with the SEC
detailed disclosure materials regarding that transaction.

The Special Committee also considered whether the reduction in the
percentage of outstanding shares of Common Stock that was publicly traded, as a
consequence of the Transactions and the issuance of additional shares to CMGI,
would adversely affect the liquidity of the trading market for, or otherwise
adversely affect the value of, the minority interest in the Company. To better
evaluate this issue, the Special Committee asked Bear Stearns to report at a
subsequent meeting on the trading characteristics of companies for which the
publicly traded shares represent a small portion of the total shares
outstanding.

On January 12, 2000, the Company's management provided to Bear Stearns its
2000 revenue projections for Adsmart and Flycast. On January 13, 2000, taking
into account those projections, Bear Stearns made a counterproposal to CMGI on
behalf of the Special Committee addressing various financial and non-financial
terms of the proposed Transactions. Under that counterproposal, the Company
offered to purchase Adsmart and Flycast for a total of 48.2 million shares of
the Common Stock, which would increase CMGI's ownership of the Company to
86.26%. The Special Committee proposed to value Adsmart at $360 million, as
compared to CMGI's proposal of $425 million, but the Special Committee would
value the Common Stock using a 20-day average rather than the five-day average
that CMGI proposed. The net effect of those changes was that the number of
shares of Common Stock proposed to be issued to CMGI for Adsmart was within five
percent of the number of shares required under CMGI's proposal. With respect to
Flycast, the Special Committee proposed that the Company would issue 36.6
million shares of Common Stock, constituting approximately one-third fewer
shares than would be required under CMGI's proposal. This proposal was made in
view of the fact that the valuation of Flycast, based on the number of shares of
CMGI common stock issued in the acquisition and the closing price of CMGI common
stock on September 29, 1999, was approximately $835 million.

On January 14, 2000, Bear Stearns reported to the Special Committee that
CMGI had indicated to Bear Stearns that it would not accept the Special
Committee's counterproposal. The Special Committee instructed Bear Stearns to
continue its discussions with CMGI's financial advisor and to review the peer
group that it was using to value Flycast based upon a multiple of calendar 2000
revenue. The Special Committee also discussed, and instructed the Company's
management to consider whether the Company could reasonably expect to develop in
a timely fashion an adequate alternative to Flycast's proprietary technology, if
the Company and CMGI were unable to negotiate mutually acceptable terms for the
Company's acquisition of Flycast.

The Special Committee reconvened on January 17, 2000 to review with the
Company's management, Bear Stearns and counsel the status of Bear Stearns's
discussions with CMGI's financial advisor. Management reviewed with the Special
Committee why management believed that the operational, marketing and sales
synergies that would result from combination of the Company, Adsmart and Flycast
would allow each company to generate more revenue during the year ending
December 31, 2000 than previously projected.
24
<PAGE> 28

Management also noted that it expected the Flycast acquisition would be
materially accretive to the Company's revenue per share even at the valuation
CMGI had proposed. In addition, management confirmed that it did not believe the
Company could develop in a timely fashion an adequate alternative to Flycast's
proprietary technology, if the Company and CMGI were unable to negotiate
mutually acceptable terms for the Company's acquisition of Flycast.

The Special Committee then met with Bear Stearns and counsel without
management present. Bear Stearns reported that it had spoken several times with
CMGI's financial advisor subsequent to the January 14 meeting, and that CMGI's
position regarding the valuation of Flycast had not materially changed, although
CMGI had offered to accept $50 million less of Common Stock for Flycast. After
Bear Stearns delivered its report, the Special Committee reached a consensus
that (i) it was unlikely CMGI would accept a further reduction in Flycast's
valuation and (ii) the Special Committee would be inclined to support CMGI's
revised proposal if in the opinion of Bear Stearns the aggregate purchase price
for Adsmart and Flycast, taken as a whole, was fair from a financial point of
view to the Company's stockholders other than CMGI.

The Special Committee met on January 18, 2000 with Bear Stearns and
counsel. At that meeting, counsel updated the Special Committee on its
negotiations with CMGI's counsel regarding the proposed terms of the Merger
Agreement, and Bear Stearns advised the Special Committee that, subject to the
receipt of confirmatory data regarding Adsmart's financial statements and Bear
Stearns's review of a substantially final form of Merger Agreement, Bear Stearns
was prepared to opine that the aggregate purchase price for Adsmart and Flycast
was fair from a financial point of view to the Company's stockholders other than
CMGI. Bear Stearns then reviewed with the Special Committee the various elements
of its analysis that would support that opinion, noting in particular that Bear
Stearns had taken into account projected calendar 2000 revenue with and without
the revenue synergies expected by management. Bear Stearns also reviewed with
the Special Committee the trading characteristics of companies for which the
publicly traded shares represented a small portion of the total shares
outstanding.

The Special Committee reconvened on January 19, 2000 with Bear Stearns and
counsel. At that meeting, counsel reviewed the material terms of the Merger
Agreement, describing for the Special Committee the representations in the
Merger Agreement regarding the business and financial condition of Adsmart and
Flycast, the various pre- and post-closing obligations of the Company and CMGI,
and the extent to which CMGI would be required to indemnify the Company for
damages under the Merger Agreement. In particular, counsel noted that the
Company's obligation to complete the Transactions would be conditioned on the
receipt of audited Adsmart financial statements; the Company's Board of
Directors would generally not have the right to terminate the Merger Agreement
or withdraw its recommendation of the Transactions unless CMGI acted in breach
of the Merger Agreement; CMGI would agree to vote its shares of the Common Stock
and Adsmart in favor of the Transactions; CMGI would agree that neither it nor
any of its other subsidiaries would specifically solicit Adsmart or Flycast
employees to terminate their employment with the Company, Flycast or Adsmart,
but CMGI would be permitted to hire those employees if they left the Company,
Flycast or Adsmart on their own initiative; and CMGI would not agree to refrain
from effecting a short-form merger.

Counsel confirmed to the Special Committee that the Merger Agreement would
require the Company to issue a maximum of approximately 64.9 million shares of
Common Stock in exchange for Adsmart and Flycast, assuming the full exercise of
all Adsmart options assumed by the Company and all Flycast options assumed by
CMGI (in each case net of option shares assumed to be tendered to satisfy the
exercise price of those options). Bear Stearns noted the Adsmart valuation had
increased by approximately $11 million, or 34,000 shares of Common Stock, to
reflect a decision not to have the Company indemnify CMGI for CMGI's obligations
under convertible notes issued in connection with a prior Adsmart acquisition.
Bear Stearns then orally delivered its fairness opinion and reviewed its final
analysis of the factors supporting that opinion.

After those presentations, the Special Committee voted unanimously to
recommend that the Company's Board of Directors approve the Transactions on the
financial terms presented to the Special Committee at the January 19 meeting and
authorize the execution of the Merger Agreement on substantially the terms
presented at that meeting. Immediately after the adjournment of that Special
Committee meeting, the Company's Board of Directors met and upon receiving the
Special Committee's recommendation, voted to

25
<PAGE> 29

authorize management to cause the Company to enter into the Merger Agreement and
to complete the Transactions. Messrs. Wetherell, Goldman and Hajducky abstained
from that vote because of their affiliation with CMGI.

On January 19, 2000, the Merger Agreement was executed by the parties. On
January 20, 2000, prior to the opening of trading on the Nasdaq National Market,
the Company and CMGI issued a joint press release announcing the Transactions.

REASONS FOR THE TRANSACTIONS

THE COMPANY. THE SPECIAL COMMITTEE UNANIMOUSLY RECOMMENDED THE
TRANSACTIONS, AND THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY DETERMINED
THAT THE TRANSACTIONS ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND
ITS STOCKHOLDERS. THE DIRECTORS AFFILIATED WITH CMGI ABSTAINED FROM VOTING.

These decisions were based on several potential benefits of the
Transactions that the Board of Directors of the Company believes will contribute
to the success of the Company. These potential benefits include:

- the opportunity that the Transactions would provide to combine the
Company's profile-driven targeting capabilities, Adsmart's audited
demographic and lifestyle target audience groups, and Flycast's
performance-focused, direct response and optimization solutions to
provide targeting that would allow marketers to reach precise audiences
and deliver innovative marketing programs to those audiences;

- the opportunity that the Transactions would provide for the Company to
deliver its advertising programs across the Internet, broadband and other
emerging platforms, in or out of the Company's captive networks;

- the opportunity that the Transactions would provide for the Company to
integrate I/PRO and AdKnowledge in the testing and refining of a wider
range of advertising campaigns;

- the opportunity that the Transactions would provide for the Company to
become a one-stop source for all the solutions necessary for marketers to
meet their multiple marketing goals across the Web; and

- the opportunity that the Transactions would provide for the Company to
accelerate its rate of growth.

These decisions were also based on the dynamic changes affecting the online
advertising market in recent years, characterized by a significant expansion in
the size and diversity of the online audience, as well as the pace of
technological innovation.

The Special Committee and the Board of Directors of the Company reviewed a
number of factors in evaluating the Transactions, including, but not limited to,
the following: (i) historical information concerning the Company's, Adsmart's
and Flycast's respective business focus, financial performance and condition,
operations, technology and management; (ii) management's view of the financial
condition, results of operations and businesses of the Company, Adsmart and
Flycast before and after giving effect to the Transactions; (iii) the
differences and similarities between business and operating strategies of the
three companies; (iv) current financial market conditions and historical stock
market prices, volatility and trading information; (v) the consideration the
Adsmart stockholders would receive in the Merger in light of comparable
transactions; (vi) the consideration CMGI will receive in the Contribution in
light of comparable transactions; (vii) the belief that the terms of the Merger
Agreement are reasonable; (viii) the impact of the Transactions on customers and
employees; (ix) results of the due diligence investigation of Adsmart and
Flycast conducted by the Company's management, accountants and counsel; (x) the
expectation that the Transactions would be accounted for as a combination of
entities under common control, and therefore would not result in the Company
having to recognize any goodwill for accounting purposes, and (xi) review of the
valuations of comparable companies.

The Special Committee and the Board of Directors of the Company also
identified and considered a number of potentially negative factors in its
deliberations concerning the Transactions including the following: (i) the risks
that the benefits sought to be achieved by the Transactions may not be realized;
(ii) the possibility of management disruption associated with the Transactions
and integrating the operations of the
26
<PAGE> 30

three companies, as well as the risk that key management and personnel of
Adsmart and Flycast might leave after the Transactions are completed; and (iii)
other applicable risks.

The Special Committee and the Board of Directors concluded, however, that,
on balance, the potential benefits of the Transactions to the Company and its
stockholders outweighed the associated risks. The discussion of the information
and factors considered by the Board of Directors of the Company is not intended
to be exhaustive. In view of the variety of factors considered in connection
with its evaluation of the Transactions, the Board of Directors did not find it
practicable to, and did not quantify or otherwise assign relative weight to, the
specific factors considered in reaching its determination.

THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF COMMON
STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND VOTING AT THE MEETING WILL
BE REQUIRED TO APPROVE THE ISSUANCE OF THE MERGER SHARES AND THE CONTRIBUTION
SHARES.

THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS BELIEVE THAT THE
TRANSACTIONS ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMEND A VOTE FOR APPROVAL OF THE ISSUANCE OF THE MERGER SHARES AND THE
CONTRIBUTION SHARES.

ADSMART. ADSMART'S BOARD OF DIRECTORS UNANIMOUSLY CONCLUDED THAT THE
MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, ADSMART AND ITS SHAREHOLDERS.

The decision by Adsmart's board of directors to approve the Merger was
based on several potential benefits of the Merger to Adsmart, including: (i) the
Merger would provide Adsmart stockholders with an equity interest in the Company
that provides stockholders of Adsmart with increased liquidity for their
investment; (ii) the Merger would provide Adsmart with immediate access to
additional financial resources to accelerate its growth, as well as access to
the public markets for further capital if needed; (iii) the possible strategic
growth opportunities resulting from the Merger; and (iv) the belief that
Adsmart's business complements the operations of the Company, as well as the
respective business and financial condition of each of the two companies.

The decision of Adsmart's board of directors to approve the Merger and the
Merger Agreement resulted from the board's careful consideration of a range of
strategic alternatives, including the pursuit of a long-term independent
business strategy for Adsmart. Adsmart's board of directors considered a number
of factors in evaluating the Merger, including the following: (i) identifying
and securing the strategic alternative that would provide the greatest value to
Adsmart stockholders; (ii) the relative volatility of the market value of the
Common Stock; (iii) the relative likelihood of completing the Merger; (iv) the
relative risks to Adsmart's business if the Merger is not completed; (v) the
results of due diligence reviews conducted by Adsmart's management, legal
advisors and financial advisors examining the Company's business, operations,
technology and competitive position and possible expansion opportunities for
Adsmart following the Merger; (vi) review of the current and prospective
business environment in which Adsmart operates, the competitive environment for
ad management and delivery services for the Internet; and (vii) the recent trend
towards consolidation among its competitors.

Adsmart's board of directors also considered a number of potentially
negative factors in its deliberations concerning the Merger, including: (i) the
risk that the Merger might not be consummated; (ii) the potential loss of
revenues and business opportunities for Adsmart as a result of confusion in the
marketplace after the announcement of the Merger, or possible adverse reactions
by certain existing or prospective Adsmart customers who compete with CMGI, the
Company or their affiliates, and the possible exploitation of such issues by
Adsmart's and CMGI's and the Company's competitors; (iii) the possibility of
management disruption associated with the Merger and integrating the operations
of the companies, as well as the risk that key management and technical
personnel might leave Adsmart after the Merger is completed; (iv) the risk that
the benefits sought to be achieved by the Merger would not be realized; and (v)
other applicable risks.

Adsmart's board of directors concluded, however, that, on the balance, the
potential benefits to Adsmart and its stockholders of the Merger outweighed the
risks associated with the Merger.

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<PAGE> 31

The discussion of the information and factors considered by Adsmart's board
of directors is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Merger, Adsmart's board of
directors did not find it practicable to, and did not quantify or otherwise
assign relative weight to, the specific factors considered in reaching its
determination.

FLYCAST. FLYCAST'S BOARD OF DIRECTORS UNANIMOUSLY CONCLUDED THAT THE
CONTRIBUTION IS FAIR TO, AND IN THE BEST INTERESTS OF, FLYCAST AND ITS
STOCKHOLDER.

The decision by Flycast's board of directors to approve the Contribution
was based on several potential benefits of the Contribution to Flycast,
including: (i) the Contribution would provide Flycast with immediate access to
additional financial resources to accelerate its growth, as well as access to
the public markets for further capital if needed; (ii) the possible strategic
growth opportunities resulting from the Contribution; and (iii) the belief that
Flycast's business complements the operations of the Company, as well as the
respective business and financial condition of each of the two companies.

The decision of Flycast's board of directors to approve the Contribution
and the Merger Agreement resulted from the board's careful consideration of a
range of strategic alternatives, including the pursuit of a long-term
independent business strategy for Flycast. Flycast's board of directors
considered a number of factors in evaluating the Contribution, including the
following: (i) identifying and securing the strategic alternative that would
provide the greatest value to the Flycast stockholder; (ii) the relative
volatility of the market value of the Common Stock; (iii) the relative
likelihood of completing the Contribution; (iv) the relative risks to Flycast's
business if the Contribution is not completed; (v) the results of due diligence
reviews conducted by Flycast's management, legal advisors and financial advisors
examining the Company's business, operations, technology and competitive
position and possible expansion opportunities for Flycast; (vi) review of the
current and prospective business environment in which Flycast operates, the
competitive environment for delivery services for the Internet; and (vii) the
recent trend towards consolidation among its competitors.

Flycast's board of directors also considered a number of potentially
negative factors in its deliberations concerning the Contribution, including:
(i) the risk that the Contribution might not be consummated; (ii) the potential
loss of revenues and business opportunities for Flycast as a result of confusion
in the marketplace after the announcement of the Contribution, or possible
adverse reactions by certain existing or prospective Flycast customers who
compete with the Company or its affiliates, and the possible exploitation of
such issues by Flycast's and the Company's competitors; (iii) the possibility of
management disruption associated with the Contribution and integrating the
operations of the companies, as well as the risk that key management and
technical personnel might leave Flycast after the Contribution is completed;
(iv) the risk that the benefits sought to be achieved by the Contribution would
not be realized; and (v) other applicable risks.

Flycast's board of directors concluded, however, that, on the balance, the
potential benefits to Flycast and its stockholder of the Contribution outweighed
the risks associated with the Contribution.

The discussion of the information and factors considered by Flycast's board
of directors is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Contribution, Flycast's
board of directors did not find it practicable to, and did not quantify or
otherwise assign relative weight to, the specific factors considered in reaching
its determination.

OPINION OF ENGAGE'S FINANCIAL ADVISOR

Bear Stearns acted as financial advisor to the Company and the Special
Committee in connection with the Transactions. At the January 19, 2000 meeting
of the Special Committee, Bear Stearns rendered its oral opinion, subsequently
confirmed in writing as of the same date, to the Special Committee to the effect
that, as of the date of such opinion, based upon and subject to the assumptions
made, matters considered and limits of the review undertaken by Bear Stearns,
the purchase price was fair, from a financial point of view, to the stockholders
of the Company, excluding CMGI and its affiliates.

The full text of Bear Stearns' written opinion, dated January 19, 2000,
which sets forth among other things, the assumptions made, matters considered
and limits on the review undertaken by Bear Stearns in

28
<PAGE> 32

connection with the opinion is attached as Annex B to this Proxy Statement and
is incorporated herein by reference. The Company's stockholders are urged to
read Bear Stearns' opinion in its entirety. The summary of the opinion of Bear
Stearns set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of the opinion. In this summary, Adsmart and Flycast
are referred to together as the Combined Companies.

In reading the discussion of the fairness opinion provided below, the
Company's stockholders should be aware that Bear Stearns' opinion:

- is intended for the benefit and use of the Special Committee;

- does not constitute a recommendation to the Special Committee as to how
to vote in connection with the Transactions;

- does not constitute a recommendation to any holders of the Company's
Common Stock as to how to vote in connection with the Transactions; and

- does not address the Company's underlying business decision to pursue the
Transactions.

In connection with Bear Stearns' role as financial advisor to the Company,
and in arriving at its opinion, Bear Stearns has, among other things:

- reviewed the Merger Agreement in final form;

- reviewed the Company's Registration Statement on Form S-1 dated July 19,
1999, its Annual Report on Form 10-K for the period ended July 31, 1999
and its Quarterly Report on Form 10-Q for the period ended October 31,
1999;

- reviewed certain operating and financial information, including
projections provided to Bear Stearns by management relating to the
Company's business and prospects;

- met with certain members of the Company's senior management to discuss
the Company's business, operations, historical and projected financial
results and future prospects;

- reviewed Flycast's Registration Statement on Form S-1 dated May 3, 1999
and its Quarterly Reports on Form 10-Q for the periods ended June 30,
1999 and September 30, 1999;

- reviewed certain operating and financial information, including
projections, provided to Bear Stearns by Adsmart's and Flycast's
management relating to Adsmart's and Flycast's respective business and
prospects;

- met with certain members of Adsmart's and Flycast's senior management to
discuss Adsmart's and Flycast's respective business, operations,
historical and projected financial results and future prospects;

- reviewed the historical prices, trading multiples and trading volumes of
the Common Stock and shares of Flycast common stock (prior to its
purchase by CMGI);

- reviewed publicly available financial data, stock market performance data
and trading multiples of companies which Bear Stearns deemed generally
comparable to the Company, Adsmart and Flycast;

- reviewed the terms of recent mergers and acquisitions involving companies
which Bear Stearns deemed generally comparable to Adsmart and Flycast and
the Transactions;

- reviewed the pro forma financial results, financial condition and
capitalization of the Company giving effect to the Transactions;

- conducted such other studies, analyses, inquiries and investigations as
Bear Stearns deemed appropriate; and

- reviewed synergy estimates of the Company, Adsmart and Flycast provided
by the Company's management.

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<PAGE> 33

In preparing its opinion, Bear Stearns did not assume any responsibility
for the independent verification of, and did not independently verify, any
information, whether publicly available or furnished to it, concerning the
Company, Adsmart or Flycast, including, without limitation, any financial
information, forecasts or projections, considered in connection with the
rendering of its opinion. Bear Stearns assumed and relied upon the accuracy and
completeness of all such information.

In arriving at its opinion, Bear Stearns did not conduct a physical
inspection of the properties or assets, and did not prepare or obtain any
independent evaluation or appraisal of any of the assets or liabilities of the
Company, Adsmart or Flycast. With respect to the financial forecasts and synergy
estimates made available to Bear Stearns and used in its analysis, Bear Stearns
has assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the Company's management as to
the matters covered thereby. In rendering its opinion, Bear Stearns expressed no
view as to the reasonableness of such forecasts and projections or the
assumptions on which they are based.

Bear Stearns did not express any opinion as to the price or range of prices
at which the Common Stock of the Company might trade subsequent to the
announcement of the Transactions or as to the price or range of prices at which
the shares of Common Stock of the Company may trade subsequent to the
consummation of the Transactions. The opinion of Bear Stearns was necessarily
based on economic, market and other conditions, and the information made
available to Bear Stearns, as of the date thereof. Although subsequent
developments may affect its opinion, Bear Stearns has assumed no obligation to
update, revise or reaffirm it.

Bear Stearns assumed, for all purposes material to Bear Stearns' analysis,
the accuracy and completeness of the representations and warranties, performance
of all covenants and satisfaction of all conditions with respect to the Merger
Agreement.

Bear Stearns assumed that the Transactions will qualify as tax-free
reorganization within the meaning of Sections 368 and 351 of the Code.

Set forth below is a brief summary of some of the valuation and financial
and comparative analyses considered by Bear Stearns in connection with the
rendering of the Bear Stearns opinion and reviewed with the Special Committee on
January 19, 2000. In order to understand fully the financial analyses used by
Bear Stearns, the tables must be read with the text of each summary because the
tables alone are not a complete description of the financial analysis. This
summary does not purport to be a complete description of the analyses underlying
the Bear Stearns opinion and is qualified in its entirety by reference to the
full text of the Bear Stearns opinion.

The following summary describes the analyses and factors that Bear Stearns
deemed material in its presentation to the Special Committee of the Board of
Directors of the Company and in preparing its opinion, but is not a
comprehensive description of all analyses performed and factors considered by
Bear Stearns in connection with preparing its opinion. The preparation of a
fairness opinion is a complex process involving the application of subjective
business judgment in determining the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, is not readily susceptible to summary description.
Bear Stearns believes that its analyses must be considered as a whole and that
considering any portion of such analyses and of the factors considered without
considering all analyses and factors could create a misleading view of the
process underlying the opinion. In arriving at its fairness determination, Bear
Stearns did not assign specific weights to any particular analyses.

In conducting its analysis and arriving at its opinions, Bear Stearns used
a variety of generally accepted valuation methods. The analyses were prepared
solely for the purpose of enabling Bear Stearns to provide its opinion to the
Special Committee as to the fairness of the purchase price to the Company's
stockholders, other than CMGI, and do not purport to be appraisals of or
necessarily reflect the prices at which businesses or securities actually may be
sold, which are inherently subject to uncertainty. In connection with its
analyses, Bear Stearns made, and was provided by the Company's management with,
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the Company's,
Adsmart's and Flycast's control. Analyses based on estimates or forecasts of
future results are not necessarily indicative of actual past or future values or
results, which may be significantly more

30
<PAGE> 34

or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the Company, Adsmart, Flycast or their respective
advisors, none of the Company, Bear Stearns nor any other person assumes
responsibility if future results or actual values are materially different form
these forecasts or assumptions.

Historical Stock Price Analysis. Bear Stearns reviewed and analyzed recent
and historical market prices and trading volumes for the Company's Common Stock
and compared such market prices to the Comparable Companies, as defined below,
and certain market indices. Bear Stearns observed that Engage's stock price
increased 32.7% during the 20 trading days prior to the announcement of the
Transactions. The 52-week high stock price was $44.50 and the low was $11.57.

Comparable Public Company Trading Analysis. Bear Stearns compared the
implied ratio of the considerations to be paid in the Transactions to the
projected revenue of the Combined Companies to the projected revenue multiples
Bear Stearns had observed in the market for companies Bear Stearns deemed
generally comparable to Adsmart and Flycast (the "Comparable Companies"). The
Comparable Companies were:

- 24/7 Media, Inc.

- DoubleClick Inc.

- Engage

- Exactis.com, Inc.

- Net Perceptions, Inc.

- yesmail.com, inc.

Bear Stearns reviewed the implied ratios for the Comparable Companies based
on both a spot price and a 20 trading days average stock price basis. The spot
price is the most recent stock price and provides information on current equity
values. During the 20 trading days prior to the announcement of the
Transactions, the Company's stock price increased 32.7%. Bear Stearns believes
that the increase in the stock price was due in part to market speculation about
the possibility of the Company announcing a merger or acquisition. Also, like
many Internet related companies, Engage and the Comparable Companies have highly
volatile stock prices. To reduce the impact of this stock price increase and
volatility on the Transactions analysis, Bear Stearns reviewed the 20 trading
days average stock price for both Engage and the Comparable Companies. Bear
Stearns reviewed the implied ratios for the Combined Companies both including
and excluding synergies from the Transactions.

The following table summarizes the analysis.

<TABLE>
<CAPTION>
COMBINED COMPANY
----------------------
EXCLUDING INCLUDING COMPARABLE COMPANIES
SYNERGIES SYNERGIES HARMONIC MEAN
--------- --------- --------------------
<S> <C> <C> <C>
Equity Value Based on Spot Price to
Calendar Year 1999E Revenue....................... 28.7x 28.7x 34.2x
Calendar Year 2000E Revenue....................... 16.5x 14.4x 19.1x
Equity Value Based on 20 Days Average Price to
Calendar Year 1999E Revenue....................... 25.2x 25.2x 34.1x
Calendar Year 2000E Revenue....................... 14.5x 12.7x 19.0x
</TABLE>

None of the Comparable Companies is identical to the Combined Companies.
Accordingly, Bear Stearns believes the analysis of publicly traded comparable
companies is not simply mathematical. Rather, it involves complex considerations
and qualitative judgments, reflected in Bear Stearns' opinion, concerning
differences in financial and operating characteristics of the Comparable
Companies and other factors that could affect the public trading value of the
Comparable Companies.

Comparable M&A Transactions Analysis. Bear Stearns compared the implied
ratio of the consideration to be paid in the Transactions to the projected
revenue of the Combined Companies to the projected revenue

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<PAGE> 35

multiples Bear Stearns observed in the market for merger and acquisition that
Bear Stearns deemed comparable to the Transactions (the "Comparable
Transactions"). The Comparable Transactions were:

- the acquisition of Flycast Communications by CMGI, announced on September
30, 1999;

- the acquisition of AdKnowledge Inc. by Engage, announced on September 24,
1999;

- the acquisition of AdForce, Inc. by CMGI, announced on September 20,
1999;

- the acquisition of NetGravity, Inc. by DoubleClick Inc., announced on
July 13, 1999; and

- the acquisition of yesmail.com by CMGI, announced on December 15, 1999.

Bear Stearns observed ratios of equity value as of the announcement date to
latest twelve months ("LTM") revenue and next twelve months ("NTM") revenue.
Bear Stearns reviewed the implied ratios for the Comparable Transactions based
on both a spot price and a 20 trading days average stock price basis for the
reasons described above. Bear Stearns reviewed the implied ratios for the
Combined Companies both including and excluding synergies from the Transactions.

The following table summarizes the analysis.

<TABLE>
<CAPTION>
COMBINED COMPANY
----------------------
EXCLUDING INCLUDING COMPARABLE TRANSACTIONS
SYNERGIES SYNERGIES HARMONIC MEAN
--------- --------- -----------------------
<S> <C> <C> <C>
Equity Value Based on Spot Price to
Latest Twelve Months Revenue........................ 28.7x 28.7x 38.6x
Next Twelve Months Revenue.......................... 16.5x 14.4x 15.4x
Equity Value Based on 20 Days Average Price to
Latest Twelve Months Revenue........................ 25.2x 25.2x 34.7x
Next Twelve Months Revenue.......................... 14.5x 12.7x 14.2x
</TABLE>

Bear Stearns also evaluated the difference in the ratio of equity value to
NTM revenue paid by CMGI for Flycast on September 30, 1999 compared to the
implied ratio the Company would pay for the Combined Companies. In this analysis
Bear Stearns evaluated the changes in projections for Flycast by considering the
changes in Flycast's projections since September 30, 1999, the synergies
expected to result from the Transactions and the change in the stock prices of
the Comparable Companies since September 30, 1999.

All the multiples for the Comparable Transactions were based on public
information available at the time of the announcement of such Transactions,
without taking into account differing market and other conditions during the
period which the Comparable Transactions occurred.

Because the reasons for, and circumstances surrounding, each of the
Comparable Transactions were so diverse, and due to the inherent differences
between the operations and financial conditions of the Company, Adsmart and
Flycast and the companies involved in the Comparable Transactions, Bear Stearns
believes that a comparable Transactions analysis is not simply mathematical.
Rather, it involves complex considerations and qualitative judgments, reflected
in Bear Stearns' opinion, concerning differences between the characteristics of
the Comparable Transactions and the Transactions that could affect the value of
the subject companies and businesses and the Company, Adsmart and Flycast.

Relative Contribution Analysis. Based on the Combined Companies'
projections, Bear Stearns computed a relative contribution analysis measuring
the percentage of fully diluted equity ownership versus projected revenue
contribution. The analysis indicated that shares of the Company's Common Stock
issued to CMGI in exchange for the Combined Companies would represent 36% of the
combined company's diluted outstanding shares and the Combined Companies would
contribute, during fiscal years ending July 31, 2000 and 2001, 71% and 72%,
respectively, of the combined company's revenue (without taking into account any
synergies).

Pro Forma Merger Consequences Analysis. Bear Stearns analyzed certain pro
forma effects of the Transactions. Bear Stearns noted that the Transactions
would increase the Company's pro forma revenue per
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<PAGE> 36

share excluding synergies by 66% and 125% for the fiscal years ending July 31,
2000 and 2001, respectively, and including synergies by 83% and 140% for the
fiscal years ending July 31, 2000 and 2001, respectively.

The terms of the Transactions were determined through negotiations between
the Company and CMGI and were approved by the Special Committee and the
Company's Board of Directors. Although Bear Stearns provided advice to the
Special Committee and the Company during the course of these negotiations, the
decision to enter into the Transactions was solely that of the Special Committee
and the Company's Board of Directors. As described above, the opinion and
presentation of Bear Stearns to the Special Committee were only some of the
factors taken into consideration by the Special Committee and the Company's
Board of Directors in making their determinations to approve the Transactions.
Bear Stearns' opinion was provided to the Special Committee to assist it in
connection with its consideration of the Transactions and does not constitute a
recommendation to any holder of the Company's Common Stock as to how to vote
with respect to the Transactions.

INTERESTS OF FINANCIAL ADVISOR TO ENGAGE IN THE MERGER

The Company retained Bear Stearns as the financial advisor to the Company
and the Special Committee based on Bear Stearns' experience and expertise in
transactions similar to the Transactions. Bear Stearns, as part of its
investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
Pursuant to the terms of its engagement letter with Bear Stearns, dated January
14, 2000, the Company has agreed to pay Bear Stearns a total fee of $4 million,
$100,000 of which was paid as a retainer advisory fee upon execution of the
engagement letter, $1.5 million of which became payable when Bear Stearns
informed the Company that Bear Stearns was prepared to render an opinion with
respect to the Transactions and $2.4 million of which will become payable upon
the consummation of the Transactions. In addition, the Company has agreed to
reimburse Bear Stearns for reasonable out-of-pocket fees, expenses and costs in
connection with the performance of its activities under the engagement letter,
including the fees and expenses of its accountants and legal counsel, if any,
and any other advisor retained by Bear Stearns. The Company has also agreed to
indemnify Bear Stearns and certain related persons against certain liabilities
in connection with the engagement of Bear Stearns, including certain liabilities
under the federal and state securities laws.

Bear Stearns is an internationally recognized investment banking firm that
has substantial experience in transactions similar to the Transactions. Bear
Stearns has been previously engaged by the Company to provide certain investment
banking and financial advisory services in connection with its initial public
offering. Bear Stearns may provide financial advisory and financing services to
the combined company and/or its affiliates and may receive fees for the
rendering of these services. Bear Stearns publishes research reports regarding
the Internet industry and the businesses and services of publicly owned
companies in the Internet industry. In the ordinary course of its business, Bear
Stearns may actively trade the equity and debt securities of Engage and/or CMGI
and/or their affiliates for its own account and for the accounts of its
customers and, accordingly, Bear Stearns may at any time hold a long or short
position in such securities.

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THE MERGER AGREEMENT

GENERAL

The Merger Agreement contemplates the following transactions:

Merger. First, Merger Sub will merge with Adsmart, with Adsmart being the
surviving corporation ("New Adsmart"). In the Merger, holders of outstanding
shares of Adsmart common stock ("Existing Adsmart Common Shares") and Adsmart
employee stock options will receive an aggregate of approximately 11,223,704
shares of Common Stock, which we refer to as the "Merger Shares". The Merger
Shares will represent approximately 6.5% of the outstanding Common Stock after
the Merger and Contribution, based on the number of shares of Common Stock
outstanding on March 15, 2000.

The value of the Merger Shares as of January 19, 2000, the date the Merger
Agreement was entered into, and April , 2000, the most recent practicable date
before the mailing of the Proxy Statement, based on the closing price per share
of the Common Stock on those days, was as follows:

<TABLE>
<CAPTION>
CLOSING PRICE PER SHARE OF AGGREGATE VALUE
DATE ENGAGE COMMON STOCK OF MERGER SHARES
- ---- -------------------------- ----------------
<S> <C> <C>
January 19, 2000............................... $38.50 $432 million
April , 2000.................................
</TABLE>

Contribution. Second, CMGI will contribute all of the capital stock of
Flycast to the Company in exchange for approximately 53,773,930 shares of Common
Stock, which we refer to as the "Contribution Shares". The Contribution Shares
will represent approximately 31% of the outstanding Common Stock after the
Merger and Contribution, based on the number of shares of Common Stock
outstanding on March 15, 2000.

The value of the Contribution Shares as of January 19, 2000, the date the
Merger Agreement was entered into, and April , 2000, the most recent
practicable date before the mailing of the Proxy Statement, based on the closing
price per share of the Common Stock on those days, was as follows:

<TABLE>
<CAPTION>
CLOSING PRICE PER SHARE OF AGGREGATE VALUE OF
DATE ENGAGE COMMON STOCK CONTRIBUTION SHARES
- ---- -------------------------- -------------------
<S> <C> <C>
January 19, 2000............................. $38.50 $2.07 billion
April , 2000...............................
</TABLE>

THE ISSUANCE OF THE MERGER SHARES AND THE CONTRIBUTION SHARES REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND VOTING AT THE
MEETING.

THE MERGER

Treatment of Existing Adsmart Common Shares and Determination of Conversion
Ratio. Holders, including CMGI, of Existing Adsmart Common Shares will receive
Merger Shares equal to the number of Existing Adsmart Common Shares held by such
holder multiplied by the Engage Conversion Ratio. The "Engage Conversion Ratio"
is the result obtained by dividing (A) 11,223,704 by (B) the sum of the number
of Existing Adsmart Common Shares outstanding immediately prior to the effective
time of the Merger (the "Merger Effective Time") (assuming the conversion into
Existing Adsmart Common Shares of all outstanding Existing Adsmart Preferred
Shares (as defined below)) and the number of shares of Adsmart common stock
subject to stock options. The Engage Conversion Ratio has been adjusted to
reflect the Stock Split and is subject to further adjustment in the event of any
other stock split, stock dividend, reverse stock split or similar event
affecting the Common Stock prior to the Merger Effective Time.

Conversion of Adsmart Preferred Shares and Notes Held by CMGI. Prior to
the Merger Effective Time, all convertible promissory notes of Adsmart
outstanding, including those held by CMGI, will be converted into shares of
Series B Convertible Preferred Stock, $0.01 par value per share, of Adsmart (the
"Adsmart Series B Convertible Preferred Stock") in accordance with their terms.
After the conversion of the notes and

34
<PAGE> 38

prior to the Merger Effective Time, all outstanding shares of Series A
Convertible Preferred Stock, $0.01 par value per share, of Adsmart, all of which
are held by CMGI, and of Adsmart Series B Convertible Preferred Stock
(collectively, the "Existing Adsmart Preferred Shares") will be converted into
shares of Adsmart common stock.

Treatment of Adsmart Employee Stock Options. The Company will assume the
Adsmart stock option plans. Immediately after the Merger Effective Time, each
Adsmart option outstanding shall be converted into a similar stock option to
acquire that number of Merger Shares equal to the number of Existing Adsmart
Common Shares for which it is exercisable multiplied by the Engage Conversion
Ratio, with an exercise price equal to the quotient determined by dividing the
exercise price of existing Adsmart options by the Engage Conversion Ratio,
rounded down to the nearest whole cent. The resulting Company options will be
governed by the terms of the assumed Adsmart stock option plans.

THE CONTRIBUTION

Treatment of Flycast Common Shares. CMGI will contribute to the Company
all of the outstanding shares of common stock, $0.01 par value per share, of
Flycast (the "Flycast Common Shares") in exchange for 53,773,930 Contribution
Shares. The number of Contribution Shares has been adjusted to reflect the Stock
Split and is subject to further adjustment in the event of any other stock
split, stock dividend, reverse stock split or similar event affecting the Common
Stock prior to the Merger Effective Time.

Treatment of Flycast Employee Stock Options. Certain employees and
consultants of Flycast hold options to purchase shares of CMGI common stock
("Flycast - CMGI Options"). With the consent of the Company and CMGI, a holder
of Flycast - CMGI Options may elect to exchange his Flycast - CMGI Options for
options to purchase shares of the Company's Common Stock. To the extent that any
Flycast - CMGI Options are exchanged or expire unexercised, CMGI shall deliver
to the Company the number of shares of the Company's Common Stock equal to the
number of shares of CMGI common stock subject to the exchanged or expired option
multiplied by 2.882 (the "Option Exchange Ratio"). The Option Exchange Ratio has
been adjusted to reflect the Stock Split and is subject to further adjustment in
the event of any other stock split, stock dividend, reverse stock split or
similar event affecting the Common Stock or CMGI common stock, rounded down to
the nearest share. In addition, if any Flycast - CMGI Option not previously
exchanged is exercised, CMGI will deliver to the Company the amount of the
exercise price received by it.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and warranties of the
Company, CMGI, Adsmart and Flycast.

COVENANTS

Each of the parties has agreed to use its reasonable best efforts to take
all actions necessary to consummate the transactions contemplated by the Merger
Agreement.

The Company has agreed that its Board of Directors shall recommend that the
stockholders of the Company vote in favor of the issuance of its shares to CMGI
pursuant to the Merger and Contribution, which recommendation shall be supported
by the Special Committee.

CMGI has agreed to vote all of the shares of Common Stock held by it in
favor of the issuance of shares to CMGI pursuant to the Merger and Contribution.

Until the Closing, each of Adsmart and Flycast has agreed to conduct its
respective operations in the ordinary course of business and has agreed not to
take certain specified actions without the consent the Company.

The Company has agreed to comply with the provisions of the merger
agreement between CMGI and Flycast relating to the continued indemnification of
the former directors of Flycast after the closing of the acquisition of Flycast
by CMGI. In addition, the Company has agreed that it will cause New Adsmart to

35
<PAGE> 39

continue to indemnify the present and former directors and officers of Adsmart
against any costs or liabilities that they might incur in connection with any
claim, suit or proceeding arising out of matters at or prior to the closing, to
the fullest extent permitted under Delaware law.

As of the closing, CMGI has agreed to release any and all claims that it
may have against Flycast arising out of the Flycast merger agreement. Also, as
of the closing, CMGI has agreed to assign to the Company, to the extent
assignable, any claims that it may have against 2Can under the merger agreement
relating to the acquisition of 2Can by CMGI.

CMGI has agreed that, for a period of 18 months after the date of the
Merger Agreement, it will not, and it shall use reasonable efforts to cause its
majority-owned subsidiaries not to, solicit the employment of any employee of
Adsmart or Flycast, other than as a result of a general solicitation not
directed specifically to employees of Adsmart or Flycast.

CONDITIONS TO OBLIGATIONS TO EFFECT THE TRANSACTIONS

The respective obligations of each party to effect the Transactions are
subject to the satisfaction or waiver of the following conditions:

- approval by the Company's stockholders of the issuance of the Merger
Shares and the Contribution Shares pursuant to the Merger Agreement;

- authorization for listing of the Merger Shares and the Contribution
Shares on the Nasdaq National Market; and

- no court, arbitrational tribunal, administrative agency or commission or
other governmental or regulatory authority or agencies shall have issued
any order, stay or injunction which has the effect of making the Merger
or Contribution illegal or otherwise prohibiting consummation of the
Merger or Contribution.

The obligation of the Company to consummate the Transactions is subject to
the satisfaction or waiver of the following additional conditions:

- all outstanding convertible promissory notes of Adsmart held by CMGI
shall have been converted into shares of Adsmart preferred stock;

- all outstanding shares of Adsmart preferred stock shall have been
converted into shares of Adsmart common stock;

- the number of shares of Adsmart common stock electing appraisal rights
shall not exceed 3% of the number of outstanding shares of Adsmart common
stock;

- Adsmart shall have obtained all waivers, permits and consents required
for the Merger, except for any failure which would not have material
adverse effect;

- the representations and warranties of CMGI, Flycast and Adsmart shall be
true and correct as of the closing, except for failures which would not
have material adverse effect;

- CMGI, Flycast and Adsmart shall have performed in all material respects
its agreements required to be performed under the Merger Agreement;

- the audited financial statements of Adsmart called for by the Merger
Agreement shall have been delivered to Company and the revenue, net
income (loss), and stockholders' equity reflected in the audited
financial statements shall not differ from the same line items reflected
in the unaudited financial statements previously delivered in a manner
that would have a material adverse effect; and

- there shall have been no material adverse effect to Flycast's business
from the date of CMGI's acquisition of Flycast to the closing of the
Contribution.

36
<PAGE> 40

The obligations of CMGI and Adsmart to consummate the Transactions are
subject to the satisfaction or waiver of the following additional conditions:

- the representations and warranties of the Company shall be true and
correct as of the Closing, except for failures which would not have a
material adverse effect; and

- the Company shall have performed in all material respects its agreements
required to be performed under the Merger Agreement.

INDEMNIFICATION

CMGI has agreed to indemnify the Company for costs, expenses, liabilities
and losses incurred by the Company as a result of any breach by CMGI or Adsmart
of any representations or warranties set forth in the Merger Agreement. All
representations and warranties as to Adsmart and CMGI in the Merger Agreement
shall expire one year following the Closing. All other representations and
warranties expire upon the Closing, other than the representations and
warranties as to CMGI's ownership of the outstanding shares of Flycast. The
aggregate liability of CMGI under the Merger Agreement shall not exceed
$437,500,000, and CMGI shall have no liability except to the extent that the
aggregate damages exceed $10.0 million. CMGI may elect to satisfy any
indemnification obligation by surrendering shares of Common Stock of the
Company, at a value of $38.98 per share.

37
<PAGE> 41

ENGAGE'S SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected historical condensed financial information should be
read in conjunction with Engage's consolidated financial statements and related
notes and Engage's "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on page 50, which are included in this Proxy
Statement. The consolidated statement of operations data for each of the years
in the three-years ended July 31, 1999, and the consolidated balance sheet data
at July 31, 1998 and 1999 are derived from the audited consolidated financial
statements of Engage appearing elsewhere in this Proxy Statement. The
consolidated statement of operations data for the period July 18, 1995
(inception) to July 31, 1996, and the consolidated balance data at July 31, 1996
and 1997 are derived from the audited consolidated financial statements of
Engage not included herein. The selected financial data for the six months ended
January 31, 1999 and 2000, and as of January 31, 2000 have been derived from
Engage's unaudited consolidated financial statements and in the opinion of
Engage's management include all adjustment (consisting only of normal recurring
adjustments) which are necessary to present fairly the results of operations and
financial position of Engage for those periods in accordance with generally
accepted accounting principles. Historical results are not necessarily
indicative of the results to be expected in the future. No cash dividends have
been declared or paid on Engage common stock.

<TABLE>
<CAPTION>
JULY 18, 1995 SIX MONTHS ENDED
(INCEPTION) YEAR ENDED JULY 31, JANUARY 31,
TO JULY 31, -------------------------------- --------------------
1996 1997 1998 1999 1999 2000
------------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... $ -- $ 25 $ 2,217 $ 16,023 $ 4,265 $ 21,071
Cost of revenue.............................. -- 31 2,238 9,451 3,060 13,533
------- -------- -------- -------- -------- --------
Gross (loss) profit.................... -- (6) (21) 6,572 1,205 7,538
------- -------- -------- -------- -------- --------
Operating expenses:
In-process research and development...... -- -- 9,200 4,500 -- 2,317
Research and development................. 1,796 7,261 5,859 8,699 3,788 7,885
Selling and marketing.................... 155 1,566 4,015 12,776 3,704 18,071
General and administrative............... 428 1,429 1,993 4,115 1,316 4,985
Amortization of goodwill and other
intangibles............................ -- -- 1,391 5,829 2,086 13,728
Stock-based compensation................. -- -- 426 1,455 391 326
------- -------- -------- -------- -------- --------
Total operating expenses............. 2,379 10,256 22,884 37,374 11,285 47,312
------- -------- -------- -------- -------- --------
Loss from operations......................... (2,379) (10,262) (22,905) (30,802) (10,080) (39,774)
Gain on sale of product rights............... -- -- 9,240 -- -- --
Other (expense) income....................... -- -- (172) (1,201) (499) 1,873
------- -------- -------- -------- -------- --------
Net loss..................................... $(2,379) $(10,262) $(13,837) $(32,003) $(10,579) $(37,901)
======= ======== ======== ======== ======== ========
Unaudited basic and diluted net loss per
share...................................... $ (0.38)
========
Unaudited pro forma basic and diluted net
loss per share............................. $ (0.41) $ (0.45) $ (0.16)
======== ======== ========
Weighted average shares of common stock used
in computing basic and pro forma diluted
net loss per share......................... 100,935
========
Weighted average shares of common stock used
in computing pro forma basic and pro forma
diluted net loss per share................. 33,499 71,861 67,297
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
JULY 31,
------------------------------------------ JANUARY 31,
1996 1997 1998 1999 2000
------- -------- ------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ -- $ -- $ 96 $112,034 $44,010
Working (deficit) capital................................... (4,427) (14,209) (8,609) 103,553 70,549
Total assets................................................ 2,403 1,782 24,046 163,948 309,546
Debt to CMGI and affiliates................................. 3,507 14,018 7,753 -- --
Long-term obligations....................................... -- -- -- 1,875 6,090
Stockholders' (deficit) equity.............................. (2,299) (12,539) 12,720 146,298 270,478
</TABLE>

38
<PAGE> 42

ADSMART'S SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected historical condensed financial information should be
read in conjunction with Adsmart's consolidated financial statements and related
notes and Adsmart's "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on page 77, which are included in this Proxy
Statement. The consolidated statement of operations data for each of the years
in the three-year period ended July 31, 1999 and for the six months ended
January 31, 2000, and the consolidated balance sheet data at July 31, 1998 and
1999 and January 31, 2000 are derived from the audited consolidated financial
statements of Adsmart appearing elsewhere in this Proxy Statement. The
consolidated balance sheet data at July 31, 1997 is derived from the audited
consolidated financial statements of Adsmart not included herein. The
consolidated statement of operations data for the period April 30, 1996
(inception) to July 31, 1996, the consolidated balance sheet data at July 31,
1996 and the six months ended January 31, 1999 have been derived from Adsmart's
unaudited consolidated financial statements and in the opinion of Adsmart's
management include all adjustment (consisting only of normal recurring
adjustments) which are necessary to present fairly the results of operations and
financial position of Adsmart for those periods in accordance with generally
accepted accounting principles. Historical results are not necessarily
indicative of the results to be expected in the future. No cash dividends have
been declared or paid on Adsmart common stock.

<TABLE>
<CAPTION>
APRIL 30,
1996 SIX MONTHS ENDED
(INCEPTION) YEAR ENDED JULY 31, JANUARY 31,
TO JULY 31, ---------------------------------------- --------------------------
1996 1997 1998 1999 1999 2000
----------- ----------- ----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ -- $ 15,004 $ 354,381 $ 11,068,870 $ 865,745 $ 27,588,653
Cost of revenue............................. -- 938,507 2,536,915 14,830,578 1,253,193 25,942,909
--------- ----------- ----------- ------------ ----------- ------------
Gross (loss) profit..................... -- (923,503) (2,182,534) (3,761,708) (387,448) 1,645,744
--------- ----------- ----------- ------------ ----------- ------------
Operating expenses:
Research and development.................. 89,133 1,359,370 2,318,244 -- -- --
Selling and marketing..................... 38,024 1,709,621 960,692 6,593,404 994,024 9,686,422
General and administrative................ 65,040 658,425 1,130,765 1,104,292 155,546 2,064,344
Amortization of goodwill and other
intangibles............................. -- -- -- 2,589,267 -- 3,452,357
--------- ----------- ----------- ------------ ----------- ------------
Total operating expenses................ 192,197 3,727,416 4,409,701 10,286,963 1,149,570 15,203,123
--------- ----------- ----------- ------------ ----------- ------------
Loss from operations........................ (192,197) (4,650,919) (6,592,235) (14,048,671) (1,537,018) (13,557,379)
Other income (expense)...................... -- (95,041) (574,976) (191,776) (829,798)
--------- ----------- ----------- ------------ ----------- ------------
Net loss.................................... $(192,197) $(4,650,919) $(6,687,276) $(14,623,647) $(1,728,794) $(14,387,177)
========= =========== =========== ============ =========== ============
Unaudited pro forma basic and diluted net
loss per share............................ $ (0.28) $ (0.08) $ (0.13)
============ =========== ============
Weighted average shares of common stock used
in computing pro forma basic and pro forma
diluted net loss per share................ 51,631,358 22,168,653 114,258,978
============ =========== ============
</TABLE>

<TABLE>
<CAPTION>
JULY 31,
---------------------------------------------------- JANUARY 31,
1996 1997 1998 1999 2000
--------- ----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ -- $ -- $ -- $ -- $ --
Working deficit............................................. (183,897) (5,130,299) (5,533,291) (50,575,961) (61,584,452)
Total assets................................................ 58,916 355,448 406,264 43,093,429 (53,705,249)
Debt to CMGI and affiliates................................. 200,790 4,601,462 4,564,070 44,698,279 66,419,063
Long-term obligations....................................... -- 23,664 12,412 69,108 44,523
Stockholders' deficit....................................... (192,197) (4,923,116) (5,529,972) (18,514,573) (32,901,750)
</TABLE>

39
<PAGE> 43

FLYCAST'S SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected condensed historical consolidated financial
information should be read in conjunction with Flycast's consolidated financial
statements and related notes and Flycast's "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on page 85, which are included
in this Proxy Statement. The consolidated statement of operations information
for each of the years in the three-years ended December 31, 1999, and the
consolidated balance sheet data at December 31, 1997, 1998 and 1999 and the
period April 14, 1996 (inception) to December 31, 1996, are derived from the
audited consolidated financial statements of Flycast appearing elsewhere in this
Proxy Statement. The consolidated statement of operations data for the year
ended December 31, 1996 and the consolidated balance sheet data at December 31,
1996 are derived from the audited consolidated financial statements of Flycast
not included herein. Historical results are not necessarily indicative of the
results to be expected in the future. No cash dividends have been declared or
paid on Flycast common stock.

<TABLE>
<CAPTION>
APRIL 14, 1996 YEAR ENDED DECEMBER 31,
(INCEPTION) TO -----------------------------
DECEMBER 31, 1996 1997 1998 1999
----------------- ------- -------- --------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue.......................................... $ 123 $ 934 $ 9,282 $ 46,154
Cost of revenue.................................. 5 600 6,118 32,100
------ ------- -------- --------
Gross profit..................................... 118 334 3,164 14,054
------ ------- -------- --------
Operating expenses............................... (512) (3,673) (11,612) (40,373)
Interest income (expense), net................... (1) (7) (412) 984
------ ------- -------- --------
Net loss......................................... $ (395) $(3,346) $ (8,860) $(25,335)
====== ======= ======== ========
Accretion of mandatorily redeemable preferred
stock.......................................... -- (206) (656) (666)
------ ------- -------- --------
Loss attributable to common stockholders......... $ (395) $(3,552) $ (9,516) $(26,001)
====== ======= ======== ========
Basic and diluted loss per share................. $(0.83) $ (6.03) $ (7.26) $ (2.81)
====== ======= ======== ========
Shares used in basic and diluted loss per
share.......................................... 476 589 1,311 9,255
====== ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1997 1998 1999
------ ------- -------- --------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........ $ 27 $ 3,593 $ 5,380 $ 56,190
Working capital (deficiency)............................. (41) 3,569 4,518 59,081
Total assets............................................. 319 4,885 11,502 91,049
Long-term obligations.................................... -- 40 4,723 2,812
Mandatorily redeemable preferred stock................... -- 8,195 13,855 --
Total common stockholders' equity (deficit).............. 198 (3,945) (12,007) 67,942
</TABLE>

40
<PAGE> 44

COMPARATIVE PER SHARE DATA
(UNAUDITED)

The following table summarizes certain unaudited per share information for
Engage, Adsmart and Flycast on a historical, pro forma combined and equivalent
pro forma combined basis. The following information should be read in
conjunction with the audited consolidated financial statements of Engage,
Adsmart and Flycast, the unaudited interim consolidated financial statements of
Engage and Adsmart, the selected historical condensed consolidated financial
data and the unaudited pro forma condensed consolidated financial information
included elsewhere. The pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the acquisitions of Adsmart and
Flycast had been consummated as of the beginning of the respective periods
presented, nor is it necessarily indicative of the future operating results or
financial position of the combined companies. The historical book value per
share is computed by dividing total stockholders' equity by the number of common
shares outstanding at the end of the period. The pro forma per share loss from
continuing operations is computed by dividing the pro forma loss from continuing
operations by the pro forma weighted average number of shares outstanding. The
pro forma combined book value per share is computed by dividing total pro forma
stockholders' equity by the pro forma number of common shares outstanding at the
end of the period. The Adsmart and Flycast equivalent pro forma combined per
share amounts are calculated by multiplying the respective Engage/Adsmart or
Engage/Flycast pro forma combined per share amounts by the respective common
stock exchange ratio of 0.090, and 2.882, respectively. The unaudited per share
information of Engage and Adsmart is presented for the year ended July 31, 1999
and for the six months ended January 31, 2000. The unaudited per share
information of Flycast is presented for the year ended June 30, 1999 and for the
six months ended December 31, 1999.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
JULY 31, 1999 JANUARY 31, 2000
------------- ----------------
<S> <C> <C>
ENGAGE
HISTORICAL PER COMMON SHARE DATA:
Net Loss.................................................... $(0.45) $(0.38)
Book Value.................................................. 1.50 2.50
PRO FORMA COMBINED PER COMMON SHARE DATA:
Net Loss.................................................... (3.15) (1.47)
Book Value.................................................. (8.03) 6.95
ADSMART
HISTORICAL PER COMMON SHARE DATA:
Net Loss.................................................... (0.28) (0.13)
Book Value.................................................. (0.17) (0.27)
EQUIVALENT PRO FORMA COMBINED PER COMMON SHARE DATA:
Net Loss.................................................... (0.12) (0.06)
Book Value.................................................. 0.25 0.23
FLYCAST
HISTORICAL PER COMMON SHARE DATA:
Net Loss.................................................... (1.87) (1.83)
Book Value.................................................. 5.51 4.45
EQUIVALENT PRO FORMA COMBINED PER COMMON SHARE DATA:
Net Loss.................................................... (8.20) (3.99)
Book Value.................................................. 21.64 20.92
</TABLE>

41
<PAGE> 45

EXISTING TRANSACTIONS BETWEEN THE COMPANY AND CMGI, ADSMART AND FLYCAST

The Company was incorporated in July 1995 as a wholly owned subsidiary of
CMGI. CMGI is currently a majority stockholder of the Company. Accordingly, CMGI
has the power to elect the Company's entire Board of Directors and to approve or
disapprove any corporate transactions or other matters submitted to the
Company's stockholders for approval, including the approval of mergers or other
significant corporate transactions.

In fiscal 1999, the Company issued a secured convertible demand note to
CMGI in exchange for the cancellation of all intercompany debt incurred by the
Company to CMGI prior to February 1, 1999. This note provides that CMGI may
elect to convert amounts payable under the note into Series C convertible
preferred stock at any time. The amount of each borrowing represented by the
note is convertible into shares of Series C convertible preferred stock at the
fair market value of such shares as of the end of the fiscal quarter in which
the borrowing was made. In April 1999, the Company borrowed $22,086,307 from
CMGI in connection with the acquisition of I/PRO. Such borrowings are
convertible into Series C convertible preferred stock at a common equivalent
price of $2.53 per share. Additional intercompany debt incurred after February
1, 1999 accrued interest at a rate of 7% per year compounded monthly until the
day CMGI elects to convert the debt into shares of Series C convertible
preferred stock. All notes held by CMGI were converted into Series C convertible
preferred stock in May 1999. Each share of Series C convertible preferred stock
converted into 40 shares of Common Stock upon the completion of the Company's
initial public offering.

The Company and CMGI entered into a facilities and administrative support
agreement under which CMGI continues to make available space at its headquarters
in Andover, Massachusetts and provides various services to the Company,
including tax and administrative, computer and information systems,
telecommunications and utilities. Under this agreement, CMGI has also agreed to
make available to the Company at least 28,000 square feet of space at its
headquarters facilities, subject to termination upon at least 12 months' notice
by CMGI. The fees payable by the Company for the availability of space and other
services are typically determined through an allocation of CMGI's costs based
upon the proportion of the Company's employee headcount to the total headcount
of CMGI and other CMGI-related companies located in the same facility or using
the same services. In fiscal 1999, the Company paid CMGI approximately $813,000
for services similar to those provided under the administrative support
agreement.

The Company and CMGI also entered into a tax allocation agreement to
allocate responsibilities, liabilities and benefits relating to taxes. The
Company is required to pay its share of income taxes shown as due on any
consolidated, combined, or unitary tax returns filed by CMGI for tax periods
ending on or before or including the date on which date the Company will no
longer be a member of CMGI's group for federal, state, or local tax purposes, as
the case may be. CMGI indemnifies the Company against liability for all taxes in
respect of consolidated, combined, or unitary tax returns for such period.
Accordingly, any redetermined tax liabilities for such periods will be the
responsibility of CMGI, and any refunds or credits of taxes attributable to the
Company or its subsidiaries in respect of consolidated, combined, or unitary tax
returns for such periods will be for the account of CMGI. The Company is
responsible for filing any separate tax returns for any taxable period and will
be responsible for any tax liabilities (and entitled to any refunds or credits
of taxes) in respect of such returns. The Company will indemnify CMGI against
liability for such taxes.

Neither CMGI nor the Company has any obligation to make any payment to the
other party for the use of such other party's tax attributes such as net
operating losses. However, if one party realizes a windfall tax benefit because
of an adjustment to items on the other party's tax return, the party that
realizes the windfall tax benefit will be required to pay to the other party the
actual incremental tax savings it has realized. For example, if an expense
deducted by CMGI for a period prior to the closing date were disallowed and
required to be capitalized by the Company for a period after the closing date,
thereby generating future depreciation deductions to the Company, the Company
would be required to pay to CMGI any incremental tax savings as a result of such
depreciation deductions when such tax savings are actually realized by the
Company.

Each of the Company and CMGI has control of any audit, appeal, litigation
or settlement of any issue raised with respect to a tax return for which it has
filing responsibility. Payments of claims under the agreement must be made
within 30 days of the date that a written demand for the claim is delivered.
Interest accrues on payments that are not made within 10 days of the final due
date at the rate applicable to under

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payments of the applicable tax. Any dispute concerning the calculation or basis
of determination of any payment provided under the tax allocation agreement will
be resolved by a law firm or "big five" accounting firm selected and paid for
jointly by the parties.

The Company and CMGI have entered into an investor rights agreement under
which the Company granted CMGI registration rights and rights to purchase shares
to maintain its majority ownership. Under this agreement, CMGI and its assignees
have the right to demand, on up to seven occasions, that the Company register
under the Securities Act of 1933, as amended, the sale of all or part of their
shares of the Company's Common Stock. CMGI and its assignees are also entitled
to include shares of the Company's Common Stock in a registered offering of
securities by the Company for its own account, subject to the underwriters'
right to reduce the number of included shares. The Company will pay all costs
associated with such registration of shares pursuant to this agreement, other
than underwriting discounts and commissions and various other expenses. Also
under this agreement, until such time as CMGI, or any permitted transferee, owns
less than a majority of voting power of the outstanding shares of capital stock
of the Company, the Company will permit CMGI, or the transferee, to purchase a
portion in any shares that it may in the future issue so that CMGI or the
transferee may maintain its majority ownership position. Any such purchases will
be at the same price as is paid by third parties for the shares. The right is
transferable by CMGI to any party that acquires directly from CMGI shares of
common stock representing at least a majority of the outstanding shares of
Common Stock of the Company.

The Company also outsources its data center operations for Engage Knowledge
and its AdBureau advertising management service to NaviSite, Inc. ("NaviSite"),
a CMGI affiliate. For Engage Knowledge, the Company leases computer equipment
and space for equipment from NaviSite. The Company pays NaviSite fees based on
the amount of space and amount of telecommunications services used by NaviSite
to support Engage Knowledge. For AdBureau, NaviSite provides comprehensive
operational and facilities support. The Company pays NaviSite a percentage of
AdBureau revenue. The Company also leases computer equipment from NaviSite. The
Company expects to continue to outsource its data center operations to NaviSite
and to lease computer equipment and space for such equipment from NaviSite. The
Company paid a total of approximately $2,122,000 to NaviSite for these services
in fiscal 1999.

The Company sells its products and services to customers affiliated with
CMGI. In fiscal 1999, the Company's revenue from sales to these affiliated
companies totaled approximately $1,938,000.

Mr. Goldman serves as a director of CMGI and Navisite. Mr. Hajducky serves
as the Chief Financial Officer and Treasurer of CMGI and as a director of
Navisite. Mr. Wetherell serves as Chairman of the Board, Chief Executive
Officer, President and Secretary of CMGI and as Chairman of the Board of
Navisite.

In early 1999, the Company and Adsmart entered into an oral agreement
pursuant to which Adsmart agreed to contribute certain data associated with the
Adsmart Network to the Engage Knowledge database.

In November 1999, the Company and Flycast entered into an agreement under
which Engage granted Flycast the right to use its profiling technology across
the Flycast Network. Pursuant to the agreement, Flycast also agreed to
participate in Engage's AudienceNet. In January 2000, the Company and Flycast
entered into a license agreement pursuant to which the Company granted Flycast a
license to use certain of the Company's technology.

DESCRIPTION OF THE COMPANY'S CAPITAL STOCK

The Company's authorized capital stock consists of 150,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock").

The Company is seeking stockholder approval of an increase in its
authorized shares of Common Stock. See "Approval of Amendment to the Company's
Amended and Restated Certificate of Incorporation to Increase the Authorized
Shares of Common Stock."

The following is a summary description of the Company's capital stock and
is qualified by reference to the provisions of applicable law and to the
Company's Certificate of Incorporation and its Amended and Restated Bylaws.

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COMMON STOCK. As of April 1, 2000, there were shares of
Common Stock outstanding and held of record by stockholders. In
addition, as of April 1, 2000, there were outstanding stock options for the
purchase of a total of shares of Common Stock. Holders of Common
Stock are entitled to one vote per share for each share held of record on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Directors are elected by a plurality of the votes of the shares present
in person or by proxy at a meeting of stockholders. Holders of Common Stock are
entitled to receive ratably such lawful dividends as may be declared by the
Board of Directors of the Company. However, such dividends are subject to
preferences that may be applicable to the holders of any outstanding shares of
Preferred Stock. In the event of a liquidation, dissolution or winding up of the
affairs of the Company, whether voluntarily or involuntarily, holders of Common
Stock will be entitled to receive pro rata all of the remaining assets of the
Company available for distribution to its stockholders. Any such pro rata
distribution would be subject to the rights of the holders of any outstanding
shares of Preferred Stock. The Common Stock has no preemptive, redemption or
conversion rights. All outstanding shares of Common Stock are fully paid and
non-assessable. The rights, powers, 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 that the Company may
designate and issue in the future.

PREFERRED STOCK. The Board of Directors of the Company is authorized,
subject to any limitations prescribed by Delaware law, without further
stockholder approval, to issue from time to time up to an aggregate of 5,000,000
shares of Preferred Stock, in one or more series. The Board of Directors of the
Company is also authorized, subject to the limitations prescribed by Delaware
law, to establish the number of shares to be included in each series and to fix
the voting powers, preferences, qualifications and special or relative rights or
privileges of each series. The Board of Directors of the Company is authorized
to issue Preferred Stock with voting, conversion and other rights and
preferences that could adversely affect the voting power or other rights of the
holders of Common Stock. The Company has no current plans to issue any Preferred
Stock. However, the issuance of Preferred Stock or of rights to purchase
Preferred Stock could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire, a
majority of the outstanding Common Stock. There are no shares of Preferred Stock
outstanding.

SECTION 203 OF DELAWARE GENERAL CORPORATION LAW. The Certificate of
Incorporation contains a provision expressly electing not to be governed by
Section 203 ("Section 203") of the Delaware General Corporation Law. In general,
Section 203 restricts some business combinations involving interested
stockholders, defined as any person or entity that is the beneficial owner of at
least 15% or a corporation's voting stock or is an affiliate or associate of the
corporation or the owner of 15% or more of the outstanding voting stock of the
corporation at any time in the past three years, or their affiliates. Because of
such election, Section 203 will not apply to the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION. The Certificate of
Incorporation provides that no director of the Company shall be personally
liable to the Company or to its stockholders for monetary damages for breach of
fiduciary duty as a director, except that the limitation shall not eliminate or
limit liability to the extent that the elimination or limitation of such
liability is not permitted by the Delaware General Corporation Law as it exists
or may later be amended. The Certificate of Incorporation further provides for
the indemnification of the Company's directors and officers to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law,
including circumstances in which indemnification is otherwise discretionary. The
Company has entered into indemnification agreements with its directors
containing provisions which may require the Company, among other things, to
indemnify its directors against various liabilities that may arise by virtue of
their status or service as directors, and to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified.

STOCK TRANSFER AGENT. The transfer agent and registrar for the Common
Stock is EquiServe.

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DESCRIPTION OF ENGAGE

BUSINESS

Overview

Engage offers a range of products and services that enable Web advertisers,
merchants and Web sites to target the delivery of advertisements, content and
e-commerce offerings to their audiences and to measure their effectiveness. In
July 1999, Engage commercially introduced its Engage Knowledge data service to
customers. Engage Knowledge provides real-time access to Engage's database of
more than 52 million anonymous profiles of Web users for more effective
targeting of online advertising, promotions and content. In October 1999, Engage
introduced Engage AudienceNet, a profile driven advertising and marketing
network that uses Engage's anonymous, behavior based profiles to deliver
substantial benefits to media buyers, Web sites and ad networks. In December
1999, Engage acquired AdKnowledge Inc., a provider of products and services
which allow online marketers and advertising agencies to plan, target, serve,
track and analyze advertising companies. AdKnowledge combines analytic services
and data mining with outbound campaign management to provide sophisticated
marketers and agencies with insights into what drives brand awareness and
purchase behavior across all Web sites and networks. Engage expects that a
significant portion of its future growth will be attributable to sales of
products and services that will be based upon Engage's profiling technology.

An Engage profile is an anonymous collection of information about an
individual Web user's consumer interests, demographic characteristics and
geographic location. These profiles are developed through a combination of a
user's browsing behavior on participating sites on the Internet and information
the user has voluntarily declared at these sites, such as information provided
on an online registration form. Each anonymous profile omits information that
would permit the personal identification of the user, such as name, address and
e-mail address.

Based on its proprietary technology, Engage has built a database, called
the Engage Knowledge database, containing more than 52 million anonymous
consumer profiles drawn from multiple, diverse Web sites. When a user visits a
Web site of any customer subscribing to the Engage Knowledge data service or
participating in Engage AudienceNet, Engage matches that visitor with his or her
profile in the profile database. Based on this profile, Engage then delivers a
relevant marketing message to that visitor.

Each Engage global profile contains a series of numerical scores reflecting
each Web user's inferred preference level in hundreds of standard categories and
subcategories, such as books, business, computers, fashion, sports and travel as
well as demographic and geographic information. Categories can be further
customized to meet the needs of a specific customer or market. Engage software
uses sophisticated proprietary algorithms and methodologies to continuously
update and refine these global profiles based on a visitor's browsing behavior
across multiple Web sites, including pages selected by the user, the duration of
the user's visits and the responses of the user to specific advertisements and
promotions. Engage global profiles also incorporate anonymous demographic and
geographic information reported voluntarily by a visitor, such as data from an
onsite registration form.

Engage profiles are designed to work with other Engage applications,
third-party software or customers' internally developed solutions, allowing
customers flexibility as the uses of profiling and related applications develop
and evolve.

Products and Services

Engage offers a range of software and services that enable Web advertisers,
publishers and merchants to customize the content of Web pages and target
relevant advertising, content and e-commerce offerings based on each individual
user's interests.

Engage AudienceNet. Engage AudienceNet is a profile-based advertising and
marketing network that uses profiles from the Engage Knowledge database to
deliver to advertisers their desired target audience within hundreds of Web
sites participating in Engage AudienceNet. Using Engage AudienceNet, an Internet
media buyer can define and target an audience based on demographic, geographic
and other interest categories in the Engage Knowledge database.

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Engage Knowledge. The Engage Knowledge data service, commercially launched
in late July 1999, uses a database which contains user profiles collected from
participating sites across the Web. Engage's database has been designed to
create, refine and deliver millions of profiles in real-time to meet the demands
of multiple Web sites. The global profiles used in the delivery of the Engage
Knowledge data service omit personally identifiable information of individual
users such as name, home or e-mail address, IP address or domain name. The
database assigns a computer-generated identifier to distinguish each Web
visitor. This identifier is currently stored as a browser cookie on the Web
user's computer. This Engage Knowledge identifier is correlated with
site-specific identifiers using a proprietary technique called "dual blind"
identification. This technique protects the privacy of the individual because
the participating Web site cannot access the Engage Knowledge identifier and
Engage does not maintain any personally identifiable information that may have
been gathered at the Web site.

Engage ProfileServer. Engage ProfileServer software collects Web visitor
behavior data at the customer's Web site and declared user information reported
voluntarily by a visitor to create and deliver profiles of individual Web site
visitors. The system enables customers to create their own local profile
database, which is maintained at the customer's site, and to use these local
profiles to target advertisements, content and e-commerce offerings. The
ProfileServer system permits customers to customize the interest categories in
the local profiles so that they track preferences specific to the customer's
market.

Accipiter AdManager. AdManager automates online advertising management for
Web sites by scheduling and targeting ads, automatically rotating ad inventory
and generating up-to-the-minute, customized reports. AdManager tracks all active
advertising campaigns and Web site visitors and optimizes scheduling of
advertisements in real-time to ensure that each campaign is delivered on
schedule to qualified visitors or to the specified content areas of a site.

Accipiter AdBureau. AdBureau is Engage's turnkey, outsourced advertisement
management service based on AdManager technology. By subscribing to AdBureau, a
customer can obtain the advertisement management capabilities of AdManager
without the need to invest in on-site and management hardware, server and
administrative software or databases.

AdKnowledge. Engage's wholly-owned subsidiary, AdKnowledge, offers
comprehensive marketing services designed to execute, measure and optimize
online marketing return on investment or ROI. AdKnowledge's service offerings
include the AdKnowledge System and eAnalytics. The AdKnowledge System is a suite
of Web-based applications that enables marketers and advertising agencies to
more efficiently manage all aspects of their Web advertising from their
desktops. eAnalytics is a collection of detailed data analysis and data mining
services that gives marketers and agencies the ability to obtain deeper insights
into consumer behavior and brand awareness. In addition to increasing ROI,
AdKnowledge's services also allow its clients to experience significant
productivity gains and cost savings.

I/PRO NetLine. I/PRO NetLine is an outsourced traffic measurement service
that continuously measures Web site traffic and delivers daily results to the
customer. This service enables customers to access reports immediately, combine
data from multiple sites and standardize information for meaningful comparisons.
I/PRO provides a wide range of standard reports and enables users to customize
their reports and the data to be tracked. I/PRO provides standard reports that
contain key data about traffic at a Web site, including information about the
number of users to visit a Web site, the duration of user visits and the most
frequently visited pages of the site. Customized reports can include information
regarding specific pages, directories and clicks and other in depth data.

I/PRO I/Audit. I/PRO I/Audit outsourced services include audits of
circulation on total audience, specific advertisements or advertising campaigns,
internal management systems and co-operative marketing arrangements. I/PRO
I/Audit verifies information directly at the specific Web site rather than
relying on a sample from a panel or other indirect methods. Engage believes that
I/PRO was the first company to offer Web site specific audits of Web site
traffic and advertising campaigns.

I/PRO Research Services. I/PRO offers custom consulting services to help
clients meet their Web marketing goals. These services combine analysis of Web
audience data with customized research.

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Consultants produce in-depth reports and detailed analyses that allow customers
to measure audience behavior, monitor results against strategic objectives and
more effectively manage their Web strategies.

Consulting, Maintenance and Support Services

Engage offers comprehensive services and product support to its customers.
Engage's service and support organization, assists customers in implementing,
administering and maintaining Engage products and services. Engage's team of
service professionals provides customers with consulting services, project
implementation and integration services and training. Engage also provides
maintenance and support services to customers pursuant to annual maintenance
agreements. These services include software version updates and maintenance, as
well as telephone and on-site support.

Sales and Marketing

United States. The Company's sales and marketing strategy in the United
States is to sell:

- directly to prominent online marketers, Web site publishers and Web site
networks;

- through original equipment manufacturer, reseller and co-marketing
arrangements to reach other customers; and

- through Web design and systems integration firms.

As of March 1, 2000, the Company's sales and marketing organization
consisted of 194 employees. The Company's field sales organization is supported
by sales representatives and systems engineers located throughout the United
States.

An important element of the Company's sales strategy is to form business
relationships with third parties to assist the Company in marketing and selling
its products. In July 1999, Engage launched a new channel strategy to focus
specifically on partnering with various system integrators. System integrators
plan to integrate Engage's profile software, ProfileServer and
DecisionSupportServer, with applications used by e-commerce merchants and
corporations. Additionally, the Company will seek to enter into original
equipment manufacturer relationships that permit it to embed its software
products within products sold by other vendors, such as e-commerce and Web
serving software and hardware systems. In addition, some of the Company's
indirect sales channels will consist of either reseller arrangements in which
its partner resells and possibly customizes its products, or co-marketing
arrangements, in which the Company will work together with its partner to
promote and generate sales referrals for each party's respective products. The
Company also expects to develop relationships with Internet systems integrators
who often recommend advertising and marketing management and other Internet
solutions to their clients as part of their design, procurement and deployment
work.

To support its sales efforts and actively promote the Engage brand, the
Company conducts comprehensive marketing programs, including public relations,
print advertisements, online advertisements, seminars, trade shows and ongoing
customer communications programs.

Sales to Informix Corporation accounted for approximately 12% of Engage's
total revenues in fiscal 1999.

International. The Company maintains sales offices in the United Kingdom,
Germany, Australia and Sweden. The Company intends to expand its operations
outside the United States primarily by partnering with locally-based third
parties, including joint ventures and distribution arrangements. The Company has
formed a joint venture for the Japanese market with Sumitomo Corporation. As
part of this joint venture, Sumitomo markets a Japanese language version of
Engage software products and the Engage Knowledge data service throughout Japan.

Privacy

The Web offers the potential for privacy by allowing parties to communicate
one-to-one without knowing each others' identity. However, Web users are
increasingly concerned about privacy and the ability of third parties to gather
personal data about them from their activities on the Web. For this reason, the
Engage Knowledge global database of profiles does not store personal information
of individual users such as name, home or e-mail address, IP address or domain
name.

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The Company maintains this level of privacy through a proprietary
methodology known as "dual blind" identification. The Company assigns an
anonymous numerical identifier to each Web visitor and matches this "blind"
identifier only with information relating to online usage of a specific computer
and does not store or otherwise use any personally identifying information. This
identifier is currently stored as a browser cookie on the Web user's computer.
Each Web visitor also is assigned a different identifier for each Engage-enabled
Web site visited. This technique is known as "dual blind" identification because
a Web site does not have access to the Engage Knowledge identifier and cannot
correlate the information it may have with information from other Web sites.
Conversely, the Company does not maintain any information identifying particular
users that a Web site may have correlated with a visitor's local Web site
identifier.

Since October 1998, Engage has required all contributors to Engage
Knowledge to post a privacy policy statement on their Web sites disclosing that
the site provides non-personally identifiable information to Engage. The policy
statement must include a link to the Engage Web site where a Web user may opt
out of the Engage Knowledge database by clicking on a link that automatically
replaces the Engage Knowledge identifier on the user's computer. The Company
believes that these protections and its dual blind identification technology are
essential to allow sites to responsibly use global anonymous profiles for their
own enterprise applications.

Senior members of the Company actively participate in the development of
privacy standards for the Internet and are key contributors to industry groups
that are developing industry standards for privacy. For example, a member of
senior management is a co-author of several of the specifications of the World
Wide Web Consortium's Platform for Privacy Preferences Project, supported by
AOL/Netscape, AT&T, IBM, Microsoft and others, which seeks to develop an
industry standard that will allow Web users to express their privacy preferences
about the type and amount of information they are willing to share with Web
applications. The Company believes its products will support the standards that
are ultimately produced by this project. A member of senior management has also
authored a proposed protocol for the distribution of privacy labels for Web
cookies as part of privacy standards developed by the Internet Engineering Task
Force. A member of senior management participates on the board of advisors of
TRUSTe, of which the Company is a corporate sponsor. TRUSTe is a non-profit
organization with the goal of promoting the adoption of fair information
practices on the Web through a program which permits Web sites to display a seal
representing compliance with TRUSTe privacy guidelines. Engage is also a member
of the Online Privacy Alliance, which is an organization dedicated to improving
the protection of individuals' privacy online through self regulatory efforts,
and the Network Advertisers Initiative, which is an ongoing project by leading
members of the Internet industry to guide business practices with respect to
online advertising services delivered by network advertisers to ensure adequate
protection of consumer privacy interests. The Company actively monitors proposed
privacy laws and regulations and seeks to comply with all applicable privacy
requirements, both in the United States and throughout the world.

Government Regulation

The Company is not currently subject to any direct regulation by any
government agency, other than regulations applicable to businesses generally,
and there are currently few laws or regulations directly applicable to access to
or commerce by use of the Internet. However, due to the increasing popularity
and use of the Internet, it is possible that a number of laws and regulations
may be adopted with respect thereto, covering such issues as privacy and the use
of cookies. The adoption of any such laws or regulations may decrease the growth
of electronic commerce and/or the Internet, which could in turn decrease the
demand for the Company's products and services or increase the Company's cost of
doing business or otherwise have an adverse effect on the Company's business,
operating results or financial condition. Moreover, the applicability to the
Internet of existing laws governing issues such as property ownership, libel and
personal privacy is uncertain.

Environmental Matters

Based on the Company's experience to date, the cost of compliance with
environmental matters has been immaterial and the Company believes that it is in
material compliance with applicable environmental laws and regulations.

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Operating Infrastructure

Engage's operating infrastructure has been designed to support the combined
volumes of its largest Web site customers. Engage's data center operations are
provided by NaviSite, an affiliate of CMGI, and are located in Andover,
Massachusetts. Engage's infrastructure is designed for maximum reliability,
including redundant network access, backup power pools and advanced network
security.

Intellectual Property

The Company has filed for patents covering its profiling algorithm and its
dual-blind methodology for protecting end-user privacy. The profiling algorithm
patent application covers the process and algorithm for creating user interest
profiles from behavioral data. The dual-blind methodology patent application
covers the process of identifying visitors uniquely at each Web site while
maintaining a central database of cross-referenceable identifiers and allowing
Web sites to access globally-derived data only via their local identifier. There
can be no assurance that any of the Company's patent applications will be
granted. Even if they are granted, these patents may be successfully challenged
by others or invalidated.

The Engage Knowledge database contains detailed information about millions
of Web users. The Company believes it has rights to this database's entire data
content, all records and all derived information from the database as a whole,
all updating routines and quality assurance processes and all underlying data
warehousing technology. However, there can be no assurance that any patent,
trade secret or other intellectual property protection will be available for
such information.

The Company relies upon a combination of patent, trade secret, copyright
and trademark laws to protect its intellectual property. The Company also limits
access to and distribution of its proprietary information. However, the steps
the Company takes to protect its intellectual property may not be adequate to
deter misappropriation of its proprietary information. In addition, the Company
may be unable to detect unauthorized uses of and take appropriate steps to
enforce its intellectual property rights.

Although senior management believes that the Company's services and
products do not infringe on the intellectual property rights of others, the
Company is subject to the risk that such a claim may be asserted in the future.

Competition

The market for Internet marketing solutions, including profiling, online
advertising networks, services and systems, and Web site traffic analysis is
new, rapidly evolving and intensely competitive. Engage expects competition to
increase both from existing competitors and new market entrants for various
components of its services. Engage competes primarily on the basis of its
product features and performance, such as its scalable, application-independent
technology and the anonymity and quality of its global database of profiles,
level of service and, to a lesser extent, on price. While Engage offers products
and services that may compete with the offerings of the companies mentioned
below, Engage has developed its profiling technology with an open interface to
create the opportunity to partner with those companies.

Engage competes directly with providers of profiling technology, such as
Personify, and indirectly with applications that include more limited profiling
capability integrated into their solution, such as BroadVision and Vignette.
Doubleclick, through its NetGravity subsidiary, which has a partnership with
Aptex and MatchLogic, and businesses that offer cash or other incentives to
users to voluntarily provide profile data have indicated their intent to compete
in the global profiling solutions market. Engage also competes with companies
such as DoubleClick, 24/7 Media and MatchLogic that have the ability to
aggregate large quantities of customer behavior data across the Web.

The principal competitors of the Flycast Network and Adsmart Network are
Doubleclick, 24/7 Media and ValueClick. The principal competitor of Adknowledge
is DoubleClick's Dart for Agencies product. In the ad serving product market,
the primary competitors of Engage's Accipiter AdManager software are NetGravity,
a subsidiary of Doubleclick, and Real Media. In the outsourced ad serving
market, Engage's Accipiter AdBureau service competes with providers of ad
serving services, such as those offered by DoubleClick.

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The primary competitors for I/PRO's NetLine Web measurement service are
companies offering outsourced solutions or software solutions, such as Accrue,
Andromedia, net.Genesis and WebTrends. I/PRO I/Audit service competes with
auditing services from ABC Interactive, BPA and PricewaterhouseCoopers.

Many of Engage's current competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition and
substantially greater financial, technical and marketing resources than Engage.
Engage's current and potential competitors also may have more extensive customer
bases and larger proprietary databases. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to more effectively distribute their products
or to enhance their product and service offerings.

In addition to these current and potential commercial competitors, Engage
also faces competition from the internal capabilities of some potential
customers. Some of the largest Web publishers use internally developed
interactive marketing solutions rather than the commercial solutions offered by
Engage and its competitors. There can be no assurance that Engage will be able
to compete successfully with these internally developed solutions.

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

Employees

As of March 1, 2000, Engage had 584 employees, including 134 in
development, 191 in customer support and operations, 194 in selling and
marketing and 65 in administration. Of these, 545 employees were located in the
United States.

Facilities

The Company's principal executive offices are located in Andover,
Massachusetts consisting of approximately 58,000 feet of office space leased to
Engage by CMGI. The Company obtains space from CMGI under a facilities and
services agreement which either party may terminate with twelve months notice.

The Company also leases facilities in Raleigh, North Carolina, Redwood
Shores, Palo Alto and San Francisco, California, New York, New York and London,
England for sales and marketing and research and development activities.
Aggregate square footage under these leases approximates 89,000 square feet.

In addition, the Company leases office space in several other locations in
the United States, Germany and Australia under short-term lease arrangements.

The Company's facilities are fully utilized for current operations and the
Company believes that suitable additional space is available to accommodate
expansion needs.

Legal Proceedings

On March 16, 2000 a derivative action was filed in the Court of Chancery of
the State of Delaware against all of the directors of the Company, CMGI and the
Company, as nominal defendant. The complaint alleges that, in connection with
the proposed Transactions, CMGI and the directors of the Company have violated
their fiduciary duties of loyalty and good faith. The plaintiff is seeking an
injunction against the Transactions, rescission if the Transactions are
completed, unspecified damages, costs and disbursements, including attorneys'
and experts' fees. CMGI and the Company believe the claims are without merit and
intend to contest the claims vigorously.

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

Some of the statements contained in this section are forward-looking and
include statements about the Company's plans, objectives, expectations and
intentions that are not historical facts. When used in this document, the words
expects, anticipates, intends, plans, believes, seeks and estimates and similar
expressions are generally intended to identify forward-looking statements. You
should not place undue reliance on these

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<PAGE> 54

forward-looking statements, which apply only as of the date of this document.
These forward-looking statements involve risks and uncertainties, and there are
important factors, including those identified below under the heading "Factors
Affecting Future Operating Results" that could cause actual results to differ
materially from those expressed or implied by these forward-looking statements.

References to fiscal 1997, fiscal 1998 and fiscal 1999 mean the fiscal
years ended July 31, 1997, 1998 and 1999, respectively.

Overview

The Company offers a range of software products and services that enable
Web publishers, advertisers and merchants to target and deliver advertisements,
content and e-commerce offerings to their audiences and to measure their
effectiveness.

The Company commenced operations in September 1995 as a wholly-owned
subsidiary of CMGI. As of March 1, 2000, CMGI owned approximately 80.37% of the
outstanding common stock of the Company.

Engage derives its revenues from the sale of products, services and
support. Product revenue consists of revenue from: (1) licenses of its software
products, AdManager, ProfileServer and DecisionSupportServer, (2) subscriptions
to its service offerings, AdBureau advertising management services, I/PRO Web
site traffic measurement, auditing and analysis services and the Engage
Knowledge data service, and (3) online advertising sold on the Engage
AudienceNet network.

Product licenses are typically perpetual, although some have a one- to
three-year term. The fees for licenses of AdManager vary based on the volume of
advertisements served, and the fees for licenses of ProfileServer and
DecisionSupportServer vary based on the volume of activity on the customer's
site. Engage recognizes revenue from product licenses when a signed,
non-cancelable license exists, delivery of the product has occurred and Engage's
fees are fixed and determinable and collection is probable. The Company
typically recognizes revenue from perpetual product licenses in the quarter in
which the software is shipped and recognizes revenue from periodic licenses
ratably over the period of the license.

The Company's online advertising revenue derives from the sale of
advertising campaigns on the Engage AudienceNet network. Engage AudienceNet is
an advertising network that uses profiles from the Engage Knowledge database to
deliver to an advertiser's desired targeted audience advertising campaigns
across Web sites participating in Engage AudienceNet. Engage receives revenue
from the advertiser running an advertising campaign on AudienceNet. Advertising
revenue is recognized in the period that advertisements are delivered. Engage
generally pays each Web site running an advertisement on a CPM (cost per
thousand) basis for its advertising inventory.

Subscriptions to Engage's services typically have a one year term, although
some are on a quarterly basis. The fees for AdBureau vary based on the number of
advertisements served. Revenue is recognized ratably over the period of the
subscription or, in the case of usage-based subscriptions, monthly based on
actual usage. Subscription agreements typically include terms for automatic
renewal unless the customer provides notice of termination.

The Company's support and service revenue derives from its software
maintenance and other professional services, including consulting, installation
and training. The Company recognizes revenue from these services upon the
delivery of these services or, in the case of maintenance agreements, over the
term of the agreement. To date, substantially all of Engage's customers have
entered into maintenance contracts.

The Company began commercial shipments of its first software products,
ProfileServer and DecisionSupportServer, in the early part of fiscal 1998.
Effective April 1998, the Company acquired Accipiter, Inc., and began to sell
the Accipiter AdManager system and subscriptions to the Accipiter AdBureau
service. In April 1999, the Company acquired Internet Profiles Corporation
(I/PRO) and began to sell the I/PRO line of analysis and audit products and
services. In October 1999, the Company commercially introduced its Engage
AudienceNet network. In December, 1999, the Company acquired AdKnowledge, Inc.,
a provider of Web marketing management services focused entirely on the needs of
online marketers and agencies.

The Company expects that a significant portion of its future revenue will
be attributable to products and services based on anonymous profiles from Engage
Knowledge. For the six months ended January 31, 2000,

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<PAGE> 55

less than 10% of the Company's revenues were derived from such products and
services. Any failure of Engage AudienceNet, or Engage's global profiling
technology, to achieve widespread customer acceptance would have a material
adverse effect on the Company's business, financial condition and results of
operation.

The Company's revenue from sales to related parties consists of sales of
products and services to customers that are affiliates of CMGI. In the six
months ended January 31, 2000, the Company sold products and services to 17
affiliates of CMGI. The Company believes that the terms and conditions of those
sales are not materially different than the terms and conditions of sales to
unrelated third parties.

In August 1997, the Company sold rights to some of its data warehouse
products to Red Brick Systems, Inc. for $9.5 million in cash and 238,160 shares
of Red Brick common stock, recording a pretax gain of $9.2 million on the sale.
In January 1999, the Red Brick shares were exchanged for 142,896 shares of
Informix Corp. due to Informix's acquisition of Red Brick.

In April 1998, CMGI acquired Accipiter, which sells Internet advertising
management solutions, in exchange for 10,109,536 shares of CMGI common stock. In
August 1998, Accipiter was merged with Engage in a stock-for-stock merger in
which 700,000 shares of Engage's Series A convertible preferred stock were
issued to CMGI. Engage has reflected the acquisition of Accipiter in its
consolidated financial statements as if it occurred in April 1998. The total
purchase price for Accipiter was valued at $31.3 million.

Approximately $1.7 million of deferred compensation was recorded during
fiscal 1998 relating to approximately 346,160 shares of CMGI common stock held
in escrow to be issued to employee stockholders of Accipiter who satisfy a
two-year employment continuation provision. Compensation expense is being
recognized over the two-year service period beginning April 1, 1998. The
acquisition has been accounted for using the purchase method, and, accordingly,
the purchase price has been allocated to the assets purchased and liabilities
assumed based upon their fair values at the date of acquisition. The portion of
the purchase price allocated to goodwill and developed technology is being
amortized on a straight-line basis over five years. Amounts allocated to the
employee workforce and the Accipiter trade name are being amortized on a
straight-line basis over two years.

In August 1998, Engage acquired, for $1.4 million in cash, 49% of the
shares of Engage Technologies Japan, a joint venture with Sumitomo Corporation
in Japan. Engage's ownership interest was subsequently reduced to 46% after the
issuance of additional equity in the joint venture to a new investor. The joint
venture was established to sell Engage's products and services in Japan. This
investment is being accounted for under the equity method of accounting.
Engage's share of the joint venture's foreign currency translation adjustments
is reflected in both the investment account and in shareholders' equity as a
component of comprehensive income on the consolidated balance sheet. Under a
separate license agreement, Engage licensed its Engage Knowledge technology to
the joint venture in consideration for a non-refundable $3.0 million prepaid
royalty and future royalties of 11.11% of future revenue. The initial lump sum
royalty has been deferred and is being recognized as income over three years
beginning in December 1998, the estimated period over which Engage expects to
provide maintenance and support. In addition, Engage and the joint venture
entered into a reseller agreement under which Engage granted the joint venture
an exclusive right to resell its products to end users in Japan. Under the terms
of the reseller agreement, the joint venture is entitled to purchase Engage's
products for resale to end-users in Japan, excluding Japanese distribution
rights granted to Red Brick.

In April 1999, Engage acquired I/PRO, which provides Web site traffic
measurement and audit services, for approximately $32.7 million, consisting of
$1.6 million in net cash, $20.9 million in CMGI shares and $10.2 million in
Engage shares and options. The acquisition has been accounted for using the
purchase method, and, accordingly, the purchase price has been allocated to the
assets purchased and liabilities assumed based upon their fair values at the
dates of acquisition. Engage has recorded an expense of $4.5 million in the
third quarter of fiscal 1999 representing acquired in-process research and
development that had not yet reached technological feasibility and had no
alternative future use. Goodwill and other intangibles, totaling $27.2 million,
were recorded and are being amortized on a straight-line basis over two or five
years,

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<PAGE> 56

depending on the asset class. In addition, CMGI must pay up to $3.0 million to
I/PRO stockholders if the following performance goals are met:

- the gross revenue of I/PRO for the year ended March 31, 2000 exceeds
$10.8 million;

- as of May 1, 1999, data contributed to the Engage knowledge database
equals 65% or more of the volume of data contributed to I/PRO on the
closing of the transaction and this data constitutes 75% or more of the
data generated by visitors to the Web sites of I/PRO customers as of
March 31, 2000; and

- various employees of I/PRO are employed by Engage on March 31, 2000.

Engage must reimburse CMGI for any such payments, at CMGI's election, in
cash or by issuance of shares of Engage common stock at its then fair market
value. Any additional payment will be treated as additional purchase price and
amortized over the balance of the two- or five-year period.

Engage recorded deferred compensation of $1.7 million in 1998 related to
the Accipiter acquisition and $4.2 million for the year ended July 31, 1999,
representing the difference between the exercise price of stock options granted
and the estimated fair market value of the underlying common stock at the date
of grant. The difference is recorded as a reduction of stockholders' equity and
is being amortized over the vesting period of applicable options, typically four
years. Of the total deferred compensation amount, $1.9 million had been
amortized as of July 31, 1999 and $1.7 million has been reversed due to the
forfeiture of unvested shares. The amortization of deferred compensation is
recorded as an operating expense. The Company currently expects to amortize the
following remaining amounts of deferred compensation as of July 31, 1999 in the
periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31, IN THOUSANDS
- ------------------- ------------
<S> <C>
2000................................................... $ 681
2001................................................... 626
2002................................................... 626
2003................................................... 418
------
$2,351
======
</TABLE>

On December 22, 1999, Engage completed its acquisition of AdKnowledge, a
provider of products and services which allow online marketers and ad agencies
to plan, target, serve, track and analyze advertising campaigns. Previously, on
September 23, 1999, Engage, CMGI, AK Acquisition Corp., a wholly-owned
subsidiary of CMGI, AdKnowledge, and Steve Findley, John Mracek and Kevin
Wandryk (collectively, the "Shareholder Representative") executed an Agreement
and Plan of Merger and Contribution (the "AdKnowledge Merger Agreement"). Upon
the completion of the transactions contemplated by the AdKnowledge Merger
Agreement, AdKnowledge became a wholly-owned subsidiary of Engage. The
acquisition was effected in multiple steps. In the first step, CMGI acquired an
88% interest in AdKnowledge from the AdKnowledge stockholders. In the second
step, Engage acquired all of the shares of AdKnowledge from CMGI and the other
stockholders.

Total purchase consideration was valued at approximately $161.0 million,
net of cash acquired of $3.0 million. Included in the purchase consideration was
$3.8 million in direct acquisition costs. In connection with the acquisition of
AdKnowledge, Engage issued approximately 9.8 million shares of its common stock
to CMGI for CMGI's 88% interest in AdKnowledge and approximately 506,000 shares
of its common stock directly to shareholders of AdKnowledge, valued at
approximately $142.4 million in the aggregate. Additionally, stock options to
acquire Engage's common stock issued in the contribution, valued at
approximately $18 million, have been included in the purchase consideration.

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<PAGE> 57

shareholders, Engage will record the fair value of the CMGI shares issued to
AdKnowledge shareholders on the release date as additional purchase price. Any
difference in the fair value of Engage shares at the release date compared to
the value of the Escrow Shares will be recorded as a capital transaction between
entities under common control. Under the terms of an Intercompany Agreement
between Engage and CMGI, in the event that any Escrow Shares are returned to
CMGI, CMGI shall pay Engage, in cash or other property, a sum equal to the value
of the returned Escrow Shares.

Engage's corporate headquarters are shared with CMGI and several other CMGI
affiliates. CMGI allocates facility and services costs among these affiliates
based upon headcount within each affiliate and within each department of each
affiliate. Services provided by CMGI include support for systems, business
development and marketing. Actual expenses could have varied had Engage been
operating on a stand-alone basis. Costs allocated to Engage are considered to
equal fair market value for the facilities used and services provided. Engage
anticipates that the support provided by CMGI will decrease or be eliminated as
Engage increases its internal resources through hiring employees for the related
support functions.

Engage has incurred significant net losses and negative cash flows from
operations since its inception, and as of January 31, 2000, had an accumulated
deficit of approximately $96.4 million. Engage had net losses of $32.0 million
in fiscal 1999 and $37.9 million in the first six months of fiscal 2000. Prior
to the completion of Engage's initial public offering, these losses were funded
primarily through the issuance of preferred stock to CMGI, which stock was
converted into Engage common stock in connection with its initial public
offering. Engage intends to continue to invest heavily in sales, marketing and
promotion, technology and infrastructure development. As a result, Engage
believes that it will continue to incur operating losses and negative cash flows
from operations for the foreseeable future and that the rate at which such
losses will be incurred may increase from current levels.

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<PAGE> 58

Results of Operations

The following table sets forth selected financial data as a percentage of
revenues for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JULY 18, 1995 YEAR ENDED JULY 31, JANUARY 31,
(INCEPTION) TO ------------------------------- ----------------
JULY 31, 1996(1) 1997 1998 1999 1999 2000
---------------- --------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue.................... -- 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue............ -- 124.0 100.9 59.0 71.7 64.2
-------- --------- -------- ------ ------ ------
Gross (loss)
profit......... -- (24.0) (0.9) 41.0 28.3 35.8
-------- --------- -------- ------ ------ ------
Operating expenses:
In-process research and
development........... -- -- 415.0 28.1 -- 11.0
Research and
development........... -- 29,044.0 264.3 54.3 88.8 37.4
Selling and marketing.... -- 6,264.0 181.1 79.7 86.8 85.8
General and
administrative........ -- 5,716.0 89.9 25.7 30.9 23.7
Amortization of goodwill
and other
intangibles........... -- -- 62.7 36.3 48.9 65.2
Stock compensation....... -- -- 19.2 9.1 9.2 1.5
-------- --------- -------- ------ ------ ------
Total operating
expenses....... -- 41,024.0 1,032.2 233.2 264.6 224.5
-------- --------- -------- ------ ------ ------
Loss from operations....... -- (41,048.0) (1,033.1) (192.2) (236.3) (188.8)
Gain on sale of product
rights................... -- -- 416.8 -- -- --
Other income (expense)..... -- -- (7.8) (7.5) (11.7) 8.9
-------- --------- -------- ------ ------ ------
Net loss................... -- (41,048.0)% (624.1)% (199.7)% (248.0)% (179.9)%
======== ========= ======== ====== ====== ======
</TABLE>

- ---------------
(1) The Company did not have revenue during this period and is therefore unable
to compute costs as a percentage of revenue.

Comparison of the Six Months Ended January 31, 1999 and January 31, 2000

Revenue

Total revenue increased from $4.3 million for the six months ended January
31, 1999 to $21.1 million for the six months ended January 31, 2000. Revenue
from the Company's product offerings accounted for approximately 84% of total
revenue for the six months ended January 31, 1999, compared to 87% of total
revenue for the six months ended January 31, 2000. Approximately 44% of the
increase in total revenue was the result of inclusion of I/PRO's and
AdKnowledge's revenue in product revenue for the six months ended January 31,
2000. The remainder of the increase in total revenue was the result of an
increase in revenues from products available in both periods, and to a lesser
extent, from new product releases and an increase in services and support
revenue.

Product revenue increased from $3.6 million for the six months ended
January 31, 1999 to $18.4 million for the six months ended January 31, 2000.
Approximately 50% of this increase was the result of inclusion of I/PRO's and
AdKnowledge's revenue in the quarter ended January 31, 2000. The remainder of
the increase was the result of an increase in revenue from products available in
both periods, and to a lesser extent, from new product releases.

Service and support revenue increased from $677,000 for the six months
ended January 31, 1999 to $2.7 million for the six months ended January 31,
2000. The 299% increase in year to date revenue was the result of increased
software support and maintenance revenue resulting from increased product
revenue and two large consulting arrangements during the six months ended
January 31, 2000.

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<PAGE> 59

Cost of Revenue

Cost of product revenue increased from $1.5 million for the six months
ended January 31, 1999 to $10.6 million for the six months ended January 31,
2000. Of the total dollar increase, $5.2 million was due to the I/PRO and
AdKnowledge acquisitions and the resultant six and two months, respectively, of
incremental operational costs associated with I/PRO's and AdKnowledge's product
offerings. In addition, a significant portion of the increase was associated
with Engage's AdBureau, Engage Knowledge and AudienceNet products. Finally, a
portion of the increase was the result of increased amortization costs resulting
from the amortization of developed technology acquired in the I/PRO and
AdKnowledge acquisitions. Cost of product revenue was 43% of product revenue for
the six months ended January 31, 1999, compared to 58% of product revenue for
the six months ended January 31, 2000. The increase in cost of product revenue
as a percentage of product revenue was the result of the inclusion of costs and
revenues from I/PRO and AdKnowledge. The decrease in margins was primarily
impacted by lower margins associated with AdKnowledge product sales.

Cost of service and support revenue increased from $1.5 million for the six
months ended January 31, 1999 to $2.9 million for the six months ended January
31, 2000. Cost of service and support revenue was 224% of service and support
revenue for the six months ended January 31, 1999, compared to 108% of service
and support revenue for the six months ended January 31, 2000. Cost of service
and support revenue for the six months ended January 31, 1999 and 2000 exceeded
the related revenue due to Engage's continued investment in service and support
staff in advance of anticipated product sales. As a percentage of service and
support revenue, the improvement in costs reflects the continued growth of the
Company's service and support business and the spreading of fixed costs over a
growing revenue base.

Operating Expenses

In-process Research and Development. In-process research and development
expense was $2.3 million for the six months ended January 31, 2000, resulting
from the AdKnowledge acquisition.

Research and Development. Research and development expenses increased from
$3.8 million for the six months ended January 31, 1999 to $7.9 million for the
six months ended January 31, 2000, a 108% increase. This increase was due to the
I/PRO and AdKnowledge acquisitions and the inclusion of their operations for the
six months ended January 31, 2000, and, to a lesser extent, the expansion of the
Company's research and development activities. These increases were offset
somewhat by a decrease in spending on the translation of Engage's products into
certain foreign languages, projects which were substantially completed during
fiscal 1999. Research and development expenses were 89% of total revenue for the
six months ended January 31, 1999, compared to 37% of total revenue for the six
months ended January 31, 2000. This decrease is the direct result of the
increase in year to date revenue.

Selling and Marketing. Selling and marketing expenses increased from $3.7
million for the six months ended January 31, 1999 to $18.1 million for the six
months ended January 31, 2000, a 388% increase. The increase in costs was
primarily due to increases in product advertising costs resulting from the
release of several new products subsequent to January 31, 1999. In addition, a
portion of the increase was related to the continuing expansion of Engage's
sales force, as well as approximately $4.3 million resulting from the I/PRO and
AdKnowledge acquisitions, and the inclusion of their operations for the six and
two months, respectively. Finally, a portion of the increase is due to continued
expansion in international markets and the costs of maintaining sales and
marketing efforts in foreign markets. Overall, including the acquisition of
I/PRO and AdKnowledge, Engage's sales and marketing staff increased 392% from
January 31, 1999 to January 31, 2000. Sales and marketing expenses were 87% of
total revenues for the six months ended January 31, 1999, compared to 86% for
the six months ended January 31, 2000. The decrease as a percentage of revenue
is the result of the increase in revenue during the period, offset somewhat by
costs incurred in the Company's continued efforts to increase market awareness
of the Company's products.

General and Administrative. General and administrative expenses increased
from $1.3 million for the six months ended January 31, 1999 to $5.0 million for
the six months ended January 31, 2000, a 279% increase. The increase was
primarily due to an increase in payroll and related costs associated with the
support of growing operations and from the inclusion of I/PRO's and
AdKnowledge's operations for the six months ended January 31, 2000. General and
administrative costs were 31% of total revenue for the six months ended

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<PAGE> 60

January 31, 1999, compared to 24% for the six months ended January 31, 2000. The
decrease as a percentage of total revenue is the result of spreading fixed costs
over a larger revenue base.

Amortization of Goodwill and Other Intangibles. Amortization of intangible
assets increased from $2.1 million for the six months ended January 31, 1999 to
$13.7 million for the six months ended January 31, 2000. The increase was due to
the acquisition of I/PRO in April 1999 and AdKnowledge in December 1999.
Intangible assets from the I/PRO acquisition are being amortized over three to
five years, while intangible assets from the AdKnowledge acquisition are being
amortized over three years.

Stock Compensation. Stock compensation costs decreased from $391,000 for
the six months ended January 31, 1999 to $326,000 for the six months ended
January 31, 2000. During the six months ended January 31, 2000, as the result of
the termination of employment of certain employees prior to the vesting of their
stock options, the Company reversed $122,000 of stock compensation expense that
had been recorded in prior quarters. As such, for the six months ended January
31, 2000, the increase in stock compensation costs resulting from the stock
options issued in February 1999 was somewhat offset by the reversal of
compensation costs recorded in prior periods.

Equity in Loss of Joint Venture

Equity in loss of Engage's 46% interest in a Japanese joint venture was
$160,000 for the six months ended January 31, 1999, compared to $700,000 for the
six months ended January 31, 2000. The increase in Engage's share of losses in
the joint venture represents the joint venture's continued investment in
expanding its sales and marketing presence within its market.

Interest Income

Interest income was $2.8 million for the six months ended January 31, 2000.
During the six months ended January 31, 2000, interest income was primarily
earned from investing the proceeds of the Company's initial public offering
completed in July 1999.

Interest Expense

Interest expense was $339,000 for the six months ended January 31, 1999,
compared to $179,000 for the six months ended January 31, 2000. During fiscal
1998, Engage entered into an arrangement with CMGI which required Engage to
accrue interest on intercompany debt at a rate of 7% per annum. During the six
months ended January 31, 1999, interest expense was recorded on this debt, all
of which was converted into equity in connection with Engage's initial public
offering in July 1999. During the six months ended January 31, 2000, interest
expense was recorded on the Company's long-term debt and capital lease
obligations. Interest expense for the six months ended January 31, 2000 was
primarily related to interest paid on long-term debt and capital lease
obligations maintained by AdKnowledge.

Comparison of Fiscal 1998 to Fiscal 1999

Revenue

Total revenue increased from $2.2 million in fiscal 1998 to $16.0 million
in fiscal 1999, a result of the commencement of sales of Accipiter AdManager and
AdBureau due to the acquisition of Accipiter as well as the introduction of
ProfileServer and DecisionSupportServer. In addition, a portion of this increase
is the result of the acquisition of I/PRO and the inclusion of I/PRO's revenue
in product revenues for the last four months of fiscal 1999. Revenue from
product licenses and services accounted for approximately 88% of total revenue
during fiscal 1998 and 1999. Revenue from one customer accounted for
approximately 12% of total revenue during fiscal 1999.

Cost of Revenue

Cost of product revenue includes royalties paid to various parties for the
incorporation of their technology into Engage's products, costs associated with
the I/PRO product offerings, as well as fees paid for outsourced data center
operations and the amortization of developed technology acquired in the
Accipiter and I/PRO acquisitions. Cost of support and services revenue is
primarily comprised of payroll and benefits and allocated overhead costs
associated with Engage's customer support, installation and training staff.

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<PAGE> 61

Cost of product revenue increased from $185,000 in fiscal 1998 to $3.5
million in fiscal 1999. The increase was due primarily to the I/PRO acquisition
and the resultant four months of incremental operational costs associated with
I/PRO's product offerings, as well as costs associated with the introduction of
Engage's AdBureau services. In addition, a portion of the increase is the result
of costs associated with the resale of a thirty-party vendor's products in
conjunction with Engage's product offerings. The costs associated with such
arrangements typically provide for lower margins than sales of Engage's own
product offerings. Finally, a portion of the increase is the result of increased
amortization costs resulting from the amortization of developed technology
acquired in the Accipiter and I/PRO acquisitions.

Costs of service and support revenue increased from $2.1 million in fiscal
1998 to $6.0 million in fiscal 1999. Costs in both periods exceeded the related
revenue due to Engage's continued investment in service and support staff in
advance of anticipated product sales. Engage's service and support staff
increased from 23 at July 31, 1998 to 81 at July 31, 1999.

Operating Expenses

In-Process Research and Development. In-process research and development
expense was $9.2 million during fiscal 1998 due to the completion of the
Accipiter transaction, compared to $4.5 million during fiscal 1999 which
resulted from the I/PRO acquisition.

Research and Development. Research and development expenses consist
primarily of payroll and related costs, consulting and contractor fees,
facility-related costs, such as rent and computer and network services, and
depreciation expenses. Research and development expenses increased from $5.9
million in fiscal 1998 to $8.7 million in fiscal 1999. The increases were the
result of the growth of Engage's research and development activities and the
inclusion of Accipiter's operations for fiscal 1999, and the inclusion of
I/PRO's operations for four months in fiscal 1999. Engage's research and
development staff increased from 41 at July 31, 1998 to 77 at July 31, 1999.

Selling and Marketing. Selling and marketing expenses consist primarily of
payroll and related costs, consulting and professional fees and advertising
expenses. Selling and marketing expenses increased from $4.0 million in fiscal
1998 to $12.8 million in fiscal 1999. The increase in costs was primarily due to
the continuing expansion of Engage's sales force and the inclusion of
Accipiter's and I/PRO's operations. Engage's sales and marketing staff increased
from 26 at July 31, 1998 to 105 at July 31, 1999. In addition, a portion of the
increase was related to increases in product advertising costs resulting from
the release of new products.

General and Administrative. General and administrative costs consist
principally of payroll and related costs, consulting and professional fees,
facility and related costs and depreciation expense. General and administrative
expenses increased from $2.0 million in fiscal 1998 to $4.1 million in fiscal
1999. The increase was primarily due to an increase in payroll and related costs
associated with the support of growing operations as well as the inclusion of
Accipiter's and I/PRO's operations. In addition, a portion of this increase was
the result of increased professional fees incurred in connection with increased
contract activity and the formation of Engage's Japanese joint venture.

Amortization of Goodwill and other Intangibles. Amortization of intangible
assets increased from $1.4 million in fiscal 1998 to $5.8 million during fiscal
1999. The increase was primarily due to the acquisition of Accipiter in April
1998, and the acquisition of I/PRO in April 1999.

Stock Compensation.

Stock compensation costs increased from $426,000 in fiscal 1998 to $1.5
million during fiscal 1999. Beginning in April 1998, Engage commenced the
recognition of compensation expense relating to approximately 346,160 shares of
CMGI common stock held in escrow to be issued to employee stockholders of
Accipiter who satisfy a two-year employment continuation provision.
Additionally, stock compensation costs of $330,000 were recorded during fiscal
1999 as a result of stock options granted during 1999 with exercise prices below
the estimated fair market value of the common stock at the date of grant.

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<PAGE> 62

Gain on Sale of Product Rights

Gain on sale of product rights was approximately $9.2 million during fiscal
1998 as a result of Engage's sale of certain rights to its data warehouse
products to Red Brick Systems, Inc. during the first quarter of fiscal 1998.

Equity in Loss of Joint Venture

Equity in loss of joint venture was a loss of approximately $723,000 during
fiscal 1999. In August 1998, Engage acquired 49% of the shares of Engage
Technologies Japan, a joint venture with Sumitomo Corporation in Japan. Engage's
ownership interest was subsequently reduced to 46% after the issuance of
additional equity in the joint venture to a new investor. The joint venture was
established to sell Engage's products and services in Japan. This investment is
being accounting for under the equity method of accounting, and, as such,
Engage's portion of the joint venture's losses during fiscal 1999 are included
in Engage's results of operations. Engage anticipates that the joint venture
will experience continued losses for the foreseeable future and, as such, the
value of its investment in the joint venture will likely decrease significantly
in fiscal 2000.

Interest Expense, Net

Interest expense, net was approximately $172,000 for fiscal 1998, compared
with $313,000 for fiscal 1999. No interest expense was recorded during the first
six months of the year ended July 31, 1998. In the second half of fiscal 1998,
Engage entered into an arrangement with CMGI which requires Engage to accrue
interest on intercompany debt at a rate of 7% per annum. During fiscal 1999,
interest expense was partially offset by interest income earned on the proceeds
from the Company's initial public offering. Interest income is expected to
increase substantially in fiscal 2000 due to Engage's investment of the proceeds
from its initial public offering.

Comparison of Fiscal 1997 to Fiscal 1998

Revenue

Total revenue increased from $25,000 in fiscal 1997 to $2.2 million in
fiscal 1998. The increase in fiscal 1998 resulted from the acquisition of
Accipiter in April 1998, which added Accipiter's AdManager and AdBureau products
and services to Engage's product portfolio, as well as the introduction of
Engage's ProfileServer and DecisionSupportServer products. All revenue during
fiscal 1997 was derived from one customer, while revenue from three customers
accounted for 20%, 12% and 11% of revenue during fiscal 1998.

Cost of Revenue

Cost of product revenue was 10% of product revenue in fiscal 1998. Cost of
services and support revenue exceeded services and support revenue in fiscal
1998 as Engage hired additional services and support staff throughout the year
in anticipation of increased product sales. In addition, Engage's release of
several new products during the year result in additional support costs to
diagnose and correct customer-specific product issues that typically occur with
the release of a new software product.

Operating Expenses

In-Process Research and Development. In-process research and development
expense in fiscal 1998 was $9.2 million, resulting from the acquisition of
Accipiter.

Research and Development. Research and development expenses decreased from
$7.3 million in fiscal 1997 to $5.9 million in fiscal 1998. The decrease in
fiscal 1998 was primarily due to a decrease in staffing that occurred when
Engage sold some rights to its data warehouse products to Red Brick at the
beginning of fiscal 1998. In addition, a portion of the decrease was the result
of reassigning employees from research and development to product support,
consulting and training upon the release of several of Engage's products in
fiscal 1998.

Selling and Marketing. Selling and marketing expenses increased from $1.6
million in fiscal 1997 to $4.0 million in fiscal 1998. The increase was the
result of significant growth in Engage's sales force during this period, as well
as increased advertising expenditures.

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General and Administrative. General and administrative expenses increased
from $1.4 million in fiscal 1997 to $2.0 million in fiscal 1998. The increase
was the result of increased payroll and related costs, as well as increased
facilities costs required to support growing operations.

Amortization of Goodwill and Other Intangibles. Amortization of goodwill
and other intangibles assets was $1.4 million in fiscal 1998, resulting from the
acquisition of Accipiter in April 1998.

Gain on Sale of Product Rights

Gain on sale of product rights was approximately $9.2 million during fiscal
1998, as a result of Engage's sale of certain rights to its data warehouse
products to Red Brick during the first quarter of fiscal 1998.

Interest Expense, Net

Interest expense, net was $172,000 in fiscal 1998. In the second half of
fiscal 1998, Engage entered into an arrangement with CMGI which requires Engage
to accrue interest on intercompany debt at a rate of 7% per annum. No interest
expense was recorded in fiscal 1997.

Liquidity and Capital Resources

Since its inception, Engage has financed its operations primarily through
funds advanced from CMGI. In addition, the Company has funded its investing
activities, specifically its acquisition of Accipiter and I/PRO, through the
issuance of its convertible preferred stock. In July 1999, the Company completed
its initial public offering for the sale of 13,800,000 shares of common stock,
including the underwriter's over-allotment. The Company received proceeds from
its initial public offering of approximately $94.8 million, net of underwriting
discounts and expenses associated with the offering. Such proceeds will be used
primarily to meet the Company's working capital and capital expenditure needs.
In addition, a portion of these proceeds may be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies.

Net cash used in operating activities amounted to approximately $9.0
million, $10.5 million, $9.4 million, $2.1 million and $25.0 million for fiscal
1997, fiscal 1998 and fiscal 1999 and the six months ended January 31, 1999 and
2000, respectively. The increase in cash used in operations has primarily been
caused by increasing net operating losses, which are partially offset by
non-cash depreciation and amortization charges included in the applicable net
loss. In addition, net cash used in operating activities in fiscal 1998 included
a non-cash gain on sale of product rights of $9.2 million, offset by the
non-cash write-off of in-process research and development costs of $9.2 million.
Of the $9.4 million of net cash used in operations during fiscal 1999,
approximately $5.6 million was from the increase in accrued expenses during the
period, along with $4.3 million from the increase in deferred revenue during the
period. The increase in deferred revenue is the result of advance payments
received from customers for the Company's products. Net cash used in operations
for the six months ended January 31, 1999 included approximately $1.7 million
from the increase in accrued expenses during the period, as well as $3.5 million
from the increase in deferred revenue during the period. The increase in
deferred revenue is the result of advance payments received from customers for
Engage's products. Net cash used in operations for the six months ended January
31, 2000 included approximately $5.8 million due to increased accounts
receivable, which was the result of increases in product sales, along with
approximately $2.2 million due to increased prepaid expenses and other assets,
primarily the result of cash that has been restricted in order to collateralize
lease agreements.

Net cash used in investing activities amounted to approximately $490,000,
$1.4 million, $1.5 million and $43.3 million during fiscal 1997 and fiscal 1999
and the six months ended January 31, 1999 and 2000, respectively, while
investing activities provided $473,000 during fiscal 1998. Investing activities
used $490,000, $216,000, $342,000, $118,000 and $2.1 million during fiscal 1997,
fiscal 1998 and fiscal 1999, and the six months ended January 31, 1999 and 2000,
respectively, to acquire property and equipment required to support the growth
of the business and hiring needs. Investing activities during fiscal 1998,
fiscal 1999 and the six months ended January 31, 2000 included $689,000,
$347,000 and $3.0 million of net cash acquired from the acquisition of
Accipiter, I/PRO and AdKnowledge, respectively. Investing activities during the
six months ended January 31, 1999 used approximately $1.4 million in the
Company's investment in a Japanese joint venture. In addition, investing
activities during the six months ended January 31, 2000 used approximately

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$42.2 million for net purchases of available-for-sale securities, as well as
$2.0 million for an investment in a strategic partner of the Company.

Net cash provided by financing activities amounted to approximately $9.5
million, $10.1 million, $122.7 million, $3.5 million and $214,000 for fiscal
1997, fiscal 1998 and fiscal 1999 and the six months ended January 31, 1999 and
2000, respectively. Cash provided in fiscal 1999 included net proceeds from the
Company's initial public offering of approximately $94.8 million, net of
underwriting discounts and expenses associated with the offering, additional net
proceeds of approximately $13.1 million from a private placement of the
Company's common stock, as well as net proceeds of $1.9 million from the
issuance of Series B convertible preferred stock which occurred in the first six
months of the year ended January 31, 1999. Additional cash provided in each
period was primarily related to funds advanced from CMGI to fund the Company's
operations. Cash provided by financing activities during fiscal 1997 was
partially offset by the repayment of debt of $1.0 million. Cash provided by
financing activities during fiscal 1997, fiscal 1999 and the six months ended
January 31, 1999 and 2000 includes $22,000, $558,000, $9,000 and $384,000,
respectively, received from employee stock option exercises. In addition, cash
provided by financing during the six months ended January 31, 2000 included
proceeds of $298,000 from common stock sold under the Company's employee stock
purchase plan. Funds received through financing activities for the six months
ended January 31, 2000 were partially offset by approximately $468,000 used to
repay long-term borrowings and capital lease arrangements maintained by
AdKnowledge, and to a lesser extent, I/PRO.

Prior to the Company's initial public offering, under an informal
arrangement with CMGI, the Company maintained a zero balance cash account. CMGI
funded Engage's operations as needed, with a corresponding increase in the
Company's obligations to CMGI. Customer and other receipts were remitted to CMGI
and were applied to reduce the Company's obligations to CMGI. The outstanding
balance of Engage's obligation to CMGI at the end of each fiscal quarter,
commencing with the quarter ended January 31, 1998, have been evidenced by
demand promissory notes bearing interest at an annual rate of 7% and convertible
into shares of the Company's convertible preferred stock at the fair market
value of such stock as of the end of the applicable quarter. At June 30, 1999,
all outstanding obligations to CMGI were converted to common stock at the fair
market value of the stock at that date. The Company expects that all future
obligations under this arrangement will be repaid to CMGI on a monthly basis,
with terms similar to those between unrelated parties.

The Company has experienced a substantial increase in its expenditures
since inception consistent with its growth in operations and staffing. The
Company anticipates that expenditures will continue to increase for the
foreseeable future as the Company accelerates the growth of its business.
Additionally, the Company will continue to evaluate investment opportunities in
businesses that management believes will complement its technologies and
marketing strategies.

Assuming the closing of the acquisitions of Adsmart and Flycast, the
Company currently anticipates that its available cash resources will only be
sufficient to meet its anticipated needs for working capital and capital
expenditures for approximately the next three to four quarters. Included in this
estimate is the payment of approximately $4.7 million of fees associated with
the acquisition of Adsmart and Flycast. Therefore, the Company will need to
raise additional funds in order to fund operations. In addition, the Company may
require additional funding in order to fund more rapid expansion, to develop new
or enhance existing services or products, to respond to competitive pressures or
to acquire complementary products, businesses or technologies. The Company
believes that additional external financing will be available through credit
facilities or sales of additional equity or other debt instruments. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of the Company's stockholders will be
reduced and its stockholders may experience dilution of their interest in the
Company. If adequate funds are not available or are not available on acceptable
terms, the Company's ability to continue as a going concern, to fund its
expansion, take advantage of unanticipated opportunities, develop or enhance
services or products or otherwise respond to competitive pressures may be
significantly limited.

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In-Process Research and Development

Accipiter

CMGI acquired Accipiter on April 8, 1998 for total purchase consideration
of $31.3 million. In August 1998, Accipiter merged with Engage in a
stock-for-stock merger in which consideration of 700,000 shares of Engage Series
A Convertible Preferred Stock were issued to CMGI. The portion of the purchase
price allocated to in-process research and development was $9.2 million, or
approximately 29% of the total purchase price. At the acquisition date,
Accipiter's major in-process project was the development of AdManager version
4.0, which was intended to provide the ad serving functionality that customers
were requiring as the use of the Internet rapidly increased and customer Web
sites became more complex. In general, previous AdManager releases did not
provide for the fault tolerance, redundancy and scalability that customers began
to seek after AdManager versions 1.0 and 2.0 were released. Accordingly,
customers' long-term product needs required Accipiter to substantially redesign
the AdManager architecture to develop new technologies to provide:

- improved fault tolerance, which is the ability to operate during a system
failure, and scalability, which is the ability to expand capacity,

- an object-oriented user interface, which is a screen display that enables
users to easily operate a computer program,

- application programming interfaces, which enable a program to exchange
data with other programs and

- a new report engine, which is a component that generates reports.

This redesigned AdManager architecture was later released as version 4.0.

At the date of the acquisition, management estimated that completion of the
AdManager version 4.0 technology would be accomplished by June 1998. Engage
began beta testing AdManager version 4.0 at a customer site in June 1998 and
commercially released the product in August 1998. The initial development effort
had commenced in late 1997. At the acquisition date, the new AdManager
technology had not reached a completed prototype stage and beta testing had not
yet commenced. At the time of the Accipiter purchase, the AdManager version 4.0
project was approximately 71% complete. The AdManager version 4.0 project was
substantially completed within the time originally estimated.

The value of in-process research and development was determined using an
income approach. This approach takes into consideration earnings remaining after
deducting from cash flows related to the in-process technology, the market rates
of return on contributory assets, including developed technology, assembled
workforce, working capital and fixed assets. The cash flows are then discounted
to present value at an appropriate rate. Discount rates are determined by an
analysis of the risks associated with each of the identified intangible assets.
The discount rate used for in-process research and development was 24.5%, a
slight premium over the estimated weighted-average cost of capital of 24%, and
the discount rate used for developed technology was 21%.

The resulting net cash flows to which the discount rate was applied are
based on Engage management's estimates of revenues, cost of revenues, research
and development costs, selling and marketing costs, general and administrative
costs, and income taxes from such acquired technology. These estimates are based
on the assumptions set forth below.

Accipiter recorded revenue in 1997 of less than $1.0 million. Because of
the absence of meaningful historical revenue of Accipiter, management projected
revenue for the initial year of the forecast period based on its assessment of
future market potential and the ability of Accipiter to successfully launch its
new product offering. After the initial year of the users and online activity
and the impact such growth would have on Internet advertising. These projections
are based on Engage management's estimates of the significant growth in the
number of companies engaged in e-commerce, the need for e-commerce companies to
serve ads over the Internet, expected trends in technology and the nature and
expected timing of new product introductions by Engage and its competitors.
These estimates also include growth related to the use of Accipiter technologies
in conjunction with Engage's products, the marketing and distribution of the
resulting products through Engage's sales force and the benefits of Engage's
incremental financial support and stability.

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Engage's estimated cost of sales as a percentage of revenue is expected to
be slightly lower than Accipiter's on a stand-alone basis, which was 16% in
1997, as fixed costs included in cost of sales are spread over a larger revenue
base and provide for the realization of efficiencies due to economies of scale
through combined operations. Due to these savings, the estimated cost of sales
as a percentage of revenue is expected to decrease by 1% each year from
Accipiter's historical percentage, to a low of 11% in the fifth forecast year.

Engage's selling, general and administrative costs are expected to be
higher than Accipiter's on an absolute basis, but lower as a percentage of
revenue. Due to the small revenue base in 1997 and the impact of significant
costs associated with building a corporate infrastructure and building a
workforce for future operations, Accipiter's selling, general and administrative
costs in 1997, as a percent of revenue, are not representative of the expected
costs for the combined operations of Engage and Accipiter. Efficiencies due to
economies of scale through combined operations, such as consolidated marketing
and advertising programs, are expected to be realized immediately.

I/PRO

Engage acquired I/PRO on April 7, 1999 for total purchase consideration of
$32.7 million. The portion of the purchase price allocated to in-process
research and development was $4.5 million, or approximately 14% of the total
purchase price. At the acquisition date, I/PRO's major in-process project was
the development of a new data processing system, project name Normandy, which is
intended to provide improved functionality. In general, the existing data
processing system does not provide sufficient fault tolerance, scalability and
data processing efficiency to meet future customer needs. Accordingly,
customers' long-term product needs required I/PRO to substantially redesign the
data processing system to develop new technologies in the areas of: (1) fault
tolerance and scalability, (2) system management, (3) data capture and (4) path
analysis functionality, which is the ability to track movement of Web visitors
across Web pages.

At the date of the acquisition, management estimated that completion of the
Normandy technology would be accomplished by August 1999. The initial
development effort had commenced in late 1998. At the acquisition date, the new
Normandy technology had not reached a completed prototype stage and beta testing
had not yet commenced. At the time of the I/PRO purchase, the Normandy project
was approximately 64% complete. The Normandy project was substantially completed
within the time originally estimated.

The value of in-process research and development was determined using an
income approach. This approach takes into consideration earnings remaining after
deducting from cash flows related to the in-process technology, the market rates
of return on contributory assets, including core developed technology, assembled
workforce, working capital and fixed assets. The cash flows are then discounted
to present value at an appropriate rate. Discount rates are determined by an
analysis of the risks associated with each of the identified intangible assets.
The discount rate used for in-process research and development was 30%, a
premium over the estimated weighted-average cost of capital of 25%, and the
discount rate used for core developed technology was 22%.

Management projected average annual revenue increases for the forecast
period based on its assessment of future market potential and the ability of
I/PRO to successfully implement the Normandy technology. Revenue was predicted
to grow at rates comparable to the growth of Internet users and online activity
and the impact such growth would have on Internet service companies. Revenue
related to the Normandy project were separately identified.

These projections are based on Engage management's estimates of the
significant growth in the number of companies engaged in e-commerce, the need
for e-commerce companies to utilize independent audit, verification and analysis
services, expected trends in technology and the nature and expected timing of
new product introductions by its competitors. These estimates also include
growth related to the use of certain I/PRO technologies in conjunction with
Engage's products and the benefits of Engage's incremental financial support and
stability.

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I/PRO's estimated cost of sales as a percentage of revenue is expected to
significantly decrease on a stand-alone basis, which was 85% in 1998, as certain
fixed costs included in cost of sales are spread over a larger revenue base and
provide for the realization of efficiencies due to economies of scale. The
Normandy technology is expected to greatly increase the automation of data
processing, allowing significant labor cost savings per revenue dollar.
Increases in hardware utilization are also expected. Due to these savings, the
estimated cost of sales as a percentage of revenue is expected to decrease to a
low of 20% in the fifth forecast year.

I/PRO's operating expenses are expected to increase on an absolute basis,
but to significantly decrease as a percentage of revenue over the term of the
forecast, which was 192% in 1998. Certain fixed expenses are spread over a
larger revenue base and provide for the realization of efficiencies due to
economies of scale. Due to these savings, the estimated cost of sales as a
percentage of revenue is expected to decrease to a low of 49% in the fifth
forecast year.

AdKnowledge

The Company acquired AdKnowledge in December 1999 for total purchase
consideration valued at approximately $161.0 million, net of cash acquired of
$3.0 million. Included in the purchase consideration was $3.8 million in direct
acquisition costs. In connection with the acquisition, Engage issued
approximately 9.8 million shares of its common stock to CMGI for CMGI's 88%
interest in AdKnowledge and approximately 506,000 shares of its common stock
directly to shareholders of AdKnowledge, valued at approximately $142.4 million
in the aggregate. Additionally, stock options to acquire the Company's common
stock issued in the contribution, valued at approximately $18 million, have been
included in the purchase consideration.

Management is primarily responsible for estimating the fair value of
purchased in-process research and development. The portion of the purchase price
allocated to in-process research and development was $2,317,000, or
approximately 1.2% of the total purchase price. At the acquisition date,
AdKnowledge's major in-process projects were: (1) the development of the
AdKnowledge System Architecture Upgrade, which was intended to scale its
software to handle more customers, internationalize the AdKnowledge System, and
help AdKnowledge deploy new features more rapidly; (2) the development of the
AdServer Network Capacity Upgrade, which was intended to allow the AdKnowledge
System to handle more volume; (3) the AdServer Network Operating System Change,
which was intended to improve the managing of AdKnowledge's advertising
campaigns; (4) the development of the Optimal Global Domain Name Service, which
was intended to optimize traffic flow, deliver advertisements faster, and
improve the performance of the AdKnowledge System; and (5) the development of QA
Automation Procedures, which was intended to allow AdKnowledge to release
features on the AdKnowledge System more quickly and with better quality.

At the date of the acquisition, management estimated that completion of the
Architecture Upgrade technology would be accomplished by August 2000. The
initial development effort had commenced in November 1998. At the acquisition
date, technological feasibility of the Architecture Upgrade had not been
reached. At the time of the AdKnowledge purchase, the Architecture Upgrade
project was approximately 57% complete.

At the date of the acquisition, management estimated that completion of the
Capacity Upgrade technology would be accomplished by January 2000. The initial
development effort had commenced in October 1999. At the acquisition date,
technological feasibility of the Capacity Upgrade had not been reached. At the
time of the AdKnowledge purchase, the Capacity Upgrade project was approximately
65% complete.

At the date of the acquisition, management estimated that completion of the
Operating System technology would be accomplished by March 2000. The initial
development effort had commenced in October 1999. At the acquisition date,
technological feasibility of the Operating System Change had not been reached.
At the time of the AdKnowledge purchase, the Operating System Change project was
approximately 28% complete.

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Domain Name Service had not been reached. At the time of the AdKnowledge
purchase, the Optimal Global Domain Name Service project was approximately 23%
complete.

At the date of the acquisition, management estimated that completion of the
QA Automation Procedures technology would be accomplished by June 2000. The
initial development effort had commenced in June 1999. At the acquisition date,
technological feasibility of the QA Automation Procedures had not been reached.
At the time of the AdKnowledge purchase, the QA Automation Procedures project
was approximately 75% complete.

The value of in-process research and development was determined using an
income approach. This approach takes into consideration earnings remaining after
deducting from cash flows related to the in-process technology, the market rates
of return on contributory assets, including developed technology, assembled
workforce, trade names/trademarks, database, working capital and fixed assets.
The cash flows are then discounted to present value at an appropriate rate.
Discount rates are determined by an analysis of the risks associated with each
of the identified intangible assets. The discount rates used for in-process
research and development range from 25% to 30%, reflecting a 10% to 15% premium
over the estimated weighted-average cost of capital of 15%. These different
discount rates reflect the relative risk of the technologies, and their stage of
completion.

The resulting net cash flows to which the discount rates were applied are
based on Engage management's estimates of revenues, cost of revenues, research
and development costs, selling and marketing costs, general and administrative
costs, and income taxes from such acquired technologies. These estimates are
based on the assumptions set forth below.

Management projected average annual revenue increases for the forecast
period based on its assessment of future market potential and the ability of
AdKnowledge to successfully implement its in-process research and development
projects. These growth rates were based on the expected growth of Internet users
and online activity and the impact such growth would have on Internet
advertising. Revenues related to each of the in-process research and development
projects were identified.

AdKnowledge's estimated cost of sales as a percentage of revenue is
expected to decrease on a stand-alone basis, as efficiencies due to economies of
scale are realized. The estimated cost of sales as a percentage of revenue is
expected to decrease to a low of 30% in the third forecast year.

AdKnowledge's estimated selling and marketing expenses are expected to be
30% as a percentage of revenues for the entire forecast period. Similarly,
general and administrative expenses remained constant at 10%, as a percentage of
revenues, for the entire forecast period.

Recent Accounting Pronouncements

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants, issued Statement of Position 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for Internal
Use" ("SOP 98-1"). SOP 98-1 requires the capitalization of various internal
costs related to the implementation of computer software obtained for internal
use. The Company adopted this standard in August 1999, and the adoption of SOP
98-1 did not have a material impact on its financial position or its results of
operations.

In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting Costs of Start-Up Activities"("SOP 98-5"). Under SOP 98-5, the cost
of start-up activities should be expended as incurred. Start-up activities are
broadly defined as those 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, commencing some new operation
or organizing a new entity. The Company adopted SOP 98-5 in August 1999. The
adoption of SOP 98-5 did not have a material impact on its financial position or
results of operations.

In December 1999, the SEC issued SAB No. 101 "Revenue Recognition in
Financial Statements" ("SAB No. 101"). SAB No. 101 expresses the view of the SEC
staff in applying generally accepted accounting principles to certain revenue
recognition issues. Although the Company is still in the process of

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analyzing the impact of SAB No. 101, if any, on its consolidated statements and
related disclosures, the Company expects that there will be no material impact
on its financial position or its results of operations.

Year 2000 Compliance

Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with these "Year 2000"
requirements or risk system failure or miscalculations causing disruptions of
normal business activities. The Company has not experienced any material Year
2000 problems or disruptions.

State of Readiness

The Company completed its assessment of the Year 2000 readiness of its
operating, financial and administrative systems, including the hardware and
software that support the Company's systems.

For its currently marketed software products, the Company has completed its
Year 2000 compliance testing efforts and believes that its products are Year
2000 compliant in all material respects. The Company also conducted less
extensive testing of older versions of its products. While the Company is not
aware of any material respect in which its older products are not Year 2000
compliant, it has offered customers using older products the option to upgrade
to current versions at no additional charge. The Company also tested its
internal and third party provided systems that are used to deliver customer
services.

Costs

At January 31, 2000, the Company had spent approximately $1.5 million on
Year 2000 compliance issues and does not expect to incur any significant
additional expenses in connection with identifying, evaluating and addressing
any future Year 2000 compliance issues. Most of the Company's expenses were
related to the operating costs associated with time spent by employees and
consultants in the evaluation process and Year 2000 compliance matters and costs
to replace non-compliant equipment.

Risks

The Company is not currently aware of any Year 2000 compliance problems
relating to its products or systems that would have a material adverse effect on
its business, financial condition and results of operations, without taking into
account the Company's efforts to avoid or fix such problems. There can be no
assurance that the Company will not discover latent Year 2000 compliance
problems in its products or systems that will require substantial revision. In
addition, there can be no assurance that third-party software, hardware or
services incorporated into the Company's material systems will not need to be
revised or replaced, all of which could be time-consuming and expensive. The
failure of the Company to fix or replace its internally developed proprietary
software or third-party software, hardware or services on a timely basis could
result in lost revenue, increased operating costs, the loss of customers and
other business interruptions, any of which could have a material adverse effect
on the Company's business, financial condition and results of operations.
Moreover, the failure to adequately address Year 2000 compliance issues in its
internally developed proprietary software could result in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming to defend.

The Company is heavily dependent on NaviSite, a major third party vendor
and affiliate, to provide outsourced data services. A significant Year 2000
related disruption of the outsourced data services that NaviSite provides to the
Company could cause customers to consider canceling services with the Company or
cause an unmanageable burden on the Company's technical support, which in turn
could materially and adversely affect the Company's business, financial
condition and results of operations.

To date, the Company has not experienced any significant Year 2000
disruptions and estimated Year 2000 expenses approximated the actual costs
incurred. The Company does not expect to incur any significant additional
expenses related to the Year 2000 issue. The Company continues to monitor its
systems for Year 2000 issues but is not currently aware of any material Year
2000 problems.

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Quantitative and Qualitative Disclosure About Market Risk

The carrying values of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and notes payable,
approximate fair value because of the short maturity of these instruments.

The Company has historically had very low exposure to changes in foreign
currency exchange rates, and as such, has not used derivative financial
instruments to manage foreign currency fluctuation risk. As the Company expands
globally, the risk of foreign currency exchange rate fluctuation may increase.
Therefore, in the future, the Company may consider utilizing derivative
instruments to mitigate such risks.

FACTORS AFFECTING FUTURE OPERATING RESULTS

The Company believes that this document contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are subject to risks and uncertainties and are based
on the beliefs and assumptions of management of the Company, based on
information currently available to the Company's management. Use of words such
as "believes," "expects," "anticipates," "intends," "plans," "estimates,"
"should," "likely" or similar expressions, indicate a forward looking statement.
Forward-looking statements involve risks, uncertainties and assumptions. Certain
of the information contained in this Proxy Statement, including information with
respect to the reasons for the Transactions, trends with respect the Company's
future financial results and strategy for the Company's business consists of
forward-looking statements. Important factors that could cause actual results to
differ materially from the forward-looking statements include the following:

The Company has incurred substantial losses and anticipates continued losses

The Company has never been profitable. The Company has incurred net losses
totaling $96.4 million from inception to January 31, 2000. The Company expects
to increase its spending significantly and therefore expects to continue to
incur significant losses for the foreseeable future.

The Company will need to generate significant additional revenue to achieve
profitability. The Company may not achieve profitability. If the Company's
revenue grows more slowly than it anticipates or if the Company's operating
expenses either increase more than expected or cannot be reduced in light of
lower revenue, the Company's business, financial condition and results of
operations will be materially and adversely affected.

The Company has recently begun to introduce its profile-based solutions, and
it is uncertain whether they will achieve widespread customer acceptance

In July 1999, the Company released its Engage Knowledge data service for
sale to customers. In October 1999, the Company introduced its profile-based
AudienceNet network for advertisers on the Web. The profiling capabilities used
to create and maintain the Engage Knowledge data service will serve as the
platform for most of the Company's planned profile-based products and services.
The Company plans to integrate its profile technology with the Flycast Network
and its AdKnowledge services. The Company expects that a significant portion of
its future revenue will depend on sales of products and services incorporating
the Company's profiling technology. To date, however, a small portion of the
Company's revenue is attributable to the Company's profile-based products and
services. There can be no assurance that products and services based on the
Company's Engage Knowledge database, or the Company's profiling approach for the
creation of anonymous profiles, will achieve widespread customer acceptance, and
any failure to do so would have a material adverse effect on the Company's
business, financial condition and results of operations.

Profile-based targeting may not achieve its intended benefits and the
Company's revenue therefore may not grow as expected

The Company's products and services are designed to enable Web publishers,
advertisers and merchants to target their intended audiences more effectively.
Because the Company's profiling technology is new, the Company cannot be sure
that the use of its anonymous profiles will result in more effective targeting
of advertisements or other marketing and promotional activities. The Company's
revenue would be adversely affected if advertisers and merchants do not perceive
that the use of profiles will improve the effectiveness of their marketing
campaigns or if its customers are otherwise unable to generate a sufficient
return on

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investment from the use of the Company's profiles. If the use of the Company's
profile-based products and services does not demonstrably improve the
responsiveness of Web visitors, the Company's business, financial condition and
results of operations will be materially adversely affected.

The value of the Engage Knowledge database depends on continued contributions
of data

Decisions by the Company's major customers or strategic partners not to
contribute their data to the Engage Knowledge database would hinder the quality
and growth of the Engage Knowledge database and could severely impair the
effectiveness and value of Engage AudienceNet and future profile-based products.
To participate in AudienceNet, Web sites must agree to contribute user data to
the Engage Knowledge database and there can be no assurance that Web sites will
not decline to participate in AudienceNet or other Engage-enabled networks due
to due to concerns relating to sharing proprietary information about their users
and perceived privacy concerns.

The Company's business may be seriously harmed if the Company does not
successfully develop profile-based products and services for specific markets

The Company plans to develop profile-based products and services that are
tailored for the requirements of specific markets, such as the automotive
market. The Company's success in introducing these products and services will
depend on its ability to obtain access to the consumer information necessary to
create a meaningful database of market-specific interests and preferences, as
well as the ability to enter into marketing relationships with partners having
expertise in these markets and with Web advertisers and agencies. There can be
no assurance that the Company will be successful in obtaining this data or the
necessary marketing or customer relationships, and any failure to do so would
impair the Company's ability to introduce its planned products and services for
these markets.

The Company's quarterly operating results are subject to significant
fluctuations

The Company's revenue and operating results may vary significantly from
quarter to quarter due to a number of factors, not all of which are in the
Company's control. Future revenue is difficult to forecast and for the
foreseeable future will be influenced by the timing and amount of sales to new
customers, as well as user traffic levels and advertising and electronic
commerce activity on the Company's customers' Web sites.

The market for profile-based marketing products and services is new. As a
result, the Company must educate potential customers on the use and benefits of
its products and services. In addition, the implementation of the Engage
Knowledge data service requires a significant commitment of resources by the
Company's customers. It can, in some cases, take the Company's sales
organization several months to finalize a sale. This makes it difficult to
predict the quarter in which a sale may occur.

Many of the Company's expenses, particularly personnel costs and rent, are
relatively fixed, and are incurred in part based on expectations of future
revenue. The Company may be unable to adjust spending quickly enough to offset
any unexpected revenue shortfall. Accordingly, any shortfall in revenue may
cause significant variation in operating results in any quarter.

Because of these factors, quarter-to-quarter comparisons of the Company's
results of operations may not be an indication of the Company's future
performance. It is possible that, in future periods, the Company's results of
operations may be below the expectations of public market analysts and
investors. This could cause the trading price of the Company's common stock to
decline.

The Company has only been in business for a short period of time

The Company began commercial shipments of its first software products in
early 1998. the Company faces risks, expenses and uncertainties as an early
stage company, particularly in the new and rapidly evolving Internet market.
Because the Company only recently commenced commercial sales, its past results
and rates of growth may not be meaningful and should not be relied upon as an
indication of the Company's future performance.

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The Company will continue to be controlled by CMGI, whose interests may differ
from other stockholders

CMGI currently beneficially owns 80.37% of the outstanding shares of the
Company's Common Stock. Upon completion of the Transactions, CMGI will
beneficially own approximately 87.73% of the outstanding shares of the Company's
Common Stock. Accordingly, CMGI has and will continue to have the power to elect
the Company's entire board of directors and to approve or disapprove any
corporate transaction or other matter submitted to the Company's stockholders
for approval, including the approval of mergers or other significant corporate
transactions. The interests of CMGI may differ from the interests of the other
stockholders. Future decisions by CMGI as to the disposition of any or all of
its ownership position in the Company could be influenced by the possible need
of CMGI to maintain control of the Company in order for CMGI to avoid becoming a
registered investment company. Registration as an investment company would
subject CMGI to numerous regulatory requirements with which CMGI would have
difficulty complying. As a result, CMGI may be motivated to maintain at least a
majority ownership position of the Company, even if other stockholders of the
Company might consider a sale of control of the Company to be in their best
interests. As long as it is a majority stockholder, CMGI has contractual rights
to purchase shares in any financing of the Company sufficient to maintain its
majority ownership position. CMGI's ownership may have the effect of delaying or
preventing a change in control of the Company or discouraging a potential
acquirer from attempting to obtain control of the Company, which in turn could
adversely affect the market price of the Company's common stock.

A material portion of the Company's growth to date has been attributable to
sales to CMGI affiliates

In fiscal 1999, 12 of the Company's customers were affiliates of CMGI. In
fiscal 1999 and the first six months of fiscal 2000, sales of products and
services to affiliates of CMGI accounted for approximately $1.9 million, or
approximately 12%, and approximately $2.5 million, or approximately 12%,
respectively, of the Company's total revenue. To the extent that the Company's
growth in revenue has been attributable to sales of products and services to
these affiliates, there can be no assurance that the Company's historical rate
of growth is an indication of the Company's future prospects.

The terms of the Company's sales to CMGI affiliates could change

While the Company believes that the transactions between it and other
affiliates of CMGI have been on arms'-length terms, it is possible that the
Company might have received more favorable terms than it would have if it were
not an affiliate of CMGI. In addition, the terms of the Company's sales to
affiliated customers could change if these customers cease to be affiliates of
CMGI in the future. CMGI has been and continues to be instrumental in
introducing the Company to customers and other business partners. If the
relationship between the Company and CMGI ended or was fundamentally altered,
the Company's business, financial condition and results of operations could be
materially adversely affected.

Growing concerns about the use of "cookies" and data collection may limit the
Company's ability to develop user profiles

Web sites typically place small files of information commonly known as
"cookies" on a user's hard drive, generally without the user's knowledge or
consent. Cookie information is passed to the Web site through the Internet
user's browser software. The Company's technology currently uses cookies to
collect information about an Internet user's movement through the Internet. Most
currently available Internet browsers allow users to modify their browser
settings to prevent cookies from being stored on their hard drive, and a small
minority of users are currently choosing to do so. Users can also delete cookies
from their hard drive at any time.

Some Internet commentators and privacy advocates have suggested limiting or
eliminating the use of cookies. The effectiveness of the Company's technology
could be limited by any reduction or limitation in the use of cookies.

If the use or effectiveness of cookies is limited, the Company would likely
have to switch to other technology that allows us to gather demographic and
behavioral information. While such technology currently exists, it is
substantially less effective than cookies. Replacement of cookies could require
significant

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reengineering time and resources, might not be completed in time to avoid
negative consequences to the Company's business, financial condition or results
of operations, and might not be commercially feasible.

In addition, privacy concerns may cause some Web users to be less likely to
visit Web sites that contribute data to the Engage Knowledge database. If enough
Web users choose not to visit sites providing information to the Engage
Knowledge database, the Company's ability to attract participants to Engage
AudienceNet would be adversely affected. This would, in turn, have a material
adverse effect on the Company's business, financial condition or results of
operations.

Legislation or regulations may be adopted that could affect the Company's
ability to generate or use information for profiles and may hinder the Company's
ability to conduct business

The legal and regulatory environment governing the Internet and the use of
information about Web users is uncertain and may change. United States
legislators in the past have introduced a number of bills aimed at regulating
the collection and use of personal data from Internet users and additional
similar bills are being considered during the current congressional session. One
bill, as currently drafted, would require Internet users to affirmatively
consent before a cookie is set on their browser for any purpose, with certain
limited exceptions. If passed into law without modification, this bill would
have a material adverse effect on the Company's business. The European Union has
recently adopted a directive addressing data privacy that may result in
limitations on the collection and use of specific personal information regarding
Internet users. In addition, Germany has imposed its own laws protecting data
that can become personally identifiable through subsequent processing. Other
countries may also enact limitations on the use of personal data.

To date, these regulations have not materially restricted the use of the
Company's products. However, legislation or regulations may in the future be
adopted which may limit the Company's ability to target advertising or collect
and use information in one or more countries. Further, a number of laws and
regulations have been and may be adopted covering issues such as pricing,
acceptable content, taxation and quality of products and services on the
Internet. Such legislation could dampen the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications and
commercial medium. In addition, due to the global nature of the Internet, it is
possible that multiple federal, state or foreign jurisdictions might
inconsistently regulate the Company's activities and our customers. Any of the
foregoing developments could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company may have difficulty managing its expanding operations

The Company has recently experienced a period of rapid growth. This growth
has placed a significant strain on the Company's managerial, operational and
financial resources. The Company's total revenue increased from $25,000 in the
fiscal year ended July 31, 1997 to $2.2 million in the fiscal year ended July
31, 1998, to $16.0 million in the fiscal year ended July 31, 1999. The number of
the Company's employees increased from 67 as of July 31, 1997 to 584 as of March
1, 2000. In addition, the Company's pending acquisitions of Adsmart and Flycast,
if completed, will place a significant additional strain on the Company's
resources. To accommodate this growth, the Company must implement new or
upgraded operating and financial systems, procedures and controls throughout
many different locations. The Company may not succeed in these efforts. Failure
to expand and integrate these areas in an efficient manner could have a material
adverse effect on the Company's business, financial condition and results of
operations. If the Company continues to grow, the Company will need to recruit,
train and retain a significant number of employees, particularly employees with
technical, marketing and sales backgrounds. These individuals are in high
demand. The Company may not be able to attract the staff it needs.

The acceptance and effectiveness of Internet advertising is not yet fully
established

The Company's future success is dependent in part on an increase in the use
of the Internet as an advertising medium. The Internet advertising market is new
and rapidly evolving, and it cannot yet be compared with traditional advertising
media to gauge its effectiveness. As a result, demand for and market acceptance
of Internet advertising solutions are uncertain. In addition, there are software
programs that limit or prevent advertising from being delivered to a user's
computer. Web users' widespread adoption of such

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software would significantly undermine the commercial viability of Internet
advertising. If the market for Internet advertising fails to develop or develops
more slowly than the Company expects, its business, financial condition and
results of operations could be materially and adversely affected.

There are currently no generally accepted standards for the measurement of
the effectiveness of Internet advertising and standard measurements may need to
be developed to support and promote Internet advertising as a significant
advertising medium. The Company's advertising customers may challenge or refuse
to accept the Company's or third-party measurements of advertisement delivery
requests from the Web sites of Web publishers using the Company's solutions.

The acceptance and effectiveness of the Internet as a medium for consumer
transactions is not yet fully established

The Company's future success is dependent in part on an increase in the use
of the Internet for business transactions with consumers. The electronic
commerce market is new and rapidly evolving and the extent of consumer
acceptance of the Internet is uncertain. If a sufficiently broad base of
consumers does not accept the use of the Internet for transacting business, the
Company's business, financial condition and results of operations could be
materially and adversely affected.

The Company has many competitors and may not be able to compete effectively

The markets for Internet advertising, user targeting and Web site
assessment tools are intensely competitive. The Company competes directly with
providers of profiling technology, such as Personify, and indirectly with
applications that include more limited profiling capability integrated into
their solutions, such as BroadVision and Vignette. The primary competitors to
the Company's advertising management software are systems provided by
NetGravity, a subsidiary of DoubleClick, and Real Media. In the outsourced ad
serving market, the Company competes with providers of ad serving services,
including AdForce, which CMGI acquired in January 2000, and DoubleClick. In the
advertising sales market, the Company's primary competitors are DoubleClick and
24/7 Media. The Company's traffic measurement and analysis services and software
compete with software offered by Accrue, Andromedia, net.Genesis and WebTrends,
and the Company's audit services compete with ABC Interactive, BPA and
PricewaterhouseCoopers. The Company also encounters competition from a number of
other sources, including content aggregation companies, companies operating
advertising sales networks, advertising agencies and other companies that
facilitate Internet advertising and electronic commerce.

Many of the Company's existing competitors, as well as a number of
potential new competitors, have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than the Company. Such competitors may also
engage in more extensive research and development, undertake more far-reaching
marketing campaigns, adopt more aggressive pricing policies and make more
attractive offers to existing and potential employees, strategic partners,
advertisers and Web publishers. The Company's competitors may develop products
or services that are equal or superior to the Company's solutions or that
achieve greater market acceptance than the Company's solutions. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share. The Company may not be able to compete successfully or competitive
pressures may materially and adversely affect the Company's business, financial
condition and results of operations.

Companies doing business on the Internet, including the Company, must also
compete with television, radio, cable and print media for a share of
advertisers' total advertising budgets.

The Company's systems may fail or experience slowdowns and the Company could
lose key data used in its user profiles

Substantially all of the Company's communications hardware and other data
center operations are located at NaviSite's facilities in Andover,
Massachusetts. Fire, floods, earthquakes, power loss, telecommunications
failures, break-ins and similar events could damage these systems, including
loss of data used to create the Company's user profiles. The Company's business,
financial condition and results of

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operations could be materially and adversely affected if its systems were
affected by any of these occurrences or if any data used in its Engage Knowledge
database were lost. The Company's insurance policies may not adequately
compensate the Company for any losses that may occur due to any failures or
interruptions in the Company's systems or loss of data.

The Company may need additional financing which could be difficult to obtain

The Company intends to grow its business rapidly and expects to incur
significant operating losses for the foreseeable future. Therefore, the Company
may require significant external financing in the future. Obtaining additional
financing will be subject to a number of factors, including:

- market conditions;

- the Company's operating performance; and

- investor sentiment, particularly for Internet-related companies.

These factors may make the timing, amount, terms and conditions of
additional financing unattractive for the Company. If the Company is unable to
raise capital to fund its growth, its business, financial condition and results
of operations would be materially and adversely affected.

Technological change may render the Company's products and services obsolete

The Internet market is characterized by rapidly changing technology,
evolving industry standards, frequent new product announcements and enhancements
and changing customer demands. The introduction of new products and services
embodying new technologies and the emergence of new industry standards can
render existing products and services obsolete. The Company's success depends on
its ability to adapt to rapidly changing technologies and to improve the
performance, features and reliability of its services and products in response
to changing customer and industry demands. Furthermore, the Company may
experience difficulties that could delay or prevent the successful design,
development, testing, introduction or marketing of services. New services or
enhancements to existing services may not adequately meet the requirements of
the Company's current and prospective customers or achieve any degree of
significant market acceptance.

The Company faces risks associated with its international operations and plans
for expansion

The Company has operations in a number of international markets. The
Company intends to continue to expand the Company's international operations and
international sales and marketing efforts. To date, the Company has limited
experience in developing localized versions of its solutions and in marketing,
selling and distributing its solutions internationally. The Company has
established direct sales offices in the United Kingdom, Australia and Germany
and a joint venture with Sumitomo to conduct operations in Japan. The Company
intends to enter other international markets primarily by partnering with
locally based third parties, including entering into joint ventures and
distribution arrangements. The Company's success in such markets is directly
dependent on the success of its business partners and their dedication of
sufficient resources to the relationship.

International operations are subject to other inherent risks, including:

- compliance with the laws and regulations of different countries;

- difficulties in enforcing contractual obligations and intellectual
property rights in some countries;

- difficulties and costs of staffing and managing foreign operations; and

- fluctuations in currency exchange rates.

These risks may materially and adversely affect the Company's business,
results of operations and financial condition.

The Company may not be successful in acquiring and integrating new
technologies or businesses

The Company has acquired three companies, has signed a definitive agreement
to acquire Adsmart and Flycast, and intends in the future to continue to acquire
or make investments in complementary businesses, products, services or
technologies. The Company may not be successful in integrating and managing the

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operations of the businesses it has acquired or may acquire and, accordingly may
not realize the expected benefits therefrom. The Company could have difficulty
in assimilating acquired products, services or technologies into its operations.
These difficulties could disrupt the Company's ongoing business, distract the
Company's management and employees, increase the Company's expenses and
adversely affect the Company's results of operations. If the Company does not
successfully integrate any acquired business or if the benefits of any
acquisition do not meet the expectations of financial or industry analysts, the
market price of the Company's Common Stock may decline. The Company cannot
assure you that it will be able to identify additional acquisition or investment
candidates. Even if the Company does identify suitable candidates, the Company
cannot assure you that it will be able to make such acquisitions or investments
on commercially acceptable terms. Furthermore, the Company may incur debt or
issue equity securities to pay for any future acquisitions. The issuance of
equity securities could be dilutive to the Company's existing stockholders.

The Company depends on the continued viability of the Internet infrastructure

The Company's success depends upon the development and maintenance of a
viable Internet infrastructure. The current Internet infrastructure may be
unable to support an increased number of users. The timely development of
products such as high-speed modems and communications equipment will be
necessary to continue reliable Web access. Furthermore, the Web has experienced
outages and delays as a result of damage to portions of its infrastructure. Such
outages and delays, including those resulting from Year 2000 problems, could
adversely affect Web sites and the level of traffic on the Company's customers'
sites. The effectiveness of the Web may decline due to delays in the development
or adoption of new standards and protocols designed to support increased levels
of activity. If such new infrastructure, standards or protocols are developed,
the Company may be required to incur substantial expenditures to adapt its
products to the new technologies.

The Company's business may suffer if the Company cannot protect its
intellectual property

The Company's success and ability to compete are substantially dependent on
its internally developed technologies and trademarks, which the Company seeks to
protect through a combination of patent, copyright, trade secret and trademark
law. The Company cannot assure that any of its patent applications or trademark
registrations will be approved, or even if approved, would not be successfully
challenged by others or invalidated. In addition, the Company cannot assure that
it will be able to prevent misappropriation of its solutions or technologies,
particularly in foreign countries where laws or law enforcement practices may
not protect its proprietary rights as fully as in the United States.

The Company's profiling technology collects and utilizes data derived from
user activity on its customers' Web sites. This data is used for advertising and
content targeting. Although the Company believes that it has the right to use
such data and the compilation of such data in its database, the Company cannot
assure that any trade secret, copyright or other protection will be available
for such information. In addition, others may claim rights to such information.

The Company's business will suffer if it is unable to retain key personnel

The Company depends on the services of its senior management and key
technical personnel. In particular, the Company's success depends on the
continued efforts of the Company's Chief Executive Officer, Paul L. Schaut; the
Company's Chief Operating Officer, David A. Fish; and the Company's Chief
Technology Officer, Daniel J. Jaye, with whom the Company does not have
employment agreements. The loss of the services of any key employee could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Year 2000 problems may disrupt the Company's business

Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Therefore, the year 2000 will
appear as "00", which the system might consider to be the year 1900 rather than
the year 2000. This could result in system failures, delays or miscalculations
causing disruptions to the Company's operations.

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The failure of any of the Company's systems or systems maintained by third
parties to be Year 2000 compliant could:

- cause the Company to incur significant expenses to remedy any problems;

- affect the availability and performance of the Company's network; or

- otherwise seriously damage the Company's business.

A significant Year 2000-related disruption to the Company's network could
cause the Company's users, advertisers or electronic commerce partners to be
dissatisfied with its network or could impose an unmanageable burden on its
technical support staff. The Company's failure to correct a material Year 2000
problem could have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company will continue to rely on CMGI for various administrative services,
and conflicts of interest could arise in the provision of such services

CMGI and the Company have entered into a facilities and administrative
support agreement under which CMGI will continue to make available space at its
headquarters in Massachusetts and will provide various services to the Company,
including tax and administration, computer and information systems,
telecommunications, utilities and employee benefits administration. Under this
agreement, CMGI has agreed to make available to the Company at least 28,000
square feet of space at its headquarters facilities in Andover, Massachusetts,
subject to termination upon at least 12 months' notice by CMGI. The fees payable
by the Company for the availability of space and other services are generally
determined through an allocation of CMGI's costs based upon the proportion of
the Company's employee headcount to the total headcount of CMGI and other
CMGI-affliated companies located in the same facility or using the same
services. The Company has not independently determined the market value for
these services and may be paying more than fair market value for them if this
allocation method does not fairly reflect the Company's use of these services or
if CMGI were obtaining them at rates greater than their fair market value. This
agreement may be amended by agreement of CMGI and the Company. It is possible
that personnel of CMGI providing these services may encounter conflicts of
interests such as demands on their time by CMGI that might detract from their
level of availability or service to the Company. In addition, the Company's
reliance on these services could result in higher costs than would be incurred
if the Company's were to obtain such services from an unrelated third party.

The Company's stock price is likely to be highly volatile

The price at which the Company's common stock will trade has been and is
likely to continue to be highly volatile and may fluctuate substantially due to
a number of factors, including:

- actual or anticipated fluctuations in the Company's results of
operations;

- changes in or the Company's failure to meet securities analysts'
expectations;

- technological innovations;

- increased competition;

- conditions and trends in the Internet and other technology industries;
and

- general market conditions.

In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
securities of technology companies, particularly Internet companies. These broad
market fluctuations may result in a material decline in the market price of the
Company's common stock, regardless of its operating performance. In the past,
following periods of volatility in the market price of a particular company's
securities, securities class action litigation has often been brought against
that company. The Company may become involved in this type of litigation in the
future. Litigation is often expensive and diverts management's attention and
resources, which could have a material adverse effect upon the Company's
business, financial condition and results of operations.

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DESCRIPTION OF ADSMART

BUSINESS

Overview

Adsmart Corporation is a leading provider of full-service online
advertising solutions. Adsmart is dedicated to providing advertisers and Web
publishers with targeted, brand name Web sites in sought after Internet audience
categories. The Adsmart Network is an on-line advertising network comprised of
over 400 Web sites totaling over three billion monthly impressions. Adsmart
provides advertisers with premium Web sites while generating a profitable
advertising revenue stream for Web publishers.

Adsmart's objective is to take the traditional proven methods of
advertising, such as leveraging the power of a brand, and apply these methods
directly to the interactive medium. Adsmart believes that premium brands can
command higher cost per thousand ads, or CPMs, and Adsmart has built a network
of high quality, brand name sites for selling successful advertising campaigns.
Adsmart's knowledge of media and its focus on the importance of the brand
enables Adsmart to offer targeted, customized advertising campaigns that are
designed to reach the right buyers on the top branded Web sites.

In March 1999, CMGI acquired 2Can Media, Inc., an on-line internet
advertising representation firm and immediately merged it with Adsmart. The
acquisition was made to further increase both the size and quality of the
Adsmart Network through the addition of more brand name Web sites.

Products and Services

Adsmart Network

Adsmart has created key divisions and targeted categories designed to match
the way that advertisers buy media. Adsmart's key divisions include Women,
Sports, Business/Finance, Technology, Travel, Automotive, 18-34 and its Hispanic
division, NetFuerza. Adsmart's top branded Web sites, including Fast Company,
U.S. News Online and WWF are represented in these key divisions. These divisions
provide advertisers a broad, highly popular set of Web sites from which to
choose. Pricing is in accordance with the Web site's current rate card or by
agreement with the Web site directly.

Adsmart organizes and sells a certain amount of its network ad inventory
through its Targeted Audience Group (TAG) program. Through extensive research,
Adsmart's media consultants examine how media buyers prefer to evaluate and
purchase audiences and establish targeted audience groups that allow marketers
to make specific, audience-based media buys. As of January 31, 2000 there were
25 TAGs, including adventure sports enthusiasts, business travelers, home
owners/home buyers, and moms. Adsmart analyzes and audits the audiences of
hundreds of Web sites and groups them with the categories according to
demographics and lifestyles.

In addition, all of the sites in its network are represented in Adsmart's
media plus division. This division offers advertising placement across the
entire Adsmart Network without specificity regarding individual Web sites. This
division provides advertisers the demographics of a broad, general Internet
audience for their online media advertisements.

While advertisers benefit from these categories that directly meet their
buying demands, advertisers are also able to make site specific media purchases,
taking advantage of the premium brand names in the Adsmart Network and unique
sponsorship campaigns, such as interactive games, microsites, contests and
sponsorship of key events, developed by the Adsmart sales team. By structuring
the network in this fashion, Adsmart is leveraging the benefits of a
site-specific model while aggregating its brands into leading
advertiser-specified targets.

Consulting

The Adsmart consulting group provides a complimentary service to Web sites
within the Adsmart Network to help maximize page impressions and improve the Web
sites' commercial viability. These Adsmart

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executives work one-on-one with the Web site to offer personalized strategic
counseling on Web site development and appearance. Consultants provide Web sites
advice on increasing page impressions and use of a Web site, and advice on
establishing additional revenue opportunities. In addition, the Adsmart
consulting group provides detailed research on the Web sites' competitive
landscape and offers suggestions on making individual Web sites more
advertiser-friendly.

International

Adsmart's NetFuerza, an Hispanic online advertising network with over 60
sites and 50 million monthly impressions, NetFuerza represents the most
significant part of Adsmart's international outreach. Adsmart has also formed
strategic alliances with advertising networks in Canada, Europe and Asia. These
alliances enable Adsmart to sell advertisements on networks in these countries.
In turn, these networks have the ability to place advertisements on Adsmart's
network.

Business-to-Business

Adsmart offers marketers in the business to business e-commerce market the
opportunity to advertise by vertical audience groups. This approach enables
marketers to reach specific industry audiences, such as agriculture,
hospitality, information technology, legal and small business services. Adsmart
also offers marketers the ability to reach a qualified general business audience
by running campaigns across the business to business network. This network also
enable marketers to run banner and text advertisements across multiple email
newsletters with a single media buy.

Sales, Marketing and Customer Service

Adsmart sells its products and services primarily through its direct sales
force. These employees are located at Adsmart's headquarters in Andover,
Massachusetts and in New York, Chicago, Detroit, San Francisco and Los Angeles.
To support its direct sales force, Adsmart has established an interactive
marketing team as well as a business development team to help increase the
services provided by Adsmart.

The interactive marketing team brings together Adsmart's most seasoned
sales group to focus on the top revenue-generating accounts in the network. This
team will enable Adsmart to grow its business network-wide by assisting
advertisers in the planning and design of their Web advertising campaigns. The
business development team focuses its efforts on recruiting Web sites to join
the Adsmart Network and maintaining Web site relationships.

To promote the Adsmart brand, Adsmart markets its products and services to
clients through direct marketing, print advertising, online advertising, trade
show participation and other media events. Adsmart also markets its products and
services on its Web site. In addition, Adsmart actively pursues a public
relations program to promote the Adsmart brand and Adsmart's product offerings
to potential advertising buyers and to potential members of the Adsmart Network.
Adsmart's 10 largest customers accounted for 24.6% of its revenue for the six
months ended January 31, 2000. No single customer accounted for more than 10% of
Adsmart's revenue for the six months ended January 31, 2000.

Competition

The Internet advertising market is intensively competitive. Adsmart expects
this competition to continue to increase as there are no substantial barriers to
entry. Competition may also increase as a result of industry consolidation.
Adsmart competes primarily on the basis of its network quality and its customer
service and support efforts.

Adsmart competes for online advertising revenues with large Web publishers
and Web portals. In addition, Adsmart competes with traditional advertising
media such as print, television and radio for a portion of advertisers' total
advertising budgets. Adsmart also competes with advertising networks such as
24/7Media and DoubleClick.

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Several companies offer competitive products or services through Web
advertising networks. Adsmart's business may also compete with a greater number
of Web sites that begin to sell inventory using their own internal sales force.

Employees

As of March 1, 2000, Adsmart had 123 employees, including 76 in sales, 12
in marketing and 35 in general and administrative functions. Adsmart believes
that its continued success is dependent on attracting and retaining highly
skilled employees.

None of Adsmart's employees is subject to collective bargaining agreement.
Adsmart believes that its relationship with its employees is good.

Adsmart's principal executive offices are located in Andover, Massachusetts
consisting of approximately 15,000 square feet of office space leased to Adsmart
by CMGI.

Legal Proceedings

Adsmart is not a party to any material legal proceedings.

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

Some of the statements contained in this section are forward-looking and
include statements about Adsmart's plans, objectives, expectations and
intentions that are not historical facts. When used in this document, the words
expects, anticipates, intends, plans, believes, seeks and estimates and similar
expressions are generally intended to identify forward-looking statements. You
should not place undue reliance on these forward-looking statements, which apply
only as of the date of this document. These forward-looking statements involve
risks and uncertainties, and there are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements.

References to fiscal 1997, fiscal 1998 and fiscal 1999 mean the fiscal
years ended July 31, 1997, 1998 and 1999, respectively.

Overview

Adsmart is a leading provider of comprehensive online advertising solutions
for advertisers and Web publishers. Adsmart was incorporated as a wholly-owned
subsidiary of CMGI. Adsmart has grown from eight employees as of August 1996 to
123 employees as of March 1, 2000.

Adsmart was founded to develop and market technology for Internet
advertising. From inception through July 1997, Adsmart was a development stage
company devoting a majority of its resources to conducting research and
development. Beginning in August 1997, Adsmart changed its focus and began to
concentrate on the sale of advertising on Adsmart Network Web sites and on
advertising management services provided to Web sites. Substantially all of
Adsmart's revenue to date has been derived from online advertising sales within
the Adsmart Network. In addition, Adsmart expects that it will continue to
derive substantially all of its revenue from online advertising sales for the
forseeable future. Adsmart offers advertising on the Adsmart Network to third
party advertisers with pricing generally determined on a CPM basis.

Revenue from the Adsmart Network is received from the advertiser that
orders the advertisement. Adsmart typically pays the Web publisher (on whose Web
site such advertisement is delivered) a service fee. Pricing of advertising is
CPM-based and varies depending on whether the advertising is run across the
network, across certain categories or on individual web sites. Advertisements
are typically sold pursuant to short-term agreements that are subject to
cancellation.

Adsmart also sells sponsorships advertising, which involves a greater
degree of integration among Adsmart, the advertiser and the Web sites on the
Adsmart Network. Sponsorship advertising is typically priced based on the length
of time that the sponsorship advertisement runs, rather than on a CPM basis.
Advertising revenue is recognized in the period that advertisements are
delivered and collectibility is probable.

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Sponsorship revenue is recognized ratably over the sponsorship term, typically
three to six months. Adsmart pays each Web site in the Adsmart Network a
percentage of the revenue generated by advertisements run on its Web site. The
amount paid to the Web site is included in cost of revenues. Generally, Adsmart
bills and collects for advertisements delivered on the Adsmart Network and
assumes the risk of non-payment from advertisers.

Adsmart expects the Adsmart Network will continue to account for a
substantial portion of Adsmart's revenues for the foreseeable future. Adsmart's
ten largest customers accounted for 26.4% and 24.6% of revenue for fiscal 1999
and the six months ended January 31, 2000, respectively. No single advertiser
accounted for more than 10% or revenue for fiscal 1999 or the six months ended
January 31, 2000.

In March 1999, CMGI acquired 2Can Media, Inc. ("2Can"), an online internet
advertising representation firm, in exchange for 6.5% convertible promissory
notes. In March 1999, 2Can Media was merged with Adsmart in exchange for $28.5
million of convertible debt to CMGI which is convertible into 6.85 million
shares of Adsmart's Series B convertible preferred stock at the option of CMGI.
Adsmart has reflected the acquisition of 2Can Media in its consolidated
financial statements using the purchase method of accounting. The total purchase
price of 2Can of $28.5 million, included bridge notes receivable of $1.5
million.

Adsmart has incurred significant losses since inception and, as of January
31, 2000, had an accumulated deficit of $40.6 million.

Due to the limited operating history of Adsmart and the constantly changing
nature of its business, Adsmart believes that period-to-period comparisons of
its operating results are not meaningful and should not be relied upon as an
indication of future performance. Adsmart plans to significantly increase its
operating expenses to increase its sales and marketing operations, to continue
to add quality sites to the Adsmart Network and to expand internationally. As a
result of these factors, Adsmart expects to continue to incur significant losses
on a quarterly and annual basis.

Results of Operations

Comparison of the Six Months Ended January 31, 1999 Compared to the Six Months
Ended January 31, 2000

Revenue

Adsmart's revenue is derived primarily from the delivery of advertisements
on the Web sites of Web publishers on the Adsmart Network. Revenue increased
from $866,000 for the six months ended January 31, 1999 to $27.6 million for the
six months ended January 31, 2000. This increase was primarily due to an
increase in the number of advertisers purchasing advertisements on the Adsmart
Network and to the acquisition of 2Can on March 11, 1999.

Cost of Revenue

Cost of revenue consists primarily of amounts Adsmart pays to Web
publishers that are part of the Adsmart Network for advertisements delivered to
their Web sites. The amount paid to the Web sites represents a percentage of the
revenue generated by delivering advertisements. Cost of revenue also includes
amounts paid to third parties for advertisement delivery services. Cost of
revenue was $1.3 million for the six months ended July 31, 1999 and $25.9
million for the six months ended July 31, 2000. The increase in the cost of
revenue was due to the related growth in advertising revenue and associated
amounts paid to Web sites and an increase in expenses from third party
advertisement delivery services.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, travel, advertising, trade show and marketing material
expenses. Sales and marketing expenses increased from $994,000 for the six
months ended January 31, 1999 to $9.7 million for the six months ended January
31, 2000. The increase was due primarily to the increase in sales personnel,
commissions associated with the increase in revenue and costs related to the
acquisition of 2Can. The increase also resulted from continued

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development and implementation of Adsmart's marketing and branding campaigns.
Adsmart expects sales and marketing expenses to increase in future periods as a
result of hiring of additional personnel to expand into new markets and to
continue to promote the Adsmart brand and advertising solutions.

General and Administrative. General and administrative expenses consist
primarily of compensation and professional service fees and related supplies and
materials. General and administrative expenses increased from $156,000 for the
six months ended January 31, 1999 to $2.1 million for the six months ended
January 31, 2000. The increase was primarily due to increased compensation and
supplies and materials as a result of the increased headcount from the
acquisition of 2Can. Adsmart expects general and administrative expenses to
increase in future periods as it incurs additional costs related to the growth
of its business and operations, including the hiring of additional personnel,
but to decrease as a percentage of revenue.

Interest Expense. Interest expense consists of interest payable on debt to
CMGI. Interest expense increased from $192,000 for the six months ended January
31, 1999 to $830,000 for the six months ended January 31, 2000, as a result of
an increase in outstanding debt. Adsmart had no interest income for the six
months ended January 31, 1999 and 2000.

Comparison of Fiscal Years Ended July 31, 1997, 1998 and 1999.

Revenue

Adsmart's revenue increased from $15,000 in fiscal 1997 to $354,000 in
fiscal 1998 and $11.1 million in fiscal 1999. The increase in revenue from
fiscal 1997 to fiscal 1998 resulted primarily from an increase in the number of
advertisers purchasing advertisements on the Adsmart Network. The increase in
revenue from fiscal 1998 to fiscal 1999 was primarily due to an increase in
online advertising sales resulting from the acquisition of 2Can in March 1999,
and was also due to an increase in the number of advertisers purchasing
advertisements on the Adsmart Network.

Cost of Revenue

Cost of revenue increased from $939,000 in fiscal 1997 to $2.5 million in
fiscal 1998 and $14.8 million in fiscal 1999. Cost of revenue exceeded revenue
in all periods mainly due to the impact of guaranteed CPM rates negotiated with
certain Web sites. As CPM rates being paid by advertisers increase, cost of
revenue will continue to decrease as the effect of the guaranteed CPM rates
becomes minimal. In 1999, Adsmart both acquired and entered into certain
contracts with Web sites in which it has guaranteed that the Web site's
inventory will be sold for a minimum CPM. To the extent Adsmart cannot sell the
related inventory or cannot sell such inventory for an amount greater than the
minimum guarantee, Adsmart incurs a loss under the contract. During 1999,
Adsmart accrued $3.0 million for possible losses related to such contracts.
Approximately $1.1 million of the accrual related to contracts acquired from
2Can while approximately $1.9 million of the accrual related to contracts
entered into by Adsmart during 1999 and was included in cost of revenue.

Operating Expenses

Sales and Marketing. Sales and marketing expenses increased from $1.7
million in fiscal 1997 to $2.3 million in fiscal 1998 and $6.6 million in fiscal
1999. The increases in each period resulted from of significant growth in
Adsmart's sales force during these periods, as well as increased advertising and
marketing expenditures incurred to promote the Adsmart brand and the Adsmart
Network.

Research and Development. Research and development expenses include
contract consulting fees, salaries and associated operating expenses for
in-house research and development activities. Research and development expenses
decreased from $1.4 million in fiscal 1997 to $961,000 in fiscal 1998. The
decrease in fiscal 1998 was due to the decision by management to move away from
developing advertising delivery technology and begin to concentrate on the sale
of online advertising solutions. In fiscal 1999, research and development
expenses were $0 as Adsmart ceased all development of advertising delivery
technology.

General and Administrative. General and administrative expenses increased
from $658,000 in fiscal 1997 to $1.1 million in fiscal 1998 and $1.1 million in
fiscal 1999. The increase resulted from increased payroll and related costs, as
well as increases in facilities costs required to support growing operations.

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Additionally, in January 1998, Adsmart made the decision to no longer
pursue the development of certain advertising technology. As a result of this
decision, certain equipment became idle. Adsmart accrued approximately $626,000
in July 1998 related to the present value of the future minimum lease payments,
less any amounts recoverable from the sale of the equipment, under these leases.
Adsmart also recorded a write-down of fixed assets of approximately $338,000
during fiscal 1998 related to the idle equipment owned by Adsmart.

Amortization of Goodwill

Adsmart recorded approximately $34.5 million of goodwill related to the
purchase of 2Can and is amortizing this goodwill on a straight-line basis over
five years. Amortization of goodwill resulting from the acquisition of 2Can was
$2.6 million for the period from March 11, 1999 through July 31, 1999, and $3.5
million for the six months ended January 31, 2000.

Interest Expense. Interest expense increased from $0 in fiscal 1997 to
$95,000 in fiscal 1998 and $575,000 in fiscal 1999. In the second half of fiscal
1998, Adsmart entered into an arrangement with CMGI, which requires Adsmart to
accrue interest on intercompany debt at a rate of 7% per annum. Adsmart had no
interest income in fiscal 1998 and fiscal 1999.

Liquidity and Capital Resources

Since inception, Adsmart's operations have been funded by CMGI.

Net cash used in operating activities amounted to $4.0 million, $5.8
million, $10.7 million and $21.6 million for fiscal 1997, 1998, 1999 and the
six-month period ended January 31, 2000, respectively. The increase in cash used
in operations has primarily resulted from increases in net operating losses and
accounts receivable and accounts payable (including related parties), which are
partially offset by non-cash depreciation and amortization charges included in
the applicable net loss and increases in the accounts payable and accrued
expenses.

Net cash used in investing activities amounted to $364,000, $186,000 and
$80,000 during fiscal 1997 and 1998 and the six-month period ended January 31,
2000, respectively. In 1998, the Company had cash provided from investing
activities of $313,000 due principally to the net cash acquired from
acquisitions. Cash used in investing activities was primarily related to
purchases of property and equipment required to support the growth of the
business.

Net cash provided by financing activities amounted to $4.4 million, $6.0
million, $10.3 million, and $21.7 million for fiscal 1997, 1998, 1999 and the
six-month period ended January 31, 2000, respectively. Cash provided for
financing activities included funds advanced from CMGI to fund Admart's
operations.

CMGI has historically funded Adsmart's operations as needed. Customer and
other receipts have been remitted to CMGI and have been applied to reduce
Adsmart's obligations to CMGI. Adsmart has issued a secured convertible demand
note to CMGI in exchange for the cancellation of all outstanding intercompany
debt incurred by it to CMGI prior to February 1, 1998. Intercompany debt accrues
interest at a rate of 7% per year, compounded monthly.

Adsmart has experienced a substantial increase in its expenditures since
inception consistent with its growth in operations and staffing. Adsmart
anticipates that expenditures will continue to increase for at least three years
as it accelerates the growth of its business. Additionally, Adsmart will
continue to evaluate investment opportunities in businesses that management
believes will complement its market strategies.

Year 2000 Compliance

Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21(st) century dates from
20(th) century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with these "Year 2000"
requirements or risk system failure or miscalculations causing disruptions of
normal business activities. Adsmart has not experienced any material Year 2000
problems or disruptions.

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State of Readiness

Adsmart completed its assessment of the Year 2000 readiness of its
operating, financial and administrative systems, including the hardware and
software that support Adsmart's systems.

Costs

At January 31, 2000, Adsmart has spent approximately $200,000 on Year 2000
compliance issues and does not expect to incur any significant additional
expenses in connection with identifying, evaluating and addressing any future
Year 2000 compliance issues. Most of Adsmart's expenses were related to the
operating costs associated with time spent by employees in the evaluation
process and Year 2000 compliance matters and the costs to replace non-compliant
equipment.

Risks

Adsmart is not currently aware of any Year 2000 compliance problems
relating to its systems that would have a material adverse effect on its
business, financial condition and results of operations, without taking into
account Adsmart's efforts to avoid or fix such problems. There can be no
assurance that Adsmart will not discover Year 2000 compliance problems in its
systems that will require substantial revision. In addition, there can be no
assurance that third-party software, hardware or services incorporated into
Adsmart's material systems will not need to be revised or replaced, all of which
could be time-consuming and expensive. The failure of Adsmart to fix or replace
its internally developed proprietary software or third-party software, hardware
or services on a timely basis could result in lost revenue, increased operating
costs, the loss of customers and other business interruptions, any of which
could have a material adverse effect on Adsmart's business, financial condition
and results of operations.

Adsmart is heavily dependent on AdForce, a major third party vendor and
affiliate, to provide outsourced ad serving services. A significant Year 2000
related disruption of the outsourced ad serving services that AdForce provides
to Adsmart could cause customers to consider canceling services with Adsmart
which in turn could materially and adversely affect Adsmart's business,
financial condition and results of operations.

To date, Adsmart has not experienced any significant Year 2000 disruptions
and estimated Year 2000 expenses approximated the actual costs incurred. Adsmart
does not expect to incur significant additional expenses related to the Year
2000 issue. Adsmart continues to monitor its systems for Year 2000 issues but is
not currently aware of any material Year 2000 problems.

Recent Accounting Principles

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC"), issued Statement of
Position 98-1, "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires the capitalization of
certain internal costs related to the implementation of computer software
obtained for internal use. Adsmart adopted this standard in August 1999, and the
adoption of SOP 98-1 did not have a material impact on its financial position or
its results of operations.

In April 1998, the AcSEC issued Statement of Position 98-5, "Reporting
Costs of Start-Up Activities" ("SOP 98-5"). Under SOP 98-5, the cost of start-up
activities should be expensed as incurred. Start-up activities are broadly
defined as those 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, commencing some new operation
or organizing a new entity. Adsmart adopted SOP 98-5 in August 1999. The
adoption of SOP 98-5 did not have a material impact on its financial position or
results of operations.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition in Financial
Statements. SAB No. 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. Management believes that the Company has complied with the
provisions of SAB No. 101.

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DESCRIPTION OF FLYCAST

BUSINESS

Overview

Flycast Communications Corporation is a leading provider of Web-based
direct response advertising solutions to advertisers. Flycast works closely with
advertisers to maximize the value of their advertising campaigns on the Web.
Flycast's advertiser customers are primarily companies selling goods and
services over the Internet, direct marketing agencies, or other advertisers who
are interested in driving the Web user towards specific actions. Those actions
include clicking on advertisements, registering their names or other
information, or buying products. Flycast offers its customers direct response
solutions that include widespread placement of advertisements over the Web,
prices that minimize their cost per action and continuous improvement and
optimization of their advertising campaign through the application of technology
and through the services of its trained staff.

The Flycast Network

Flycast delivers Web-based advertising solutions designed to maximize the
return on investment ("ROI") for response-oriented advertisers, direct marketers
and e-commerce companies. Flycast provides these solutions through a large
network of Web sites, proprietary technology and responsive customer service. By
combining unsold advertising inventory from the over 3,000 Web sites comprising
the Flycast Network, Flycast offers advertisers a large audience of Web users
and high-quality advertising space at favorable prices. These Web sites include
both small Web sites and large, premium Web sites. Additionally, by selling
advertising space on an unnamed basis, Flycast creates a supplemental and
incremental revenue opportunity for Web sites that does not conflict with their
other sales efforts, including large, premium Web sites with direct sales
forces. Flycast's AdExchange (AdEx) system, a proprietary automated advertising
management platform, analyzes response rates across the network. Flycast's
customer service staff translates real-time feedback regarding advertising
effectiveness into further optimization for the advertiser.

Products and Services

The Flycast Network. The Flycast Network offers a comprehensive system for
planning, buying, selling, managing, evaluating and administering Web
advertising. To fulfill the needs of response-oriented advertisers, the Flycast
Network aggregates advertising inventory from Web sites that meet minimum size
and quality requirements. Many small and medium-size Web sites that are unable
to support their own sales forces list all of their inventory with Flycast.
Other Web sites that maintain either a direct or outsourced sales force, but
that are unable to sell all of their inventory, list the unsold portion on the
Flycast Network. When a Web site joins the Flycast Network, Flycast makes no
guarantees with respect to revenue, cost per thousand or impressions sold. Web
sites are free to leave the Flycast Network at any time. Flycast pays each Web
site on the Flycast Network a percentage of the revenue generated by delivering
advertisements on their Web sites. The Flycast Network currently consists of
over 3,000 Web sites.

Flycast designed its AdEx technology platform to deliver ROI-oriented
advertising solutions to advertisers. AdEx receives orders from advertisers and
matches them with the appropriate advertising space available on the Flycast
Network. Each time a Web user visits a Flycast Network Web site, a signal is
sent to the AdEx system. This signal contains information on the type of
advertising space represented. The system then selects the appropriate
advertisement and serves it to the Web site, concluding a process that typically
takes less than one second.

Through comprehensive performance reports generated by AdEx, advertisers
can track the progress of their advertising campaigns via online reports. In
addition, Flycast's media consultants monitor the progress of each advertising
campaign relative to the performance goals set by the advertiser.

Advertising space on the Flycast Network is sold directly to advertisers
and agencies as one of four media products: Run of Network, Run of Category,
Category Select or Site Select. Flycast sales representatives work

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with advertisers to select the appropriate media product based on the
advertisers' requirements for the amount and timing of impressions, and desired
response rates. The following is a more detailed description of the four media
products.

Run of Network: Run of Network offers advertising placements across the
entire Flycast Network without specificity regarding individual Web sites. This
product provides the greatest overall reach for advertisers at the lowest-cost
per thousand impressions.

Run of Category: Flycast Network sites are categorized into 25 affinity
categories based on nature of content, such as sports and outdoors,
entertainment, and news and information. Run of Category allows the advertiser
to select one or more specific content types within which to run its
advertising, at a higher cost than Run of Network, but without specificity
regarding individual Web sites.

Category Select: Category Select allows an advertiser to define a set of
Websites as a unique category in which its advertising is to be run, without
allocating a specific number of impressions to individual Web sites. Flycast's
rates for Category Select vary based on the number of Web sites and impressions.

Site Select: Flycast offers advertisers the ability to allocate the number
of impressions on specifically designated individual Web sites. Pricing is in
accordance with the Web site's current rate card, or by agreement with the Web
site directly. Flycast does not discount the named individual Web site's
advertising space or sell at rates that conflict with those published by the Web
site.

Substantially all advertisers purchase the Run of Network media product.
Actual base rates for each media product may vary depending on the length of
contract and number of impressions purchased. In addition to the base rates
charged for each media product, Flycast charges, on a cost per thousand basis,
for special targeting or advertising format requirements.

Flycast Local Market/Value Added Reseller Division

In addition to direct sales of advertising space, Flycast also packages and
sells impressions on a wholesale basis to value added resellers. To develop this
channel, Flycast recently initiated relationships with BellSouth Corporation,
SBC Communications Inc., US WEST, R.H. Donnelley and British Telecom. Under
these agreements, Flycast will deliver local Web advertising inventory to the
BellSouth, SBC, US WEST, R.H. Donnelley and British Telecom sales forces for
resale to local advertisers.

Flycast has also developed a suite of tools and services to support value
added resellers with a turnkey offering. In addition to supplying geo-targeted
advertising inventory for resale in accordance with the value added reseller's
specifications, Flycast supplies customized, co-branded applications,
performance reporting, billing services and training and sales support.

eDispatch

Flycast eDispatch is a suite of email marketing products and services
designed to provide customer acquisition, list management and customer retention
programs. In August 1999, Flycast announced the commercial launch of its first
eDispatch service, the Flycast eDispatch Newsletter Network, which provides an
open, broad-reaching opportunity for online marketers to leverage the
advertising power of email newsletters. The Newsletter Network provides a
one-stop option for advertisers to run banner and text advertisements across
multiple newsletters with a single media buy. Flycast works with all publishers,
regardless of their email platform, to provide open access to the Newsletter
Network.

CPCNet

In December 1999, Flycast introduced Flycast CPCnet, a new cost-per-click
advertising network. Flycast CPCnet meets the needs of both advertisers and
publishers who prefer to operate within a pay-for-performance environment. For
advertisers, who are interested in cost-per-click campaigns as part of their
online media strategy, Flycast CPCnet provides an entirely new vehicle for
online direct marketing. For

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publishers, Flycast CPCnet allows small web sites to join a web advertising
network, create new revenue streams and reach new advertisers.

Valet

In November 1999, Flycast launched its comprehensive e-commerce offering
called Valet, which is targeted to Web sites in the Flycast Network. Valet
offers sites the ability to link to an online shopping area. Valet enables the
Web sites in the Flycast Network to integrate search capabilities into their
sites, allowing consumers to search the Web for a wide range of information
about products and services made available through Valet.

International

In October 1999, Flycast launched its European operations, which are
designed to meet the growing demand for response based web advertising solutions
in Europe's largest media markets, including Germany, Scandinavia and the United
Kingdom. Flycast opened offices in Germany, Sweden and the United Kingdom to
facilitate Flycast's expansion in key European markets. Initially, Flycast will
offer direct marketers based in Europe the ability to advertise across the
entire Flycast Network, as well as the ability to geo-target on specific
European Web sites only.

Technology and Operations

Flycast's proprietary AdEx technology platform is a complete suite of agent
based solutions that enables real-time advertising delivery and management. The
key applications that utilize the AdEx platform are:

AdAgent, a Java-based client interface that allows buyers to plan, execute
and manage advertising purchases.

AdReporter, a Web-based tool that provides media buyers real-time reports
on their purchases.

ValueTrak, a program that provides e-commerce advertisers the ability to
track viewers beyond a click to a transaction on an e-commerce Web site to
measure viewer responses, including registrations, units downloaded or products
purchased.

SiteRegistry, a tool that allows affiliated Web sites to control the pages
they provide to Flycast and to create instant online information packages about
Flycast and its advertising opportunities that are then made available to
advertisers.

SiteReporter, a tool that allows affiliated Web sites to monitor the
performance of advertising campaigns on their sites and to track the revenue
they have earned through the Flycast Network.

AdEx is designed to be scaleable through a segmented and redundant,
distributed processing architecture. Flycast's modular and open architecture
allows it to interface with third-party ad servers, as well as providers of
proprietary media formats. Separate sub-systems that utilize Oracle databases
support real-time, agent-based tools, including media planning, media buying,
tracking, reporting, auditing and billing. These applications are based on a
three-tiered architecture that allows the rapid development of new applications
and interfaces.

Sales, Marketing and Customer Service

Flycast sells its products and services primarily through its direct sales
force and also sells impressions on a wholesale basis to selected value added
reseller partners. Flycast's direct sales organization, which included 44
salespeople as of March 1, 2000, mainly targets larger advertisers and agencies.
These employees are located at Flycast's headquarters in San Francisco and in 11
states. To support its direct sales force, Flycast has established a media
consulting group as well as a site network services group to help increase the
effectiveness and ease-of-use of Flycast's services. The media consulting
group's goals are to maintain advertiser relationships, achieve optimal
advertising results and maximize current and future media revenue

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streams. The site network services group reviews Web sites that apply to be
included in the Flycast Network, recruits new Web sites, maintains Web site
relationships and provides general Web site technical support.

To support its direct sales efforts and to promote the Flycast brand,
Flycast markets its products and services to clients via direct marketing, print
advertising, online advertising, Flycast's Web site, trade show participation
and other media events. In addition, Flycast actively pursues a public relations
program to promote the Flycast brand and Flycast's products and services to
potential advertising buyers and potential members of the Flycast Network.
Flycast's ten largest customers accounted for 29% of its revenue for the year
ended December 31, 1999. No single customer accounted for more than 10% of
Flycast's revenue for the year ended December 31, 1999.

Competition

The Internet advertising market is intensely competitive. Flycast expects
this competition to continue to increase because there are no substantial
barriers to entry. Competition may also increase as a result of industry
consolidation. Flycast believes that its ability to compete depends upon many
factors both within and beyond its control, including the following:

- the timing and market acceptance of new solutions and enhancements
to its existing solutions developed by Flycast or its competitors;

- customer service and support efforts;

- sales and marketing efforts;

- Flycast's ability, relative to its competitors, to scale its
technology as customer needs grow; and

- the ease of use, performance, price and reliability of solutions
developed by either Flycast or its competitors.

Competition among current and future suppliers of Internet navigational and
informational services, high-traffic Web sites and Internet service providers,
as well as competition with other media for advertising placements, could result
in significant price competition and reductions in advertising revenues.

As Flycast expands the scope of its Web services, it may compete with a
greater number of Web sites and other media companies across a wide range of
different Web services, including in vertical markets where competitors may have
advantages in expertise, brand recognition and other factors. Several companies
offer competitive products or services through Web advertising networks,
including DoubleClick and 24/7 Media. Flycast's business may also encounter
competition from providers of advertising inventory management products and
related services, including NetGravity (now part of DoubleClick). In addition,
Flycast may compete with a number of content aggregation companies, advertising
agencies and other companies that facilitate Web advertising.

Employees

As of March 1, 2000, Flycast had 232 employees, including 137 in sales, 21
in marketing, 50 in research and development and 24 in general and
administrative functions. Flycast is not subject to any collective bargaining
agreements and believes that its employee relations are good.

Legal Proceedings

Flycast is not a party to any material legal proceedings.

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

Some of the statements contained in this section are forward-looking and
include statements about Flycast's plans, objectives, expectations and
intentions that are not historical facts. When used in this document, the words
expects, anticipates, intends, plans, believes, seeks and estimates and similar
expressions are generally intended to identify forward-looking statements. You
should not place undue reliance on these

85
<PAGE> 89

forward-looking statements, which apply only as of the date of this document.
These forward-looking statements involve risks and uncertainties, and there are
important factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements.

References to fiscal 1997, fiscal 1998 and fiscal 1999 mean the fiscal
years ended December 31, 1997, 1998 and 1999, respectively.

Overview

Flycast delivers Web-based advertising solutions designed to maximize the
ROI for response-oriented advertisers, direct marketers and electronic commerce
companies. By combining unsold advertising space from over 3,000 Web sites, the
Flycast Network offers advertisers a large audience of Web users and high-
quality advertising space at favorable prices. Additionally, by selling
advertising space on an unnamed basis, Flycast creates a supplemental revenue
opportunity for Web sites that does not conflict with their other sales efforts.

On May 4, 1999, Flycast completed an initial public offering of 3,000,000
shares of common stock at a price of $25.00 per share. In addition, on June 4,
1999, Flycast sold an additional 200,000 shares under the underwriters'
over-allotment option. The net proceeds of approximately $73.0 million from the
initial public offering were added to Flycast's working capital. Pending use of
the net proceeds, Flycast has invested such funds in short-term, interest
bearing investment grade obligations.

On August 30, 1999, Flycast completed a merger with InterStep, Inc., a
Massachusetts corporation which commenced operations in 1995. Flycast has
accounted for this transaction as a pooling-of-interests and, accordingly, the
consolidated financial statements of Flycast for all periods presented have been
restated to include the accounts of InterStep.

On January 13, 2000, Flycast was acquired by CMGI, Inc. in a
stock-for-stock merger. Under the terms of the agreement, CMGI issued 0.9476
shares of CMGI common stock (after giving effect to the CMGI two-for-one stock
split effected in January 2000) for every Flycast share held on the closing
date.

Flycast commenced operations in April 1996 as a California corporation.
From April 1996 through May 1997, Flycast's operating activities related
primarily to developing its AdEx technology and the Flycast Network, identifying
markets and recruiting personnel.

Revenue from advertisements delivered on the Flycast Network began in the
second quarter of 1997. Flycast generates revenue by delivering advertisements
to Web sites in the Flycast Network. Pricing of advertising is generally based
on cost per advertising impression and varies depending on whether the
advertising is run across the network, across specific categories or on
individual Web sites. Flycast sells its services through its sales and marketing
staff located in San Francisco, Atlanta, Boston, Boulder, Chicago, Dallas
Detroit, Los Angeles, New York, Philadelphia, Sarasota, Seattle and Fairfax,
Virginia. The advertisements Flycast delivers are typically sold under
short-term agreements that are subject to cancellation. Advertising revenue is
recognized in the period that advertisements are delivered. Flycast pays each
Web site in the Flycast Network an agreed upon percentage of the revenue
generated by advertisements run on its site. That amount is included in cost of
revenue. Generally, Flycast bills and collect for advertisements delivered on
the Flycast Network and assumes the risk of non-payment from advertisers.

Flycast expects to generate most of its revenue for the foreseeable future
from advertisements delivered to Web sites on the Flycast Network. Flycast's ten
largest customers accounted for 29% of its revenue for the year ended December
31, 1999. No single customer accounted for more than 10% of Flycast's revenue
and no Web site contributed more than 5% of Flycast's advertising views served,
as measured based on the fees Flycast paid to Web sites, during the year ended
December 31, 1999.

Flycast has entered into value added reseller relationships with BellSouth,
SBC Communications and US WEST. Under these agreements, Flycast will deliver
local Web advertising inventory to BellSouth's, SBC's and US WEST's sales forces
that they, in turn, will offer to local advertisers. To date, these agreements

86
<PAGE> 90

have not accounted for a material percentage of revenue. However, Flycast
anticipates that revenue from these agreements will account for an increasing
percentage of its revenue in the future.

Flycast has incurred significant losses since inception and, as of December
31, 1999, had an accumulated deficit of $39.5 million. In addition, Flycast has
recorded stock-based compensation, which represents the difference between the
exercise price and the fair market value of its common stock issuable upon the
exercise of stock options granted to employees. Stock-based compensation of $1.6
million was amortized during fiscal 1999. Stock-based compensation of $1.3
million will be amortized over the remaining vesting periods of the related
options.

In light of the rapidly evolving nature of Flycast's business and Flycast's
limited operating history, Flycast believes that period-to-period comparisons of
its operating results are not meaningful and that the results for any period
should not be relied upon as an indication of future performance. Flycast
currently expects to increase significantly its operating expenses in order to
expand its sales and marketing operations, including its reseller network, to
enhance its AdEx technology platform and to expand internationally. As a result
of these factors, Flycast expects to incur significant losses on a quarterly and
annual basis for the foreseeable future.

On August 30, 1999, Flycast completed the acquisition of InterStep, Inc. by
issuing 480,337 shares of its common stock for all of the outstanding shares of
InterStep. Of the 480,337 shares of Flycast common stock, 47,558 shares are held
by an escrow agent to serve as security for the indemnity provided by some of
the stockholders of InterStep. The information presented in this document
reflects the combination of Flycast and InterStep using the pooling-of-
interests method of accounting for a business combination.

On September 30, 1999, Flycast announced the signing of a definitive
agreement to be acquired by CMGI (after giving effect to the CMGI two-for-one
stock split effected in January 2000) in a stock-for-stock merger. Under the
terms of the agreement, CMGI would issue 0.9476 CMGI shares for every Flycast
share held on the closing date of the transaction. The transaction closed on
January 13, 2000.

Results of Operations

The following table sets forth statements of operations data for the
periods indicated as a percentage of revenue. This information should be read in
conjunction with Flycast's financial statements and related notes included
elsewhere in this proxy statement:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Revenue..................................................... 100% 100% 100%
Cost of revenue............................................. 64 66 70
Gross profit...................................... 36 34 30
Sales and marketing....................................... 149 56 45
Research and development.................................. 158 32 18
General and administration................................ 86 24 21
Stock-based compensation.................................. -- 13 3
---- --- ---
Total operating expenses.......................... 393 125 87
---- --- ---
Operating loss.............................................. (357) (91) (57)
Interest income (expense), net.............................. (1) (4) 2
---- --- ---
Net loss.................................................... (358)% (95)% (55)%
==== === ===
</TABLE>

Years Ended December 31, 1997, 1998 and 1999

Revenue. For the year ended December 31, 1999 revenues increased to $46.2
million from $9.3 million for the year ended December 31, 1998. For the year
ended December 31, 1997, revenue was $934,000. This increase was primarily due
to an increase in the number of advertisers purchasing advertisements on the
Flycast Network.

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<PAGE> 91

Cost of Revenue. For the year ended December 31, 1999, cost of revenues
increased to $32.1 million from $6.1 million for the year ended December 31,
1998. For the year ended December 31, 1997, cost of revenue were $600,000. The
increase in cost of revenues was due to the related growth in advertising
revenue and associated amounts paid to Web sites, increased expenses from
third-party Internet service providers and increased depreciation expenses.

Sales and Marketing. For the period ended December 31, 1999, sales and
marketing expenses increased to $21.0 million or 45% of revenue from $5.2
million, or 56% of revenue, for the year ended December 31, 1998. For the year
ended December 31, 1997, sales and marketing expenses were $1.4 million, or 149%
of revenue. The increase in absolute dollars was due primarily to the increase
in sales personnel and costs related to the continued development and
implementation of Flycast's marketing campaigns.

Research and Development. For the period ended December 31, 1999, research
and development expenses increased to $8.1 million or 18% of revenue from $3.0
million, or 32% of revenue, for the year ended December 31, 1998. For the year
ended December 31, 1997, research and development expenses were $1.5 million, or
158% of revenue. The increase in absolute dollars was due primarily due to
increased personnel expenses.

General and Administrative. For the period ended December 31, 1999,
general and administrative expenses increased to $9.7 million or 21% of revenue
from $2.2 million, or 24% of revenue, for the year ended December 31, 1998. For
the year ended December 31, 1997, general and administrative expenses were
$807,000, or 86% of revenue. The increase in absolute dollars was mainly due to
additional administrative and overhead expenses consistent with the growth of
the company.

Stock-Based Compensation. Stock-based compensation of $1.6 million and
$1.2 million was amortized during the year ended December 31, 1999 and 1998,
respectively.

Interest Income (Expense), Net. Interest income (expense), net consists of
interest paid on capital lease and debt obligations, offset in part by interest
earnings on Flycast's cash, cash equivalents and investments. Interest expense
was $102,000 in 1997, $510,000 in 1998 and $871,000 in 1999. Interest income was
$95,000 in 1997, $98,000 in 1998 and $1.9 million in 1999.

Income Taxes. No income tax benefits have been recorded for any of the
periods presented. At December 31, 1999, Flycast had approximately $44.2 million
and $22.0 million, respectively of federal and state net operating loss
carryforwards available to offset future taxable income; these carryforwards
begin to expire in 2011 for federal purposes and 2004 for state income tax
purposes. The Company also has federal and state research and development tax
credit carryforwards of $77,000 and $58,000, respectively, which will begin to
expire in 2011. The California research and development credits may be carried
forward indefinitely until utilized. Code Sections 382 and 383 and similar
California rules place a limitation on the amount of taxable income which can be
offset by NOL carryforwards after a change in control (generally greater than
50% change in ownership). Due to these provisions, utilization of the NOL and
tax credit carryforwards may be limited.

Liquidity and Capital Resources

Prior to the acquisition of Flycast by CMGI, Flycast financed its
operations primarily through the private placement of equity and convertible
debt securities, borrowings from a related party and others and its initial
public offering. As of December 31, 1999, Flycast had raised approximately
$100.8 million from the issuance of common and preferred stock. As of December
31, 1999, Flycast had $10.0 million of cash and cash equivalents and $46.2
million in short-term investments and had borrowings of $5.6 million under
credit and capital lease facilities.

Net cash used in operating activities was $3.2 million for the year ended
December 31, 1997, $7.3 million for the year ended December 31, 1998 and $25.9
million for the year ended December 31, 1999. Cash used in operating activities
resulted from net losses and increases in accounts receivable, which were
partially offset by increases in accounts payable and accrued liabilities.

88
<PAGE> 92

Net cash used in investing activities was $569,000 for the year ended
December 31, 1997, $311,000 for the year ended December 31, 1998 and $57.1
million for the year ended December 31, 1999. Cash used in investing activities
was related to purchases of property and equipment and short-term investments
during 1997 and 1998. In 1999, cash used in investing activities was primarily
related to the investment of initial public offering proceeds.

Net cash provided by financing activities was $7.3 million for the year
ended December 31, 1997, $9.2 million for the year ended December 31, 1998 and
$87.6 million for the year ended December 31, 1999. Cash provided by financing
activities, during 1997 and 1998, resulted from sales of preferred stock and the
proceeds from long-term debt. In 1999, cash provided by financing activities
resulted from proceeds from the sale of preferred stock and the sale of common
stock in Flycast's initial public offering.

While Flycast does not have any material commitments for capital
expenditures, Flycast anticipates that it will experience an increase in its
capital expenditures consistent with its anticipated growth in operations,
infrastructure and personnel. Flycast currently anticipates that it will
continue to experience significant growth in its operating expenses for the
foreseeable future and that its operating expenses will be a material use of its
cash resources. Flycast believes that its existing cash, cash equivalents and
short-term investments will be sufficient to meet its anticipated cash needs for
working capital, repayment of debt and capital expenditure for at least the next
twelve months.

OTHER MATTERS

The Board of Directors does not know of any other matters which may come
before the Meeting. However, if any other matters are properly presented to the
Meeting, it is the intention of persons named in the accompanying proxy to vote,
or otherwise act, in accordance with their judgement on such matters.

The Board of Directors hopes that stockholders will attend the Meeting.
Whether or not you plan to attend, you are urged to complete, sign and return
the enclosed proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the Meeting, and your cooperation will be
appreciated. Stockholders who attend the Meeting may vote their shares at the
Meeting even though they have sent in their proxies.

PROPOSALS OF STOCKHOLDERS FOR 2000 ANNUAL MEETING

Any proposal that a stockholder of the Company wishes to be considered for
inclusion in the Company's proxy statement and proxy card for the Company's 2000
Annual Meeting of Stockholders (the "2000 Annual Meeting") must be submitted to
the Secretary of the Company at its offices, 100 Brickstone Square, Andover,
Massachusetts 01810, no later than July 22, 2000. In addition, such proposals
must comply with the requirements of Rule 14a-8 under the Exchange Act.

If a stockholder of the Company wishes to present a proposal before the
2000 Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy card, such stockholder must
also give written notice to the Secretary of the Company at the address noted
above. The Secretary must receive such notice no later than July 22, 2000. If a
stockholder fails to provide timely notice of a proposal to be presented at the
2000 Annual Meeting, the proxies designated by the Board of Directors of the
Company will have discretionary authority to vote on any such proposal.

By order of the Board of Directors,

Michael K. Baker, Secretary
April , 2000

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<PAGE> 93

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ENGAGE TECHNOLOGIES, INC.
Independent Auditors' Report................................ F-4
Consolidated Balance Sheets as of July 31, 1998 and 1999 and
January 31, 2000 (unaudited).............................. F-5
Consolidated Statements of Operations for the three years
ended July 31, 1999 and for the six months ended January
31, 1999 and 2000 (unaudited)............................. F-6
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the three years ended July 31, 1999 and for
the six months ended January 31, 2000 (unaudited)......... F-7
Consolidated Statements of Cash Flows for the three years
ended July 31, 1999 and for the six months ended January
31, 1999 and 2000 (unaudited)............................. F-8
Notes to Consolidated Financial Statements.................. F-9
INTERNET PROFILES CORPORATION
Report of Independent Accountants........................... F-33
Balance Sheets as of December 31, 1997 and 1998 and March
31, 1999 (unaudited)...................................... F-34
Statements of Operations for the years ended December 31,
1997 and 1998 and for the three months ended March 31,
1998 and 1999 (unaudited)................................. F-35
Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1997 and 1998 and for the three months
ended March 31, 1999 (unaudited).......................... F-36
Statements of Cash Flows for the years ended December 31,
1997 and 1998 and for the three months ended March 31,
1998 and 1999 (unaudited)................................. F-37
Notes to Financial Statements............................... F-38
ADKNOWLEDGE INC.
Report of Independent Accountants........................... F-48
Consolidated Balance Sheets as of December 31, 1997 and 1998
and September 30, 1999 (unaudited)........................ F-49
Consolidated Statements of Operations for the period from
July 10, 1996 (date of inception) to December 31, 1996,
the two years ended December 31, 1998 and for the nine
months ended September 30, 1998 and 1999 (unaudited)...... F-50
Consolidated Statements of Shareholders' Equity for period
from July 10, 1996 (date of inception) to December 31,
1996, the two years ended December 31, 1998 and for the
nine months ended September 30, 1999 (unaudited).......... F-51
Consolidated Statements of Cash Flows for the period from
July 10, 1996 (date of inception) to December 31, 1996,
the two years ended December 31, 1998 and for the nine
months ended September 30, 1998 and 1999 (unaudited)...... F-52
Notes to Consolidated Financial Statements.................. F-53
FOCALINK COMMUNICATIONS, INC.
Report of Independent Accountants........................... F-69
Balance Sheet as of December 31, 1997....................... F-70
Statement of Operations for the year ended December 31,
1997...................................................... F-71
Statement of Shareholders' Equity for the year ended
December 31, 1997......................................... F-72
Statement of Cash Flows for the year ended December 31,
1997...................................................... F-73
Notes to Financial Statements............................... F-74
FLYCAST COMMUNICATIONS CORPORATION
Independent Auditors' Report................................ F-80
Consolidated Balance Sheet as of December 31, 1999.......... F-81
</TABLE>

F-1
<PAGE> 94

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Statement of Operations for the year ended
December 31, 1999......................................... F-82
Consolidated Statement of Common Stockholders' Equity
(Deficit)for the year ended December 31, 1999............. F-83
Consolidated Statements of Cash Flows for the year ended
December 31, 1999......................................... F-84
Notes to Consolidated Financial Statements.................. F-85
FLYCAST COMMUNICATIONS CORPORATION
Independent Auditor's Report................................ F-95
Consolidated Balance Sheets as of December 31, 1997 and
1998...................................................... F-96
Consolidated Statements of Operations for the three years
ended December 31, 1998................................... F-97
Consolidated Statements of Common Stockholders' Equity
(Deficit) for the three years ended December 31, 1998..... F-98
Consolidated Statements of Cash Flows for the three years
ended December 31, 1998................................... F-99
Notes to Consolidated Financial Statements.................. F-100
ADSMART CORPORATION
Independent Auditors' Report................................ F-111
Consolidated Balance Sheets as of July 31, 1998 and 1999 and
January 31, 2000.......................................... F-112
Consolidated Statements of Operations for the three years
ended July 31, 1999 and for the six months ended January
31, 1999 (unaudited) and 2000............................. F-113
Consolidated Statements of Stockholders' Deficit for the
three years ended July 31, 1999 and for the six months
ended January 31, 2000.................................... F-114
Consolidated Statements of Cash Flows for the three years
ended July 31, 1999 and for the six months ended January
31, 1999 (unaudited) and 2000............................. F-115
Notes to Consolidated Financial Statements.................. F-116
EISENBERG COMMUNICATIONS GROUP, INC.
Independent Auditors' Report................................ F-129
Balance Sheet as of September 29, 1998...................... F-130
Statement of Operations for the period January 1, 1998
through September 29, 1998................................ F-131
Statement of Stockholders' Deficit for the period January 1,
1998 through September 29, 1998........................... F-132
Statement of Cash Flows for the period January 1, 1998
through September 29, 1998................................ F-133
Notes to Financial Statements............................... F-134
2CAN MEDIA, INC.
Independent Auditors' Report................................ F-139
Balance Sheets as of December 31, 1998 and March 10, 1999... F-140
Statements of Operations for the year ended December 31,
1998 and the period January 1, 1999 through March 10,
1999...................................................... F-141
Statements of Stockholders' Equity for the year ended
December 31, 1998 and the period January 1, 1999 through
March 10, 1999............................................ F-142
Statements of Cash Flows for the year ended December 31,
1998 and the period January 1, 1999 through March 10,
1999...................................................... F-143
Notes to Financial Statements............................... F-144
PRO FORMA FINANCIAL STATEMENTS
Background on completed and pending acquisitions............ F-
Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of January 31, 2000....................................... F-159
Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of January 31, 2000.............................. F-163
</TABLE>

F-2
<PAGE> 95

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended January 31, 2000...... F-164
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the six months ended January
31, 2000.................................................. F-165
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended July 31, 1999............... F-167
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended July 31,
1999...................................................... F-168
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended July 31, 1998............... F-170
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended July 31,
1998...................................................... F-171
Unaudited Pro Forma Condensed Consolidated Statement of
Operations and related Notes for the year ended July 31,
1997...................................................... F-172
</TABLE>

F-3
<PAGE> 96

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Engage Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Engage
Technologies, Inc. and subsidiaries as of July 31, 1998 and 1999, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the years in the three-year period ended July 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Engage
Technologies, Inc. and subsidiaries as of July 31, 1998 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended July 31, 1999, in conformity with generally accepted
accounting principles.

KPMG LLP

September 10, 1999
Boston, Massachusetts

F-4
<PAGE> 97

ENGAGE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
------------------ -----------
1998 1999 2000
------- -------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PAR VALUE)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 96 $112,034 $ 44,010
Available-for-sale securities............................. 567 1,067 44,678
Accounts receivable, less allowance for doubtful accounts
of $360, $986 and $1,621 at July 31, 1998 and 1999 and
January 31, 2000, respectively.......................... 1,824 5,632 12,861
Prepaid expenses.......................................... 230 595 1,978
------- -------- --------
Total current assets................................ 2,717 119,328 103,527
------- -------- --------
Property and equipment, net................................. 789 1,801 7,168
Investment in joint venture................................. -- 1,047 415
Intangible assets, net of accumulated amortization of
$1,498, $7,903 and $22,191 at July 31, 1998 and 1999 and
January 31, 2000, respectively............................ 20,540 41,401 193,765
Restricted cash............................................. -- -- 1,661
Other assets................................................ -- 371 3,010
------- -------- --------
Total assets........................................ $24,046 $163,948 $309,546
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ -- $ -- $ 2,028
Obligation under capital lease............................ -- 302 1,041
Debt to CMGI.............................................. 7,753 -- --
Due to CMGI and affiliates................................ -- 131 1,878
Accounts payable.......................................... 499 988 3,118
Accrued expenses.......................................... 1,614 10,061 19,751
Deferred revenue.......................................... 1,460 4,293 5,162
------- -------- --------
Total current liabilities........................... 11,326 15,775 32,978
------- -------- --------
Deferred revenue............................................ -- 1,508 1,067
Long-term debt, net of current portion...................... -- -- 2,812
Obligation under capital lease, net of current portion...... -- 367 1,768
Other long-term liabilities................................. -- -- 443
Commitments and contingencies
Stockholders' equity:
Series A Preferred Stock, $.01 par value, 1,500 shares
authorized, 1,500, 0 and 0 shares issued and outstanding
at July 31, 1998 and 1999 and January 31, 2000, and 0
shares issued and outstanding at July 31, 1998 and 1999
and January 31, 2000, respectively (liquidating
preference of $16,340 at July 31, 1998)................. 15 -- --
Series B Preferred Stock, $.01 par value, 239 shares
authorized, 0 shares issued and outstanding at July 31,
1998 and 1999 and January 31, 2000...................... -- -- --
Series C Preferred Stock, $.01 par value, 2,000 shares
authorized, 0 shares issued and outstanding at July 31,
1998 and 1999 and January 31, 2000...................... -- -- --
Common Stock, $.01 par value, 150,000 shares authorized,
380, 97,349 and 108,153 shares issued and outstanding at
July 31, 1998 and 1999 and January 31, 2000,
respectively............................................ 4 973 1,082
Additional paid-in capital................................ 41,677 208,183 367,361
Deferred compensation..................................... (1,305) (4,024) (2,025)
Accumulated other comprehensive income (loss)............. (1,193) (353) 442
Accumulated deficit....................................... (26,478) (58,481) (96,382)
------- -------- --------
Total stockholders' equity.......................... 12,720 146,298 270,478
------- -------- --------
Total liabilities and stockholders' equity.......... $24,046 $163,948 $309,546
======= ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
F-5
<PAGE> 98

ENGAGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
-------------------------------- --------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Product revenue................... $ 25 $ 1,742 $ 12,366 $ 2,744 $ 16,322
Product revenue, related
parties........................ -- 203 1,801 844 2,045
Services and support revenue...... -- 240 1,719 627 2,283
Services and support revenue,
related parties................ -- 32 137 50 421
-------- -------- -------- -------- --------
Total revenue............. 25 2,217 16,023 4,265 21,071
-------- -------- -------- -------- --------
Cost of revenue:
Cost of product revenue........... 31 185 3,494 1,543 10,622
Cost of services and support
revenue........................ -- 2,053 5,957 1,517 2,911
-------- -------- -------- -------- --------
Total cost of revenue..... 31 2,238 9,451 3,060 13,533
-------- -------- -------- -------- --------
Gross (loss) profit....... (6) (21) 6,572 1,205 7,538
-------- -------- -------- -------- --------
Operating expenses:
In-process research and
development.................... -- 9,200 4,500 -- 2,317
Research and development.......... 7,261 5,859 8,699 3,788 7,885
Selling and marketing............. 1,566 4,015 12,776 3,704 18,071
General and administrative........ 1,429 1,993 4,115 1,316 4,985
Amortization of goodwill and other
intangibles.................... -- 1,391 5,829 2,086 13,728
Stock compensation................ -- 426 1,455 391 326
-------- -------- -------- -------- --------
Total operating
expenses................ 10,256 22,884 37,374 11,285 47,312
-------- -------- -------- -------- --------
Loss from operations................ (10,262) (22,905) (30,802) (10,080) (39,774)
Other income (expense):
Gain on sale of product rights.... -- 9,240 -- -- --
Equity in loss of joint venture... -- -- (723) (160) (700)
Loss on disposal of property and
equipment...................... -- -- (165) -- --
Other expense..................... -- -- -- -- (25)
Interest income................... -- -- 134 -- 2,777
Interest expense.................. -- (172) (447) (339) (179)
-------- -------- -------- -------- --------
Net loss............................ $(10,262) $(13,837) $(32,003) $(10,579) $(37,901)
======== ======== ======== ======== ========
Basic and diluted net loss per
share............................. $ (.38)
========
Weighted average number of basic and
diluted shares outstanding........ 100,935
========
Pro forma basic and diluted net loss
per share......................... $ (.41) $ (.45) $ (.16)
======== ======== ========
Pro forma weighted average number of
basic and diluted shares
outstanding....................... 33,499 71,861 67,297
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
F-6
<PAGE> 99

ENGAGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- --------------- --------------- ---------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ ------ ------ ------- ------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1996........... -- $ -- -- $-- -- $-- 32,000 $ 320 $ (240)
Exercise of stock options........ -- -- -- -- -- -- 376 4 18
Net loss......................... -- -- -- -- -- -- -- -- --
------ ---- ---- --- ---- --- ------- ------ --------
Balance at July 31, 1997........... -- -- -- -- -- -- 32,376 324 (222)
Reorganization................... 800 8 -- -- -- -- (32,000) (320) 8,232
Acquisition of Accipiter......... 700 7 -- -- -- -- -- -- 33,667
Amortization of deferred
compensation................... -- -- -- -- -- -- -- -- --
Exercise of stock options........ -- -- -- -- -- -- 4 -- --
Unrealized loss on
available-for-sale
securities..................... -- -- -- -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- -- -- --
------ ---- ---- --- ---- --- ------- ------ --------
Balance at July 31, 1998........... 1,500 15 -- -- -- -- 380 4 41,677
Issuance of preferred stock, net
of issuance costs of $66....... -- -- 239 2 -- -- -- -- 1,932
Acquisition of I/PRO............. -- -- -- -- -- -- 2,020 20 10,161
Deferred compensation on stock
option issuances............... -- -- -- -- -- -- -- -- 4,174
Conversion of debt to CMGI....... -- -- -- -- 414 4 711 7 42,765
Issuance of common stock, net of
issuance costs of $50.......... -- -- -- -- -- -- 1,876 19 13,063
Initial public offering, net of
issuance costs of $1,500, and
conversion of preferred
stock.......................... (1,500) (15) (239) (2) (414) (4) 91,296 913 93,863
Foreign currency translation
adjustment..................... -- -- -- -- -- -- -- -- --
Amortization of deferred
compensation................... -- -- -- -- -- -- -- -- --
Exercise of stock options........ -- -- -- -- -- -- 1,066 10 548
Unrealized gain on
available-for-sale
securities..................... -- -- -- -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- -- -- --
------ ---- ---- --- ---- --- ------- ------ --------
Balance at July 31, 1999........... -- -- -- -- -- -- 97,349 973 208,183
Acquisition of AdKnowledge
(unaudited).................... -- -- -- -- -- -- 10,336 104 160,174
Foreign currency translation
adjustment (unaudited)......... -- -- -- -- -- -- -- -- --
Amortization of deferred
compensation (unaudited)....... -- -- -- -- -- -- -- -- --
Exercise of stock
options(unaudited)............. -- -- -- -- -- -- 421 4 380
Sale of common stock under
Employee Stock Purchase Plan
(unaudited).................... -- -- -- -- -- -- 47 1 297
Reversal of deferred compensation
on forfeited stock options
(unaudited).................... -- -- -- -- -- -- -- -- (1,673)
Unrealized gain on
available-for-sale securities
(unaudited).................... -- -- -- -- -- -- -- -- --
Net loss (unaudited)............. -- -- -- -- -- -- -- -- --
------ ---- ---- --- ---- --- ------- ------ --------
Balance at January 31, 2000
(unaudited)...................... -- $ -- -- $-- -- $-- 108,153 $1,082 $367,361
====== ==== ==== === ==== === ======= ====== ========

<CAPTION>
ACCUMULATED TOTAL
OTHER STOCKHOLDERS'
DEFERRED COMPREHENSIVE ACCUMULATED EQUITY
COMPENSATION INCOME (LOSS) DEFICIT (DEFICIT)
------------ ------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at July 31, 1996........... $ -- $ -- $ (2,379) $ (2,299)
Exercise of stock options........ -- -- -- 22
Net loss......................... -- -- (10,262) (10,262)
------- ------- -------- --------
Balance at July 31, 1997........... -- -- (12,641) (12,539)
Reorganization................... -- -- -- 7,920
Acquisition of Accipiter......... (1,731) -- -- 31,943
Amortization of deferred
compensation................... 426 -- -- 426
Exercise of stock options........ -- -- -- --
Unrealized loss on
available-for-sale
securities..................... -- (1,193) -- (1,193)
Net loss......................... -- -- (13,837) (13,837)
------- ------- -------- --------
Balance at July 31, 1998........... (1,305) (1,193) (26,478) 12,720
Issuance of preferred stock, net
of issuance costs of $66....... -- -- -- 1,934
Acquisition of I/PRO............. -- -- -- 10,181
Deferred compensation on stock
option issuances............... (4,174) -- -- --
Conversion of debt to CMGI....... -- -- -- 42,776
Issuance of common stock, net of
issuance costs of $50.......... -- -- -- 13,082
Initial public offering, net of
issuance costs of $1,500, and
conversion of preferred
stock.......................... -- -- -- 94,755
Foreign currency translation
adjustment..................... -- 340 -- 340
Amortization of deferred
compensation................... 1,455 -- -- 1,455
Exercise of stock options........ -- -- -- 558
Unrealized gain on
available-for-sale
securities..................... -- 500 -- 500
Net loss......................... -- -- (32,003) (32,003)
------- ------- -------- --------
Balance at July 31, 1999........... (4,024) (353) (58,481) 146,298
Acquisition of AdKnowledge
(unaudited).................... -- -- -- 160,278
Foreign currency translation
adjustment (unaudited)......... -- 91 -- 91
Amortization of deferred
compensation (unaudited)....... 326 -- -- 326
Exercise of stock
options(unaudited)............. -- -- -- 384
Sale of common stock under
Employee Stock Purchase Plan
(unaudited).................... -- -- -- 298
Reversal of deferred compensation
on forfeited stock options
(unaudited).................... 1,673 -- -- --
Unrealized gain on
available-for-sale securities
(unaudited).................... -- 704 -- 704
Net loss (unaudited)............. -- -- (37,901) (37,901)
------- ------- -------- --------
Balance at January 31, 2000
(unaudited)...................... $(2,025) $ 442 $(96,382) $270,478
======= ======= ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 100

ENGAGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JULY 31, JANUARY 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $(10,262) $(13,837) $(32,003) $(10,579) $(37,901)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization......................... 947 1,863 7,184 2,488 15,328
Equity in loss of joint venture....................... -- -- 723 160 721
Provision for bad debts............................... -- 240 343 41 571
Stock compensation.................................... -- 426 1,455 391 326
Amortization of discount on available-for-sale
securities......................................... -- -- -- -- (767)
Gain on sale of available-for-sale securities......... -- -- -- -- (40)
Gain on sale of product rights........................ -- (9,240) -- -- --
Loss on disposal of property and equipment............ -- -- 165 -- --
In-process research and development................... -- 9,200 4,500 -- 2,317
Changes in operating assets and liabilities, net of
impact of acquisitions:
Accounts receivable................................ (30) (1,438) (3,182) (120) (5,778)
Prepaid expenses and other assets.................. 194 (147) (188) 13 (2,238)
Net change in due to CMGI and affiliates........... -- -- -- -- 1,782
Accounts payable................................... -- 475 (62) 358 122
Accrued expenses................................... 137 835 7,372 1,681 533
Deferred revenue................................... 15 1,117 4,324 3,472 52
-------- -------- -------- -------- --------
Net cash used for operating activities........... (8,999) (10,506) (9,369) (2,095) (24,972)
-------- -------- -------- -------- --------
Cash flows from investing activities:
Purchase of available-for-sale securities............... -- -- -- -- (54,016)
Proceeds from redemption of available-for-sale
securities............................................ -- -- -- -- 11,800
Net cash acquired on acquisition of subsidiaries........ -- 689 347 -- 3,044
Investment in joint venture............................. -- -- (1,424) (1,424) --
Long-term investment at cost............................ -- -- -- -- (2,000)
Purchases of property and equipment..................... (490) (216) (342) (118) (2,104)
Proceeds from sale of property and equipment............ -- -- 8 -- 8
-------- -------- -------- -------- --------
Net cash (used for) provided by investing
activities.................................... (490) 473 (1,411) (1,542) (43,268)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Net change in debt to CMGI and affiliates............... 10,511 10,129 12,579 1,598 --
Issuance of common stock, net of issuance costs......... -- -- 107,837 -- --
Proceeds from stock option exercises.................... 22 -- 558 9 384
Proceeds from stock issued under Employee Stock Purchase
Plan.................................................. -- -- -- -- 298
Issuance of preferred stock, net of issuance costs...... -- -- 1,934 1,934 --
Repayment of capital lease obligations.................. -- -- (184) -- (155)
Repayment of long-term borrowings....................... -- -- -- -- (313)
Principal payments on notes............................. (1,044) -- -- -- --
-------- -------- -------- -------- --------
Net cash provided by financing activities........ 9,489 10,129 122,724 3,541 214
-------- -------- -------- -------- --------

Effect of exchange rate changes on cash and cash
equivalents............................................. -- -- (6) -- 2
-------- -------- -------- -------- --------

Net increase (decrease) in cash and cash equivalents...... -- 96 111,938 (96) (68,024)

Cash and cash equivalents, beginning of period............ -- -- 96 96 112,034
-------- -------- -------- -------- --------

Cash and cash equivalents, end of period.................. $ -- $ 96 $112,034 $ -- $ 44,010
======== ======== ======== ======== ========

Supplemental disclosures of cash flow information:
Cash paid for interest.................................. $ -- $ -- $ 41 $ -- $ 176
======== ======== ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements
F-8
<PAGE> 101

ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS

Engage provides products and services that enable customers to create and
use profiles of individual Web visitors to target advertisements, content and
e-commerce offerings.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company is a majority owned subsidiary of CMGI, Inc. ("CMGI"). The
accompanying consolidated financial statements, which have been prepared as if
the Company had operated as a separate stand-alone entity for all periods
presented, include only revenue and expenses attributable to the Company since
it commenced operations in September 1995.

The consolidated financial statements include certain allocations based on
headcount from CMGI for certain general and administrative expenses such as
rent, legal services, insurance and employee benefits. Management believes that
the method used to allocate the costs and expenses is reasonable; however, such
allocated amounts may or may not necessarily be indicative of what actual
expenses would have been incurred had the Company operated independently of
CMGI.

Principles of Consolidation

The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries, Internet Profiles Corporations ("I/PRO"),
AdKnowledge Inc. ("AdKnowledge") and Engage Technologies Limited, after
elimination of all significant intercompany balances and transactions.

Use of Estimates

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

Revenue Recognition

Prior to August 1, 1998, revenue from sales of product licenses to
customers were generally recognized when the product was shipped, provided no
significant obligations remain and collectibility is probable, in accordance
with Statement of Position ("SOP") 91-1, Software Revenue Recognition. Effective
August 1, 1998, the Company adopted the provisions of SOP 97-2, Software Revenue
Recognition. For transactions after August 1, 1998, revenues from software
product licenses, Engage AudienceNet campaigns, Knowledge database services and
web-site traffic audit reports are generally recognized when (i) a signed
noncancelable software license exists, (ii) delivery has occurred, (iii) the
Company's fee is fixed or determinable, and (iv) collectibility is probable.
Revenue from license agreements that have significant customizations and
modifications of the software product is deferred and recognized using the
percentage of completion method. There was no material change to the Company's
accounting for revenue as a result of the adoption of SOP 97-2.

Revenue from periodic subscriptions is recognized ratably over the
subscription term, typically twelve months. Revenue from usage based
subscriptions is recognized monthly based on actual usage.

The Company recognizes revenue from ad delivery and associated management
services based on the number of advertisements delivered as well as from monthly
usage fees for the Company's web-based advertising management system.

F-9
<PAGE> 102
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Service and support revenue includes software maintenance and other
professional services revenues, primarily from consulting, implementation and
training. Revenue from software maintenance is deferred and recognized ratably
over the term of each maintenance agreement, typically twelve months. Revenue
from professional services is recognized as the services are performed,
collectibility is probable and such revenue are contractually non-refundable.

Amounts collected prior to satisfying the above revenue recognition
criteria are classified as deferred revenue.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with
original maturities of three months or less from the date of purchase.
Investments with maturities of greater than three months and less than twelve
months are considered short-term investments. At July 31, 1999, cash equivalents
consist of an investment in a money market fund.

Prior to the Company's initial public offering, under an arrangement with
CMGI, the Company maintained a zero balance cash account. Cash required by the
Company for the funding of its operations is provided as needed with a
corresponding increase in the "Debt to CMGI" account. Customer receipts and
other cash receipts of the Company are remitted to CMGI upon receipt by the
Company and serve to reduce the "Debt to CMGI" account. Cash on hand at July 31,
1998 is held by the Company's subsidiaries.

During fiscal 1998, non-cash investing activities included the sale of data
warehouse product rights in exchange for available-for-sale securities and the
reduction of approximately $8,400,000 of debt due to CMGI. In addition, non-cash
investing activities also include the Company's acquisition of Accipiter (see
note 7) in exchange for 700,000 shares of the Company's Series A Convertible
Preferred Stock.

During fiscal 1998, non-cash financing activities included the issuance of
800,000 shares of the Company's Series A Convertible Preferred Stock in exchange
for 32,000,000 shares of the Company's common stock and an $8,000,000 reduction
in the debt to CMGI (see note 11).

During fiscal 1999, non-cash investing activities include the acquisition
of I/PRO (see note 7) in exchange for 2,020,368 shares of the Company's common
stock, and additional debt to CMGI totaling $22,086,000.

During fiscal 1999, non-cash financing activities included the issuance of
413,564 shares of the Company's Series C Preferred Stock as repayment of
approximately $37,447,000 of debt to CMGI. In addition, non-cash financing
activities included the issuance of 710,524 shares of the Company's Common Stock
as repayment of approximately $5,329,000 of debt to CMGI.

Unaudited

During the six months ended January 31, 2000, as the result of the
termination of employment of certain employees prior to the vesting of their
stock options, unvested stock options for which deferred compensation costs had
been recorded in a prior period were cancelled. As a result of these
cancellations, the Company has recorded a reduction of $1,673,000 in both
deferred compensation and additional paid-in capital.

During the six months ended January 31, 2000, the Company acquired
AdKnowledge through the issuance of common stock (see note 7).

Marketable Securities

The appropriate classification of marketable securities is determined at
the time of acquisition and reevaluated at each balance sheet date. Marketable
securities have been classified as available-for-sale and are carried at fair
value, based on quoted market prices, with unrealized gains and losses included
in accumulated other comprehensive income (loss) on the consolidated balance
sheets.

F-10
<PAGE> 103
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements and assets under capital leases are amortized using the
straight-line method over the shorter of the lease term or estimated useful life
of the asset. Expenditures for maintenance and repairs are charged to expense as
incurred.

Investment in Joint Venture

The Company's investment in the common stock of a Japanese joint venture is
accounted for by the equity method.

Intangibles

Intangibles relate to the Company's purchase of Accipiter, Inc. in April
1998, I/PRO in April 1999 and AdKnowledge in December 1999 (see note 7). Such
costs are being amortized on a straight-line basis over two to five years,
depending on the periods expected to be benefited.

Accounting for Impairment of Long-Lived Assets

The Company assesses the need to record impairment losses on long-lived
assets used in operations when indicators of impairment are present. On an
on-going basis, management reviews the value and period of amortization or
depreciation of long-lived assets, including costs in excess of net assets of
companies acquired. During this review, the significant assumptions used in
determining the original cost of long-lived assets are reevaluated. Although the
assumptions may vary from transaction to transaction, they generally include
revenue growth, operating results, cash flows and other indicators of value.
Management then determines whether there has been a permanent impairment of the
value of long-lived assets by comparing future estimated undiscounted cash flows
to the asset's carrying value. If the estimated future undiscounted cash flows
exceed the carrying value of the asset, a loss is recorded as the excess of the
asset's carrying value over fair value.

Research and Development Costs and Software Costs

Expenditures related to the development of new products and processes,
including significant improvements and refinements to existing products and the
development of software, are expensed as incurred, unless they are required to
be capitalized. Software development costs are required to be capitalized when a
product's technological feasibility has been established by completion of a
detailed program design or working model of the product, and ending when a
product is available for general release to customers. To date, the
establishment of technological feasibility and general release have
substantially coincided. As a result, there have been no capitalized software
development costs to date. Additionally, at the date of acquisition or
investment, the components of the purchase price of each acquisition or
investment are evaluated to identify amounts allocated to in-process research
and development. Upon completion of acquisition accounting and valuation, such
amounts are charged to expense if technological feasibility had not been reached
at the acquisition date.

Foreign Currency Translation

The functional currency for the Company's foreign subsidiary and its
investment in joint venture is its local currency. The financial statements of
this subsidiary and the joint venture are translated into United States dollars
using period-end exchange rates for assets and liabilities and average exchange
rates during the period for revenues and expenses. The resulting translation
adjustments are included in accumulated other comprehensive income (loss) on the
consolidated balance sheets. Net gains and losses resulting from foreign

F-11
<PAGE> 104
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

currency transactions arising from exchange rate fluctuations on transactions
denominated in currencies other than the functional currencies are included in
the consolidated statements of operations and were immaterial for all periods
presented.

Income Taxes

The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The Company was greater than 80% owned by CMGI up through the
date of the initial public offering, and as such, CMGI realized the full benefit
of all federal and part of the state net operating losses that had been incurred
by the Company up through the initial public offering. Therefore, such net
operating losses incurred by the Company prior to the initial public offering
will have no future benefit to the Company. Subsequent to the initial public
offering, CMGI owned approximately 79% of the Company and thus the Company will
have available to it the full benefit of all Federal and state net operating
losses incurred subsequent to the date of the initial public offering.

Unaudited

As a result of Company common stock issued to CMGI in the AdKnowledge
acquisition, CMGI's ownership interest increased to more than 80%. As a result,
beginning December 22, 1999, CMGI will again realize the full benefit of all of
the Company's Federal and state net operating losses until such time as CMGI's
ownership interest falls below 80%. The tax sharing agreement between the
Company and CMGI requires the Company to reimburse CMGI to the extent it
contributes to the consolidated tax liability of the CMGI group; however, under
the policy, CMGI is not obligated to reimburse the Company for any losses
utilized in the consolidated CMGI group.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expense was
approximately $40,000, $175,000 and $1,204,000 for the fiscal years ended July
31, 1997, 1998 and 1999, respectively.

Stock-Based Compensation Plans

The Company has adopted SFAS No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). As permitted by SFAS 123, the Company measures
compensation cost in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB No. 25"), and related
interpretations. Accordingly, no accounting recognition is given to stock
options granted at fair market value until they are exercised. Upon exercise,
net proceeds, including income tax benefits realized, are credited to equity.
Compensation cost for stock options granted with exercise prices below estimated
fair market value is recognized over the vesting period, typically four years.
The adoption of SFAS 123 was not material to the Company's financial condition
or results of operations; however, the pro forma impact on earnings has been
disclosed in the notes to the consolidated financial statements as required by
SFAS 123 (see note 12).

Segment Reporting

The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for the way that public business enterprises report selected information about
operating segments in annual and interim financial statements. It also
F-12
<PAGE> 105
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 requires the use of the
"management approach" in disclosing segment information, based largely on how
senior management generally analyzes the business operations. SFAS 131 has been
adopted effective August 1, 1998. The Company currently operates in only one
segment, and as such, no additional disclosures are required.

Net Loss per Share

The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". Basic
earnings per share is computed based on the weighted average number of common
shares outstanding during the period. The dilutive effect of common stock
equivalents is included in the calculation of diluted earnings per share only
when the effect of their inclusion would be dilutive.

Pro forma basic loss per share is based upon the weighted average number of
common shares outstanding during the period. Pro forma diluted loss per share is
based upon the weighted average number of common shares outstanding during the
period plus additional weighted average common equivalent shares outstanding
during the period, computed using the "if-converted method". Common equivalent
shares have been excluded from the computation of diluted loss per share in each
period, as their effect would have been anti-dilutive in each period presented.

Conversion of all preferred stock and debt to CMGI occurred upon the
completion of the Company's initial public offering in July 1999. The pro forma
basic and diluted net loss per share information included in the accompanying
statements of operations for the six months ended January 31, 1999 reflect the
impact on pro forma basic and diluted net loss per share of such conversion as
of the beginning of each period or date of issuance, if later, using the
if-converted method. Historical basic and diluted net loss per share has not
been presented for any period prior to January 31, 2000 because it is irrelevant
due to the change in the Company's capital structure and resultant basic and
diluted loss per share that resulted upon conversion of the convertible
preferred stock and debt to CMGI. Pro forma basic and diluted net loss per share
has been presented for comparative purposes.

The reconciliation of the numerators and denominators of the pro forma
basic and pro forma diluted loss per share computation for the Company's
reported net loss is as follows:

PRO FORMA BASIC AND DILUTED NET LOSS PER SHARE

<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED JULY 31, JANUARY 31,
---------------------- ------------
1998 1999 1999
--------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C>
Numerator:
Loss....................................................... $(13,837) $(32,003) $(10,579)
-------- -------- --------
Denominator:
Weighted average shares outstanding........................ 30,798 3,931 416
Assumed conversion of preferred stock...................... 1,578 59,068 60,856
Assumed conversion of debt to CMGI......................... 1,123 8,862 6,025
-------- -------- --------
Weighted average number of diluted shares outstanding...... 33,499 71,861 67,297
-------- -------- --------
Pro forma basic and diluted loss per share................. $ (.41) $ (.45) $ (.16)
======== ======== ========
</TABLE>

F-13
<PAGE> 106
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The reconciliation of the numerators and denominators of the basic and
diluted loss per share computation for the Company's reported net loss is as
follows:

BASIC AND DILUTED NET LOSS PER SHARE

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31, 2000
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
(UNAUDITED)
<S> <C>
NUMERATOR:
Net loss.................................................... $(37,901)
--------
DENOMINATOR:
Weighted average shares outstanding, basic and diluted...... 100,935
--------
Basic and diluted net loss per share........................ $ (0.38)
========
</TABLE>

At January 31, 2000, the Company had outstanding stock options to purchase
20,668,182 shares of common stock at a weighted average exercise price of $7.30
that could potentially dilute earnings per share. The dilutive effect of the
exercise of these options has been excluded from the computation of diluted net
loss per share, as the effect would have been antidilutive for the periods
presented.

New Accounting Pronouncements

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC"), issued Statement of
Position 98-1, "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires the capitalization of
certain internal costs related to the implementation of computer software
obtained for internal use. The Company adopted this standard in August 1999, and
the adoption of SOP 98-1 did not have a material impact on its financial
position or its results of operations.

In April 1998, the AcSEC issued Statement of Position 98-5, "Reporting
Costs of Start-Up Activities" ("SOP 98-5"). Under SOP 98-5, the cost of start-up
activities should be expensed as incurred. Start-up activities are broadly
defined as those 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, commencing some new operation
or organizing a new entity. The Company adopted SOP 98-5 in August 1999. The
adoption of SOP 98-5 did not have a material impact on its financial position or
results of operations.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities"("SFAS 133"). SFAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. SFAS 133
requires the recognition of all derivatives as either assets or liabilities in
the statement of financial position and the measurement of those instruments at
fair value. Engage is required to adopt this standard in the first quarter of
fiscal year 2001 pursuant to SFAS No. 137 (issued in June 1999), which delays
the adoption of SFAS 133 until that time. Engage expects that the adoption of
SFAS 133 will not have a material impact on the its financial position or its
results of operations.

F-14
<PAGE> 107
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Unaudited Interim Financial Information

The consolidated financial statements as of January 31, 2000 and for the
six months ended January 31, 1999 and 2000 and related notes are unaudited;
however, in the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the financial
statements for the interim period have been included. Results of operations for
the interim periods presented are not necessarily indicative of the results that
may be expected for the full fiscal year or any future period.

Reclassifications

Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.

(3) SALE OF PRODUCT RIGHTS

In August 1997, the Company sold rights to some of its data warehouse
software products to Red Brick Systems, Inc. ("Red Brick") for $9,500,000 in
cash and 238,160 shares of Red Brick common stock, recording a pretax gain of
$9,240,000 on the sale. The cash component was received directly by CMGI and
debt to CMGI was reduced by a corresponding amount. In January 1999, the Red
Brick shares were exchanged for 142,896 shares of Informix Corp. due to
Informix's acquisition of Red Brick. The Informix shares were sold during the
six months ended January 31, 2000 at an insignificant gain to the Company.

(4) AVAILABLE-FOR-SALE SECURITIES

Available-for-sale securities at July 31, 1998 consists of 238,160 shares
of Red Brick common stock received as part of the Company's sale of product
rights to Red Brick. Available-for-sale securities at July 31, 1999 consists of
142,896 shares of Informix Corp. (see note 3). These securities are carried at
fair value based on quoted market prices. A $1,193,000 unrealized holding loss
and $500,000 unrealized holding gain was recorded on the Red Brick shares at
July 31, 1998 and 1999, respectively, based on the change in market value since
the date of acquisition. The unrealized holding loss is presented in the equity
section of the Company's consolidated balance sheet as a component of
accumulated other comprehensive loss.

(5) PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
JULY 31,
----------------
ESTIMATED USEFUL LIFE 1998 1999
------------------------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Office furniture and computer equipment............. 3-5 years $ 940 $2,490
Software licenses................................... 3 years 273 305
Leasehold improvements.............................. 4 years or life-of-lease 105 244
------ ------
1,318 3,039
Less: Accumulated depreciation and amortization..... (529) (1,238)
------ ------
$ 789 $1,801
====== ======
</TABLE>

Property and equipment recorded under capital leases amounted to
approximately $735,000 at July 31, 1999. Total accumulated amortization related
to these assets amounted to approximately $177,000 at July 31, 1999. The Company
had no assets under capital lease at July 31, 1998.

F-15
<PAGE> 108
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) INVESTMENT IN JOINT VENTURE

In August 1998, the Company acquired for $1.4 million in cash, 49% of the
shares of Engage Technologies Japan (the "Joint Venture"), a joint venture with
Sumitomo Corporation in Japan. The Company's ownership interest was reduced to
46.3% in March 1999 as a result of the Joint Venture's selling an ownership
interest to an additional investor. The Joint Venture was established to sell
the Company's products and services in Japan. The Joint Venture is authorized to
solicit additional investors so long as the new investors' ownership interests
do not exceed 30% on a fully diluted, aggregate ownership basis. If the Joint
Venture requires funds in excess of $4 million (excluding the parties' initial
capital contributions) for its operations, the Company is required to provide a
bank guarantee in an amount proportionate to its ownership interest. This
investment is being accounted for under the equity method of accounting. The
Company's share of the Joint Venture's foreign currency translation adjustments
is reflected in both the investment account and shareholders' equity on the
consolidated balance sheet as a component of accumulated other comprehensive
income (loss).

Under a separate license agreement, the Company licensed its Engage
Knowledge technology to the Joint Venture in consideration for a non-refundable
$3 million prepaid royalty and royalties of 11.11% of all future revenues. The
initial prepaid royalty has been recorded as deferred revenue and is being
recognized as income over three years, the estimated period over which the
Company expects to provide maintenance and support. In addition, the Company and
the Joint Venture entered into a reseller agreement under which the Company
granted the Joint Venture an exclusive right to resell its products to end users
in Japan, excluding certain Japanese distribution rights granted to Red Brick
(see note 3).

(7) ACQUISITIONS

Accipiter

In April 1998, CMGI acquired Accipiter, Inc. ("Accipiter"), a company
specializing in Internet advertising management solutions, in exchange for
10,109,536 shares of CMGI Common Stock (which number reflects four CMGI
two-for-one stock splits between April 1998 and the date of these financial
statements). In August 1998, Accipiter was legally merged with the Company in a
stock-for-stock merger in which consideration of 700,000 shares of the Company's
Series A Convertible Preferred Stock was issued to CMGI. The Company has
reflected in its consolidated financial statements the acquisition of Accipiter
as if it occurred in April 1998. The total purchase price for Accipiter was
valued at $31,253,000, including acquisition costs of $198,000. The value of the
CMGI shares included in the purchase price was recorded net of a weighted
average 10% market value discount to reflect the restrictions on
transferability.

Management is primarily responsible for estimating the fair value of
purchased in-process research and development. The portion of the purchase price
allocated to in-process research and development was $9,200,000, or
approximately 29% of the total purchase price. At the acquisition date,
Accipiter's major in-process project was the development of AdManager version
4.0, which was intended to provide the ad serving functionality that customers
were requiring as the use of the Internet rapidly increased and customer Web
sites became more complex. In general, previous AdManager releases did not
provide for the fault tolerance, redundancy and scalability that customers began
to seek after AdManager versions 1.0 and 2.0 were released. Accordingly,
customers' long-term product needs required Accipiter to substantially redesign
the AdManager architecture (later released as version 4.0) to develop new
technologies in the areas of: (1) fault tolerance and scalability, (2) an
object-oriented user interface, (3) application programming interfaces and (4) a
new report engine.

At the date of the acquisition, management estimated that completion of the
AdManager version 4.0 technology would be accomplished by June 1998. Engage
began testing AdManager version 4.0 at a customer's site (beta testing) in June
1998 and commercially released the product in August 1998. The initial

F-16
<PAGE> 109
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

development effort had commenced in late 1997. At the acquisition date, the new
AdManager technology had not reached a completed prototype stage and beta
testing had not yet commenced. At the time of the Accipiter purchase, the
AdManager version 4.0 project was approximately 71% complete. The AdManager
version 4.0 project was substantially completed within the time originally
estimated.

Accipiter recorded revenue in 1997 of less than $1,000,000. Because of the
absence of meaningful historical revenue of Accipiter, management projected
revenue for the initial year of the forecast period based on its assessment of
future market potential and the ability of Accipiter to successfully launch its
new product offering. After the initial year of the forecast period, revenue was
predicted to grow at rates comparable to the growth of Internet users and online
activity and the impact such growth would have on Internet advertising.

These projections are based on Engage management's estimates of the
significant growth in the number of companies engaged in e-commerce (which is
supported by independent market data), the need for e-commerce companies to
serve ads over the Internet, expected trends in technology (such as increased
speed of the Internet, reduced hardware costs and the resulting increase in new
Internet users to whom ads will be served) and the nature and expected timing of
new product introductions by Engage and its competitors. These estimates also
include growth related to the use of certain Accipiter technologies in
conjunction with Engage's products, the marketing and distribution of the
resulting products through Engage's sales force and the benefits of Engage's
incremental financial support and stability.

Engage's estimated cost of sales as a percentage of revenue is expected to
be slightly lower than Accipiter's (classified as support and royalties by
Accipiter) on a stand-alone basis (16% in 1997), as certain fixed costs included
in cost of sales are spread over a larger revenue base and provide for the
realization of efficiencies due to economies of scale through combined
operations. Due to these savings, the estimated cost of sales as a percentage of
revenue is expected to decrease by 1% each year from Accipiter's historical
percentage, to a low of 11% in the fifth forecast year.

Approximately $1,700,000 of deferred compensation was recorded during
fiscal 1998 relating to approximately 346,160 shares of CMGI common stock issued
to the then employee stockholders of Accipiter, which are being held in escrow.
These shares are subject to forfeiture upon termination of employment over a

F-17
<PAGE> 110
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

two-year period. Compensation expense is being recognized over the two-year
service period beginning April 1, 1998.

I/PRO

In April 1999, Engage acquired I/PRO, a provider of Web-site traffic
measurement and audit services, for approximately $32,651,000, including
acquisition costs of $244,000. The purchase price consisted of $1,563,000 in net
cash, $20,907,000 in CMGI common shares and $10,181,000 in Engage common shares
and options. The per share value of the CMGI shares included in the purchase
price was $28.99, net of a 9% weighted average market value discount to reflect
the restriction on transferability. The per share value of the Engage shares
included in the purchase price was $3.29 per share. In addition, CMGI must pay
up to $3,000,000 to the former I/PRO stockholders if stated performance goals
are met by I/PRO one year after the closing. Engage must reimburse CMGI for any
payments, due under stated performance goals, in cash or by issuance of shares
of Engage's Series C convertible preferred stock at its then fair market value,
at CMGI's election. Any additional payments will be treated as additional
purchase price.

I/PRO's major in-process project was the development of a new data
processing system, project name Normandy, which is intended to provide the
improved functionality required as the use of the Internet rapidly increases and
customer Web site activity increases in volume and complexity. In general, the
existing data processing system does not provide sufficient fault tolerance,
scalability, and data processing efficiency that will be required to meet future
customer needs. Accordingly, customers' long-term product needs required I/PRO
to substantially redesign the data processing system to develop new technologies
in the areas of: (1) fault tolerance and scalability, (2) system management, (3)
data capture and (4) path analysis functionality.

The value of in-process research and development was determined using an
income approach. This approach takes into consideration earnings remaining after
deducting from cash flows related to the in-process technology, the market rates
of returns on contributory assets, including core developed technology,
assembled workforce, working capital and fixed assets. The cash flows are then
discounted to present value at an appropriate rate. Discount rates are
determined by an analysis of the risks associated with each of the identified
intangible assets. The discount rate used for in-process research and
development was 30%, a premium over the estimated weighted-average cost of
capital of 25%, and the discount rate used for core developed technology was
22%.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reduced hardware costs and the resulting increase in new Internet users) and the
nature and expected timing of new product introductions by Engage and its
competitors. These estimates also include growth related to the use of certain
I/PRO technologies in conjunction with Engage's products and the benefits of
Engage's incremental financial support and stability.

I/PRO's estimated cost of sales as a percentage of revenue is expected to
significantly decrease on a stand-alone basis (85% in 1998), as certain fixed
costs included in cost of sales are spread over a larger revenue base and
provide for the realization of efficiencies due to economies of scale. Normandy
technology is expected to greatly increase the automation of data processing
allowing significant labor cost savings per revenue dollar. Increases in
hardware utilization are also expected.

Due to these savings, the estimated cost of sales as a percentage of
revenue is expected to decrease to a low of 20% in the fifth forecast year.

AdKnowledge (Unaudited)

On December 22, 1999, Engage completed its acquisition of AdKnowledge Inc.
("AdKnowledge"), a provider of products and services which allow online
marketers and ad agencies to plan, target, serve, track and analyze advertising
campaigns. Previously, on September 23, 1999, Engage, CMGI, AK Acquisition
Corp., a wholly-owned subsidiary of CMGI, AdKnowledge, and Steve Findley, John
Mracek and Kevin Wandryk (collectively, the "Shareholder Representative")
executed an Agreement and Plan of Merger and Contribution (the "Merger
Agreement"). Upon the completion of the transactions contemplated by the Merger
Agreement, AdKnowledge became a wholly-owned subsidiary of Engage. Specifically,
the Merger Agreement contemplated:

First, a merger of Transitory Sub with and into AdKnowledge, with
AdKnowledge being the surviving corporation (the "Surviving Corporation"). In
this merger, all the AdKnowledge preferred shareholders received CMGI common
stock and a new class of AdKnowledge common stock ("Surviving Corporation Common
Stock"), and all common shareholders of AdKnowledge received shares of Surviving
Corporation Common Stock. Upon completion of this merger on November 30, 1999,
CMGI owned approximately 88% of the Surviving Corporation Common Stock.

Second, CMGI and other shareholders of Surviving Corporation contributed
their Surviving Corporation Common Stock to Engage in exchange for approximately
10,300,000 shares of Engage common stock (the "Contribution"). Engage issued
common stock from its authorized but unissued capital stock.

Third, Engage consummated a California short-form merger (the "Short-Form
Merger") between Surviving Corporation and a wholly-owned subsidiary of Engage
("Engage Sub"), pursuant to which Engage Sub merged with and into Surviving
Corporation, with Surviving Corporation being the surviving corporation in such
merger. Any remaining holders of Surviving Corporation Common Stock received
Engage common stock in this merger.

Total purchase consideration was valued at approximately $161,000,000, net
of cash acquired of $3,000,000. Included in the purchase consideration was
$3,800,000 in direct acquisition costs. In connection with the contribution and
the Short-Form Merger, Engage issued approximately 9,800,000 shares of its
common stock to CMGI for CMGI's 88% interest in Surviving Corporation and
approximately 506,000 shares of its common stock directly to shareholders of
Surviving Corporation, valued at approximately $142,400,000 in the aggregate.
Additionally, stock options to acquire Registrant's common stock issued in the
contribution, valued at approximately $18,000,000, have been included in the
purchase consideration.

F-19
<PAGE> 112
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

consideration and will be recorded as additional purchase price at the then-fair
value upon the attainment of certain performance goals measured through November
30, 2000. Engage issued approximately 1,116,000 of its common shares to CMGI in
consideration for the Escrow Shares. No value has been ascribed to the value of
these shares. If the performance goals are met and the Escrow Shares are
released to the AdKnowledge shareholders, Engage will record the fair value of
the CMGI shares issued to AdKnowledge shareholders on the release date as
additional purchase price. Any difference in the fair value of Engage shares at
the release date compared to the value of the Escrow Shares will be recorded as
a capital transaction between entities under common control. Under the terms of
an Intercompany Agreement between Engage and CMGI, in the event that any Escrow
Shares are returned to CMGI, CMGI shall pay Engage, in cash or other property, a
sum equal to the value of the returned Escrow Shares.

Management is primarily responsible for estimating the fair value of
purchased in-process research and development. The portion of the purchase price
allocated to in-process research and development was $2,317,000, or
approximately 1.2% of the total purchase price. At the acquisition date,
AdKnowledge's major in-process projects were: (1) the development of the
AdKnowledge System Architecture Upgrade, which was intended to scale its
software to handle more customers, internationalize the AdKnowledge System, and
help AdKnowledge deploy new features more rapidly; (2) the development of the
AdServer Network Capacity Upgrade, which was intended to allow the AdKnowledge
System to handle more volume; (3) the AdServer Network Operating System Change,
which was intended to improve the managing of AdKnowledge's advertising
campaigns; (4) the development of the Optimal Global Domain Name Service, which
was intended to optimize traffic flow, delivere advertisements faster, and
improve the performance of the AdKnowledge System; and (5) the development of QA
Automation Procedures, which was intended to allow AdKnowledge to release
features on the AdKnowledge System more quickly and with better quality.

At the date of the acquisition, management estimated that completion of the
Capacity Upgrade technology would be accomplished by January 2000. The initial
development effort had commenced in October 1999. At the acquisition date,
technological feasibilty of the Capacity Upgrade had not been reached. At the
time of the AdKnowledge purchase, the Capacity Upgrade project was approximately
65% complete.

At the date of the acquisition, management estimated that completion of the
Optimal Global Domain Name Service technology would be accomplished by June
2000. The initial development effort had commenced in September 1999. At the
acquisition date, technological feasibility of the Optimal Global Domain Name
Service had not been reached. At the time of the AdKnowledge purchase, the
Optimal Global Domain Name Service project was approximately 23% complete.

At the date of the acquisition, management estimated that completion of the
QA Automation Procedures technology would be accomplished by June 2000. The
initial development effort had commenced in June 1999. At the acquisition date,
technological feasibilty of the QA Automation Procedures had not been reached.
At the time of the AdKnowledge purchase, the QA Automation Procedures project
was approximately 75% complete.

F-20
<PAGE> 113
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The value of in-process research and development was determined using an
income approach. This approach takes into consideration earnings remaining after
deducting from cash flows related to the in-process technology, the market rates
of return on contributory assets, including developed technology, assembled
workforce, trade names/trademarks, database, working capital and fixed assets.
The cash flows are then discounted to present value at an appropriate rate.
Discount rates are determined by an analysis of the risks associated with each
of the identified intangible assets. The discount rates used for in-process
research and development range from 25% to 30%, reflecting a 10% to 15% premium
over the estimated weighted-average cost of capital of 15%. These different
discount rates reflect the relative risk of the technologies, and their stage of
completion.

The acquisition of AdKnowledge has been accounted for using the purchase
method, and accordingly, the purchase price has been allocated to the assets
purchased and liabilities assumed based upon their fair values at the date of
acquisition. The amount of the purchase price allocated to goodwill, developed
technology and other identifiable intangible assets is being amortized on a
straight-line basis over three years. Amortization of developed technology is
charged to cost of product revenue, while amortization of goodwill and other
identifiable intangible assets is reflected as a separate component within
operating expenses.

The acquisitions of Accipiter, I/PRO and AdKnowledge have been accounted
for using the purchase method, and, accordingly, the purchase prices have been
allocated to the assets purchased and liabilities assumed based upon their fair
values at the dates of acquisition. The amount of the purchase prices allocated
to goodwill and developed technology is being amortized on a straight-line basis
over five years for both Accipiter and I/PRO, and over three years for
AdKnowledge. The amount of the purchase price allocated to other identifiable
intangible assets is being amortized on a straight line basis over the following
periods; Accipiter and I/PRO work force over two years, Accipiter trade name
over two years, I/PRO tradename over five years, and AdKnowledge developed
technology and other intangibles over three years. Amortization of developed
technology is charged to cost of product revenue while both goodwill and other
identifiable intangible assets are reflected as separate components within
operating expenses.

F-21
<PAGE> 114
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The purchase price of the Accipiter, I/PRO and AdKnowledge acquisitions was
allocated as follows:

<TABLE>
<CAPTION>
ACCIPITER I/PRO ADKNOWLEDGE
--------- ------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Working capital deficit, net of cash acquired of
$689 for Accipiter, $347 for I/PRO and $3,044 for
AdKnowledge...................................... $ (249) $ (498) $ (7,954)
Property and equipment............................. 262 1,676 4,311
Other assets....................................... 2 230 515
In-process research and development................ 9,200 4,500 2,317
Long-term obligations.............................. -- (465) (4,809)
Goodwill........................................... 20,158 22,288 160,144
Developed technology............................... 1,600 3,000 1,763
Other identifiable intangible assets............... 280 1,920 4,745
------- ------- --------
Purchase price, net of cash acquired............... $31,253 $32,651 $161,032
======= ======= ========
</TABLE>

The following table represents the unaudited pro forma results of
operations of the Company for the years ended July 31, 1997, 1998 and 1999 and
the six months ended January 31, 2000, as if the Accipiter acquisition had
occurred on August 1, 1996, the I/PRO acquisition had occurred on August 1,
1997, and the AdKnowledge acquisition had occurred on August 1, 1998. These pro
forma results include adjustments for the amortization of goodwill and other
intangibles and deferred compensation and the elimination of amounts expensed
for in-process research and development and for the issuance of shares used in
the acquisition. They have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the acquisitions
been made at the beginning of the periods noted or of results that may occur in
the future.

<TABLE>
<CAPTION>
JULY 31,
--------------------------------- JANUARY 31,
1997 1998 1999 2000
-------- -------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues.......................... $ 428 $ 7,348 $ 22,911 $ 24,250
Net loss.............................. (16,825) (23,149) (104,104) (65,503)
Pro forma net loss per share.......... (.28) (.32) (1.17) (.60)
</TABLE>

(8) DEBT TO CMGI

In May 1999, the Company formalized its borrowing arrangement with CMGI and
executed a secured convertible demand note with CMGI dated February 1, 1999.
Advances accrue interest at the annual rate of 7%, and advances and accrued
interest may be prepaid without penalty. Advances outstanding under this note
are secured by substantially all assets and intellectual property of the Company
and principal, and accrued interest may be converted at the option of CMGI into
shares of Series C Preferred Stock or common stock. The number of Series C
Preferred shares or common shares to be issued upon conversion of each borrowing
represented by the note is based on the estimated fair value of the Company at
the end of the period in which such borrowing was made.

In accordance with this arrangement, CMGI elected to convert advances and
accrued interest outstanding in the amount of $37,447,000 into 413,564 shares of
Series C Preferred Stock. An additional $5,329,000 was converted into 710,524
shares of common stock at the initial public offering price per common share.

F-22
<PAGE> 115
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) LEASES

The Company leases certain computer equipment under capital leases which
expire at various dates through November 2002.

In addition to leasing computer equipment under various capital leases, the
Company has entered into noncancelable operating leases covering certain of its
office facilities and equipment which expire through 2004. In addition, the
Company pays CMGI for office facilities used as the Company's headquarters for
which it is charged based upon an allocation of the total costs for the
facilities at market rates.

The Company leases certain property and equipment from a subsidiary of
CMGI. Under the arrangement, the related party negotiates the terms and
conditions of the lease and obtains the assets to be leased. The related party
bears all liability for payment, and the Company is not financially obligated
under the leases. The Company is charged the actual lease fees paid by the
related party, plus an additional administrative charge that approximates the
fair value of the services received.

Total rent expense amounted to $305,000, $483,000 and $1,169,000 for the
years ended July 31, 1997, 1998 and 1999, respectively. Rent expense for office
facilities paid to CMGI amounted to approximately $274,000, $258,000 and
$335,000 for the years ended July 31, 1997, 1998 and 1999, respectively. Rent
expense for equipment paid to a subsidiary of CMGI amounted to approximately
$31,000, $125,000 and $302,000 for the years ended July 31, 1997, 1998 and 1999,
respectively.

Minimum annual rental commitments are as follows at July 31, 1999:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
(IN THOUSANDS)
<S> <C> <C>
2000........................................................ $ 833 $336
2001........................................................ 716 311
2002........................................................ 643 76
2003........................................................ 206 4
2004........................................................ 154 --
------ ----
$2,552 727
======
Less: amount representing interest.......................... 58
----
Present value of capital lease obligations.................. $669
====
Comprised of:
Current portion........................................... $302
Non-current portion....................................... 367
----
$669
====
</TABLE>

(10) INCOME TAXES

No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses for all periods presented. At July 31,
1999, the Company had no significant net operating loss carryforwards available
to offset future federal taxable income as the Company's parent, CMGI, has
utilized substantially all of the Company's net operating losses through July
31, 1999. The Company has recorded a full valuation allowance against its
deferred tax assets since management believes that, after considering all the
available objective evidence, both positive and negative, historical and
prospective, with greater weight given to historical evidence, it is not more
likely than not that these assets will be realized. No income tax benefit has
been recorded for all periods presented because of the valuation allowance.

F-23
<PAGE> 116
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
federal deferred tax assets (liabilities) are comprised of the following:

<TABLE>
<CAPTION>
JULY 31,
-------------------
1998 1999
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Research credits.......................................... $ 72 $ 72
Deferred revenue.......................................... 288 2,337
Accruals and other reserves............................... 377 2,456
Loss carryforwards........................................ 1,862 12,351
Depreciation and amortization............................. 345 --
Basis difference in available for sale securities......... 821 615
------- --------
Total gross deferred tax assets........................... 3,765 17,831
Less: Valuation allowance................................... (3,765) (16,549)
------- --------
Net deferred tax assets..................................... -- 1,282
------- --------
Deferred tax liabilities:
Depreciation and amortization............................. -- (1,282)
------- --------
Net deferred taxes.......................................... $ -- $ --
======= ========
</TABLE>

Subsequently reported tax benefits relating to the valuation allowance for
deferred tax assets as of July 31, 1998 and 1999 will be allocated as follows:

<TABLE>
<CAPTION>
JULY 31,
-------------------
1998 1999
------- --------
<S> <C> <C>
Income tax benefit that would be recognized in the
consolidated statements of operations..................... $ 2,085 $ 4,760
Goodwill and other non-current intangible assets............ 1,189 11,504
Accumulated other comprehensive income (loss)............... 491 285
------- --------
$ 3,765 $ 16,549
======= ========
</TABLE>

The Company has net operating loss carryforwards for Massachusetts tax
purposes of approximately $10,700,000 and $11,000,000 as of July 31, 1998 and
July 31, 1999, respectively. The net operating loss carryforwards will expire
from 2001 through 2003. In addition, the Company has net operating loss
carryforwards for North Carolina tax purposes of approximately $4,400,000 and
$8,300,000 as of July 31, 1998 and July 31, 1999, respectively, which will
expire from 2001 through 2003, of which $2,700,000 is related to losses incurred
by Accipiter, Inc. prior to its acquisition by the Company. The Company also has
net operating loss carryforwards for California tax purposes of $16,500,000 as
of July 31, 1999, of which, $15,000,000 is related to the pre-acquisition period
of I/PRO. The Company also has $2,700,000 of federal net operating loss
carryforwards, which will expire from 2011 through 2012, related to losses
incurred by Accipiter, Inc. prior to its acquisition.

The tax benefits related to net operating loss carryforwards from the
pre-acquisition periods of Accipiter and I/PRO, when realized, will be recorded
as a decrease in goodwill and other non-current intangible assets. The
utilization of these net operating losses may be limited pursuant to Internal
Revenue Code Section 382 as a result of prior and future ownership changes.

F-24
<PAGE> 117
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11) STOCKHOLDERS' EQUITY

Issuance of Common Stock to Compaq Computer

Immediately prior to the effectiveness of the Company's initial public
offering, the Company sold 1,876,000 shares of common stock to Compaq Computer
Corporation for net proceeds of approximately $13,082,000.

Public Offering of Common Stock

In July 1999, the Company completed its initial public offering for the
sale of 13,800,000 shares of common stock. The Company received proceeds of
approximately $94,755,000, net of underwriting discounts and expenses associated
with the offering.

Authorized Share Increase and Stock Split

In June 1999, the Board of Directors approved an increase in the number of
authorized common shares from 30,000,000 to 150,000,000. Upon approval of the
share increase, a two-for-one stock split was declared.

Unaudited

In February 2000, the Company's Board of Directors approved a two-for-one
stock split of the Company's common stock, effected in the form of a stock
dividend of one share of common stock for each share of common stock
outstanding. The stock dividend is payable on April 3, 2000 to stockholders of
record at the close of business on March 20, 2000.

Accordingly, the consolidated financial statements have been retroactively
adjusted for all periods presented to reflect both stock splits event (see also
note 17).

Deferred Compensation

Engage recorded deferred compensation of $1,700,000 in 1998 related to the
Accipiter acquisition and $4,200,000 in 1999, representing the difference
between the exercise price of stock options granted and the estimated fair
market value of the underlying common stock at the date of grant. The difference
is recorded as a reduction of stockholders' equity and is being amortized over
the vesting period of applicable options, typically four years. Of the total
deferred compensation amount, $1.9 million had been amortized as of July 31,
1999 and $1,700,000 has been reversed due to forfeiture of unvested common
shares and stock options. The amortization of deferred compensation is recorded
as an operating expense.

Preferred Stock

In July 1998, the Company's shareholders authorized 5,000,000 shares of
preferred stock, of which 1,500,000 have been designated as Series A convertible
preferred stock ("Series A Preferred Stock"), 238,597 shares have been
designated as Series B convertible preferred stock ("Series B Preferred Stock"),
and 2,000,000 shares have been designated as Series C Convertible Preferred
Stock ("Series C Preferred Stock").

Series A Preferred Stock

In July 1998, the Board of Directors authorized and issued 800,000 shares
of Series A Preferred Stock in exchange for 32,000,000 shares of the Company's
common stock and $8,000,000 in principal amount of debt to CMGI. The Series A
Preferred Stock is entitled to receive annual dividends at 7%, as and if
declared. As of and prior to July 31, 1999, no dividends had been declared or
paid by the Company. Each share of Series A Convertible Preferred Stock votes on
an as-converted basis and is convertible into forty shares of common stock under
certain conditions and subject to certain adjustments. In the event of any
liquidation, dissolution

F-25
<PAGE> 118
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

or winding up of the Company, the Series A Preferred Stock has a liquidation
preference of $5 per share, plus cumulative dividends of 7% compounded annually
beginning on February 1, 1998. The Series A Preferred Stock is convertible into
common stock immediately at the option of the holder.

In July 1998, the Board of Directors authorized the issuance of an
additional 700,000 shares of Series A Preferred Stock to CMGI in connection with
the Company's acquisition of Accipiter, Inc.

All outstanding shares of Series A Preferred Stock converted to 60,000,000
shares of common stock upon the completion of the Company's initial public
offering.

Series B Preferred Stock

In August 1998, the Board of Directors designated and issued 238,597 shares
of Series B Preferred Stock. Proceeds from the sale were $1,934,000, net of
issuance costs of $6,000. Each share of Series B Preferred Stock votes on an
as-converted basis and is convertible into four shares of common stock under
certain conditions and subject to certain adjustments. In the event of any
liquidation, dissolution or winding up of the Company, the Series B Preferred
Stock has a liquidation preference of $8.38 per share, subject to the prior
payment of the liquidation preference on Series A Preferred Stock. The Series B
Preferred Stock is convertible into common stock immediately at the option of
the holder.

All outstanding shares of Series B Preferred Stock converted to 954,388
shares of common stock upon the completion of the Company's initial public
offering.

Series C Convertible Preferred Stock

In May 1999, the Board of Directors approved the designation of 2,000,000
shares of the Company's preferred stock as Series C Convertible Preferred Stock
("Series C Preferred Stock"). The Series C Preferred Stock is entitled to
receive noncumulative annual dividends, payable when, as and if declared at the
rate of 7% per annum. In the event of any liquidation, dissolution or winding up
of the Company, the Series C Preferred Stock ranks senior to the Series B
Preferred Stock and pari passu with the Series A Preferred Stock, and has a
liquidation preference equal to its purchase price plus dividends computed at 7%
per share per annum. Each share of Series C Preferred Stock votes on an
as-converted basis and is convertible at the option of the holder into forty
shares of common stock, subject to certain adjustments. During fiscal 1999, the
Company issued 413,564 shares of Series C Preferred Stock in connection with its
borrowing agreement with CMGI (see Note 8).

All outstanding shares of Series C Preferred Stock converted to 16,542,560
shares of common stock upon the completion of the Company's initial public
offering.

(12) STOCK OPTION PLANS

Engage 1995 Equity Incentive Plan

In August 1995, the Company's board of directors and stockholders approved
the 1995 Equity Incentive Plan (the "1995 Plan"). Under the 1995 Plan, up to
30,000,000 non-qualified stock options or incentive stock options may be granted
to the Company's or its affiliates' employees, as defined. The Board of
Directors administers this plan, selects the individuals to whom options will be
granted, and determines the number of shares and exercise price of each option.
Options granted under the 1995 Plan typically vest over a four year period, with
25% of options granted becoming exercisable one year from the date of grant and
the remaining 75% vesting monthly for the next thirty-six (36) months.

F-26
<PAGE> 119
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1999 Stock Option Plan for Non-Employee Directors

The 1999 Stock Option Plan for Non-Employee Directors (the "1999 Directors
Plan") was adopted by the board of directors in June 1999. Under the terms of
the 1999 Directors Plan, directors who are not employees of Engage or any
subsidiary of Engage and not affiliates of an institutional investor that owns
shares of Engage's common stock receive nonstatutory options to purchase shares
of Engage's common stock. A total of 500,000 shares of common stock may be
issued upon exercise of options granted under the plan. The board of directors
has discretion to establish the terms of options granted under the plan. All
options must have an exercise price equal to the fair market value of the common
stock on the date of grant.

The following table reflects activity and historical prices of stock
options under the Company's 1995 Plan and the 1999 Stock Option Plan for
Non-Employee Directors for the three years ended July 31, 1999:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------------------------------------
1997 1998 1999
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of
period......................... 5,151,000 $0.08 4,782,000 $0.12 8,296,108 $0.54
Granted.......................... 1,807,000 0.30 6,581,000 0.73 12,877,020 4.79
Exercised........................ (375,000) 0.06 (3,200) 0.22 (1,066,796) 0.52
Cancelled........................ (1,801,000) 0.19 (3,063,692) 0.28 (1,964,052) 2.06
---------- ----- ---------- ----- ---------- -----
Options outstanding, end of
period......................... 4,782,000 $0.12 8,296,108 $0.54 18,142,280 $3.40
========== ===== ========== ===== ========== =====
Options exercisable, end of
period......................... 1,212,356 $0.06 1,278,888 $0.15 3,192,838 $0.40
========== ===== ========== ===== ========== =====
Options available for grant, end
of period...................... 2,843,000 2,904,640 10,872,724
========== ========== ==========
</TABLE>

The following table summarizes information about stock options under the
Company's 1995 Plan outstanding at July 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ----------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- ------------------------ ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.01-$0.21......................... 4,757,772 2.9 $0.11 2,327,640 $0.10
$0.22-$0.42......................... 162,000 2.2 0.36 113,704 0.36
$0.43-$0.84......................... 76,852 2.7 0.52 47,780 0.52
$0.85-$1.47......................... 2,843,176 3.8 1.19 636,458 1.19
$1.48-$2.10......................... 686,000 4.4 2.10 33,332 2.10
$2.11-$2.53......................... 1,328,184 4.6 2.47 -- --
$2.54-$7.46......................... 3,743,696 4.8 5.02 33,924 4.60
$7.47-$7.50......................... 4,544,000 4.9 7.50 -- --
$7.51-$15.50........................ 600 5.0 15.50 -- --
---------- ---------
18,142,280 4.1 $3.40 3,192,838 $0.40
========== =========
</TABLE>

F-27
<PAGE> 120
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CMGI 1986 Stock Option Plan

Certain Engage employees have been granted stock options under the CMGI
1986 Stock Option Plan (the "1986 Plan"). Options under the 1986 Plan are
granted at fair market value on the date of the grant and are generally
exercisable in equal cumulative installments over a four-to-ten year period
beginning one year after the date of grant. Outstanding options under the 1986
Plan expire through 2007. Under the 1986 Plan, non-qualified stock options or
incentive stock options may be granted to CMGI's or its subsidiaries' employees,
as defined. The board of directors of CMGI administers this plan, selects the
individuals to whom options will be granted, and determines the number of shares
and exercise price of each option. The following table reflects activity and
historical prices of stock options granted to Company employees under CMGI's
1986 Plan for the three years ended July 31, 1999:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------------------------------------
1997 1998 1999
------------------ ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of
period............................... 320,640 $0.46 362,480 $0.62 281,560 $1.06
Granted................................ 97,600 0.97 160,000 1.16 615,200 5.00
Exercised.............................. (43,760) 0.07 (212,584) 0.42 (124,850) 1.02
Cancelled.............................. (12,000) 0.88 (28,336) 0.92 -- --
------- ----- -------- ----- -------- -----
Options outstanding, end of period..... 362,480 $0.62 281,560 $1.06 771,910 $4.20
======= ===== ======== ===== ======== =====
Options exercisable, end of period..... 167,196 $0.40 37,204 $0.88 33,828 $0.99
======= ===== ======== ===== ======== =====
</TABLE>

The following table summarizes information about stock options under the
CMGI 1986 Stock Plan outstanding at July 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ ----------------------------
WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL WEIGHTED WEIGHTED
RANGE OF NUMBER LIFE AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING (YEARS) EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- --------------- ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.81-$0.97 59,040 1.88 $0.91 27,494 $0.87
$1.16 93,334 3.24 1.16 3,332 1.16
$1.88 4,336 1.32 1.88 3,002 1.88
$5.00 615,200 4.13 5.00 -- --
------- ------
771,910 3.83 $4.20 33,828 $0.99
======= ======
</TABLE>

SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), sets
forth a fair-value based method of recognizing stock-based compensation expense.
As permitted by SFAS 123, the Company has elected to continue to apply APB No.
25 to account for its stock-based compensation plans. Had compensation cost for
awards in fiscal 1997, 1998 and 1999 under the Company's stock-based
compensation plans been determined based on the fair value method set forth
under SFAS 123, the pro forma effect on the Company's net loss would have been
as follows:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, 1997 JULY 31, 1998 JULY 31, 1999
------------------------ ------------------------ ------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net loss.............. $(10,262) $(10,385) $(13,837) $(14,195) $(32,003) $(36,166)
</TABLE>

F-28
<PAGE> 121
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair value of each stock option grant has been estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions for fiscal 1997, 1998 and 1999, respectively: volatility of
66.69%, 90.07% and 98.44%; risk-free interest rate of 6.19%, 5.48% and 5.43%;
expected life of options of 4.0, 3.4 and 2.4 years; and 0% dividend yield for
all years. The weighted average fair value per share of options granted during
fiscal 1997, 1998 and 1999 was $0.17, $0.43 and $2.74, respectively.

The fair value of each stock option granted under the CMGI 1986 Plan has
been estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions for fiscal 1997, 1998 and 1999,
respectively: volatility of 66.69%, 90.07% and 100.00%; risk-free interest rate
of 6.19%, 5.50% and 5.16%; expected life of options of 6.2, 4.2 and 2.5 years;
and 0% dividend yield for all years. The weighted average fair value per share
of options granted during fiscal 1997, 1998 and 1999 was $0.65, $0.79 and $2.99,
respectively.

1999 Employee Stock Purchase Plan

1999 Employee Stock Purchase Plan ("1999 ESPP") was adopted by the board of
directors in June 1999. The 1999 ESPP provides for the issuance of a maximum of
1,500,000 shares of common stock and will be administered by the compensation
committee. All employees of Engage whose customary employment is for more than
20 hours per week and for more than 6 months in any calendar year are eligible
to participate in the 1999 ESPP. As of July 31, 1999, no shares have been issued
under the 1999 ESPP.

(13) COMPREHENSIVE INCOME

Effective August 1, 1998, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income" ("SFAS
130"). This statement requires that all components of comprehensive income be
reported in the financial statements in the period in which they are recognized.
The components of comprehensive loss for the Company include net loss, the net
change in foreign currency translation adjustments and unrealized holding gains
and losses on available-for-sale securities. The financial statements of prior
periods have been reclassified for comparative purposes.

The components of comprehensive loss, net of income taxes, are as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
-------------------------------- --------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss............................ $(10,262) $(13,837) $(32,003) $(10,579) $(37,901)
Foreign currency adjustments........ -- -- 340 345 91
Net unrealized holding gain (loss)
arising during the period......... -- (1,193) 500 1,113 704
-------- -------- -------- -------- --------
Comprehensive loss.................. $(10,262) $(15,030) $(31,163) $ (9,121) $(37,106)
======== ======== ======== ======== ========
</TABLE>

F-29
<PAGE> 122
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of accumulated comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
ACCUMULATED
UNREALIZED OTHER
FOREIGN GAINS COMPREHENSIVE
CURRENCY (LOSSES) INCOME
ADJUSTMENTS ON SECURITIES (LOSS)
----------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, July 31, 1997................................ $ -- $ -- $ --
Activity, fiscal 1998................................. -- -- --
---- ------- -------
Balance, July 31, 1998................................ -- (1,193) (1,193)
Activity, fiscal 1999................................. 340 500 840
---- ------- -------
Balance, July 31, 1999................................ 340 (693) (353)
Activity, six months ended January 31, 2000
(unaudited)......................................... 91 704 795
---- ------- -------
Balance, January 31, 2000............................. $431 $ 11 $ 442
==== ======= =======
</TABLE>

(14) CONCENTRATION OF CREDIT RISK

Amounts included in the consolidated balance sheets for accounts
receivable, debt to CMGI, accounts payable and accrued expenses approximate
their fair value due to their short maturities. Financial instruments that
potentially subject the Company to credit risk consist primarily of accounts
receivable and cash investments. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral or other security against trade receivable balances; however, it does
maintain reserves for potential credit losses and such losses have been within
management's expectations. At July 31, 1999, substantially all of the Company's
cash and cash equivalents are invested in one money market fund with a major
bank.

The Company's revenue for the year ended July 31, 1997 was derived from one
customer. Sales to three customers accounted for 20%, 12% and 11% of total
revenues for the year ended July 31, 1998. Sales to one customer accounted for
12% of total revenues for the year ended July 31, 1999. Sales to two customers
accounted for 11% and 10% of total revenues for the six months ended January 31,
1999 and sales to one customer accounted for 14% of total revenues for the six
months ended January 31, 2000. Accounts receivable due from three customers
approximated 23%, 12% and 12% of total accounts receivable at July 31, 1998.
Accounts receivable from two customers approximated 14% and 11% of total
accounts receivable at July 31, 1999. The Company's customer base consists of
geographically diverse customers across many industries.

(15) RELATED PARTY TRANSACTIONS

CMGI has provided the Company with systems and related services
("enterprise services") at amounts that approximated the fair value of services
received in each of the periods presented in these financial statements. The
Company also occupies facilities that are leased by CMGI, whereby CMGI charges
the Company for its share of rent and related facility costs through an
allocation based upon the company's headcount in relation to total headcount for
all CMGI companies located in the premises. The Company has also purchased
certain employee benefits (including 401(k) plan participation by employees of
the Company) and insurance (including property and casualty insurance) through
CMGI. Amounts due CMGI are included

F-30
<PAGE> 123
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in "Debt to CMGI" on the consolidated balance sheets (see note 8). The following
summarizes the expenses allocated to the Company by CMGI for enterprise
services, rent and facilities and human resources:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Enterprise services......................................... $129 $201 $223
Rent and facilities......................................... $312 $366 $434
Human resources............................................. $ 11 $ 30 $156
</TABLE>

In addition, beginning in fiscal 1997, the Company outsources data center
operations and management information services from CMGI and one of its
affiliates, for which fees were charged at estimated fair value of $1,162,000,
$889,000 and $2,122,000 during the years ended July 31, 1997, 1998 and 1999,
respectively.

The Company sells its products and services to companies that CMGI has an
investment interest or a significant ownership interest. The Company sold no
products to related parties in fiscal 1997. Total revenue realized from sales to
related parties were $235,000, $1,938,000, $894,000 and $2,466,000 for the
fiscal year ended July 31, 1998 and 1999 and the six months ended January 31,
1999 and 2000, respectively. The related cost of revenue is consistent with the
costs incurred on similar transactions with unrelated parties.

(16) GEOGRAPHIC INFORMATION

The Company currently has offices in the United States and the United
Kingdom. The Company markets its products worldwide. Revenues are grouped into
three main geographic areas; United States, Europe and Rest of world. Revenue
was distributed by geography as follows:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------
1997 1998 1999
---- ------ -------
<S> <C> <C> <C>
United States............................................. $25 $1,584 $13,241
Europe.................................................... -- 71 1,199
Rest of world............................................. -- 562 1,583
--- ------ -------
$25 $2,217 $16,023
=== ====== =======
</TABLE>

The Company's assets located outside of the United States are immaterial to
the Company's financial statements.

(17) PENDING ACQUISITION (UNAUDITED)

On January 19, 2000, Engage and CMGI, the majority stockholder of Engage,
executed an Agreement and Plan of Merger and Contribution (the "Agreement")
pursuant to which Engage will acquire Adsmart Corporation ("Adsmart") and
Flycast Communications Corporation ("Flycast"). Under the terms of the
Agreement, Engage will acquire Flycast and Adsmart from CMGI and will issue to
CMGI approximately 65 million shares of common stock of Engage. The transaction
will be accounted for as a combination of entities under common control (i.e.,
"as if pooling"), and is subject to certain conditions and the approval of
Engage's stockholders. CMGI has agreed to vote the shares of common stock of
Engage held by it in favor of the transaction. The fair value of Engage's
purchase consideration to be paid to CMGI in excess of CMGI's carrying values of
the net assets of Flycast and Adsmart on the consummation date will be charged
to equity.

F-31
<PAGE> 124
ENGAGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The transaction is expected to be completed in April or May 2000. Direct costs
of the Adsmart and Flycast acquisitions, consisting primarily of investment
banker and legal and accounting fees approximating $4.7 million, will be
expensed upon the closing of the acquisitions (see note 18(b)).

(18) SUBSEQUENT EVENT (UNAUDITED)

(a) Stock Split

(b) Law Suit

On March 16, 2000, a derivative action was filed in the Court of Chancery
of the State of Delaware against Edward A. Bennett, Christopher A. Evans, Craig
D. Goldman, Andrew J. Hajducky, III, Frederic D. Rosen, Paul L. Schaut, David S.
Wetherell, members of the Company's Board of Directors, CMGI, Inc., the majority
stockholder of the Company and the Company, as nominal defendant. The complaint
alleges that, in connection with the proposed sale by CMGI of Flycast
Communications Corporation and Adsmart Corporation to the Company, CMGI and the
individual defendants have violated their fiduciary duties. The Company believes
that the complaint is without merit and expects that its Board of Directors will
contest the claims vigorously.

F-32
<PAGE> 125

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Internet Profiles Corporation:

In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Internet Profiles
Corporation at December 31, 1998 and 1997 and the results of its operations and
cash flows for the years then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred recurring losses from operations
and has an accumulated deficit of $27,768,378 at December 31, 1998 that raise
substantial doubt as to its ability to continue as a going concern. Management's
plans in regard to those matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

PricewaterhouseCoopers LLP

San Jose, California
March 1, 1999

F-33
<PAGE> 126

INTERNET PROFILES CORPORATION

BALANCE SHEETS
DECEMBER 31, 1998 AND 1997 AND MARCH 31, 1999

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1997 1998 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 5,641,857 $ 1,191,604 $ 410,578
Accounts receivable, net of allowance of $232,655 and
$308,586 as of December 31, 1997 and 1998, and
$434,002 as of March 31, 1999, respectively........... 680,785 778,693 799,417
Accounts receivable from corporate partner and investor,
net of allowance of $47,074 and $50,000 as of December
31, 1997 and 1998, and $50,000 as of March 31, 1999,
respectively.......................................... 222,209 268,090 168,934
Prepaid expenses and other current assets............... 210,840 376,999 322,834
------------ ------------ ------------
Total current assets............................... 6,755,691 2,615,386 1,701,763
Property and equipment, net................................. 2,365,613 1,875,951 1,675,660
Other assets, net........................................... 230,606 254,403 255,068
------------ ------------ ------------
Total assets....................................... $ 9,351,910 $ 4,745,740 $ 3,632,491
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of capital lease and loan obligation.... $ 913,071 $ 3,065,221 $ 2,867,989
Accounts payable........................................ 492,083 60,913 540,122
Accrued expenses........................................ 513,589 821,799 1,044,659
Commission payable to corporate partner and investor
(Note 6).............................................. 259,688 236,454 97,926
Deferred revenue........................................ 37,973 15,525 17,325
Current portion of license accrual...................... 58,334 175,000 --
------------ ------------ ------------
Total current liabilities.......................... 2,274,738 4,374,912 4,568,021
Capital lease and loan obligation, less current portion..... 884,973 533,762 465,318
License accrual, less current portion....................... 116,666 -- --
------------ ------------ ------------
Total liabilities.................................. 3,276,377 4,908,674 5,033,339
Commitments (Note 6) Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value:
Authorized: 27,628,134 shares
Series A (liquidation value: $68,737): Issued and
outstanding: 1,140,350 shares as of December 31, 1997
and 1998, and March 31, 1999.......................... 1,140 1,140 1,140
Series B (liquidation value: $679,542): Issued and
outstanding: 2,788,289 shares as of December 31, 1997
and 1998, and 2,889,639 shares as of March 31, 1999... 2,788 2,788 2,889
Series C (liquidation value: $4,113,184): Issued and
outstanding: 2,168,586 shares as of December 31, 1997,
1998, and March 31, 1999.............................. 2,169 2,169 2,169
Series D (liquidation value: $7,178,167): Issued and
outstanding: 18,303,009 shares as of December 31,
1997, and 21,174,535 shares as of December 31, 1998
and March 31, 1999.................................... 18,303 21,175 21,175
Common stock, $0.001 par value: Authorized: 75,000,000
shares Issued and outstanding: 2,383,475 shares as of
December 31, 1997, 4,553,463 shares as of December 31,
1998, and 8,010,206 shares as of March 31, 1999......... 2,384 4,554 8,011
Notes receivable from stockholders (Note 7)................. -- (69,468) (206,338)
Additional paid-in capital.................................. 25,899,443 27,643,086 27,895,046
Accumulated deficit......................................... (19,850,694) (27,768,378) (29,124,940)
------------ ------------ ------------
Total stockholders' equity (deficit)............... 6,075,533 (162,934) (1,400,848)
------------ ------------ ------------
Total liabilities and stockholder's equity
(deficit)........................................ $ 9,351,910 $ 4,745,740 $ 3,632,491
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 127

INTERNET PROFILES CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------- -------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues.................................. $ 3,050,244 $ 4,557,754 $ 911,880 $ 1,701,312
Cost of revenues.......................... 3,502,485 3,889,330 971,225 1,133,099
----------- ----------- ----------- -----------
Gross margin (loss)............. (452,241) 668,424 (59,345) 568,213
Operating expenses:
Research and development............. 2,631,864 2,890,819 519,486 639,063
General and administrative........... 1,751,975 2,766,812 569,582 594,911
Sales and marketing.................. 1,882,742 3,112,174 569,080 962,911
----------- ----------- ----------- -----------
Loss from operations............ (6,718,822) (8,101,381) (1,717,493) (1,628,672)
Interest income........................... 78,043 125,935 62,125 3,562
Interest expense.......................... (186,930) (127,238) (42,570) (26,916)
Other income (Note 9)..................... -- 185,000 -- 295,464
----------- ----------- ----------- -----------
Net loss........................ $(6,827,709) $(7,917,684) $(1,697,938) $(1,356,562)
=========== =========== =========== ===========
Net loss per share--basic and diluted..... $ (3.38) $ (2.70) $ (0.17) $ (0.06)
=========== =========== =========== ===========
Shares used in computing per share
calculation--basic and diluted.......... 2,022,536 2,933,689 9,704,000 21,756,211
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 128

INTERNET PROFILES CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1999
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
-----------------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D
------------------ ------------------ ------------------ --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ --------- ------ --------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996............ 1,140,350 $1,140 2,788,289 $2,788 2,168,586 $2,169 -- --
Issuance of Series D preferred stock
for cash at $0.339 per share net of
issuance costs of $59,921........... -- -- -- -- -- -- 18,303,009 $18,303
Exercise of options in exchange for
cash................................ -- -- -- -- -- -- -- --
Issuance of common stock in exchange
for technologies.................... -- -- -- -- -- -- -- --
Net loss.............................. -- -- -- -- -- -- -- --
--------- ------ --------- ------ --------- ------ ---------- -------
Balances, December 31, 1997............ 1,140,350 1,140 2,788,289 2,788 2,168,586 2,169 18,303,009 18,303
Issuance of Series D preferred stock
for cash at $0.339 per share, net of
issuance costs of $14,473........... -- -- -- -- -- -- 2,871,526 2,872
Exercise of options in exchange for
cash................................ -- -- -- -- -- -- -- --
Issuance of non-statutory options to
employees........................... -- -- -- -- -- -- -- --
Issuance of common stock in connection
with exercise of warrants........... -- -- -- -- -- -- -- --
Exercise of options in exchange for
promissory notes.................... -- -- -- -- -- -- -- --
Issuance of common stock warrants..... -- -- -- -- -- -- -- --
Net loss.............................. -- -- -- -- -- -- -- --
--------- ------ --------- ------ --------- ------ ---------- -------
Balances, December 31,1998............. 1,140,350 1,140 2,788,289 2,788 2,168,586 2,169 21,174,535 21,175
Issuance of preferred stock in
connection with exercise of
warrants............................ -- -- 101,350 101 -- -- -- --
Exercise of options in exchange for
cash................................ -- -- -- -- -- -- -- --
Exercise of options in exchange for
promissory notes.................... -- -- -- -- -- -- -- --
Issuance of common stock warrants..... -- -- -- -- -- -- -- --
Net loss.............................. -- -- -- -- -- -- -- --
--------- ------ --------- ------ --------- ------ ---------- -------
Balances, March 31, 1999 (unaudited)... 1,140,350 $1,140 2,889,639 $2,889 2,168,586 $2,169 21,174,535 21,175
========= ====== ========= ====== ========= ====== ========== =======

COMMON STOCK ADDITIONAL
--------------------- NOTES PAID-IN ACCUMULATED
SHARES AMOUNT RECEIVABLE CAPITAL DEFICIT TOTAL
--------- --------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996............ 1,634,417 $ 1,635 -- $19,464,091 $(13,022,985) $ 6,448,838
Issuance of Series D preferred stock
for cash at $0.339 per share net of
issuance costs of $59,921........... -- -- -- 6,126,496 -- 6,144,799
Exercise of options in exchange for
cash................................ 421,844 422 -- 63,772 -- 64,194
Issuance of common stock in exchange
for technologies.................... 327,214 327 -- 245,084 -- 245,411
Net loss.............................. -- -- -- -- (6,827,709) (6,827,709)
--------- --------- --------- ----------- ------------ ------------
Balances, December 31, 1997............ 2,383,475 2,384 -- 25,899,443 (19,850,694) 6,075,533
Issuance of Series D preferred stock
for cash at $0.339 per share, net of
issuance costs of $14,473........... -- -- -- 956,103 -- 958,975
Exercise of options in exchange for
cash................................ 111,295 111 -- 8,148 -- 8,259
Issuance of non-statutory options to
employees........................... -- -- -- 690,000 -- 690,000
Issuance of common stock in connection
with exercise of warrants........... 322,000 322 -- 2,898 -- 3,220
Exercise of options in exchange for
promissory notes.................... 1,736,693 1,737 (69,468) 67,731 -- --
Issuance of common stock warrants..... -- -- -- 18,763 -- 18,763
Net loss.............................. -- -- -- -- (7,917,684) (7,917,684)
--------- --------- --------- ----------- ------------ ------------
Balances, December 31,1998............. 4,553,463 4,554 (69,468) 27,643,086 (27,768,378) (162,934)
Issuance of preferred stock in
connection with exercise of
warrants............................ -- -- -- 112,397 -- 112,498
Exercise of options in exchange for
cash................................ 35,000 35 -- 1,365 -- 1,400
Exercise of options in exchange for
promissory notes.................... 3,421,743 3,422 (136,870) 133,448 -- --
Issuance of common stock warrants..... -- -- -- 4,750 -- 4,750
Net loss.............................. -- -- -- -- (1,356,562) (1,356,562)
--------- --------- --------- ----------- ------------ ------------
Balances, March 31, 1999 (unaudited)... 8,010,206 $ 8,011 $(206,338) $27,895,046 $(29,124,940) $ (1,400,848)
========= ========= ========= =========== ============ ============
</TABLE>

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

F-36
<PAGE> 129

INTERNET PROFILES CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------------- -------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(6,827,709) $(7,917,684) $(1,697,938) $(1,356,562)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 1,356,235 1,608,217 354,528 355,940
Fair value of common stock warrants issued...... -- 18,763 -- 4,750
Common stock issued in exchange for technology
or services................................... 245,411 -- -- --
Non-statutory stock options issued to
employees..................................... -- 690,000 -- --
Provision for doubtful accounts................. (2,271) 78,857 31,647 125,416
Changes in assets and liabilities:
Accounts receivable........................... (88,617) (176,765) (31,847) (146,140)
Accounts receivable from corporate partner and
investor................................... (106,430) (45,881) (96,712) 99,156
Prepaid expenses and other current assets..... (68,399) (166,159) (118,600) 54,165
Other assets.................................. (222,606) (23,797) -- (5,667)
Accounts payable.............................. 141,104 (431,170) (131,132) 479,209
Accrued expenses.............................. (24,511) 308,210 285,376 222,860
Commission payable to corporate partner and
investor................................... 204,188 (23,234) 12,129 (138,528)
Deferred revenue.............................. 9,635 (22,448) (12,885) 1,800
License accrual............................... 175,000 -- -- (175,000)
----------- ----------- ----------- -----------
Net cash used in operating activities...... (5,208,970) (6,103,091) (1,405,434) (478,601)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment............... (532,073) (987,737) (207,932) (156,006)
Proceeds from disposal of property and
equipment....................................... -- -- -- 5,359
----------- ----------- ----------- -----------
Net cash used in investing activities...... (532,073) (987,737) (207,932) (150,647)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of convertible debt........ -- 1,999,721 -- --
Proceeds from issuance of Series D preferred
stock........................................... 6,144,799 958,975 958,975 --
Proceeds from exercise of options................. 64,194 8,259 4,085 1,400
Proceeds from issuance of common stock in
connection with the exercise of warrants........ -- 3,220 -- 112,498
Principal borrowings on capital lease............. -- 748,495 -- --
Payments on capital lease and loan obligations.... (715,986) (1,078,095) (210,537) (265,676)
----------- ----------- ----------- -----------
Net cash provided by financing
activities............................... 5,493,007 2,640,575 752,523 (151,778)
----------- ----------- ----------- -----------
Net decrease in cash and cash equivalents........... (248,036) (4,450,253) (860,843) (781,026)
Cash and cash equivalents, beginning of year........ 5,889,893 5,641,857 5,641,857 1,191,604
----------- ----------- ----------- -----------
Cash and cash equivalents, end of year.............. $ 5,641,857 $ 1,191,604 $ 4,781,014 $ 410,578
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash payments for interest........................ $ 189,430 $ 127,238 $ 42,570 $ 26,916
Taxes paid........................................ $ 2,500 $ 2,138 $ -- $ 1,677
Proceeds from sale of intellectual property....... $ -- $ -- $ -- $ 300,000
Supplemental schedule of noncash financing
activities:
Acquisition of property and equipment under
capital lease and loan.......................... $ 309,472 $ 130,818 $ 119,538 $ --
Notes receivable from stockholders................ $ -- $ 69,468 $ -- $ 136,870
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-37
<PAGE> 130

INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. FORMATION AND BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION OF THE
FINANCIAL STATEMENTS

Internet Profiles Corporation (the "Company") was incorporated in
California on August 4, 1994 as a provider of software and services that help
customers analyze and obtain independent verification of Web site activity. The
Nielsen I/PRO Netline service provides an outsourced solution for comprehensive
site analysis and reporting directly to the customer's desktop. Nielsen I/PRO
I/Audit provides third party verification of web site traffic, validating a web
site as an advertising vehicle for media buyers. Customized measurement services
are also available, which provide a comprehensive and customized array of
measurement and analysis for E-Commerce, ad-supported and corporate web sites.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and at December 31, 1998, the Company had an accumulated
deficit of $27,768,378. The Company expects to incur further losses related to
its operations. The Company's operations are currently funded by proceeds from
the sale of convertible debt. In order to fund continuing operations, the
Company entered into a definitive purchase agreement as of March 1, 1999,
whereby the Company will be acquired by CMGI, Inc. (see Note 11).

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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original or remaining maturity of less than three months at the date of purchase
to be cash equivalents. Substantially all of its cash and cash equivalents are
custodied with one major financial institution.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses and other liabilities approximate fair value due to their short
maturities. Based upon borrowing rates currently available to the Company for
loans with similar terms, the carrying value of capital lease obligations
approximate fair value.

REVENUE RECOGNITION

The Company generally recognizes revenue on its Netline product ratably
over the subscription period as the services are provided. The Company
recognizes revenue on its I/Audit product upon delivery of its Web site audit
reports. The Company provides an allowance for sales returns and doubtful
accounts receivable, where appropriate.

DEPRECIATION AND AMORTIZATION

Property and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives, which are generally three
years. Software and marketing database licenses are carried at cost, which is
amortized on a straight-line basis over their estimated useful lives, generally
four years. Upon

F-38
<PAGE> 131
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

disposal, the assets and related accumulated depreciation or amortization are
removed from the Company's accounts and the resulting gains or losses are
reflected in the current operations.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to operations as incurred.
Software development costs are capitalized beginning when a product's
technological feasibility has been established and ending when a product is
available for general release to customers. To date, the establishment of
technological feasibility of the Company's products and general release have
substantially coincided, and as a result, the Company has not capitalized any
software development costs.

RECLASSIFICATIONS

Certain prior-year amounts have been reclassified to conform with the
current-year presentation.

INCOME TAXES

The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred taxes to the amounts expected to
be realized.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and cash equivalents
and accounts receivable. Substantially all of its cash and cash equivalents are
custodied with one major financial institution. Deposits held with banks may
exceed the amount of insurance provided on such deposits. Generally these
deposits may be redeemed upon demand and therefore, bear minimal risk.

The Company performs Web site audit services to customers throughout the
United States. One customer, a corporate partner and investor, accounted for 23%
of accounts receivable as of December 31, 1997 and 1998.

CERTAIN RISKS AND UNCERTAINTIES

The Company's products and services are concentrated in a single segment in
the internet industry which is characterized by rapid technological advances,
changes in customer requirements and evolving regulatory requirements and
industry standards. The success of the Company depends on the management's
ability to anticipate or to respond quickly and adequately to technological
developments in its industry, changes in customer requirements or changes in
regulatory requirements or industry standards. Any significant delays in the
development or introduction of products or services could have a material
adverse effect on the Company's business and operating results.

F-39
<PAGE> 132
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1997 and 1998 and March 31, 1999
consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1997 1998 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and office equipment............ $4,496,479 $4,381,655 $4,532,303
Furniture and fixtures................... 201,360 268,205 268,205
Leasehold improvements................... 13,507 299,020 299,020
---------- ---------- ----------
4,711,346 4,948,880 5,099,528
Less accumulated depreciation and
amortization........................... (2,345,733) (3,072,929) (3,423,868)
---------- ---------- ----------
$2,365,613 $1,875,951 $1,675,660
========== ========== ==========
</TABLE>

At December 31, 1997 and 1998 and March 31, 1999, equipment on capital
leases accounted for $2,339,710, $3,088,206 and $3,088,206, respectively, of the
computer and office equipment, and $1,258,313, $2,090,899 and $2,289,310,
respectively, of the accumulated depreciation and amortization.

4. ACCRUED EXPENSES

Accrued expenses at December 31, 1997 and 1998 and March 31, 1999 consist
of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1997 1998 1999
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and related expenses........ $ 50,974 $ 50,635 $ 54,414
Accrued vacation............................ 100,000 110,213 133,617
Professional fees payable................... 96,102 89,490 77,236
Accrued bonuses............................. 103,000 269,558 365,058
Other accrued liabilities................... 163,513 301,903 414,334
-------- -------- ----------
$513,589 $821,799 $1,044,659
======== ======== ==========
</TABLE>

5. CAPITAL LEASE AND LOAN OBLIGATIONS

The Company leases certain property and equipment under capital leases
which expire at various dates through November 2002. Future minimum lease
payments under these capital lease agreements are as follows:

<TABLE>
<CAPTION>
1998
----------
<S> <C>
1999........................................................ $ 584,481
2000........................................................ 312,917
2001........................................................ 239,112
2002........................................................ 21,362
----------
Total minimum lease payments...................... 1,157,872
Less amount representing interest........................... 100,763
----------
Present value of minimum lease payments..................... 1,057,109
Less current portion........................................ 523,347
----------
$ 533,762
==========
</TABLE>

The Company also entered into a loan and security agreement for equipment
purchases with a financial institution under which the Company borrowed an
aggregate amount of $768,050. The equipment line consists

F-40
<PAGE> 133
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

of advances for the acquisition of equipment through October 1997. The equipment
loan bears interest at the bank's prime rate plus 0.5% (9.00% and 8.25% at
December 31, 1997 and 1998, respectively) and is payable in monthly installments
ending December 2000. The loan is secured by substantially all assets of the
Company.

Future minimum payments under this loan agreement are as follows:

YEAR ENDED DECEMBER 31,

<TABLE>
<S> <C>
1999........................................................ $306,013
2000........................................................ 283,341
--------
Minimum payments............................................ 589,354
Less amount representing interest........................... 47,201
--------
Present value of minimum payments........................... $542,153
========
</TABLE>

The agreement in respect of the loan contains certain covenants related to
the Company's quick ratio, liquidity and profitability. Default on any covenant
may affect the commitment by the bank to continue to lend under the agreement
and, if not corrected, could accelerate the maturity of any borrowings
outstanding under the agreement. At December 31, 1998, and at various dates
throughout the year, the Company was not in compliance with certain covenants.
The Company has obtained waivers in respect of non-compliance as of December 31,
1998. The Company was in default of certain covenants subsequent to December 31,
1998, which if not corrected, could accelerate the maturity of borrowings still
outstanding. Therefore, all balances outstanding at December 31, 1998 have been
classified as current.

In November and December 1998, the Company obtained a series of bridge
loans totaling approximately $1,999,721 from a group of existing preferred
shareholders. The notes bear interest at an annual rate of 6% which accrues
daily and is added to the principal balance, with principal and interest to be
repaid, in total, six months after the commencement of the note term. On the
sale or merger of the Company, the loans would have certain repayment
preferences involving either conversion of the notes to a new series of
preferred stock, or repayment of the loans prior to distribution of any funds to
holders of any class of Company preferred or common stock.

6. COMMITMENTS

The Company leases three facilities under noncancelable operating leases
expiring in September 1999 and July 2002. The Company is responsible for certain
taxes, maintenance costs and insurance under these leases. Future minimum lease
payments under the noncancelable operating leases are as follows:

Rent expense for the years ended December 31, 1997 and 1998, and for the
three months ended March 31, 1998 and 1999 was $702,434, $578,839, $251,555 and
$271,693 respectively.

In 1995 the Company entered into an agreement with a corporate partner and
investor for the sale and marketing of existing internet usage measurement and
analysis products and services developed by the Company. Under this agreement,
the Company is required to pay commissions on net revenues from products sold in
the US primarily through the efforts of this corporate partner, as well as on
products sold through the efforts of the Company. Revenues related to this
agreement from products sold primarily through the efforts of this corporate
partner for the years ended December 31, 1997 and 1998 totaled $390,995 and
$363,508, respectively. Commissions incurred relative to this agreement on
products sold through the efforts of the
F-41
<PAGE> 134
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Company for the years ended December 31, 1997 and 1998 totaled $146,188 and
$236,454 respectively. The agreement expired in September 1998 and was extended
for an additional year, and may continue to be extended by the mutual agreement
of the parties. As of December 31, 1997 and 1998 under this agreement, amounts
payable to the corporate partner totaled $259,688 and $236,454 respectively, and
amounts receivable from the corporate partner totaled $222,209 and $268,090,
respectively.

In October 1997, the Company agreed to pay $175,000 to a software vendor
for a software license, payable in six monthly installments of $29,167 per
month, with the first such payment being due and payable upon the earlier of ten
days following the date upon which the vendor files a petition in bankruptcy, or
390 days from October 31, 1997. No payments related to this agreement were made
during the year ended December 31, 1998. During January 1999, the balance
outstanding on this agreement was paid in full to the software vendor.

7. STOCKHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

DIVIDENDS

The holders of Series A, B, C and D preferred stock are entitled to
preferential noncumulative dividends at the rate of $0.0285, $0.111, $0.739 and
$0.0339 per share, respectively, if and when declared by the Board of Directors.
No dividends have been declared as of December 31, 1998 or 1997.

LIQUIDATION

Series D preferred stock will be entitled to receive in preference to the
holders of the Series A, B and C preferred stock and the common stock an amount
per share equal to $0.339. The maximum aggregate amount the holders of the
Series A, B and C preferred stock will be entitled to receive is $4,861,463. The
respective liquidation preferences of the Series A, B and C preferred stock
adjust annually on May of each year to provide the Series C preferred with an
annual increase in its liquidation preference amount of five percent. Any assets
remaining after the distribution to the Series A, B, C and D preferred stock
will be distributed pro-rata to the holders of the common stock.

MERGERS

A merger, reorganization or sale of all or substantially all of the assets
of the Company in which more than 50% of the outstanding stock of the Company is
exchanged, shall be deemed to be a liquidation, dissolution or winding up.

VOTING

The holders of each share of Series A, B, C and D preferred stock shall
have the right to one vote for each share of common stock into which such
preferred stock could then be converted, and with respect to such vote, such
holder shall have full voting rights and powers equal to the voting rights and
powers of the holders of common stock.

CONVERSION

Each share of Series A, B, C and D preferred stock, at the option of the
holder, may be converted into the number of fully paid and nonassessable shares
of common stock as is determined by dividing the conversion price per share in
effect for the preferred stock at the time of conversion into the per share
conversion value of such shares. The initial conversion price per share and the
per share conversion value of Series A, B, C and D preferred stock are $0.285,
$0.57, $2.47 and $0.339 per share, respectively. The initial conversion price of

F-42
<PAGE> 135
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

preferred stock is subject to adjustment from time to time. The number of shares
into which a share of preferred stock is convertible is referred to as the
conversion rate of such series.

Conversion is automatic at its then effective conversion rate immediately
upon a closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of equity securities.

COMMON STOCK

The Company issued 1,000,000 shares of its common stock to the founders
under a stock purchase agreement. Each share of common stock is entitled to one
vote. The holders of common stock are also entitled to receive dividends
whenever funds are legally available and when declared by the Board of
Directors, subject to the prior rights of holders of all classes of stock
outstanding. As of December 31, 1998 and 1997, no dividends have been declared.

STOCK ISSUED IN EXCHANGE FOR IN-PROCESS TECHNOLOGIES

In November 1997, the Company acquired the rights to certain technologies
which were previously held by two unrelated companies. In connection with the
purchase of these in-process technologies, the Company issued 216,000 and
111,214 shares of common stock at fair value of $162,000 and $83,411,
respectively. These amounts were immediately expensed to the statement of
operations as part of the expenses for research and development.

NOTES RECEIVABLE FROM STOCKHOLDERS

Notes receivable from stockholders consist of the exercise of stock options
for notes. For a portion of the shares, exercise of the underlying option was
permitted before vesting under the related option plan had occurred. The notes
are full recourse promissory notes bearing interest at 6%, and are
collateralized by the stock issued upon exercise of the stock options. Interest
is payable in arrears, with both interest and principle being due and payable on
the fourth anniversary of the date of the making of the note. Should certain
circumstances occur, the Company has the right to repurchase any of the shares
related to the early exercise of unvested options described above.

WARRANTS

In November 1994, in connection with a sales and marketing agreement, the
Company issued a warrant valued at $97,229, to purchase 120,000 shares of common
stock with an exercise price of $1.67 per share. The warrant expired during
1997.

In December 1995, in connection with a sales and marketing agreement, the
Company issued a warrant valued at $3,764, to purchase 644,000 shares of common
stock. Of the 644,000 shares, 322,000 of the shares have an exercise price of
$0.01 per share and 322,000 have an exercise price of $2.22 per share. The
warrants were exercisable immediately upon grant. During the year ended December
31, 1998, 322,000 of the warrants were exercised at the exercise price of $0.01
per share, and the remaining 322,000 expired.

In August 1995 and January 1996, in connection with a financing
arrangement, the Company issued warrants valued at $32,491 and $22,962, to
purchase 60,810 and 40,540 shares of Series B preferred stock at an exercise
price of $1.11 per share. The warrants were exercisable immediately upon grant
and will expire on the earlier August 2005 and January 2006, respectively, or
the fifth anniversary of the closing date of the Company's initial public
offering.

F-43
<PAGE> 136
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

In March 1996, in connection with a financing arrangement, the Company
issued a warrant valued at $15,560, to purchase 4,330 shares of Series C
preferred stock at an exercise price of $7.39 per share. The warrant was
exercisable immediately upon grant and the warrant will expire in March 2001.

In April 1996, in connection with a financing arrangement, the Company
issued a warrant valued at $33,599, to purchase 9,472 shares of Series C
preferred stock at an exercise price of $7.39 per share. The warrant was
exercisable immediately upon grant and will expire at the earlier of April 2006
or the fifth anniversary of the closing date of the Company's initial public
offering.

In October 1996, in connection with a sales agreement, the Company issued a
warrant valued at $72,776, to purchase 75,000 shares of common stock at an
exercise price of $2.00 per share. The warrant was exercisable immediately upon
grant and will expire at the earlier of October 1999 or the closing date of the
Company's initial public offering.

In February, 1998, in connection with a financing arrangement, the company
issued a warrant valued at $41,000, to purchase 240,000 shares of Series D
preferred stock at an exercise price of $0.339 per share. The warrant was
exercisable immediately upon grant and will expire in February 2004.

In August 1998, in connection with a financing arrangement, the Company
issued a warrant valued at $28,033, to purchase 162,242 shares of Series D
preferred stock at an exercise price of $0.339 per share. The warrant was
exercisable immediately upon grant and will expire in August 2004.

In connection with consulting agreements in September 1998, the Company
issued warrants valued at $2,648, to purchase 125,000 shares of common stock
with an exercise price of $0.04 per share. The warrant was exercisable
immediately upon grant and will expire in September 2004.

STOCK OPTIONS

The Company has adopted the 1995 Stock Option Plan (the "Plan") under which
incentive stock options may be granted to employees and nonstatutory stock
options may be granted to employees and consultants. In December 1997, the
Company's Board of Directors increased the number of common stock shares
reserved for issuance under the 1995 Stock Option Plan to 10,030,095.

The Board of Directors may issue incentive stock options to employees and
nonstatutory stock options to consultants or employees. The Board of Directors
has the authority to determine to whom options will be granted, the number of
shares, the term and exercise price (which cannot be less than fair market value
at date of grant for incentive stock options or 85% of fair market value for
nonstatutory stock options). If an employee or person owns stock representing
more than 10% of the outstanding voting shares, the price of each share shall be
at least 110% of fair market value, as determined by the Board of Directors.
Stock options generally expire ten years from the date of grant. Options granted
under the Plan generally become exercisable starting one year after the date of
grant, with 25% of the shares subject to the option becoming exercisable at that
time and an additional 1/16 of such shares becoming exercisable each quarter
thereafter.

F-44
<PAGE> 137
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Activity under the Plan is as follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
---------------------------------------------------
WEIGHTED
AVERAGE
NUMBER OF EXERCISE AGGREGATE EXERCISE
SHARES PRICE PRICE PRICE
---------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Balances, January 1, 1997................... 2,056,210 $0.01-$1.50 $1,161,874 $0.57
Options granted........................ 1,286,311 $0.04-$1.50 992,518 $0.77
Options exercised...................... (421,844) $0.01-$1.50 (65,329) $0.15
Options canceled....................... (1,203,503) $0.01-$1.50 (815,664) $0.68
---------- ----------
Balances, December 31, 1997................. 1,717,174 $0.01-$1.50 1,273,399 $0.74
Options granted........................ 10,134,031 $0.04 405,361 $0.04
Options exercised...................... (1,847,988) $0.04-$0.75 (77,727) $0.04
Options canceled....................... (2,047,672) $0.04-$1.50 (811,712) $0.40
---------- ----------
Balances, December 31, 1998................. 7,955,545 $0.01-$1.50 789,321 $0.11
Options granted........................ 46,500 $0.04 1,860 $0.04
Options exercised...................... (3,456,743) $0.04-$0.75 (138,270) $0.04
Options canceled....................... (460,416) $0.04-$1.50 (89,146) $0.20
---------- ----------
Balances, March 31, 1999 (unaudited)........ 4,084,886 $0.01-$1.50 $ 563,765 $0.20
========== ==========
</TABLE>

The following table summarizes information with respect to stock options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
DECEMBER 31, 1998
- ---------------------------------------------------
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
-------------------------- -----------
WEIGHTED
AVERAGE
REMAINING
EXERCISE NUMBER CONTRACTUAL NUMBER
PRICES OUTSTANDING LIFE (YEARS) EXERCISABLE
- -------- ----------- ------------ -----------
<S> <C> <C> <C>
0$.01.. 60,000 6.3 55,624
0$.04.. 7,322,575 9.7 5,073,020
0$.11.. 81,500 7.0 60,717
0$.75.. 314,470 8.4 128,868
1$.00.. 29,000 7.4 18,125
1$.50.. 148,000 8.0 128,873
--------- --- ---------
7,955,545 9.4 5,465,227
========= === =========
</TABLE>

PRO FORMA STOCK-BASED COMPENSATION

During October 1995, the Financial Accounting Standards Board issued
Statement No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation,"
which establishes a fair value based method of accounting for stock-based
compensation plans. The Company has chosen to continue to account for employee
stock options under APB Opinion No. 25, "Accounting for Stock Issued to
Employees" with disclosure of pro forma information concerning its stock option
plan in accordance with SFAS No. 123. The following disclosures are provided
pursuant to SFAS No. 123:

Fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1997 and 1998.

F-45
<PAGE> 138
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1997 1998
----------------------- -----------------------
WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE
OUTSTANDING YEARS OUTSTANDING YEARS
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Options granted at $0.01 per share.............. 60,000 7.27 60,000 6.27
Options granted at $0.04 per share.............. 66,500 9.93 7,322,575 9.70
Options granted at $0.11 per share.............. 100,000 8.02 81,500 7.03
Options granted at $0.75 per share.............. 1,283,011 9.29 314,470 8.38
Options granted at $1.00 per share.............. 44,000 8.35 29,000 7.35
Options granted at $1.50 per share.............. 169,000 8.95 148,000 8.03
</TABLE>

The risk free interest rate for 1997 and 1998 were 6.36% and 5.42%,
respectively. The weighted average fair value of those options granted in 1997
and 1998 was $0.77 and $0.04, respectively.

The following pro forma loss information has been prepared following the
provisions of SFAS No. 123:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Net loss--pro forma.......... $6,880,503 $7,948,894
</TABLE>

The above pro forma effects on income may not be representative of the
effects on net income for future years as option grants typically vest over
several years and additional options are generally granted each year.

8. INCOME TAXES

The primary components of the net deferred tax asset as of December 31,
1997 and 1998 are:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
Net operating loss carryforwards -federal and
state........................................ $7,658,836 $10,105,689
Depreciable assets............................. 194,836 229,659
Reserves and allowances........................ 476,021 390,858
Other temporary differences, net............... (569,511) (565,662)
---------- -----------
7,760,182 10,160,544
Valuation allowance............................ (7,760,182) (10,160,544)
---------- -----------
Net deferred tax asset....................... $ -- $
========== ===========
</TABLE>

Due to the uncertainty surrounding the realization of the favorable tax
attributes in future tax returns, the Company has placed a valuation allowance
against its otherwise recognizable net deferred tax asset. The valuation
allowance increased by $2,616,592 in 1997 and $2,400,362 in 1998.

As of December 31, 1998, the Company has net operating loss carryforwards
of approximately $25,071,000 and $17,891,000 for federal and California state
tax purposes, respectively. Such carryforwards expire in varying amounts through
the year 2018 if not used before such time to offset future taxable income or
tax liabilities.

Due to changes in the Company's ownership, the amount of net operating loss
carryforwards available to offset future federal and state taxable income or tax
may be limited by Internal Revenue Code (IRC) Section 382. The amount of such
limitation, if any, has not been determined.

F-46
<PAGE> 139
INTERNET PROFILES CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. SALE OF TECHNOLOGY

In October 1998, the Company sold the rights to one of its internet
properties in exchange for cash proceeds of $160,000 and certain limited future
advertising rights valued at $25,000, resulting in a gain of $185,000.

10. EMPLOYEE BENEFIT PLAN

Essentially all Company employees are covered by a Company-sponsored 401(k)
plan, which qualifies under Section 401(k) of the Internal Revenue Code of 1986,
as amended. Each eligible employee may elect to contribute to the plan, through
payroll deductions, up to 15% of compensation, subject to certain limitations.
The Company, at its discretion, may make additional contributions. No such
additional contributions were made during the years ended December 31, 1997 or
1998.

11. SUBSEQUENT EVENTS

In February 1999, the Company transferred its rights to certain
technologies used in measuring and reporting the results of advertising
campaigns in exchange for cash proceeds of $300,000. This amount is subject to
increase if certain performance goals are met during 1999. The entire purchase
price was recorded as a gain, as, in compliance with its normal accounting
policies, the Company had previously expensed all costs associated with the
development of this technology.

On March 1, 1999, the Company signed a binding letter of intent to be
acquired by CMGI, Inc. and Engage Technologies, Inc. Upon signing of a
definitive purchase agreement, the Company will become a wholly owned subsidiary
of Engage Technologies, Inc., which is in turn a majority owned subsidiary of
CMGI, Inc. A portion of the purchase price will be used to retire certain
liabilities, including the outstanding balance on a loan and security agreement
with a financial institution, attorney and broker fees related to the
transaction, and certain other commitments. Approximately 10% of the remaining
purchase price will be used to retire a portion of the outstanding common stock
of the Company. The remainder, in the form of various forms of equity vehicles
available to CMGI, Inc., will be used to retire the balance of the Company's
common and preferred stock.

F-47
<PAGE> 140

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of AdKnowledge Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, shareholders' equity and cash
flows present fairly, in all material respects, the financial position of
AdKnowledge Inc. at December 31, 1997 and 1998, and the results of its
operations and cash flows for the period from July 10, 1996 (date of inception)
to December 31, 1996 and for the years ended December 31, 1997 and 1998 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

San Jose, California
June 25, 1999

F-48
<PAGE> 141

ADKNOWLEDGE INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------- -------------
1997 1998 1999
---------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 383,320 $ 1,164,577 $ 4,915,949
Short-term investments.................................. -- -- 1,018,293
Accounts receivable, net of allowance for doubtful
accounts of $114,245, $89,199 and $307,568 at December
31, 1997 and 1998 and September 30, 1999,
respectively.......................................... 456,771 528,501 1,579,516
Deposits................................................ -- 206,540 60,433
Prepaid expenses and other current assets............... 2,299 293,454 1,081,831
---------- ------------ ------------
Total current assets................................ 842,390 2,193,072 8,656,022
Restricted cash............................................. 79,637 79,637 79,637
Related party notes receivable.............................. 512,751 625,023 498,317
Fixed assets................................................ 1,210,262 1,609,904 4,325,495
Goodwill, net............................................... 2,149,096 1,719,277 1,396,913
Other intangible assets, net................................ 1,007,000 671,333 419,583
Other assets................................................ 138,442 198,990 1,321,648
---------- ------------ ------------
Total assets........................................ $5,939,578 $ 7,097,236 $ 16,697,615
========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit......................... $ 500,000 $ -- $ --
Accounts payable........................................ 406,380 1,044,249 2,226,179
Accrued payroll and related liabilities................. 112,432 148,152 612,663
Other accrued liabilities............................... 327,348 152,565 1,103,248
Deferred revenue........................................ 228,114 288,685 578,034
Related party payable................................... 401,589 -- --
Capital lease obligations, current...................... 374,782 509,606 708,965
Notes payable, current.................................. 72,333 1,597,053 1,966,883
---------- ------------ ------------
Total current liabilities........................... 2,422,978 3,740,310 7,195,972
Deferred revenue, long-term................................. -- 261,684 --
Other liabilities........................................... -- -- 80,250
Capital lease obligations, long-term........................ 515,674 902,546 1,683,714
Notes payable, long-term.................................... 132,609 535,557 3,498,724
---------- ------------ ------------
3,071,261 5,440,097 12,458,660
---------- ------------ ------------
Commitments (Note 8)
Shareholders' equity:
Convertible Preferred Stock: no par value; 9,987,000
shares, 25,103,192 shares and 41,232,478 shares
authorized at December 31, 1997 and 1998 and September
30, 1999, respectively; 9,494,377 shares, 23,926,995
shares and 39,482,552 shares issued and outstanding at
December 31, 1997 and 1998 and September 30, 1999,
respectively (Aggregate liquidation preference:
$17,548,703 at December 31, 1998 and $31,548,704 at
September 30, 1999)................................... 5,548,118 13,548,118 27,473,792
Common Stock: no par value; 25,000,000 shares,
38,896,808 shares and 56,191,522 shares authorized at
December 31, 1997 and 1998 and September 30, 1999,
respectively; 6,135,130 shares, 5,277,135 shares and
8,190,925 shares issued and outstanding at December
31, 1997 and 1998 and September 30, 1999,
respectively.......................................... 1,268,638 3,670,491 8,046,297
Warrants................................................ 247,507 519,917 2,252,414
Note receivable from shareholder........................ (38,365) (40,535) (42,162)
Deferred stock-based compensation....................... (514,543) (2,140,265) (5,444,417)
Unrealized loss on investments.......................... -- -- (584)
Accumulated deficit..................................... (3,643,038) (13,900,587) (28,046,385)
---------- ------------ ------------
Total shareholders' equity.......................... 2,868,317 1,657,139 4,238,955
---------- ------------ ------------
Total liabilities and shareholders' equity.......... $5,939,578 $ 7,097,236 $ 16,697,615
========== ============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-49
<PAGE> 142

ADKNOWLEDGE INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

F-50
<PAGE> 143

ADKNOWLEDGE INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK NOTE
(NOTE 9) COMMON STOCK RECEIVABLE DEFERRED
------------------------ ----------------------- FROM STOCK-BASED
SHARES AMOUNT SHARES AMOUNT WARRANTS SHAREHOLDER COMPENSATION
---------- ----------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock........... -- $ -- 4,103,408 $ 23,000 $ -- $ -- $ --
Issuance of Series A preferred
stock............................. 525,000 105,000 -- -- -- -- --
Deferred stock-based compensation
related to options granted........ -- -- -- 175,220 -- -- (175,220)
Amortization of deferred
stock-based compensation.......... -- -- -- -- -- -- 17,678
Stock-based compensation related to
restricted stock issuance......... -- -- -- 546,691 -- -- --
Net loss........................... -- -- -- -- -- -- --
---------- ----------- ---------- ---------- ---------- -------- -----------
Balance at December 31, 1996....... 525,000 105,000 4,103,408 744,911 -- -- (157,542)
Issuance of Series B Convertible
Preferred Stock................... 5,512,000 2,600,010 -- -- -- -- --
Issuance of Series C Convertible
Preferred Stock in connection with
acquisition....................... 3,457,377 2,843,108 -- -- -- -- --
Issuance of Common Stock in
connection with acquisition....... -- -- 336,909 15,892 -- -- --
Exercise of Common Stock options... -- -- 1,694,813 53,117 -- (38,100) --
Issuance of warrants in connection
with acquisition.................. -- -- -- -- 247,507 -- --
Interest accrued on note receivable
from shareholder.................. -- -- -- -- -- (265) --
Deferred stock-based compensation
related to options granted........ -- -- -- 454,718 -- -- (454,718)
Amortization of deferred
stock-based compensation.......... -- -- -- -- -- -- 97,717
Net loss........................... -- -- -- -- -- -- --
---------- ----------- ---------- ---------- ---------- -------- -----------
Balance at December 31, 1997....... 9,494,377 5,548,118 6,135,130 1,268,638 247,507 (38,365) (514,543)
Issuance of Series D Convertible
Preferred Stock................... 11,636,298 6,448,411 -- -- -- -- --
Issuance of Series D Convertible
Preferred Stock upon conversion of
notes payable..................... 2,796,320 1,551,589 -- -- -- -- --
Exercise of Common Stock options... -- -- 309,535 18,335 -- -- --
Repurchase of Common Stock......... -- -- (1,167,530) (48,916) -- -- --
Deferred stock-based compensation
related to options granted........ -- -- -- 2,432,434 -- -- (2,432,434)
Issuance of warrants in conjunction
with debt......................... -- -- -- -- 272,410 -- --
Interest accrued on note receivable
from shareholder.................. -- -- -- -- -- (2,170) --
Amortization of deferred
stock-based compensation.......... -- -- -- -- -- -- 806,712
Net loss........................... -- -- -- -- -- -- --
---------- ----------- ---------- ---------- ---------- -------- -----------
Balance at December 31, 1998....... 23,926,995 13,548,118 5,277,135 3,670,491 519,917 (40,535) (2,140,265)
Issuance of Series E Convertible
Preferred Stock, net of stock
issuance costs.................... 15,555,557 13,925,674 -- -- -- -- --
Deferred stock compensation related
to options granted................ -- -- -- 4,004,139 -- -- (4,004,139)
Exercise of Common Stock options... -- -- 3,031,064 359,879 -- -- --
Compensation related to
acceleration of vesting of
employee stock option............. -- -- -- 14,484 -- -- --
Compensation related to issuance of
Common Stock to consultant........ -- -- 1,000 2,756 -- -- --
Repurchase of Common Stock......... -- -- (118,274) (5,452) -- -- --
Issuance of warrants in conjunction
with debt......................... -- -- -- -- 1,732,497 -- --
Interest accrued on note receivable
from shareholder.................. -- -- -- -- -- (1,627) --
Amortization of deferred
stock-based compensation.......... -- -- -- -- -- -- 699,987
Unrealized loss on investments..... -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- --
---------- ----------- ---------- ---------- ---------- -------- -----------
Balance at September 30, 1999
(unaudited)....................... 39,482,552 $27,473,792 8,190,925 $8,046,297 $2,252,414 $(42,162) $(5,444,417)
========== =========== ========== ========== ========== ======== ===========

UNREALIZED TOTAL
LOSS ON ACCUMULATED SHAREHOLDERS'
INVESTMENTS DEFICIT EQUITY
----------- ------------ -------------
<S> <C> <C> <C>
Issuance of common stock........... $ -- $ -- $ 23,000
Issuance of Series A preferred
stock............................. -- -- 105,000
Deferred stock-based compensation
related to options granted........ -- -- --
Amortization of deferred
stock-based compensation.......... -- -- 17,678
Stock-based compensation related to
restricted stock issuance......... -- -- 546,691
Net loss........................... -- (728,969) (728,969)
----- ------------ ------------
Balance at December 31, 1996....... -- (728,969) (36,600)
Issuance of Series B Convertible
Preferred Stock................... -- -- 2,600,010
Issuance of Series C Convertible
Preferred Stock in connection with
acquisition....................... -- -- 2,843,108
Issuance of Common Stock in
connection with acquisition....... -- -- 15,892
Exercise of Common Stock options... -- -- 15,017
Issuance of warrants in connection
with acquisition.................. -- -- 247,507
Interest accrued on note receivable
from shareholder.................. -- -- (265)
Deferred stock-based compensation
related to options granted........ -- -- --
Amortization of deferred
stock-based compensation.......... -- -- 97,717
Net loss........................... -- (2,914,069) (2,914,069)
----- ------------ ------------
Balance at December 31, 1997....... -- (3,643,038) 2,868,317
Issuance of Series D Convertible
Preferred Stock................... -- -- 6,448,411
Issuance of Series D Convertible
Preferred Stock upon conversion of
notes payable..................... -- -- 1,551,589
Exercise of Common Stock options... -- -- 18,335
Repurchase of Common Stock......... -- -- (48,916)
Deferred stock-based compensation
related to options granted........ -- -- --
Issuance of warrants in conjunction
with debt......................... -- -- 272,410
Interest accrued on note receivable
from shareholder.................. -- -- (2,170)
Amortization of deferred
stock-based compensation.......... -- -- 806,712
Net loss........................... -- (10,257,549) (10,257,549)
----- ------------ ------------
Balance at December 31, 1998....... -- (13,900,587) 1,657,139
Issuance of Series E Convertible
Preferred Stock, net of stock
issuance costs.................... -- -- 13,925,674
Deferred stock compensation related
to options granted................ -- -- --
Exercise of Common Stock options... -- -- 359,879
Compensation related to
acceleration of vesting of
employee stock option............. -- -- 14,484
Compensation related to issuance of
Common Stock to consultant........ -- -- 2,756
Repurchase of Common Stock......... -- -- (5,452)
Issuance of warrants in conjunction
with debt......................... -- -- 1,732,497
Interest accrued on note receivable
from shareholder.................. -- -- (1,627)
Amortization of deferred
stock-based compensation.......... -- -- 699,987
Unrealized loss on investments..... (584) -- (584)
Net loss........................... -- (14,145,798) (14,145,798)
----- ------------ ------------
Balance at September 30, 1999
(unaudited)....................... $(584) $(28,046,385) $ 4,238,955
===== ============ ============
</TABLE>

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

F-51
<PAGE> 144

ADKNOWLEDGE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JULY 10,
1996 (DATE OF FOR THE NINE MONTHS ENDED
INCEPTION) TO YEARS ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, -------------------------- --------------------------
1996 1997 1998 1998 1999
-------------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................. $(728,969) $(2,914,069) $(10,257,549) $(7,147,340) $(14,145,798)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization........... 4,121 68,225 1,465,074 1,056,898 1,556,949
Provision for doubtful accounts......... -- 87,820 199,422 153,310 218,304
Net (gain) loss on disposal of property
and equipment......................... -- -- 177,471 36,627 (458)
Forgiveness of related party note
receivable............................ -- -- 250,000 250,000 298,979
Noncash interest and other charges,
net................................... -- -- (20,689) (14,951) 193,647
Stock-based compensation and other
compensation charges.................. 564,369 97,717 806,712 639,832 717,227
Acquisition of in-process research and
development........................... -- 804,000 -- -- --
Changes in operating assets and
liabilities:
Accounts receivable................... (2,397) (304,398) (271,152) (234,417) (1,269,319)
Deposits.............................. -- -- (206,540) (164,861) 121,107
Prepaid expenses and other current
assets.............................. (5,700) 3,700 (187,996) (57,033) (220,895)
Accounts payable...................... 5,567 88,352 637,869 546,543 1,181,930
Accrued liabilities................... 38,749 35,163 (139,063) (193,226) 1,415,194
Deferred revenue...................... -- 102,269 322,255 479,851 27,665
--------- ----------- ------------ ----------- ------------
Net cash used in operating
activities........................ (124,260) (1,931,221) (7,224,186) (4,648,767) (9,905,468)
--------- ----------- ------------ ----------- ------------
Cash flows from investing activities:
Purchases of fixed assets................. (37,483) (366,959) (1,308,583) (906,304) (2,704,310)
Proceeds from sale of property and
equipment............................... -- -- 31,882 31,882 2,200
Purchases of short-term investments....... -- -- -- -- (2,018,877)
Maturities of short-term investments...... -- -- -- -- 1,000,000
Issuance of related party notes
receivable.............................. -- -- (325,000) (325,000) (147,712)
Decrease (increase) in other assets....... -- (9,100) 89,950 106,861 (82,896)
Increase in other liabilities............. -- -- -- -- 25,668
Increase in restricted cash............... -- (79,637) -- -- --
Cash acquired in acquisition of Focalink
Communications, Inc..................... -- 305,995 -- -- --
--------- ----------- ------------ ----------- ------------
Net cash used in investing
activities........................ (37,483) (149,701) (1,511,751) (1,092,561) (3,925,927)
--------- ----------- ------------ ----------- ------------
Cash flows from financing activities:
Issuance of loans to related parties...... -- (937,751) -- -- --
Proceeds from related party borrowings.... 250,000 150,000 1,150,000 1,150,000 --
Borrowings under capital lease
obligations............................. -- -- 949,968 629,587 349,534
Repayment of capital lease obligations.... -- -- (428,272) (272,745) (364,865)
Proceeds from line of credit.............. -- 500,000 -- -- --
Proceeds from issuance of notes payable... -- -- 1,500,000 -- 4,985,000
Repayment of notes payable................ -- (117,391) (72,332) (54,249) (1,667,003)
Proceeds from issuance of Common Stock.... 23,000 53,117 18,335 10,033 359,879
Payment for repurchase of Common Stock.... -- -- (48,916) (45,225) (5,452)
Proceeds from issuance of Preferred
Stock................................... 105,000 2,600,010 6,448,411 6,448,411 13,925,674
--------- ----------- ------------ ----------- ------------
Net cash provided by financing
activities........................ 378,000 2,247,985 9,517,194 7,865,812 17,582,767
--------- ----------- ------------ ----------- ------------
Net increase in cash and cash equivalents... 216,257 167,063 781,257 2,124,484 3,751,372
Cash and cash equivalents at beginning of
period.................................... -- 216,257 383,320 383,320 1,164,577
--------- ----------- ------------ ----------- ------------
Cash and cash equivalents at end of
period.................................... $ 216,257 $ 383,320 $ 1,164,577 $ 2,507,804 $ 4,915,949
========= =========== ============ =========== ============
</TABLE>

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

F-52
<PAGE> 145

ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company

AdKnowledge Inc., formerly ClickOver, Inc. (the "Company"), is a provider
of comprehensive internet advertising management and analytic services for
marketers and advertising agencies.

The Company was incorporated in California on July 10, 1996 under the name
of ClickOver, Inc. On February 6, 1998, the Company changed its name to
AdKnowledge Inc.

Basis of presentation

The Company has incurred losses and negative cash flows from operations
since inception. The Company's activities have been primarily financed through
private placements of equity securities, subordinated debentures and capital
lease financing. Management is seeking to increase revenues through the
marketing of its products and services while exploring other venues to fund
working capital requirements. The Company will be required to raise additional
capital through the issuance of debt or equity securities and capital lease
financing. Such financing may not be available on terms satisfactory to
AdKnowledge, if at all. There can be no assurance that sufficient revenues will
be achieved or additional financing will be available.

Principles of consolidation

The consolidated financial statements include the accounts of AdKnowledge
Inc. and its wholly-owned subsidiary, Focalink Communications, Inc. All
significant intercompany accounts and transactions have been eliminated.

Unaudited interim results

The accompanying interim financial statements as of September 30, 1999, and
for the nine months ended September 30, 1998 and 1999 are unaudited. The
unaudited interim financial statements have been prepared on the same basis as
the annual consolidated financial statements and, in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments
necessary to present fairly the Company's financial position as of September 30,
1999 and results of operations and cash flows for the nine months ended
September 30, 1998 and 1999. The financial data and other information disclosed
in these notes to consolidated financial statements related to these periods are
unaudited. The results for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999.

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 financial statements and
accompanying notes. Actual results could differ from those estimates.

Cash and cash equivalents and short-term investments

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company's
short-term investments are classified as available-for-sale as of the balance
sheet date and are reported at fair value, based on quoted market prices, with
unrealized gains and losses recorded in shareholders' equity on the consolidated
balance sheets.

F-53
<PAGE> 146
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

Restricted cash

Cash balances of $79,637 at December 31, 1997 and 1998 and September 30,
1999 were restricted from withdrawal and held by a bank in the form of
certificates of deposit. These certificates of deposit serve as collateral to a
letter of credit issued to the Company's landlord as a security deposit.

Fair value of financial instruments

Carrying amounts of certain of the Company's financial instruments
including cash and cash equivalents, receivables, deposits, borrowings under
line of credit, accounts payable and other accrued liabilities, and the current
portion of notes payable approximate fair value due to their short maturities.

Carrying amounts of long-term notes payable and capital leases are
considered to approximate fair value based upon comparable market information
available at the respective balance sheet dates.

Concentration of credit risk

Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents and accounts
receivable. The Company deposits its cash and cash equivalents in domestic
financial institutions. The Company's accounts receivable are derived from
revenue earned from customers located in the U.S. AdKnowledge sells and grants
credit for its services to its customers without requiring collateral or
third-party guarantees. The Company monitors customers' payment history and
establishes reserves for bad debt as warranted.

At December 31, 1998, one customer accounted for 10% of total accounts
receivable.

Fixed assets

Fixed assets are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally 3
to 5 years. Equipment acquired under capital leases is amortized on a
straight-line basis over the shorter of its lease term or estimated useful life,
generally three years. When fixed assets are retired or otherwise disposed of,
the cost and related accumulated depreciation are removed from the accounts and
the resulting gain or loss is included in income.

Long-lived assets

The Company accounts for long-lived assets under Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
the Company to review for impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets, whenever events or changes in
circumstances indicate that the carrying amount of an asset might not be
recoverable. When such an event occurs, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual disposition.
If the undiscounted expected future cash flows is less than the carrying amount
of the asset, an impairment loss is recognized. To date, no impairment loss has
been recognized.

Revenue recognition

For the year ended December 31, 1998, the Company's revenues were derived
primarily from the provision of ad delivery and associated management services
to its clients. The Company recognizes revenue at the time the services are
delivered, providing the Company does not have significant remaining obligations
and collection of the resulting receivable is probable. The Company recognizes
revenue from these services based

F-54
<PAGE> 147
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

on the number of advertisements delivered, as well as from monthly usage fees
for the Company's Web-based advertising management system.

For the year ended December 31, 1997, the Company's revenues were derived
primarily from the sale of software licenses to Web publishers and were
recognized in accordance with the provisions of Statement of Position 91-1,
"Software Revenue Recognition." The Company recognized revenue from the sale of
software licenses upon shipment if remaining obligations were insignificant and
collection of the resulting receivable was probable. Revenue from software
maintenance contracts, including amounts unbundled from product sales, was
deferred and recognized ratably over the period of the contract.

Research and development costs

Research and development expenditures are charged to operations as
incurred.

Advertising costs

Costs related to advertising and promotion of products is charged to sales
and marketing expense as incurred. Advertising cost charged to expenses for the
period from July 10, 1996 (date of inception) to December 31, 1996 and for the
years ended December 31, 1997 and 1998 were approximately none, $175,251 and
$292,218, respectively.

Income taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires an asset and liability
approach to financial accounting and reporting for income taxes. Accordingly,
deferred tax assets and liabilities arise from the differences between the tax
basis of an asset or liability and their reported amounts in the financial
statements, or from the tax benefit of net operating loss carryforwards.
Deferred tax amounts are determined using the tax rates expected to be in effect
when the taxes will actually be paid or refunds received, as provided under
currently enacted tax law. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.

Stock-based compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation
expense is based on the difference, if any, on the date of the grant, between
the fair value of the Company's stock and the exercise price of the option. The
Company accounts for equity instruments issued to nonemployees in accordance
with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF")
96-18.

Comprehensive income

The Company adopted the provisions of SFAS No. 130, Reporting Comprehensive
Income. This statement requires companies to classify items of other
comprehensive income by their nature in the financial statements and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. The Company had no comprehensive income items to report through December
31, 1998 and an insignificant amount of unrealized loss on investments in the
nine months ended September 30, 1999.

F-55
<PAGE> 148
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

Segment information

In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS No. 131 supersedes FAS 14, "Financial Reporting for Segments
of a Business Enterprise," replacing the "industry segment" approach with the
"management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. SFAS
No. 131 also requires disclosures about products and services, geographic areas,
and major customers. The Company conducts its business within one business
segment primarily within the U.S.

Certain risks and uncertainties

The Company's products and services are concentrated in the Internet
advertising industry which is characterized by rapid technological advances,
changes in customer requirements and evolving regulatory requirements and
industry standards. Any failure by the Company to anticipate or to respond
adequately to technological developments in its industry, changes in customer
requirements or changes in regulatory requirements or industry standards, or any
significant delays in the development or introduction of products or services,
could have a material adverse effect on the Company's business and operating
results.

Recent accounting pronouncements

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1
is effective for financial statements for years beginning after December 15,
1998. SOP 98-1 provides guidance over accounting for computer software developed
or obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. The adoption of this standard did not have
a material impact on the Company's results of operations, financial positions or
cash flows.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities". SOP 98-5, which is effective for fiscal years beginning
after December 15, 1998, provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. As the Company has
historically expensed these costs, the adoption of SOP 98-5 did not have a
significant impact on its results of operations, financial positions or cash
flows.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 is effective for fiscal
quarters beginning after June 15, 2000. The Company is evaluating the
requirements of SFAS No. 133.

NOTE 2--ACQUISITION OF FOCALINK COMMUNICATIONS, INC.:

On December 31, 1997, the Company completed its acquisition of Focalink
Communications, Inc. ("Focalink") for approximately $5,505,000, including
acquisition costs of $208,000 and liabilities assumed of $2,190,439. Focalink
was primarily engaged in the development of software tools to evaluate, place
and manage advertising campaigns on the Internet. The acquisition was accounted
for as a purchase and resulted in a one-time write-off of $804,000 for purchased
in-process research and development for which there was no alternative future
use and for which technological feasibility has not been established. The
balance of the purchase price in excess of tangible net assets acquired was
allocated to purchased technology and goodwill of

F-56
<PAGE> 149
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

$1,007,000 and $2,149,096, respectively. The Company is amortizing the purchased
technology and goodwill on a straight-line basis over three and five years,
respectively.

In connection with the acquisition, the Company issued 336,909 shares of
Common Stock and a total of 3,457,377 shares of Series C (issued as Series C-1,
C-2 and C-3) Convertible Preferred Stock valued at an aggregate of $2,859,000 in
exchange for the outstanding common and preferred stock of Focalink as well as
$4,367,000 of long term debt. The Company also issued warrants to purchase
176,197 shares of Series C Convertible Preferred Stock at prices ranging from
$1.80 to $7.02 per share and valued at $247,507.

The following (unaudited) pro forma summary represents the results of
operation as if the acquisition of Focalink had occurred at the beginning of the
period presented.

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JULY 10, 1996
(DATE OF
INCEPTION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------- ------------
<S> <C> <C>
Pro forma net revenue...................................... $ 94,040 $1,777,911
Pro forma net loss......................................... $4,568,637 $9,840,178
</TABLE>

In-process research and development charges of $804,000 were excluded from
the pro forma net loss for the year ended December 31, 1996. The pro forma
results are not necessarily indicative of what actually would have occurred if
the acquisition had been effected at the beginning of the period presented and
may not be indicative of future results.

NOTE 3--SUPPLEMENTAL CASH FLOW INFORMATION:

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JULY 10, FOR THE NINE
1996 (DATE OF SEPTEMBER 30,
INCEPTION) TO YEAR ENDED DECEMBER 31, MONTHS ENDED
DECEMBER 31, ----------------------- -----------------------
1996 1997 1998 1998 1999
---------------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest............. $-- $ 21,993 $ 233,128 $ 162,134 $ 408,575
Supplemental noncash investing and
financing activity:
Noncash assets and liabilities
acquired from Focalink
Communications, Inc.:
Net current liabilities....... -- (380,303) -- -- --
Property and equipment, net... -- 868,367 -- -- --
Goodwill...................... -- 2,149,096 -- -- --
Other intangible assets....... -- 1,007,000 -- -- --
Other assets.................. -- 129,342 -- -- --
Related party payable......... -- (250,000) -- -- --
Capital leases................ -- (890,456) -- -- --
Issuance of Common Stock, Preferred
Stock and warrants for
acquisition of Focalink
Communications, Inc.............. $-- $3,106,507 $ -- $ -- $ --
== ========== ========== ========== ==========
Note receivable issued on exercise
of stock options................. $-- $ 38,100 $ -- $ -- $ --
== ========== ========== ========== ==========
</TABLE>

F-57
<PAGE> 150
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JULY 10, FOR THE NINE
1996 (DATE OF SEPTEMBER 30,
INCEPTION) TO YEAR ENDED DECEMBER 31, MONTHS ENDED
DECEMBER 31, ----------------------- -----------------------
1996 1997 1998 1998 1999
---------------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest accrued on note receivable
from shareholder................. $-- $ 265 $ 2,170 $ 1,627 $ 1,627
== ========== ========== ========== ==========
Property and equipment acquired
under capital leases............. $-- $ -- $1,007,772 $ 667,750 $1,353,840
== ========== ========== ========== ==========
Conversion of notes payable to
Series D
Convertible Preferred Stock...... $-- $ -- $1,551,589 $1,551,589 $ --
== ========== ========== ========== ==========
Conversion of borrowing under line
of credit to term note........... $-- $ -- $ 500,000 $ -- $ --
== ========== ========== ========== ==========
Issuance of warrants in conjunction
with debt........................ $-- $ -- $ 272,410 $ 33,836 $1,732,497
== ========== ========== ========== ==========
</TABLE>

NOTE 4--FIXED ASSETS:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
FIXED ASSETS, NET:
Computer equipment and software............................. $1,109,710 $2,321,488
Furniture, fixtures and office equipment.................... 172,898 199,079
---------- ----------
1,282,608 2,520,567
Less: Accumulated depreciation and amortization............. (72,346) (910,663)
---------- ----------
$1,210,262 $1,609,904
========== ==========
</TABLE>

Fixed assets includes $1,246,451 and $1,912,414 of assets under capital
leases at December 31, 1997 and 1998, respectively. Accumulated amortization of
assets under capital leases totaled $469,979 and $754,672 at December 31, 1997
and 1998, respectively.

NOTE 5--RELATED PARTY TRANSACTIONS:

At December 31, 1998, the Company had notes receivable from officers and
shareholders in the amounts of $40,535, (including interest) for the purchase of
common stock (included in shareholders' equity) and $625,023 which was borrowed
for other personal reasons. The notes bear interest at rates of 5.56% to 5.69%
and are due at various dates through March 31, 2002. Notes in the amount of
$275,599 are collateralized by a deed of trust on a residence and $389,959 of
the notes are collateralized by common stock of the Company. Notes in the amount
of $208,385 are without recourse, except to the extent of the common stock held
as collateral.

In August 1999, the Company forgave a note receivable from an officer in an
aggregate amount of $298,979, including accrued interest. Such amount was
recorded as a charge to general and administrative expenses in the third quarter
of 1999. Concurrent with the forgiveness of this note, the Company issued the
officer a note in the amount of $147,714 for the purpose of enabling such
officer to pay taxes associated with the forgiveness of the related note. This
note bears interest at a rate of 5.43%, is collateralized by common stock of the
Company and is payable upon the earlier of the occurrence of certain specified
events or in August 2002.

F-58
<PAGE> 151
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

During the year ended December 31, 1998, the Company incurred $223,000 of
expenses for business consulting services rendered by two shareholders and one
former executive of the Company.

In addition, the Company issued 2,345,300 shares of Series D Preferred
Stock in March 1998 in exchange for a note payable to an investor in the amount
of $1,300,000. The note was issued in January 1998 with warrants to purchase
117,265 shares of common stock. The warrant was cancelled in connection with the
note conversion. The Company also assumed a loan in the amount of $251,589 from
an investor in connection with the acquisition of Focalink, which loan was
converted to 451,020 shares of Series D Preferred Stock in March 1998.

NOTE 6--INCOME TAXES:

Deferred tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $4,349 $6,367
Accruals and reserves.................................. 86 130
Research credits....................................... 109 294
Depreciation........................................... (148) 119
Other.................................................. 76 104
------ ------
4,472 7,014
------ ------
Valuation allowance......................................... (4,472) (7,014)
------ ------
$ -- $ --
====== ======
</TABLE>

Due to uncertainties surrounding the use of the deferred tax assets, a full
valuation allowance has been recorded.

At December 31, 1998, the Company had approximately $16 million of federal
and $15.8 million of state net operating loss carryforwards available to offset
future taxable income which expire in varying amounts between 1998 and 2011.
Under the Tax Reform Act of 1986, the amounts of and benefits from net operating
loss carryforwards may be impaired or limited in certain circumstances. Events
which cause limitations in the amount of net operating losses that the Company
may utilize in any one year include, but are not limited to, a cumulative
ownership change of more than 50%, as defined, over a three year period. Given
the equity changes that have occurred during the years ended December 31, 1997
and 1998, the Company has likely incurred an ownership change and the
utilization of its net operating losses are subject to such limitations.

F-59
<PAGE> 152
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

NOTE 7--BORROWINGS:

The following amounts were outstanding at December 31, 1997 and 1998:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
-------- ----------
<S> <C> <C>
Revolving line of credit, interest at prime plus 2% (9.75%
at December 31, 1997)(1).................................. $500,000 $ --
Equipment line of credit, interest at prime plus 2% (9.75%
at December 31, 1997)(1).................................. 204,942 --
Term loan payable monthly through February 2001, interest at
prime plus 2% (9.75% at December 31, 1998)(2)............. -- 500,000
Equipment loan payable monthly through October 2000,
interest at prime plus 2% (9.75% at December 31,
1998)(2).................................................. -- 132,610
Note payable under combined master lease, subordinated loan
agreement and letter of credit facility, interest at
13%(3).................................................... -- 1,500,000
</TABLE>

- ---------------
1. The revolving line of credit and equipment line of credit were converted into
the respective term and equipment loans in December 1998.

2. The term loan and equipment loan are subject to various financial covenants
with which the Company was in compliance at December 31, 1998.

3. Under the combined master lease, subordinated loan agreement and line of
credit facility, the Company has an aggregate credit facility of
approximately $4,000,000. Amounts borrowed under this facility are
collateralized by substantially all of the Company's assets and are
subordinated to the Company's term and equipment loans. The agreement
contains various financial and operating covenants with which the Company was
in compliance at December 31, 1998. Under the agreement the Company has
obtained a letter of credit for $526,000 used as a deposit for the lease of
its corporate headquarters. If the letter of credit is drawn upon, the
Company will be required to repay the amount used over a two-year period with
interest at 14% per year. The Company is charged a facility fee equal to 1%
of the letter of credit balance per year.

Some of the debt and capital leases restrict the payment of dividends.

In February 1999, the Company repaid $1,250,000 of the Note payable and
converted the balance into a term note payable for $9,823 per month through
August 2001 with interest at 13%. In addition, the Company borrowed an
additional $1,000,000 in January 1999 with interest at 13%, and payable monthly
through August 2001.

In August 1999, the Company entered into a subordinated loan agreement and
secured promissory note for $4,000,000. Amounts borrowed under this note are
collateralized by substantially all of the Company's assets and are subordinated
to the Company's term and equipment loans. Borrowings will be repaid in thirty-
six equal monthly payments of principal and interest at a rate of 13.3% per
annum, through September 2002. In connection with this note, the Company paid a
facility fee of $40,000 and granted the lender warrants to purchase up to
711,112 shares of Series E Convertible Preferred Stock at an exercise price
which shall be between $0.90 and $1.10 per share. These warrants expire at the
later of 10 years from the issue date or five years from an initial public
offering of the Company's common stock. The fair value of these warrants of
$1,694,738, (valued under the Black-Scholes model) has been accounted for as
debt discount and is included with other current and long-term assets at
September 30, 1999. As of September 30, 1999, the fair value of warrants
aggregating $683,451 and $1,195,110 are accounted for as debt discount and are
included as components of other current assets and other assets, respectively.

F-60
<PAGE> 153
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

Future minimum principal payments under notes payable at December 31, 1998,
are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1999........................................................ $ 1,597,053
2000........................................................ 451,760
2001........................................................ 83,797
-----------
2,132,610
Less current portion........................................ (1,597,053)
-----------
$ 535,557
===========
</TABLE>

Future minimum principal payments under notes payable at September 30,
1999, are as follows:

<TABLE>
<CAPTION>
PERIOD ENDING
DECEMBER 31,
- -------------
<S> <C>
1999........................................................ $ 471,690
2000........................................................ 2,009,747
2001........................................................ 1,830,833
2002........................................................ 1,153,337
-----------
5,465,607
Less current portion........................................ (1,966,883)
-----------
$ 3,498,724
===========
</TABLE>

NOTE 8--COMMITMENTS:

Capital and operating leases

In November 1998, the Company entered into a new operating lease agreement
for its corporate headquarters. This lease commenced in January 1999 and expires
in December 2004. The Company also leases other office space and equipment under
noncancelable operating and capital leases with various expiration dates through
2003. Effective July 1999, the Company entered into a new operating lease
agreement for its New York office. This lease commenced in October 1999 and
expires in October 2004.

In July 1999, the Company entered into noncancelable capital leases
totaling $349,534 which expire in 2003.

F-61
<PAGE> 154
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

Future minimum lease payments under noncancelable operating and capital
leases and future minimum sublease rental receipts under noncancelable operating
leases at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED CAPITAL OPERATING SUBLEASE
DECEMBER 31, LEASES LEASES INCOME
- ------------ ---------- ---------- --------
<S> <C> <C> <C>
1999................................................ $ 699,319 $1,322,281 $390,912
2000................................................ 484,179 1,285,018 332,048
2001................................................ 379,617 1,219,726 256,680
2002................................................ 217,237 973,171 --
2003................................................ -- 984,788 --
Thereafter.......................................... -- 1,017,068 --
---------- ---------- --------
Total minimum lease payments and sublease income.... 1,780,352 $6,802,052 $979,640
========== ========
Less: Amount representing interest.................. (368,200)
----------
Present value of capital lease obligations.......... 1,412,152
Less: Current portion............................... (509,606)
----------
Long-term portion of capital lease obligations...... $ 902,546
==========
</TABLE>

Future minimum lease payments under noncancelable operating and capital
leases and future minimum sublease rental receipts under noncancelable operating
leases at September 30, 1999 are as follows:

<TABLE>
<CAPTION>
PERIOD ENDED CAPITAL OPERATING SUBLEASE
DECEMBER 31, LEASES LEASES INCOME
- ------------ ---------- ---------- --------
<S> <C> <C> <C>
1999................................................ $ 240,906 $ 357,079 $103,233
2000................................................ 984,743 1,428,135 332,048
2001................................................ 1,016,843 1,375,854 256,680
2002................................................ 580,770 1,130,064 --
2003................................................ 52,430 1,150,100 --
Thereafter.......................................... -- 1,168,604 --
---------- ---------- --------
Total minimum lease payments and sublease income.... 2,875,692 $6,609,836 $691,961
========== ========
Less: Amount representing interest.................. (483,013)
----------
Present value of capital lease obligations.......... 2,392,679
----------
Less: Current portion............................... (708,965)
----------
Long-term portion of capital lease obligations...... $1,683,714
==========
</TABLE>

In 1999 the Company entered into an agreement with an applications service
provider which requires payments of up to $603,000 through May 2002. This
agreement is cancellable upon specified conditions.

F-62
<PAGE> 155
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

NOTE 9--CONVERTIBLE PREFERRED STOCK:

Convertible Preferred Stock at December 31, 1998 and September 30, 1999,
consists of the following:

<TABLE>
<CAPTION>
SERIES SHARES AMOUNT
- ------ ------ ------
<S> <C> <C>
A................................................ 525,000 $ 105,000
B................................................ 5,512,000 2,600,010
C-1.............................................. 569,525 468,644
C-2.............................................. 605,122 497,421
C-3.............................................. 2,282,730 1,877,043
D................................................ 14,432,618 8,000,000
---------- -----------
December 31, 1998................................ 23,926,995 13,548,118
E................................................ 15,555,557 13,925,674
---------- -----------
September 30, 1999............................... 39,482,552 $27,473,792
========== ===========
</TABLE>

The holders of Convertible Preferred Stock have various rights and
preferences as follows:

Voting

Each share of Series A, B, C-1, C-2, C-3, D and E Convertible Preferred
Stock has voting rights equal to an equivalent number of shares of Common Stock
into which it is convertible and votes together as one class with the Common
Stock.

As long as at least 25% of the shares of any Series of Convertible
Preferred Stock remain outstanding, the Company must obtain approval from a
majority of the holders of Convertible Preferred Stock in order to (1) amend the
Articles of Incorporation or by laws as related to Convertible Preferred Stock,
(2) change the authorized or issued number of shares of Convertible Preferred
Stock, (3) alter or change the rights, preferences or privileges of the shares
of any series of Preferred Stock so as to adversely affect the shares, (4)
create a new class of stock or effect a merger, consolidation or sale of assets
where the existing shareholders retain less than 50% of the voting stock of the
surviving entity.

Dividends

Holders of Series A, B, C-1, C-2, C-3, D and E Convertible Preferred Stock
are entitled to receive noncumulative dividends at the per annum rate of $0.01,
$0.03, $0.05, $0.21, $0.12, $0.04 and $0.63 per share, respectively, when and if
declared by the Board of Directors. The holders of Series A, B, C-1, C-2, C-3, D
and E Convertible Preferred Stock will also be entitled to participate in
dividends on Common Stock, when and if declared by the Board of Directors, based
on the number of shares of Common Stock held on an as-if converted basis. No
dividends on Convertible Preferred Stock or Common Stock have been declared by
the Board of Directors from inception through December 31, 1998.

Liquidation

In the event of any liquidation, dissolution or winding up of the Company,
including a merger, acquisition or sale of assets where the beneficial owners of
the Company's Common Stock and Convertible Preferred Stock own less than 50% of
the resulting voting power of the surviving entity, the holders of Series A, B,
C-1, C-2, C-3, D and E Convertible Preferred Stock are entitled to receive an
amount of $0.20, $0.4717, $0.8451, $3.2981, $1.9129, $0.5543 and $0.90 per
share, respectively, plus any declared but unpaid dividends prior to and in
preference to any distribution to the holders of Common Stock. The remaining
assets, if any, shall be

F-63
<PAGE> 156
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

distributed until the Series A, B, C-1, C-2, C-3, D and E shall have in the
aggregate an amount equal to $0.80, $1.8868, $3.3804, $13.1924, $7.6516, $2.2172
and $3.60 per share. Should the Company's legally available assets be
insufficient to satisfy the liquidation preferences, the funds will be
distributed pro rata in proportion to the Series A, B, C-1, C-2, C-3, D and E
Convertible Preferred Stock ownership.

Conversion

Each share of Series A, B, C-1, C-2, C-3, D and E Convertible Preferred
Stock is convertible into shares of Common Stock, at the option of the holder,
according to a conversion ratio and subject to adjustment for dilution. Each
share of Series A, B, C-1, C-2, C-3, D and E Convertible Preferred Stock
automatically converts into the number of shares of Common Stock into which such
shares are convertible at the then effective conversion ratio upon: (1) the
closing of a public offering of Common Stock at a per share price of not less
than $1.6629 per share as of December 31, 1998 and $2.70 per share as of
September 30, 1999 with gross proceeds of not less than $10 million, (2) the
consent of the holders of the majority of Convertible Preferred Stock. At
December 31, 1998 the Company had reserved approximately 25 million shares of
common stock for the conversion of the preferred stock. In 1999 the number of
shares of common stock reserved for conversion of preferred stock was increased
to approximately 42 million.

Warrants

At December 31, 1998, there were warrants to purchase 706,166 shares of
Series D Convertible Preferred Stock at prices ranging from $0.69 to $0.90 per
share, and warrants to purchase 176,197 shares of Series C Convertible Preferred
Stock at prices ranging from $1.80 to $7.02 per share outstanding and
exercisable. The Series C warrants were issued in connection with the
acquisition of Focalink (see Note 2) and expire through 2006. The fair value of
these warrants, $247,507 (valued under the Black-Scholes model) was included in
the purchase price. The Series D warrants were issued in connection with the
various financings in 1998 and expire at the earlier of 10 years from the issue
date or five years from an initial public offering of the Company's common
stock. The fair value of these warrants, $272,410 (valued under the
Black-Scholes model), has been accounted for as debt discount and has been
included with other current and long term assets. The Company amortized $18,753
of such discount in 1998.

In February 1999, in conjunction with leases entered into, the Company
granted the lender warrants to purchase 55,555 shares of Series E Convertible
Preferred Stock at $0.90 per share. These warrants expire at the earlier of 10
years from the issue date or five years from an initial public offering of the
Company's common stock. The fair value of these warrants, $37,759 (valued under
the Black-Scholes model), has been accounted for as debt discount and has been
included with other current and long term assets.

Restricted Stock Purchase Agreement

The Company sold Common Stock to certain employees under restricted
purchase agreements under which the Company had the right to repurchase the
shares in the event the employee terminated employment. In 1996, the repurchase
right with respect to 1,952,468 unvested shares was waived. As a result,
$546,691 of compensation expenses, equal to the difference between the purchase
price of the stock and the then current value, was charged to operations. The
repurchase right with respect to all other shares had expired at December 31,
1998.

NOTE 10--STOCK OPTION PLANS:

In 1996 and 1998, the Company adopted the 1996 and 1998 Stock Option Plans
(the "Plans"), respectively. The Plans provide for the granting of stock options
to employees, non-employee Board members and consultants of the Company. Options
granted under the Plan may be either incentive stock options or
F-64
<PAGE> 157
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

nonqualified stock options. Incentive stock options ("ISO") may be granted only
to Company employees. Nonqualified stock options ("NSO") may be granted to
Company employees, non-employee Board members and consultants. The Company has
reserved 7,521,592 and 1,372,286 shares of Common Stock for issuance under the
1996 Stock Option Plan and the 1998 Stock Option Plan, respectively.

Options under the Plans may be granted for periods of up to ten years and
at prices no less than 85% of the estimated fair value of the shares on the date
of grant as determined by the Board of Directors, provided, however, that (i)
the exercise price of an ISO and NSO shall not be less than 100% and 85% of the
estimated fair value of the shares on the date of grant, respectively, and (ii)
the exercise price of an ISO and NSO granted to a 10% shareholder shall not be
less than 110% of the estimated fair value of the shares on the date of grant
and the option term cannot exceed five years from the date of grant. Options are
exercisable immediately, subject to a right of repurchase by the Company of
unvested shares. To date, options granted generally vest over four years. At
December 31, 1997 and 1998, 629,426 and 1,238,682 shares of Common Stock,
including shares under unexercised options, were subject to repurchase,
respectively. There were no shares subject to repurchase at December 31, 1996.

During 1998, the Company recorded $35,263 of deferred stock compensation
for the fair value of 78,367 options granted in 1998 to non-employees (valued
under the Black-Scholes model). The compensation expense is being recognized
over the period of service.

The following table summarizes information about stock options at December
31, 1996, 1997 and 1998 and at September 30, 1999:

<TABLE>
<CAPTION>
WEIGHTED
OPTIONS AVERAGE
AVAILABLE NUMBER OF EXERCISE AGGREGATE EXERCISE
FOR GRANT OPTIONS PRICE PRICE PRICE
--------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Options reserved--1996 Stock Option
Plan............................... 3,321,592
Options granted...................... (625,000) 625,000 $ 0.01 $ 6,250 $ 0.01
---------- ---------- ---------- -------
Balances, December 31, 1996.......... 2,696,592 625,000 6,250 0.01
Options reserved..................... 200,000 -- --
Options granted...................... (1,827,255) 1,827,255 0.01-0.0472 73,823 0.0402
Options exercised.................... -- (1,694,813) 0.01-0.0472 (53,117) 0.0313
Options canceled..................... 63,000 (63,000) 0.0472 (2,972) 0.0472
---------- ---------- ---------- -------
Balances, December 31, 1997.......... 1,132,337 694,442 23,984 0.0345
Options reserved..................... 4,000,000 -- --
Stock repurchases.................... 1,167,530 -- --
Options reserved--1998
Stock Option Plan.................... 1,372,286 -- --
Options granted...................... (6,345,885) 6,345,885 0.06 382,815 0.0603
Options exercised.................... -- (309,535) 0.0236-0.06 (18,335) 0.0592
Options canceled..................... 873,295 (873,295) 0.0236-0.06 (50,783) 0.0582
---------- ---------- ---------- -------
Balances, December 31, 1998.......... 2,199,563 5,857,497 337,681 0.0576
Stock repurchases.................... 118,274 -- --
Options granted...................... (2,857,391) 2,857,391 0.06-1.50 1,373,092 0.4805
Options exercised.................... -- (3,031,064) 0.0236-1.00 (359,880) 0.1187
Options canceled..................... 1,506,202 (1,506,202) 0.0472-0.50 (115,393) 0.0766
---------- ---------- ---------- -------
Balances, September 30, 1999......... 966,648 4,177,622 $1,235,500 $0.2957
========== ========== ========== =======
</TABLE>

F-65
<PAGE> 158
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
AT DECEMBER 31, 1998
----------------------------------------
WEIGHTED
AVERAGE WEIGHTED
RANGE OF REMAINING AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE
PRICE OUTSTANDING LIFE PRICE
- -------- ----------- ----------- --------
<S> <C> <C> <C>
$0.02360................................. 282,702 8.33 $0.02
$0.04717................................. 268,240 8.79 $0.05
$0.06000................................. 5,306,555 9.45 $0.06
---------
5,857,497
=========
</TABLE>

Under APB No. 25, compensation expense is recognized based on the amount by
which the fair value of the underlying common stock exceeds the exercise price
of the stock options at the measurement date, which in the case of employee
stock options is typically the date of grant. For financial reporting purposes,
the Company has determined that the deemed fair market value on the date of
grant of certain employee stock options was in excess of the exercise price of
the options. This amount is recorded as deferred stock-based compensation and is
classified as a reduction of shareholders' equity and is amortized as a charge
to operations over the vesting period of the applicable options. The vesting
period is generally four years. Consequently, the Company recorded deferred
stock-based compensation of $175,220, $454,718, $2,432,434, and $4,004,139
during the period from July 10, 1996 (date of inception) to December 31, 1996,
during the years ended December 31, 1997 and 1998, and during the nine months
ended September 30, 1999, respectively. Amortization recognized for the period
from July 10, 1996 (date of inception) to December 31, 1996 and for the years
ended December 31, 1997 and 1998 and the nine months ended September 30, 1999
totaled $17,678, $97,717, $806,712 and $699,987, respectively. The Company's
stock option grants and related deemed fair value are as follows:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF WEIGHTED AVERAGE
OPTIONS AVERAGE DEEMED
GRANTED EXERCISE PRICE FAIR VALUE
--------- -------------- ----------
<S> <C> <C> <C>
For the period from July 10, 1996 (date
of inception) to December 31, 1996:
Options granted at deemed fair value.... -- $ -- $ --
Options granted below deemed fair
value................................. 625,000 0.01 0.29
--------- ----- -----
Total......................... 625,000 $0.01 $0.29
========= ===== =====
For the year ended December 31, 1997:
Options granted at deemed fair value.... -- $ -- $ --
Options granted below deemed fair
value................................. 1,827,255 0.04 0.29
--------- ----- -----
Total......................... 1,827,255 $0.04 $0.29
========= ===== =====
For the year ended December 31, 1998:
Options granted at deemed fair value.... -- $ -- $ --
Options granted below deemed fair
value................................. 6,345,885 0.06 0.50
--------- ----- -----
Total......................... 6,345,885 $0.06 $0.50
========= ===== =====
For the period ended September 30, 1999:
Options granted at deemed fair value.... -- $ -- $ --
Options granted below deemed fair
value................................. 2,857,391 0.48 2.13
--------- ----- -----
Total......................... 2,857,391 $0.48 $2.13
========= ===== =====
</TABLE>

F-66
<PAGE> 159
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

Pro forma stock-based compensation

The Company accounts for employee stock options under APB Opinion No. 25.
Had the Company determined compensation expense under SFAS No. 123, the effect
on the Company's net earnings would have been insignificant. These pro forma
results are not necessarily indicative of results which may be expected in the
future as additional grants are made each year and options vest over several
years. The weighted average fair value of the options and warrants granted or
modified for the period ended December 31, 1996, and the years ended December
31, 1997 and 1998 was $0.0022, $0.0086 and $0.0114, respectively.

The following weighted average assumptions were used in the above
calculations:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk free interest rate..................................... 6.36% 6.23% 5.24%
Expected life............................................... 4 years 4 years 4 years
Volatility.................................................. -- -- --
Dividend yield.............................................. -- -- --
</TABLE>

NOTE 11--EMPLOYEE BENEFIT PLAN:

In January 1, 1998, the Company adopted the savings plan under Section
401(k) of the Internal Revenue Code of Focalink Communications, Inc. There were
no contributions made by the Company in 1998.

NOTE 12--MERGER AND CONTRIBUTION AGREEMENT (UNAUDITED):

On August 27, 1999, the Company filed a Registration Statement on Form S-1
with the Securities and Exchange Commission ("SEC"). On September 30, 1999, the
Company filed a Request for Withdrawal of its Form S-1 with the SEC because it
entered into the merger and contribution agreement described below. In
connection with the withdrawal of its Form S-1, the Company recorded a charge to
operations of $772,686 for the write-off of deferred initial public offering
costs in September 1999.

On September 23, 1999, the Company signed an agreement pursuant to which it
agreed to be acquired by Engage Technologies, Inc. ("Engage"), a provider of
products and services that enable customers to create and use profiles of
individual Web visitors to target advertisements, content and e-commerce
offerings. Upon completion of the transaction, the Company will become a
wholly-owned subsidiary of Engage, which is a majority owned subsidiary of CMGI,
Inc. ("CMGI"). Under the terms of the merger and contribution agreement, CMGI
will initially acquire control of the Company through the issuance of
approximately $170 million of CMGI common stock in a merger of a subsidiary of
CMGI into the Company. The value of the CMGI common stock being delivered is
based on $84.80, the average of the last reported sales prices of the CMGI
common stock over the 45 consecutive trading days ending on September 20, 1999,
which value may be adjusted upward by up to 10% or downward by up to 10% based
upon the average of the last reported sales prices of such stock over the 45
consecutive trading days ending two trading days prior to the effective time of
this merger.

Upon completion of this merger, CMGI will own approximately 88% of the
Common Stock of the Company. This merger will be followed by a contribution of
the Company's shares held by CMGI and the Company's shareholders to Engage in
exchange for approximately $193 million of Engage common stock. The value of the
Engage common stock being delivered is $31.45, the average of the last reported
sales prices of Engage common stock over the 45 consecutive trading days ending
on September 20, 1999 and may be adjusted upward or downward in the same manner
as the CMGI stock described above. Any remaining holders of AdKnowledge Common
Stock will receive Engage common stock in a short-form merger with a subsidiary
of Engage.

F-67
<PAGE> 160
ADKNOWLEDGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1999 IS UNAUDITED)

The transaction, which will be accounted for as a purchase, is subject to
certain conditions, regulatory approval and the shareholder approval of Engage
and AdKnowledge. In connection with the merger and contribution, the Company
amended its Articles of Incorporation in November 1999 to authorize 114,000,000
shares of Common Stock for issuance, of which 58,000,000 shall be Common Stock,
no par value, and 56,000,000 shall be Class B Common Stock, par value $0.01. In
addition, the Company is authorized through this amendment to issue an
additional 7,500,000 shares of Convertible Preferred Stock, designated as Series
F, no par value.

NOTE 13--COMPUTATION OF NET LOSS PER SHARE:

Basic net loss per share is computed by dividing net income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted net income per share is computed giving effect to all
dilutive potential common shares that were outstanding during the period.
Dilutive potential common equivalent shares consist of the incremental common
shares issuable upon exercise of stock options.

A reconciliation of the numerator and denominator of basic and diluted net
income per share is provided as follows:

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JULY 10, 1996
(DATE OF FOR THE NINE MONTHS
INCEPTION) TO YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
DECEMBER 31, -------------------------- --------------------------
1996 1997 1998 1998 1999
--------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Numerator--Net loss per
share, basic and diluted:
Net Loss................ $(728,969) $(2,914,069) $(10,257,549) $(7,147,340) $(14,145,798)
========= =========== ============ =========== ============
Denominator--Net loss per
share, basic and diluted:
Weighted average common
shares outstanding.... 1,880,729 4,886,242 5,753,222 5,540,441 6,456,294
========= =========== ============ =========== ============
Net loss per share--basic and
diluted.................... $ (0.39) $ (0.60) $ (1.78) $ (1.29) $ (2.19)
========= =========== ============ =========== ============
</TABLE>

F-68
<PAGE> 161

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Focalink Communications, Inc.

In our opinion, the accompanying balance sheet and the related statement of
operations, shareholders' equity and cash flows present fairly, in all material
respects, the financial position of Focalink Communications, Inc. at December
31, 1997, and the results of its operations and cash flows for the year ended
December 31, 1997 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

San Jose, California
June 25, 1999

F-69
<PAGE> 162

FOCALINK COMMUNICATIONS, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 305,995
Accounts receivable, net of allowance for doubtful
accounts of $26,426 at December 31, 1997............... 237,796
Prepaid expenses and other current assets................. 2,300
------------
Total current assets................................. 546,091
Property and equipment, net................................. 868,367
Other assets................................................ 129,342
------------
Total assets......................................... $ 1,543,800
============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 312,461
Accrued payroll and related liabilities................... 58,187
Other accrued liabilities................................. 123,904
Deferred revenue.......................................... 125,845
Capital lease obligations, current........................ 374,782
------------
Total current liabilities............................ 995,179
Capital lease obligations, long-term........................ 515,674
Notes payable, long-term.................................... 5,027,000
------------
6,537,853
------------
Shareholders' equity:
Series A Preferred Stock: $0.001 par value; 2,500,000
shares authorized; 2,500,000 shares issued and
outstanding............................................ 2,500
Series B Preferred Stock: $0.001 par value; 2,700,000
shares authorized; 2,656,250 shares issued and
outstanding............................................ 2,656
Common Stock: $0.001 par value; 11,400,000 shares
authorized; 1,478,949 shares issued and outstanding.... 1,479
Additional paid in capital................................ 5,285,226
Note receivable from shareholder.......................... (10,000)
Accumulated deficit....................................... (10,275,914)
------------
Total shareholders' equity........................... (4,994,053)
------------
Total liabilities and shareholders' equity........... $ 1,543,800
============
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-70
<PAGE> 163

FOCALINK COMMUNICATIONS, INC.

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Revenues.................................................... $ 1,213,704
Cost of revenues............................................ 591,448
-----------
Gross profit.............................................. 622,256
Operating Expenses:
Research and development.................................... 3,458,826
Sales and marketing......................................... 2,431,841
General and administrative.................................. 676,981
-----------
Total operating expenses.......................... 6,567,648
-----------
Loss from operations........................................ (5,945,392)
Interest income............................................. 26,560
Interest expense............................................ (339,994)
-----------
Net loss.................................................... $(6,258,826)
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-71
<PAGE> 164

FOCALINK COMMUNICATIONS, INC.

STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
PREFERRED STOCK A PREFERRED STOCK B COMMON STOCK ADDITIONAL
------------------ ------------------ ------------------ PAID IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ------ --------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997......................... 2,500,000 $2,500 2,656,250 $2,656 1,820,056 $1,821 $5,276,922
Issuance of common stock at $0.01................. -- -- -- -- 553,754 553 16,010
Repurchase of common stock at $0.01 per share--... -- -- -- -- (906,053) (906) (8,154)
Stock options exercised at $0.04 per share--...... -- -- -- -- 11,192 11 448
--------- ------ --------- ------ --------- ------ ----------
Balances, December 31, 1997....................... 2,500,000 $2,500 2,656,250 $2,656 1,478,949 $1,479 $5,285,226
========= ====== ========= ====== ========= ====== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-72
<PAGE> 165

FOCALINK COMMUNICATIONS, INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
CASH FLOWS FROM OPERATIONS:
Net loss.................................................... $(6,258,826)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 372,144
Allowance for doubtful accounts........................ 26,425
Change in assets and liabilities:
Accounts receivable.................................. (148,379)
Prepaids and other current assets.................... 342,867
Other assets......................................... (72,884)
Accounts payable..................................... 34,698
Deferred revenue..................................... 70,921
Accrued liabilities.................................. 524
-----------
Net cash used in operating activities............. (5,632,510)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.................. (560,746)
-----------
Net cash used in investing activities............. (560,746)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from demand note payable...................... 5,027,000
Payment of demand note payable......................... (4,502)
Payments of principal under capital lease
obligations........................................... 234,904
-----------
Cash provided by financing activities............. 5,257,402
-----------
Net (decrease) increase in cash and cash equivalents........ (935,854)
Cash and cash equivalents at beginning of year.............. 1,241,849
-----------
Cash and cash equivalents at end of year.................... $ 305,995
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES:
Cash paid during the year for:
Interest............................................. $ 339,994
===========
Income tax........................................... $ 1,822
===========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING
ACTIVITIES:
Acquisition of fixed assets through capital lease
obligations........................................... $ 462,672
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-73
<PAGE> 166

FOCALINK COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1--FORMATION AND BUSINESS OF THE COMPANY:

The Company

Focalink Communications ("the Company") is a provider of Web-based software
tools for evaluating, placing, and managing advertising campaigns on the Web.
Its main products are Smartbanner, which is a Web advertising campaign
management service and MarketMatch, which is a media planning tool. The Company
is in the development stage and since inception has devoted substantially all of
its efforts to developing its products, raising capital and hiring personnel.

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity or remaining maturity of three months or less at the time of purchase
to be cash equivalents, which include money market funds and commercial paper.
The Company has a certificate of deposit which is the deposit for its current
facility.

Concentration of Credit Risk

The Company's cash and cash equivalents as of December 31, 1997 are
deposited with one U.S. financial institution. The balance of such deposits
exceeds federal insured amounts.

Fair Value of Financial Instruments:

The carrying amounts of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses and other liabilities approximate fair value due to their short
maturities. Based upon borrowing rates currently available to the Company for
loans with similar terms, the carrying value of capital lease obligations
approximate fair value.

Property and Equipment

Property and equipment are stated at cost and depreciated on a
straight-line basis over the estimated useful lives of the related assets,
generally three to five years. Leased assets are amortized on a straight-line
basis over the lesser of the estimated useful life or the lease term. Gains and
losses upon asset disposal are recognized in operations in the year of
disposition.

Income Taxes

Deferred tax assets and liabilities are determined based on the differences
between financial reporting and tax bases of assets and liabilities, measured at
tax rates that will be in effect when the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.

F-74
<PAGE> 167
FOCALINK COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Revenue Recognition

Revenues from subscriptions are recognized on a month-to-month basis.
Revenues from contracts are deferred and recognized ratably over the life of the
contract which is generally one year.

Research and Development Expenditures

Research and development expenditures are charged to operations as
incurred.

Advertising

The Company expenses advertising costs as incurred. Advertising costs for
1997 were $1,632,398.

NOTE 3--PROPERTY AND EQUIPMENT, NET:

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Furniture and fixture....................................... $ 88,010
Computer software and equipment............................. 1,255,911
----------
1,343,921
Less accumulated depreciation and amortization.............. 475,554
----------
$ 868,367
==========
</TABLE>

Property and equipment under capital leases consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Computer equipment.......................................... $1,158,271
Office equipment............................................ 86,078
----------
1,244,349
Less accumulated amortization............................... 469,979
----------
$ 774,370
==========
</TABLE>

NOTE 4--COMMITMENTS AND CAPITAL LEASE OBLIGATIONS:

The Company leases its current facilities under noncancelable operating
leases expiring through December 2002.

The Company has entered into an arrangement with a leasing company whereby
the leasing company reimburses the Company for purchases of property and
equipment through the use of an equipment lease line of credit.

F-75
<PAGE> 168
FOCALINK COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum payments under these agreements are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
1997 1997
---------- ----------
<S> <C> <C>
Year Ended December 31,
1998................................................... $ 315,531 $ 496,248
1999................................................... 316,494 470,833
2000................................................... 317,181 104,581
2001................................................... 317,181 --
2002................................................... 289,990 --
---------- ----------
Minimum lease payments...................................... $1,556,377 $1,071,662
Less amount representing interest........................... (181,206)
----------
Present value of minimum lease payments..................... 890,456
Less current portion........................................ (374,782)
----------
Amount due after one year................................... $ 515,674
==========
</TABLE>

The capital lease obligations, which expire through May 2000, are
collateralized by the related assets. Under the terms of the capital lease
obligations, the Company is responsible for taxes, insurance and maintenance
costs.

Rent expense was $327,429 for the year ended December 31, 1997.

In conjunction with the capital leases, 29,269 warrants to purchase Series
A preferred stock were outstanding at December 31, 1997, 700,746 warrants to
purchase Series A-1 preferred stock were outstanding at December 31, 1997 and
43,438 warrants to purchase Series B preferred stock were outstanding at
December 31, 1997. These warrants expire on November 30, 2005 and June 30, 2006,
respectively.

NOTE 5--SHAREHOLDERS' EQUITY:

Common Stock

The Company had certain restricted stock purchase agreements with certain
employees. Under these agreements, the Company has the right to repurchase any
unvested shares upon termination of employment for a period up to 90 days from
the date of termination. As of December 31, 1997, 404,174 shares are unvested.
The shares will vest through 1999.

Convertible Preferred Stock

Dividends

The holders of shares of Series A and Series B preferred stock are entitled
to receive dividends, out of any assets legally available prior and in
preference to any declaration or payment of any dividend to the common
stockholders, at the rate of $0.0328 and $0.128 per share per annum,
respectively or if greater, amounts equal to dividends paid on the outstanding
shares of common stock of the Company, when and as declared by the Board of
Directors. Such dividends are not cumulative. After payment of the dividend
preference, outstanding shares of Series A and Series B preferred stock shall
participate with shares of common stock as to any additional declaration or
payment of any dividend. As of December 31, 1997, no dividends have been
declared.

Liquidation

In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the holders of Series A and Series B preferred
stock shall be entitled to receive, prior and in preference to any distribution
of any assets of the Company to the holders of common stock, an amount per share
equal to the

F-76
<PAGE> 169
FOCALINK COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

sum of (i) $0.41 for each outstanding share of Series A preferred stock and
$1.60 for each outstanding share of Series B preferred stock and (ii) an amount
equal to declared but unpaid dividends on such shares. If upon the occurrence of
such an event, the assets and funds distributed among the holders of the Series
A and Series B preferred stock shall be insufficient to permit the payment of
preferential amounts, then the entire assets and funds of the Company legally
available for distribution shall be distributed ratably among the holders of the
Series A and Series B preferred stock in proportion to the aggregate liquidation
preference for the shares of such stock owned by each such holder.

Conversion

Each share of Series A and Series B preferred stock is convertible, at the
option of the holder, into such number of fully paid and nonassessable shares of
common stock as determined by dividing the applicable original issue price by
the conversion price applicable to such share in effect at the date of
conversion. Each share of Series A and Series B preferred stock shall
automatically be converted into shares of common stock immediately upon the
earlier of the closing of a firm commitment under written public offering in
which the public offering results in $10,000,000 or more in gross proceeds to
the Company and the per share price to the public which is at least $5.00. At
December 31, 1997, each share of Series A and Series B preferred stock can be
converted to one share of common stock, subject to adjustments under specific
circumstances. The Company has reserved a total of 5,126,250 shares of common
stock in the event of preferred stock conversion.

Redemption

The Series A and Series B preferred stock is not redeemable.

Voting rights

The holder of each share of Series A and Series B preferred stock is
entitled to one vote for each share of common stock into which such share of
preferred stock is convertible. Fractional voting rights resulting from
fractional shares shall be disregarded.

1995 Stock Option/Stock Issuance Plan

During 1995, the Company adopted the 1995 Stock Option Plan (the "Plan").
The options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Board of Directors at the time
of grant. Options are granted at an exercise price determined by the Board of
Directors. Stock Purchase Rights may also be granted, either alone, in addition
to, or in tandem with other awards granted under the Plan.

Activity under the Plan is as follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
----------------------------------------------
WEIGHTED
SHARES AGGREGATE AVERAGE
AVAILABLE NUMBER OF EXERCISE EXERCISE EXERCISE
FOR GRANT SHARES PRICE PRICE PRICE
--------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1997................. 255,636 1,057,008 $0.04-$0.16 $139,825 $0.13
Options reserved.......................... 191,983 --
Options granted........................... (134,895) 134,895 0.16 21,583 $0.16
Options exercised......................... -- (11,192) 0.04 (448) 0.04
Options cancelled......................... 257,875 (257,875) 0.04-0.16 (32,579) 0.13
-------- --------- --------
Balances, December 31, 1997............... 570,599 922,836 $0.04-$0.16 128,381 $0.14
======== ========= ========
</TABLE>

As of December 31, 1997, options to purchase 240,047 shares of common stock
were exercisable.

F-77
<PAGE> 170
FOCALINK COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information with respect to stock options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
WEIGHTED
RANGE AVERAGE WEIGHTED WEIGHTED
OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.04............................... 183,667 8.7 $0.04 112,917 $0.04
$0.16............................... 739,169 9.5 $0.16 127,130 $0.16
------- -------
922,836 240,017
======= =======
</TABLE>

The following disclosures concerning the Company's stock option plan are
provided in accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." The Company accounts for the plan in
accordance with APB No. 25 and related Interpretations.

The fair value of each option grant has been estimated on the date of grant
using the minimum value method with the following weighted average assumptions
used for grants in 1997:

<TABLE>
<S> <C>
Risk free interest rate..................................... 6.23%
Expected life............................................... 5 years
</TABLE>

The weighted average fair value of the options granted in 1997 was $0.04.

NOTE 6--INCOME TAXES:

The Company accounts for income taxes using the liability method. Under
this method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using current tax laws and rates. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.

At December 31, 1997, the Company has federal and state net operating loss
carryforwards of approximately $6,390,448 available to offset future regular and
alternative minimum taxable income, if any. These operating loss carryforwards
will expire between 2003 to 2011, if not utilized beforehand.

The difference between the effective tax rates at December 31, 1997 and the
statutory federal income tax rate is due to the operating losses not benefited.

For federal and state tax purposes, a portion of the Company's net
operating loss carryforwards may be subject to certain limitations on annual
utilization in case of a change in ownership, as defined by federal and state
tax law.

F-78
<PAGE> 171
FOCALINK COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Temporary differences which give rise to significant portions of deferred
tax assets and liabilities at December 31, 1997 are as follows:

<TABLE>
<CAPTION>
1997
----------
<S> <C>
Deferred tax assets and liabilities:
Net operating loss carryforwards....................... $4,349,000
Capitalized research and development costs............. 86,000
Research and development credit........................ 109,000
Depreciation and amortization.......................... (148,000)
Other.................................................. 76,000
----------
4,472,000
Valuation allowance......................................... (4,472,000)
----------
$ --
==========
</TABLE>

The Company has established a 100% valuation allowance against the deferred
tax asset due to uncertainties concerning their realization.

F-79
<PAGE> 172

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Flycast Communications Corporation:

We have audited the accompanying consolidated balance sheet of Flycast
Communications Corporation, a wholly owned subsidiary of CMGI, (the "Company")
as of December 31, 1999, and the related consolidated statements of operations,
common stockholders' equity (deficit) and cash flows for the year ended December
31, 1999. 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 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 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 financial position of Flycast
Communications Corporation at December 31, 1999, and the results of its
operations and its cash flows for the year ended December 31, 1999 in conformity
with generally accepted accounting principles.

KPMG LLP

San Francisco, California
March 8, 2000

F-80
<PAGE> 173

FLYCAST COMMUNICATIONS CORPORATION

CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 9,973
Investments............................................ 46,217
Accounts receivable, net of allowance for doubtful
accounts of $1,304.................................... 21,386
Prepaid expenses and other assets...................... 1,800
-------
Total current assets.............................. 79,376
-------
Property and equipment, net................................. 11,357
Other assets................................................ 316
-------
Total assets...................................... $91,049
=======

LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Short-term capital lease obligations................... $ 883
Current potions of long-term debt...................... 1,914
Accounts payable....................................... 12,458
Accrued liabilities.................................... 2,176
Accrued compensation and related expenses.............. 2,864
-------
Total current liabilities......................... 20,295
-------
Long-term capital lease obligations......................... 1,042
Long-term debt.............................................. 1,770
Common stockholders' equity:
Common stock, $0.0001 par value, 20,000,000 shares
authorized, 15,257,298 shares issued and outstanding
in 1999............................................... 109,037
Deferred stock compensation............................ (1,269)
Notes receivable from stockholders..................... (344)
Accumulated deficit.................................... (39,482)
-------
Total common stockholders' equity................. 67,942
-------
Total liabilities and common stockholders'
equity............................................ $91,049
=======
</TABLE>

See accompanying notes to consolidated financial statements.
F-81
<PAGE> 174

FLYCAST COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<S> <C>
Revenue..................................................... $ 46,154
Cost of revenue............................................. 32,100
--------
Gross profit................................................ 14,054
--------
Operating expenses:
Sales and marketing.................................... 20,971
Research and development............................... 8,132
General and administrative............................. 9,674
Stock-based compensation............................... 1,596
--------
Total operating expenses.......................... 40,373
--------
Operating loss.............................................. (26,319)
Interest income............................................. 1,855
Interest expense............................................ (871)
--------
Net loss.................................................... $(25,335)
========
Accretion of mandatorily redeemable preferred stock......... (666)
--------
Loss attributable to common stockholders.................... $(26,001)
========
Basic and diluted loss per share............................ $ (2.81)
========
Shares used in basic and diluted loss per share............. 9,255
========
</TABLE>

See accompanying notes to consolidated financial statements.
F-82
<PAGE> 175

FLYCAST COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK DEFERRED
----------------- STOCK NOTES ACCUMULATED
SHARES AMOUNT COMPENSATION RECEIVABLE DEFICIT TOTAL
------ -------- ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998... 3,132 $ 3,851 $(1,771) $(606) $(13,481) $(12,007)
Issuance of common stock for
cash....................... 3,200 73,023 -- -- -- 73,023
Exercise of common stock
options.................... 669 1,946 -- (31) -- 1,915
Repurchase of common stock... (140) (175) -- 175
Payment on notes
receivable................. -- -- -- 197 -- 197
Issuance of common stock for
services................... -- 247 -- -- -- 247
Compensatory stock
arrangements............... -- 1,094 (1,094) -- -- --
Amortization of deferred
stock compensation......... -- -- 1,596 -- -- 1,596
Conversion of preferred
stock...................... 8,396 29,051 -- -- -- 29,051
Distributions to
stockholders............... -- -- -- (79) -- (79)
Accretion of mandatorily
Redeemable preferred
stock................... -- -- -- -- (666) (666)
Net loss..................... -- -- -- -- (25,335) (25,335)
------ -------- ------- ----- -------- --------
Balance, December 31, 1999... 15,257 $109,037 $(1,269) $(344) $(39,482) $ 67,942
====== ======== ======= ===== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
F-83
<PAGE> 176

FLYCAST COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(25,335)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 2,668
Provision for bad debts................................ 1,340
Stock and warrants issued for services................. 247
Noncash interest expense............................... 100
Stock-based compensation expense....................... 1,596
Changes in operating assets and liabilities:
Accounts receivable.................................. (18,924)
Prepaid expenses and other assets.................... (1,741)
Accounts payable..................................... 9,897
Accrued liabilities.................................. 4,205
--------
Net cash used in operating activities............. (25,947)
--------
Cash flows used in investing activities:
Purchases of property and equipment....................... (10,854)
Purchases of short term investments....................... (46,034)
--------
Net cash used in investing activities............. (56,888)
--------
Cash flows from financing activities:
Payments on long term debt................................ (1,143)
Payments on capital leases................................ (838)
Proceeds from payment of notes receivable from
stockholders........................................... 197
Proceeds from issuance of common stock.................... 74,938
Distributions to stockholders............................. (79)
Proceeds from issuance of preferred stock................. 14,536
--------
Net cash provided by financing activities......... 87,611
--------
Net increase in cash and cash equivalents................... 4,776
Cash and cash equivalents, beginning of period.............. 5,197
--------
Cash and cash equivalents, end of period.................... $ 9,973
========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 749
========
Noncash financing and investing activities:
Purchase of equipment under capital lease.............. $ 1,232
========
Issuance of common stock for notes receivable.......... $ 31
========
Repurchase of common stock for extinguishment of
debt.................................................. $ 175
========
Conversion of preferred stock to common stock.......... $ 29,051
========
</TABLE>

See accompanying notes to consolidated financial statements.
F-84
<PAGE> 177

FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION -- Flycast Communications Corporation ("Flycast" or the
"Company") commenced operations on April 14, 1996 (inception). Flycast is a
leading provider of Web-based advertising solutions designed to maximize the
return on investment for direct response advertisers and e-commerce companies.
Flycast is headquartered in San Francisco.

On September 30, 1999, the Company announced that it entered into a
definitive agreement to be acquired by CMGI, Inc. ("CMGI") in a stock-for-stock
merger. Under the terms of the agreement, CMGI will issue 0.9476 CMGI shares for
every Flycast share held on the closing date of the transaction. Closing of the
merger is subject to customary conditions, including formal approval by the
Company's shareholders. In connection with the merger, the Company also entered
into a stock option agreement dated as of September 29, 1999, whereby the
Company granted CMGI an option to purchase up to 19.9% of the outstanding shares
of the Company common stock, which option may be exercised in the event that the
merger agreement is terminated under certain circumstances.

BASIS OF PRESENTATION -- On August 30, 1999, Flycast completed a merger
with InterStep, Inc., a Massachusetts corporation which commenced operations in
1995. InterStep provides publishers with e-mail content management, list
management and distribution services on an outsourced basis. In the transaction,
Flycast issued 480,337 shares of common stock to InterStep's stockholders, of
which 47,558 shares are held by an escrow agent to serve as security for the
indemnity provided by stockholders of InterStep. The Company also assumed all
outstanding InterStep common stock options, which were converted to options to
purchase approximately 10,012 shares of the Company's common stock. No
adjustments were required to conform accounting policies of the entities. There
were no significant intercompany transactions requiring elimination.

The above transaction has been accounted for as a pooling of interests and,
accordingly, the consolidated financial statements of the Company include the
accounts of Interstep.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The Company performs ongoing credit evaluations of its customers' respective
financial conditions, and, generally, requires no collateral from its customers.
The Company maintains an allowance for uncollectible accounts receivable based
on the expected collectibility of accounts receivable.

CASH EQUIVALENTS consist of money market funds and certificates of deposit
with original maturities of three months or less at the time of acquisition.

INVESTMENTS consist of certificates of deposit with an original maturity
date of greater than three months at the time of acquisition. Such investments
are considered available for sale and have carrying values which approximate
fair value.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Equipment held under capital leases is stated at the present value of minimum
lease payments. Depreciation on property and equipment is calculated on the
straight- line method over the estimated useful lives of the assets. Equipment
held under capital leases is amortized on the straight-line method over the
shorter of the lease term or the estimated useful life of the asset.

REVENUE RECOGNITION -- Revenues derived from the delivery of advertising
impressions through third-party Web sites and delivery of e-mail content are
recognized in the period the advertising impressions or e-mail contents are
delivered provided collection of the resulting receivable is probable. Revenues
from list
F-85
<PAGE> 178
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

management and distribution services are recognized when services have been
performed. Amounts payable to third party Web sites for advertisements displayed
on such sites are recorded as cost of revenue in the period the advertising
impressions or e-mails are delivered.

The Company becomes obligated to make payments to third-party Web sites,
which have contracted with Flycast to be part of the networks, in the period the
advertising impressions are delivered, irrespective of the receipt of payments
from customers. The Company therefore reports revenue using the gross method.

ADVERTISING EXPENSES are charged to operations as incurred.

RESEARCH AND DEVELOPMENT EXPENSES are charged to operations as incurred.

INCOME TAXES -- Deferred tax liabilities are recognized for future taxable
amounts, and deferred tax assets are recognized for future deductions, net of a
valuation allowance to reduce net deferred tax assets to amounts that are more
likely than not to be realized.

CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially
subject the Company to concentration of credit risk consist of trade
receivables. The Company's credit risk is mitigated by the Company's credit
evaluation process and the reasonably short collection terms. The Company does
not require collateral or other security to support accounts receivable and
maintains reserves for potential credit losses.

FINANCIAL INSTRUMENTS -- The Company's financial instruments include cash
and cash equivalents, short-term investments, notes receivable from stockholders
and long-term debt. At December 31, 1999, the fair values of these instruments
approximated their financial statement carrying amounts.

STOCK-BASED COMPENSATION -- The Company accounts for its employee stock
option plan in accordance with the provisions of Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
no accounting recognition is given to stock options granted to employees
(including directors) at fair market value until they are exercised. Upon
exercise, the net proceeds are credited to stockholders' equity (deficit).
Compensation expense is recognized over the vesting term for stock options
granted to employees (including directors) at less than fair market value.

The Company accounts for stock options issued to non-employees in
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation" and Emerging Issues
Task Force Issue No. 96-18 under the fair value based method.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF --
The Company evaluates its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets or
intangibles may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

LOSS PER COMMON SHARE -- Basic loss per common share excludes dilution and
is computed by dividing loss attributable to common stockholders by the weighted
average number of common shares outstanding for the period (excluding 1,339,194
shares subject to repurchase). Diluted loss per common share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. Potential common
shares are excluded from the computation in loss periods as their effect would
be antidilutive.

RECENTLY ISSUED ACCOUNTING STANDARDS -- In June 1997, the Financial
Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive
Income," which requires an enterprise to report,

F-86
<PAGE> 179
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

by major components and as a single total, the change in its net assets during
the period from nonowner sources; and SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," which establishes annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas and major customers.
The Company currently operates one reportable segment under SFAS No. 131.
Adoption of these statements in 1998 did not impact the Company's financial
position, results of operations or cash flows.

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued SOP no. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP No. 98-1 requires entities to
capitalize certain costs related to internal-use software once certain criteria
have been met. The Company implemented SOP No. 98-1 on January 1, 1999. The
adoption of SOP No. 98-1 did not have a material impact on its financial
position or results of operations.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value, and provides for hedge accounting when
certain conditions are met. SFAS No. 133 is effective for the Company in fiscal
2001. Although the Company has not fully assessed the implications of SFAS No.
133, the Company does not believe that adoption of this statement will have a
material impact on the Company's financial position or results of operations.

In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" (SAB 101) which specifies that
revenue is recognizable when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the seller's price to the
buyer is fixed or determinable, and collectibility is reasonably assured. This
statement must be adopted no later than the first fiscal quarter of the fiscal
year beginning after December 15, 1999. The Company does not believe that
adoption of this statement will have a material impact on the Company's
financial position or results of operations.

2. PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 1999 consisted of the following
(in thousands):

<TABLE>
<S> <C>
Computer equipment and purchased software................... $11,271
Computer equipment under capital lease...................... 2,734
Furniture, fixtures and office equipment.................... 822
-------
Total............................................. 14,827
Less accumulated depreciation............................... (3,470)
-------
Net......................................................... $11,357
=======
</TABLE>

The accumulated depreciation associated with computer equipment under
capital lease was $1,141,000 at December 31, 1999.

3. DEBT

In 1998, the Company borrowed $600,000 from a lending institution at an 8%
interest rate. Principal and interest payments are due in monthly installments
through July 2001. As of December 31, 1999, the outstanding obligation was
$277,000.

In 1998, the Company obtained a $175,000 letter of credit as a security
deposit on office space leased. In 1999, the letter was increased to $300,000 to
secure additional space at the same location. The increase was under the same
terms as the original letter. The letter of credit is collateralized by all
assets of the Company.

F-87
<PAGE> 180
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

In 1998, the Company entered into a financing agreement with a preferred
stockholder and lender for $2,500,000, due in April 2002 with interest at 11%
per annum, and for an additional $2,000,000, due in August 2001 with interest at
14%. The Company granted this lender Series C preferred stock warrants to
purchase 55,409 shares at $4.51 per share, and 72,324 shares of preferred stock
at $4.42 per share. The estimated fair value allocated to the warrants of
$304,000 is being accreted over the life of the financing agreements. As of
December 31, 1999, the recorded obligation totaled $3,407,000 and $3,000,000 is
available for future borrowing.

Debt outstanding excluding capital lease obligations (Note 8) as of
December 31, 1999 will be due in annual principal payments of $1,914,000,
$1,578,000 and $192,000 in 2000, 2001 and 2002, respectively.

4. INCOME TAXES

The Company's deferred income tax assets and liabilities at December 31,
1999 are as follows (in thousands):

<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $16,957
Research and development tax credit......................... 136
-------
Total gross deferred tax assets before valuation
allowance................................................. 17,093
Valuation allowance......................................... (14,018)
Deferred tax liabilities:
State Taxes................................................. $ 478
Accrual to cash adjustments................................. 2,489
Tangibiles and intangibles.................................. 108
-------
Total gross deferred liabilities............................ 3,075
-------
Net deferred tax assets..................................... $ --
=======
</TABLE>

At December 31, 1999, the Company had a 100% valuation allowance due to the
uncertainty of realizing future tax benefits from its net operating loss
carryforwards and other deferred tax assets.

At December 31, 1999, the Company had net operating loss ("NOL")
carryforwards of approximately $44,161,000 and $21,973,000 for federal and state
income tax purposes, respectively. These carryforwards begin to expire in 2011
for federal purposes and 2004 for state income tax purposes. The Company also
has federal and state research and development tax credit carryforwards of
$77,000 and $58,000, respectively, which will begin to expire in 2011. The
California research and development credits may be carried forward indefinitely
until utilized.

Internal Revenue Code Sections 382 and 383 and similar California rules
place a limitation on the amount of taxable income which can be offset by NOL
carryforwards after a change in control (generally greater than 50% change in
ownership). Due to these provisions, utilization of the NOL and tax credit
carryforwards may be limited. (Note 5.)

The Company did not provide for pro forma income taxes for InterStep, Inc.
as both the Company and InterStep had losses for the period presented.

5. STOCKHOLDERS' EQUITY (DEFICIT)

In January 1999, the Company sold 1,496,347 shares of Series C preferred
stock at $9.04 per share for proceeds of $13,527,000.

F-88
<PAGE> 181
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

On May 4, 1999, the Company completed an initial public offering of
3,000,000 shares of common stock. In addition, on June 4, 1999, the Company sold
an additional 200,000 shares under the underwriters' overallotment option. Total
net proceeds were $73 million. During 1999, prior to and in anticipation of the
initial public offering, warrants for 167,747 shares of Series C preferred Stock
were exercised for total proceeds of $1,009,000. Upon the closing of the initial
public offering, Flycast's mandatorily redeemable preferred stock converted into
8.4 million shares of common stock.

On August 30, 1999, Flycast acquired InterStep, Inc. by issuing 480,337
shares of common stock for all of the outstanding shares of InterStep, Inc. in
transaction that was accounted for as a pooling-of-interests. As a result,
InterStep became a wholly owned subsidiary of Flycast. For purposes of financial
statement presentation, historical financial information for InterStep has been
consolidated into the statements presented herein.

On September 30, 1999, the Company announced the signing of a definitive
agreement to be acquired by CMGI, Inc. in a stock-for-stock merger. Under the
terms of the agreement, CMGI will issue 0.9476 CMGI shares for every Flycast
share held on the closing date of the transaction. The transaction closed in
January 2000. The Company incurred approximately $25 million in expenses as a
result of the acquisition of which approximately $2.0 million was expensed in
1999 and the balance will be recorded in 2000 when the merger becomes final.

NOTES RECEIVABLE FROM STOCKHOLDERS

In July 1997, the Company issued an aggregate of 2,275,011 shares of common
stock to officers and members of the Board of Directors. In connection with such
issuance, the Company's board members paid for the stock by issuing notes
payable (secured by the shares of the Company's common stock purchased) to the
Company. The secured note payable bears interest at 6.65% per annum with the
entire principal balance of the note, together with all accrued and unpaid
interest, due and payable on the earlier of (a) nine months after the closing of
an initial public offering of the Company's common stock or (b) July 2002 or (c)
termination of employment. The shares vest over a four year period. Any unvested
shares purchased are subject to repurchase rights by the Company upon occurrence
of certain events or conditions, such as employment termination, at the original
purchase price. Of such shares, there were 1,181,023 shares subject to
repurchase at December 31, 1999.

In September 1998, two officers of the Company exercised options to
purchase 357,000 shares with an exercise price of $1.25 by issuing notes payable
(secured by the shares of the Company's common stock purchased). The secured
note payable bear interest at 5.54% per annum with the entire principal balances
of the notes, together with all accrued and unpaid interest, due and payable on
the earlier of (a) nine months after the closing of an underwritten public
offering, (b) September 2003 or (c) termination of employment.

Additionally, in March, April and December 1999, employees and officers of
the Company exercised options to purchase 23,200 shares with exercise prices
ranging from $1.25 to $8.00 by issuing notes payable (secured by the shares of
the Company's common stock purchased). The secured notes payable bear interest
ranging from 5.54% to 6.74% per annum with the entire principal balances of the
notes, together with all accrued and unpaid interest, due and payable on the
earlier of (a) nine months after the closing of an underwritten public offering,
(b) September 2003 or (c) termination of employment.

As a result of the Company's Initial Public offering on May 4, 1999, all of
the above notes, together with all accrued and unpaid interest, will become due
and payable on February 4, 2000.

F-89
<PAGE> 182
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

STOCK OPTION PLANS

The Company's stock option plans (the "Plans") provide for the grant of up
to 5,850,000 incentive or non-statutory options to employees, directors and
consultants of the Company at the fair market value of the common stock on the
date of grant as determined by the Board of Directors. Options granted under the
Plans generally vest ratably over periods of up to four years and expire ten
years from the date of grant. Of the two Plans, the 1997 Stock Option Plan also
provides for early exercise of options prior to full vesting. Any unvested
shares purchased are subject to repurchase rights by the Company upon occurrence
of certain events or conditions, such as employment termination, at the original
purchase price. There were 1.2 million shares subject to repurchase at December
31 1999.

On January 4, 1999, the Board of Directors adopted the 1999 Stock Option
Plan (the "1999 Stock Plan"). The 1999 Stock Plan will serve as the successor
equity incentive program to the Company's existing 1997 Stock Option Plan. A
total of 2,000,000 shares of common stock were initially reserved for issuance
under the 1999 Stock Plan. On March 30, 1999, the Board of Directors adopted an
amendment to the 1999 Stock Plan that increased the shares of common stock
reserved for issuance to 3,500,000.

On January 28, 1999, the Board of Directors adopted the 1999 Directors'
Stock Option Plan (the "Directors' Plan"). Under the Directors' Plan, each
person who becomes a non-employee director after the effective date of the
Directors' Plan may be granted non-statutory stock options. A total of 200,000
shares of common stock have initially been reserved for issuance under the
Directors' Plan.

Additionally, on January 28, 1999, the Board of Directors adopted, the 1999
Employee Stock Purchase Plan (the "Purchase Plan"). Under the Purchase Plan,
eligible employees are allowed to have salary withholdings of up to 10% of their
base compensation to purchase shares of common stock at a price equal to 85% of
the lower of the market value of the stock at the beginning or end of defined
purchase periods. The initial purchase period commences upon the effective date
for the initial public offering of the Company's common stock. The Company has
initially reserved 350,000 shares of common stock for issuance under this plan.

OPTIONS AND WARRANTS GRANTED TO NON-EMPLOYEES

In 1999, the Company granted options and warrants for common stock to
non-employees for services performed and to be performed through 2002. In
connection with these awards, the Company recognized $247,000 in stock-based
compensation expense related to such options which vested during 1999. At
December 31, 1999, there were no unvested options granted to non-employees.

STOCK-BASED COMPENSATION

During 1998 and 1999, the Company issued common stock options at less than
the fair value of its common stock and the Company recorded $1,094,000 as the
value of such options in 1999. Stock-based compensation of $1,596,000 was
amortized to expense in 1999 and at December 31, 1999, the Company had
$1,269,000 in unamortized deferred stock compensation related to such options.
The fair value of the common stock options granted in 1999, was $19.47 per
share.

F-90
<PAGE> 183
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

STOCK OPTION ACTIVITY

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

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OUTSTANDING EXERCISE
OPTIONS PRICE
----------- --------
<S> <C> <C>
Balance, December 31, 1998.......................... 1,938,705 $ 1.85
Granted............................................. 3,319,832 19.47
Exercised........................................... (547,191) 3.26
Canceled or expired................................. (324,418) 8.54
---------
Balance, December 31, 1999.......................... 4,386,928 $13.89
=========
Available for grant at December 31, 1999............ 814,910
=========
</TABLE>

The following table summarizes information about currently outstanding
stock options at December 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
---------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
EXERCISE PRICE SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
-------------- --------- ----------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.10 87,120 7.27 $ 0.10 59,459 $ 0.10
0.13 - 1.25 1,000,384 8.48 1.15 380,146 1.15
1.40 - 8.50 533,533 8.95 6.04 395,906 5.27
8.75 694,330 9.08 8.75 156,640 8.75
9.00 - 12.00 783,779 9.24 11.93 175,083 11.91
16.00 - 24.00 576,642 9.60 20.81 5,977 16.80
24.75 - 43.00 456,200 9.60 32.53 15,545 25.11
44.32 - 73.50 239,800 9.83 54.40 -- --
78.75 8,000 9.93 78.75 -- --
82.75 7,140 9.93 82.75 -- --
--------- ----- ------- --------- ------
4,386,928 9.09 $ 13.89 1,188,756 $ 5.45
========= ======= ========= ======
</TABLE>

ADDITIONAL STOCK PLAN INFORMATION

As discussed in Note 1, the Company accounts for its stock-based awards to
employees using the intrinsic value method in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees," and its related interpretations.

SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
disclosure of pro forma net income (loss) and earnings (loss) per share had the
Company adopted the fair value method since the Company's inception. Under SFAS
No. 123, the fair value of stock-based awards to employees is calculated through
the use of option pricing models, even though such models were developed to
estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which significantly differ from the Company's stock option
awards.

F-91
<PAGE> 184
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

The Company's calculations for employee grants were made using the fair
value approach with the following weighted average assumptions:

<TABLE>
<S> <C>
Dividend yield.............................................. None
Risk free interest rate..................................... 5.2%
Expected term, in years..................................... 2.5
Volatility.................................................. 94%
</TABLE>

The weighted average value per option as of the date of grant for options
granted during 1999 was $11.49.

If the computed values of the Company's stock-based awards to employees had
been amortized to expense over the vesting period of the awards as specified
under SFAS No. 123, loss attributable to common stockholders and basic and
diluted loss per share on a pro forma basis (as compared to such items as
reported) would have been (in thousands):

<TABLE>
<S> <C>
Loss attributable to common stockholders:
As reported............................................ $(26,001)
Pro forma.............................................. $(39,577)
Basic and diluted net loss per share:
As reported............................................ $ (2.81)
Pro forma.............................................. $ (4.28)
</TABLE>

6. NET LOSS PER SHARE

The following is a reconciliation of the denominators used in computing
basic and diluted net loss per share.

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Shares (denominator):
Weighted average common shares outstanding.......... 10,594
Weighted average common shares outstanding subject
to repurchase..................................... (1,339)
------
Shares used in computation, basic and diluted............ 9,255
======
</TABLE>

Diluted net loss per common share does not include the effects of options
to purchase 3,026,540 shares of common stock, as the effect of their inclusion
is anti-dilutive for the period presented.

F-92
<PAGE> 185
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

7. COMBINING FINANCIAL INFORMATION

The acquisition of InterStep, Inc. has been accounted for as a
pooling-of-interests and accordingly, the Company's historical consolidated
financial statements have been restated to include the accounts and results of
operations of InterStep, Inc. The results of operations previously reported by
the separate businesses and the combined amounts presented in the accompanying
consolidated financial statements are presented below.

<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
AUGUST 31, 1999
------------------
(UNAUDITED)
<S> <C>
REVENUE
Interstep.......................................... $ 602
Flycast............................................ 18,252
--------
Total......................................... 18,854
NET INCOME (LOSS)
Interstep.......................................... (180)
Flycast............................................ (18,513)
--------
Total......................................... (18,693)
========
</TABLE>

The Company has restated its previously reported results. The results for
the eight-month period ended August 31, 1999 of InterStep have been included in
the results for the year ended December 31, 1999. The equity accounts of the
separate entities were combined. There were no significant transactions between
the Company and InterStep prior to the combination.

8. COMMITMENTS AND CONTINGENCIES

LEASES

Future minimum net lease payments under non-cancelable operating leases
(with initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31:
2000.............................................. $ 883 $1,348
2001.............................................. 784 1,350
2002.............................................. 249 908
2003.............................................. 9 910
Thereafter........................................ 830
------ ------
Total........................................ $1,925 $5,346
====== ======
Present value of net minimum capital lease payments.... 1,925
Less current installments of obligations under capital
leases............................................... (883)
------
Obligations under capital leases, excluding current
installments......................................... $1,042
======
</TABLE>

Total rent expense under operating leases for the year ended 1999 was $1.1
million.

LEGAL MATTERS

On January 28, 1999, the Board of Directors approved, the re-incorporation
of the Company in the State of Delaware and the associated exchange of one share
of common stock or preferred stock of the Company for

F-93
<PAGE> 186
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999

every share of common stock or preferred stock, as the case may be, of the
Company's California predecessor. Such re-incorporation and stock exchange
became effective prior to the effective date of the initial public offering
contemplated by the Company.

The Company is involved in various other claims and legal actions.
Management does not expect that the outcome of these other claims and actions
will have a material effect on the Company's financial position or results of
operations.

9. SUBSEQUENT EVENT

On January 18, 2000, Flycast Communications' Parent Company (CMGI)
announced that a definitive agreement was entered into to sell Flycast
Communications to Engage Technologies in a stock-for-stock transaction. Closing
of the merger is subject to customary conditions, including formal approval by
the Parent Company's shareholders.

F-94
<PAGE> 187

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Flycast Communications Corporation:

We have audited the accompanying consolidated balance sheets of Flycast
Communications Corporation and subsidiary (the "Company") as of December 31,
1997 and 1998, and the related consolidated statements of operations, common
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended 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 audits. The consolidated
financial statements give retroactive effect to the merger of InterStep, Inc.
with and into Flycast Communications Corporation on August 30, 1999, which has
been accounted for as a pooling-of-interests as described in Note 9 to the
consolidated financial statements.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Flycast Communications
Corporation and subsidiary at December 31, 1997 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.

/s/ DELOITTE & TOUCHE LLP

San Jose, California
October 18, 1999

F-95
<PAGE> 188

FLYCAST COMMUNICATIONS CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,593 $ 5,197
Investments............................................... 183
Accounts receivable, net of allowance for doubtful
accounts of $12 and $178, respectively.................. 531 3,802
Prepaid expenses and other assets......................... 40 267
------- --------
Total current assets............................... 4,164 9,449
PROPERTY AND EQUIPMENT, NET................................. 703 1,945
OTHER ASSETS................................................ 18 108
------- --------
TOTAL ASSETS................................................ $ 4,885 $ 11,502
======= ========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 361 $ 2,561
Accrued liabilities....................................... 82 375
Accrued compensation and related expenses................. 63 460
Notes payable to stockholders............................. 58 62
Short-term capital lease obligations...................... 31 490
Short-term debt........................................... 983
------- --------
Total current liabilities.......................... 595 4,931
LONG-TERM CAPITAL LEASE OBLIGATIONS......................... 40 1,041
LONG-TERM DEBT.............................................. 3,682
------- --------
Total liabilities.................................. 635 9,654
------- --------
MANDATORILY REDEEMABLE PREFERRED STOCK:
Mandatorily redeemable convertible preferred stock,
$0.0001 par value, 9,904,000 shares authorized:
Series A, 920,000 shares designated, 911,295 shares
issued and outstanding in 1997 and 1998 (aggregate
liquidation preference $911)........................... 951 1,027
Series B, 5,500,000 shares designated, 5,324,532 shares
issued and outstanding in 1997 and 1998 (aggregate
liquidation preference $7,082)......................... 7,244 7,824
Series C, 3,484,000 shares designated, 497,785 shares
issued and outstanding in 1998 (aggregate liquidation
preference $4,500)..................................... 5,004
------- --------
Total mandatorily redeemable preferred stock....... 8,195 13,855
------- --------
COMMON STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.0001 par value, 20,000,000 shares
authorized, 2,827,615 and 3,132,219 shares issued and
outstanding in 1997 and 1998, respectively.............. 247 922
Common stock options...................................... 2,929
Deferred stock compensation............................... (1,771)
Notes receivable from stockholders........................ (227) (606)
Accumulated deficit....................................... (3,965) (13,481)
------- --------
Total common stockholders' equity (deficit)........ (3,945) (12,007)
------- --------
TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY (DEFICIT)................. $ 4,885 $ 11,502
======= ========
</TABLE>

See notes to consolidated financial statements.
F-96
<PAGE> 189

FLYCAST COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSAND, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
REVENUE..................................................... $ 123 $ 934 $ 9,282
COST OF REVENUE............................................. 5 600 6,118
------ ------- -------
GROSS PROFIT................................................ 118 334 3,164
------ ------- -------
OPERATING EXPENSES:
Sales and marketing....................................... 111 1,393 5,228
Research and development.................................. 218 1,473 3,010
General and administrative................................ 183 807 2,216
Stock-based compensation.................................. 1,158
------ ------- -------
Total operating expenses.......................... 512 3,673 11,612
------ ------- -------
OPERATING LOSS.............................................. (394) (3,339) (8,448)
INTEREST INCOME............................................. 1 95 98
INTEREST EXPENSE............................................ (2) (102) (510)
------ ------- -------
NET LOSS.................................................... $ (395) $(3,346) $(8,860)
====== ======= =======
ACCRETION OF MANDATORILY REDEEMABLE PREFERRED STOCK......... (206) (656)
------ ------- -------
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS.................... $ (395) $(3,552) $(9,516)
====== ======= =======
BASIC AND DILUTED LOSS PER SHARE............................ $(0.83) $ (6.03) $ (7.26)
====== ======= =======
SHARES USED IN BASIC AND DILUTED LOSS PER SHARE............. 476 589 1,311
====== ======= =======
PRO FORMA BASIC AND DILUTED LOSS PER SHARE
(Note 1).................................................. $ (1.25)
=======
SHARES USED IN PRO FORMA BASIC AND DILUTED LOSS PER SHARE
(Note 1).................................................. 7,589
=======
</TABLE>

See notes to consolidated financial statements.
F-97
<PAGE> 190

FLYCAST COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK COMMON DEFERRED
--------------- STOCK STOCK NOTES ACCUMULATED
SHARES AMOUNT OPTIONS COMPENSATION RECEIVABLE DEFICIT TOTAL
------ ------ ------- ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996.......... 475 $ 10 $ $ $ $ (18) $ (8)
Issuance of common stock for cash
and notes receivable............ 1 611 (16) 595
Net loss.......................... (395) (395)
----- ----- ------ ------- ----- -------- --------
Balance, December 31, 1996........ 476 621 (16) (413) 192
Conversion of Common Stock to
Series A Preferred Stock........ (1) (611) 16 (595)
Issuance of common stock for cash
and notes receivable............ 2,284 228 (227) 1
Exercise of common stock
options......................... 68 7 7
Issuance of common warrants in
connection with issuance of
debt............................ 2 2
Accretion of mandatorily
redeemable preferred stock...... (206) (206)
Net loss.......................... (3,346) (3,346)
----- ----- ------ ------- ----- -------- --------
Balance, December 31, 1997........ 2,827 247 (227) (3,965) (3,945)
Exercise of common stock
options......................... 686 492 (446) 46
Repurchase of common stock........ (425) (42) 42
Payment on notes receivable....... 25 25
Issuance of common stock for
services........................ 44 47 47
Compensatory stock arrangements... 2,929 (2,929)
Amortization of deferred stock
compensation.................... 1,158 1,158
Issuance of common stock options
and warrants for services....... 178 178
Accretion of mandatorily
redeemable preferred stock...... (656) (656)
Net loss.......................... (8,860) (8,860)
----- ----- ------ ------- ----- -------- --------
Balance, December 31, 1998........ 3,132 $ 922 $2,929 $(1,771) $(606) $(13,481) $(12,007)
===== ===== ====== ======= ===== ======== ========
</TABLE>

See notes to consolidated financial statements.
F-98
<PAGE> 191

FLYCAST COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1996 1997 1998
----- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(395) $(3,346) $(8,860)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.............................................. $ 30 $ 204 $ 585
Provision for bad debts................................... 12 236
Loss on sale of property and equipment.................... 5
Stock and warrants issued for services.................... 225
Noncash interest expense.................................. 71 248
Stock-based compensation expense.......................... 1,158
Changes in operating assets and liabilities:
Accounts receivable.................................... (50) (493) (3,507)
Prepaid expenses and other assets...................... (4) (54) (317)
Accounts payable....................................... 40 321 2,200
Accrued liabilities.................................... 30 121 694
----- ------- -------
Net cash used in operating activities................ (349) (3,164) (7,333)
----- ------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment....................... (252) (569) (132)
Proceeds from sale of property and equipment.............. 4
Purchases of short term investments....................... (183)
----- ------- -------
Net cash used in investing activities................ (252) (569) (311)
----- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt.............................. 5,100
Payments on long term debt................................ (179)
Payments on capital leases................................ (28) (244)
Proceeds from notes payable to shareholders............... 19
Payment on notes payable to shareholders.................. (5)
Proceeds from payment of notes receivable from
stockholders........................................... 16 25
Proceeds from issuance of common stock.................... 595 8 46
Proceeds from issuance of preferred stock................. 7,308 4,500
----- ------- -------
Net cash provided by financing activities............ 614 7,299 9,248
----- ------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 13 3,566 1,604
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 14 27 3,593
----- ------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 27 $ 3,593 $ 5,197
===== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 27 $ 258
===== ======= =======
Noncash financing and investing activities:
Purchase of equipment under capital lease.............. $ 100 $ 1,704
===== ======= =======
Issuance of common stock for notes receivable.......... $ 16 $ 228 $ 446
===== ======= =======
Repurchase of common stock for extinguishment of
debt................................................. $ 42
===== ======= =======
Conversion of common stock to preferred stock.......... $ 611
===== ======= =======
</TABLE>

See notes to consolidated financial statements.
F-99
<PAGE> 192

FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization -- Flycast Communications Corporation ("Flycast") commenced
operations on April 14, 1996 (inception). Flycast is a leading provider of
Web-based advertising solutions designed to maximize the return on investment
for direct response advertisers and e-commerce companies. Flycast is
headquartered in San Francisco.

Basis of Presentation -- On August 30, 1999, Flycast completed a merger
with InterStep, Inc. ("InterStep") a Massachusetts corporation which commenced
operations in 1995. The transaction has been accounted for as a pooling of
interests and, accordingly, the consolidated financial statements of the Company
for all periods presented have been restated to include the accounts of
InterStep (see Note 9). No adjustments were required to conform accounting
policies of the entities. There were no significant intercompany transactions
requiring elimination for any periods presented.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The Company performs ongoing credit evaluations of its customers' respective
financial conditions, and, generally, requires no collateral from its customers.
The Company maintains an allowance for uncollectible accounts receivable based
on the expected collectibility of accounts receivable.

Cash equivalents consist of money market funds and certificates of deposit
with original maturities of three months or less at the time of acquisition.

Investments consist of certificates of deposit with an original maturity
date of greater than three months at the time of acquisition. Such investments
are considered available for sale and have carrying values which approximate
fair value.

Property and Equipment -- Property and equipment are stated at cost.
Equipment held under capital leases is stated at the present value of minimum
lease payments. Depreciation on property and equipment is calculated on the
straight- line method over the estimated useful lives of the assets. Equipment
held under capital leases is amortized on the straight-line method over the
shorter of the lease term or the estimated useful life of the asset.

Revenue Recognition -- Revenues derived from the delivery of advertising
impressions through third-party Web sites and delivery of e-mail content are
recognized in the period the advertising impressions or e-mail contents are
delivered provided collection of the resulting receivable is probable. Revenues
from list management and distribution services are recognized when services have
been performed. Amounts payable to third party Web sites for advertisements
displayed on such sites are recorded as cost of revenue in the period the
advertising impressions or e-mails are delivered.

Advertising expenses are charged to operations as incurred. Advertising
expenses were not significant in 1996 or 1997 and were $634,000 in 1998.

Research and development expenses are charged to operations as incurred.

Income Taxes -- Deferred tax liabilities are recognized for future taxable
amounts, and deferred tax assets are recognized for future deductions, net of a
valuation allowance to reduce net deferred tax assets to amounts that are more
likely than not to be realized.

Concentration of Credit Risk -- Financial instruments that potentially
subject the Company to concentration of credit risk consist of trade
receivables. The Company's credit risk is mitigated by the Company's
F-100
<PAGE> 193
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

credit evaluation process and the reasonably short collection terms. The Company
does not require collateral or other security to support accounts receivable and
maintains reserves for potential credit losses.

Financial Instruments -- The Company's financial instruments include cash
and cash equivalents, short-term investments, notes receivable from stockholders
and long-term debt. At December 31, 1997 and 1998, the fair values of these
instruments approximated their financial statement carrying amounts.

Stock-Based Compensation -- The Company accounts for its employee stock
option plan in accordance with the provisions of Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
no accounting recognition is given to stock options granted to employees
(including directors) at fair market value until they are exercised. Upon
exercise, the net proceeds are credited to stockholders' equity (deficit).
Compensation expense is recognized for stock options granted to employees
(including directors) at less than fair market value.

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

Loss per Common Share -- Basic loss per common share excludes dilution and
is computed by dividing loss attributable to common stockholders by the weighted
average number of common shares outstanding for the period (excluding shares
subject to repurchase). Diluted loss per common share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. Common share equivalents are
excluded from the computation in loss periods as their effect would be
antidilutive.

Pro Forma Net Loss per Common Share -- Pro forma basic and diluted loss per
common share is computed by dividing loss attributable to common stockholders by
the weighted average number of common shares outstanding for the period
(excluding shares subject to repurchase) and the weighted average number of
common shares resulting from the assumed conversion of outstanding shares of
mandatorily redeemable preferred stock.

Recently Issued Accounting Standards -- In June 1997, the Financial
Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive
Income," which requires an enterprise to report, by major components and as a
single total, the change in its net assets during the period from nonowner
sources; and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," which establishes annual and interim reporting standards
for an enterprise's business segments and related disclosures about its
products, services, geographic areas and major customers. The Company had no
comprehensive income items to report for the three years in the period ended
December 31, 1998. The Company currently operates one reportable segment under
SFAS No. 131. Adoption of these statements in 1998 did not impact the Company's
financial position, results of operations or cash flows.

F-101
<PAGE> 194
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

believe that adoption of this statement will have a material impact on the
Company's financial position or results of operations.

2. PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 1997 and 1998 consisted of the
following (in thousands):

<TABLE>
<CAPTION>
1997 1998
----- ------
<S> <C> <C>
Computer equipment and purchased software................... $ 810 $ 904
Computer equipment under capital lease...................... 100 1,796
Furniture, fixtures and office equipment.................... 29 60
----- ------
Total............................................. 939 2,760
Less accumulated depreciation............................... (236) (815)
----- ------
Net......................................................... $ 703 $1,945
===== ======
</TABLE>

The accumulated depreciation associated with computer equipment under
capital lease was $24,000 and $312,000 at December 31, 1997 and 1998,
respectively.

3. NOTES PAYABLE TO STOCKHOLDERS

The Company has notes payable to two stockholders, payable on demand, with
interest of 6.74%. The outstanding amount as of December 31, 1997 and 1998 is
$58,000 and $62,000, respectively.

4. DEBT

In 1998, the Company obtained a $175,000 letter of credit as a security
deposit on office space leased. The letter of credit is collateralized by all
assets of the Company.

In 1998, the Company entered into a financing agreement with a preferred
stockholder and lender for $2,500,000, due in April 2002 with interest at 11%
per annum, and for an additional $5,000,000, due in August 2001 with interest at
14%. The Company granted this lender Series C preferred stock warrants to
purchase 55,409 shares at $4.51 per share, and 72,324 shares of preferred stock
at $4.42 per share. The estimated fair value allocated to the warrants of
$304,000 is being accreted over the life of the financing agreements. As of
December 31, 1998, the recorded obligation totaled $4,220,000 and $3,000,000 is
available for future borrowing.

Debt outstanding excluding capital lease obligations (Note 8) as of
December 31, 1998 will be due in annual principal payments of $983,000,
$1,876,000, $1,646,000 and $160,000 in 1999, 2000, 2001 and 2002, respectively.

F-102
<PAGE> 195
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES

The Company's deferred income tax assets are comprised of the following (in
thousands):

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $ 1,368 $ 4,239
Reserves and accruals not currently deductible.............. 28 807
Research and development tax credit......................... 40 135
Other....................................................... 23 28
------- -------
Total gross deferred tax assets before valuation
allowance................................................. 1,459 5,209
Valuation allowance......................................... (1,452) (4,945)
------- -------
7 264
Deferred tax liabilities:
Accrual to cash adjustments................................. (264)
Other....................................................... (7)
------- -------
Total gross deferred liabilities............................ (7) (264)
------- -------
Net deferred tax assets..................................... $ -- $
======= =======
</TABLE>

The Company established 100% valuation allowance at December 31, 1996, 1997
and 1998 due to the uncertainty of realizing future tax benefits from its net
operating loss carryforwards and other deferred tax assets.

At December 31, 1998, the Company had net operating loss ("NOL")
carryforwards of approximately $11,000,000 for federal and state income tax
purposes. These carryforwards begin to expire in 2004 for state and 2011 for
federal purposes. The Company also has available federal and state research and
development tax credit carryforwards of $77,000 and $58,000, respectively, which
had no expiration date as of December 31, 1998.

Internal Revenue Code Section 382 and similar California rules place a
limitation on the amount of taxable income which can be offset by NOL
carryforwards after a change in control (generally greater than 50% change in
ownership). Due to these provisions, utilization of the NOL and tax credit
carryforwards may be limited.

6. STOCKHOLDERS' EQUITY (DEFICIT)

Common Stock Reserved For Future Issuance

At December 31, 1998, the Company has reserved the following shares of
common stock for issuance in connection with:

<TABLE>
<S> <C>
Conversion of Series A preferred stock...................... 911,295
Conversion of Series B preferred stock...................... 5,324,532
Conversion of Series C preferred stock...................... 497,785
Warrants issued and outstanding............................. 386,237
Options issued and outstanding.............................. 1,938,705
Options available under stock option plans.................. 132,230
---------
Total............................................. 9,190,784
=========
</TABLE>

F-103
<PAGE> 196
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Mandatorily Redeemable Preferred Stock

In July 1997, the Company issued 611,295 shares of Series A redeemable
convertible stock in exchange for all 1,000 shares of outstanding common stock.
Additionally, in July 1997, 300,000 shares of Series A preferred stock were
issued upon conversion of $300,000 of convertible notes. In July, August and
December 1997, the Company issued 5,324,532 shares of Series B preferred stock
for $1.33 per share. In December 1998, the Company issued 497,785 shares of
Series C preferred stock for $9.04 per share.

Significant terms of the Series A, B and C redeemable convertible preferred
stock are as follows (see Note 9):

- At the option of the holder, each share of preferred stock is convertible
at any time into one share of common stock, subject to adjustment for
certain dilutive issuances. As of December 31, 1998, no such adjustments
had occurred. Shares automatically convert into common stock upon the
earlier of (a) completion of a public offering with aggregate proceeds
greater than $15,000,000 at not less than $8.00 per share or (b) upon the
consent of more than 50% of the holders of the preferred stock, voting
together as a single class.

- Series A, B and C convertible preferred stock are entitled to annual
noncumulative cash dividends of $0.08, $0.106 and $0.723 per share,
respectively, when and if declared by the Board of Directors.

- In the event of any liquidation of the Company (which includes the
acquisition of the Company by another entity), the holders of Series B
and Series C preferred stock have a liquidation preference over common
stock and Series A preferred stock of $1.33 per share and $9.04 per
share, respectively, plus all declared but unpaid dividends. After such
payment, the holders of Series A preferred stock have a liquidation
preference of $1.00 per share plus any declared but unpaid dividends.
Upon payment of all preferred stock liquidation preferences, any
remaining proceeds will be allocated to the common stockholders.

- Any time after May 31, 2002, upon the vote of at least two-thirds of the
then outstanding redeemable convertible preferred stock, the Company will
be required to redeem all of the redeemable convertible preferred stock
at the liquidation preference plus an amount equal to $0.08, $0.106 and
$0.723 per share per year compounded annually for Series A, B and C,
respectively, less any cash dividends paid. As a result, the Company has
recorded an increase to the carrying values by the accretion of the
mandatorily redeemable preferred stock of $206,000 in 1997 and $656,000
in 1998.

- Holders of preferred stock have the same voting rights as the holders of
common stock.

Preferred Stock Warrants

In 1997, in connection with certain loan arrangements, the Company issued
five year warrants to purchase 33,834 shares of Series B preferred stock at
$1.33 per share and 7,500 shares of Series A preferred stock at $1.00 per share
to a bank. The warrants expire in 2002. The fair value of these warrants of
$33,000 was recognized as interest expense in 1997.

Also in 1997, in connection with a bridge loan arrangement, the Company
issued a five year warrant to purchase 43,854 shares of Series B preferred stock
at $1.33 per share. The warrant expires in 2002 or upon closing of an
underwritten public offering. The fair value of these warrants of $36,000 was
recognized as interest expense in 1997.

As discussed in Note 4, in 1998, the Company granted a lender Series C
preferred stock warrants to purchase 55,409 shares at $4.51 per share, and
72,324 shares at $4.42 per share. The warrants expire upon the earlier of five
years from the grant date or two years from closing of an underwritten public
offering. The fair

F-104
<PAGE> 197
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

value of the warrants of $304,000 is being accreted to interest expense over the
life of the financing agreements.

In 1998, in connection with certain bridge loan arrangements, the Company
issued warrants to purchase 132,840 shares of Series C preferred stock at $9.04
per share to various lenders. The warrants expire in 2003 or upon closing of an
underwritten public offering. The fair value of these warrants of $200,000 was
recognized as interest expense in 1998.

Notes Receivable from Stockholders

In July 1997, the Company issued an aggregate of 2,275,011 shares of common
stock to officers and members of the Board of Directors. In connection with such
issuance, the Company's board members paid for the stock by issuing notes
payable (secured by the shares of the Company's common stock purchased) to the
Company. The secured note payable bears interest at 6.65% per annum with the
entire principal balance of the note, together with all accrued and unpaid
interest, due and payable on the earlier of (a) nine months after the closing of
an initial public offering of the Company's common stock or (b) July 2002 or (c)
termination of employment. The shares vest over a four year period. Any unvested
shares purchased are subject to repurchase rights by the Company upon occurrence
of certain events or conditions, such as employment termination, at the original
purchase price. Of such shares, there were 1,990,635 and 997,500 shares subject
to repurchase at December 31, 1997 and 1998, respectively.

Additionally, in September 1998, two officers of the Company exercised
options to purchase 357,000 shares with an exercise price of $1.25 by issuing
notes payable (secured by the shares of the Company's common stock purchased).
The secured note payable bear interest at 5.54% per annum with the entire
principal balances of the notes, together with all accrued and unpaid interest,
due and payable on the earlier of (a) nine months after the closing of an
underwritten public offering, (b) September 2003 or (c) termination of
employment.

Stock Option Plans

The Company's stock option plans (the "Plans") provide for the grant of up
to 2,850,000 incentive or nonstatutory options to employees, directors and
consultants of the Company at the fair market value of the common stock on the
date of grant as determined by the Board of Directors. Options granted under the
Plans generally vest ratably over periods of up to four years and expire ten
years from the date of grant. The Plans also provide for early exercise of
options prior to full vesting. Any unvested shares purchased are subject to
repurchase rights by the Company upon occurrence of certain events or
conditions, such as employment termination, at the original purchase price.
There were 528,289 shares subject to repurchase at December 31, 1998.

Options and Warrants Granted to Nonemployees

In 1998, the Company granted options and warrants for common stock to
nonemployees for services performed and to be performed through 2002. In
connection with these awards, the Company recognized $178,000 in stock-based
compensation expense related to such options which vested during 1998. At
December 31, 1998, unvested options granted to nonemployees totaled 24,479
shares.

Stock-Based Compensation

During 1998, the Company issued common stock options at less than the fair
value of its common stock. The fair value of the common stock, weighted based on
options granted in 1998, was $2.75 per share. Accordingly, the Company recorded
$2,929,000 as the value of such options in 1998. Stock-based compensa-

F-105
<PAGE> 198
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tion of $1,158,000 was amortized to expense in 1998 and at December 31, 1998,
the Company had $1,771,000 in deferred stock compensation related to such
options, which will be amortized to expense through 2002.

During 1997, the Company issued common stock options at exercise prices
equal to the fair value of its common stock. Accordingly, no stock-based
compensation was recorded for that period.

Stock Option Activity

A summary of the Company's stock option activity follows (in thousands):

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OUTSTANDING EXERCISE
OPTIONS PRICE
----------- --------
<S> <C> <C>
Balance, January 1, 1997
Granted..................................................... 497,125 $0.11
Exercised................................................... (68,020) 0.10
Canceled or expired......................................... (27,605) 0.10
---------
Balance, December 31, 1997 (68,503 shares vested at a
weighted average exercise price of $0.11)................. 401,500 0.11
Granted..................................................... 2,551,756 1.61
Exercised................................................... (686,076) 0.73
Canceled or expired......................................... (328,475) 0.24
---------
Balance, December 31, 1998.................................. 1,938,705 $1.85
=========
Available for grant at December 31, 1998.................... 132,230
=========
</TABLE>

The following table summarizes information about currently outstanding and
vested stock options at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
--------------------------------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE
RANGE OF NUMBER OF REMAINING AVERAGE NUMBER OF EXERCISE
EXERCISE PRICE SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES PRICE
- -------------- --------- ---------------- -------------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.10 to $0.13 416,799 8.76 $0.12 333,348 $0.12
1.25 866,500 9.46 1.25 176,135 1.25
1.40 270,400 9.67 1.40 24,871 1.40
1.48 4,506 9.67 1.48 250 1.48
1.75 156,050 9.75 1.75 9,753 1.75
8.00 224,450 9.92 8.00 4,676 8.00
--------- ----- ------- -----
1,938,705 $1.85 549,033 $0.64
========= ===== ======= =====
</TABLE>

Additional Stock Plan Information

F-106
<PAGE> 199
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

through the use of option pricing models, even though such models were developed
to estimate the fair value of freely tradable, fully transferable options
without vesting restrictions, which significantly differ from the Company's
stock option awards.

The Company's calculations for employee grants were made using the minimum
value option pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1997 1998
---- ----
<S> <C> <C>
Dividend yield.............................................. None None
Risk free interest rate..................................... 6.1% 5.2%
Expected term, in years..................................... 2.5 2.5
</TABLE>

The weighted average minimum value per option as of the date of grant for
options granted during 1997 and 1998 was $0.02 and $1.31, respectively.

If the computed minimum values of the Company's stock-based awards to
employees had been amortized to expense over the vesting period of the awards as
specified under SFAS No. 123, loss attributable to common stockholders and basic
and diluted loss per share on a pro forma basis (as compared to such items as
reported) would have been (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Loss attributable to common stockholders:
As reported............................................... $(3,552) $(9,516)
Pro forma................................................. $(3,555) $(9,640)
Basic and diluted net loss per share:
As reported............................................... $ (6.03) $ (7.26)
Pro forma................................................. $ (6.03) $ (7.35)
</TABLE>

7. NET LOSS PER SHARE

The following is a reconciliation of the denominators used in computing
basic and diluted net loss per share.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1996 1997 1998
------- ---------- ----------
<S> <C> <C> <C>
Shares (denominator):
Weighted average common shares outstanding..... 476,584 1,644,053 2,834,981
Weighted average common shares outstanding
subject to repurchase....................... 0 (1,054,562) (1,524,202)
------- ---------- ----------
Shares used in computation, basic and diluted.... 476,584 589,491 1,310,779
======= ========== ==========
</TABLE>

For the three years ended December 31, 1996, 1997 and 1998, the Company had
securities outstanding which could potentially dilute basic earnings per share
in the future, but were excluded in the computation of diluted net loss per
share in the periods presented, as their effect would have been antidilutive.
Such outstanding securities consist of the following at December 31, 1998:
6,733,612 shares of convertible preferred stock, warrants to purchase 345,761
shares of preferred stock, and options and warrants to purchase 1,979,181 shares
of common stock. There were 1,990,635 and 1,525,789 shares subject to repurchase
by the Company at December 31, 1997 and 1998, respectively.

F-107
<PAGE> 200
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES

Leases

Future minimum net lease payments under noncancellable operating leases
(with initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
YEAR ENDING DECEMBER 31:
1999........................................................ $ 598 $ 366
2000........................................................ 561 369
2001........................................................ 464 343
2002........................................................ 34 322
2003........................................................ 319
Thereafter.................................................. 346
------ ------
Total............................................. 1,657 $2,065
======
Less amount representing interest........................... (126)
------
Present value of net minimum capital lease payments......... 1,531
Less current installments of obligations under capital
leases.................................................... (490)
------
Obligations under capital leases, excluding current
installment............................................... $1,041
======
</TABLE>

Total rent expense under operating leases for the years ended 1996, 1997
and 1998 was $22,000, $127,000 and $400,000, respectively.

Legal Matters

In connection with the termination of employment of an officer, the Company
foreclosed on 264,560 shares of the Company's common stock securing a promissory
note from that officer. If that officer should elect to legally contest the
number of shares issued to him, and if additional shares are ultimately issued,
the Company could incur a charge equal to the fair market value of such shares.
The ultimate outcome of this matter cannot be determined at this time.

Additionally, the Company is involved in various other claims and legal
actions. Management does not expect that the outcome of these other claims and
actions will have a material effect on the Company's financial position or
results of operations.

9. SUBSEQUENT EVENTS

In January 1999, the Company sold 1,496,347 shares of Series C preferred
stock at $9.04 per share for proceeds of $13,527,000.

On January 4, 1999, the Board of Directors adopted, subject to stockholder
approval, the 1999 Stock Option Plan (the "1999 Stock Plan"). The 1999 Stock
Plan will serve as the successor equity incentive program to the Company's
existing 1997 Stock Option Plan. A total of 2,000,000 shares of common stock
were initially reserved for issuance under the 1999 Stock Plan. On March 30,
1999, the Board of Directors adopted an amendment to the 1999 Stock Plan that
increased the shares of common stock reserved for issuance to 3,500,000. The
number of shares reserved will increase for each of the next five years by the
lesser of 1,000,000 shares or 3% of the number of shares of common stock
outstanding at the beginning of the year.

F-108
<PAGE> 201
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On January 28, 1999, the Board of Directors adopted, subject to stockholder
approval, the 1999 Directors' Stock Option Plan (the "Directors' Plan"). Under
the Directors' Plan, each person who becomes a nonemployee director after the
effective date of the Directors' Plan may be granted nonstatutory stock options.
A total of 200,000 shares of common stock have initially been reserved for
issuance under the Directors' Plan.

On January 28, 1999, the Board of Directors approved, subject to
stockholder approval, the reincorporation of the Company in the State of
Delaware and the associated exchange of one share of common stock or preferred
stock of the Company for every share of common stock or preferred stock, as the
case may be, of the Company's California predecessor. Such reincorporation and
stock exchange will become effective prior to the effective date of the initial
public offering contemplated by the Company.

Additionally, on January 28, 1999, the Board of Directors adopted, subject
to stockholder approval, the 1999 Employee Stock Purchase Plan (the "Purchase
Plan"). Under the Purchase Plan, eligible employees are allowed to have salary
withholdings of up to 10% of their base compensation to purchase shares of
common stock at a price equal to 85% of the lower of the market value of the
stock at the beginning or end of defined purchase periods. The initial purchase
period commences upon the effective date for the initial public offering of the
Company's common stock. The Company has initially reserved 350,000 shares of
common stock for issuance under this plan, and the number of shares reserved
will increase for each of the next five years by the lesser of 75,000 shares or
0.5% of the shares of common stock outstanding at the beginning of the year.

On May 4, 1999, Flycast completed an initial public offering of 3,000,000
shares of the Flycast's common stock. In addition, on June 4, 1999, the Company
sold an additional 200,000 shares under the underwriters' overallotment option.
Total net proceeds were $74.4 million. Upon the closing of the initial public
offering, Flycast's mandatorily redeemable preferred stock converted into 6.9
million shares of common stock.

On August 30, 1999, Flycast completed a merger with InterStep, Inc., a
Massachusetts corporation which commenced operations in 1995. InterStep provides
publishers with e-mail content management, list management and distribution
services on an outsourced basis. In the transaction, Flycast issued 480,337
shares of common stock to InterStep's stockholders, of which 47,558 shares are
held by an escrow agent to serve as security for the indemnity provided by
stockholders of InterStep. The Company also assumed all outstanding InterStep
common stock options, which were converted to options to purchase approximately
10,012 shares of the Company's common stock. No adjustments were required to
conform accounting policies of the entities. There were no significant
intercompany transactions requiring elimination for any periods presented.

The above transaction has been accounted for as a pooling of interests and,
accordingly, the supplemental consolidated financial statements of the Company
for all periods presented have been restated to include the accounts of
InterStep.

F-109
<PAGE> 202
FLYCAST COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Revenue and net income (loss) of the separate companies for the periods
preceding the acquisition were as follows (in thousands):

<TABLE>
<CAPTION>
NET
INCOME
REVENUE (LOSS)
------- -------
<S> <C> <C>
Fiscal year ended December 31, 1998
Flycast................................................... $8,029 $(9,306)
InterStep................................................. 1,253 446
------ -------
Combined.................................................. $9,282 $(8,860)
====== =======
Fiscal year ended December 31, 1997
Flycast................................................... $ 630 $(3,417)
InterStep................................................. 304 71
------ -------
Combined.................................................. $ 934 $(3,346)
====== =======
Fiscal year ended December 31, 1996
Flycast................................................... $ -- $ (445)
InterStep................................................. 123 50
------ -------
Combined.................................................. $ 123 $ (395)
====== =======
</TABLE>

On September 30, 1999, the Company announced that a definitive agreement
was entered into to be acquired by CMGI, Inc. ("CMGI") in a stock-for-stock
merger. Under the terms of the agreement, CMGI will issue .4738 CMGI shares for
every Flycast share held on the closing date of the transaction. Closing of the
merger is subject to customary conditions, including formal approval by the
Company's shareholders. In connection with the merger, the Company also entered
into a Stock Option Agreement dated as of September 29, 1999, whereby the
Company granted CMGI an option to purchase up to 19.9% of the outstanding shares
of the Company common stock, which option may be exercised in the event that the
Merger Agreement is terminated under certain circumstances. Related to the
acquisition, the Company incurred $1,350,000 in financial advisory services
expenses in the quarter ended September 30, 1999.

F-110
<PAGE> 203

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Adsmart Corporation

We have audited the accompanying consolidated balance sheets of Adsmart
Corporation as of July 31, 1998, 1999 and January 31, 2000, and the related
statements of operations, stockholders' deficit, and cash flows for the three
years ended July 31, 1999, and the six months ended January 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Adsmart Corporation as of
July 31, 1998, 1999 and January 31, 2000, and the results of its operations and
its cash flows for the three years ended July 31, 1999, and the six months ended
January 31, 2000, in conformity with generally accepted accounting principles.

KPMG LLP

March 16, 2000
Boston, Massachusetts

F-111
<PAGE> 204

ADSMART CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JULY 31,
---------------------------- JANUARY 31,
1998 1999 2000
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Accounts receivable -- net of allowance for
doubtful accounts of $42,935, $804,288, and
$1,540,152, respectively.................... $ 347,816 $ 10,701,526 $ 23,922,730
Accounts receivable -- related parties......... -- 60,305 848,516
Receivables, other............................. -- 69,390 69,390
Prepaid expenses and other current assets...... 42,717 131,712 137,388
------------ ------------ ------------
Total current assets................... 390,533 10,962,933 24,978,024
------------ ------------ ------------
Property and equipment, net...................... 15,731 196,195 245,280
Goodwill, net of accumulated amortization of
$2,589,267 and $6,041,623...................... -- 31,934,301 28,481,945
------------ ------------ ------------
Total assets........................... $ 406,264 $ 43,093,429 $ 53,705,249
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Capital lease obligations, current portion..... $ 10,844 $ 25,071 $ 13,325
Debt to CMGI................................... 4,564,070 44,698,279 66,419,063
Accounts payable............................... 391,936 10,958,820 12,164,281
Accounts payable -- related parties............ -- 666,705 4,854,169
Accrued lease liability........................ 625,750 248,119 --
Accrued expenses............................... 331,224 4,941,900 3,111,638
------------ ------------ ------------
Total current liabilities.............. 5,923,824 61,538,894 86,562,476

Capital lease obligations, net of current
portion........................................ 12,412 69,108 44,523
Commitments and contingencies
Stockholders' deficit:
Series A Convertible Preferred Stock, $.01 par
value; 800,000 shares authorized; 800,000
shares issued and outstanding (liquidating
preference of $12,212,236)..................... 8,000 8,000 8,000
Series B Convertible Preferred Stock, $.01 par
value; 14,200,000 shares authorized; 0 shares
issued and outstanding......................... -- -- --
Common stock, $.01 par value; 160,000,000 shares
authorized; 50,000 shares issued and
outstanding.................................... 500 500 500
Additional paid-in-capital....................... 6,071,920 7,710,966 7,710,966
Accumulated deficit.............................. (11,610,392) (26,234,039) (40,621,216)
------------ ------------ ------------
Total stockholders' deficit............ (5,529,972) (18,514,573) (32,901,750)
------------ ------------ ------------
Total liabilities and stockholders'
deficit.............................. $ 406,264 $ 43,093,429 $ 53,705,249
============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.
F-112
<PAGE> 205

ADSMART CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
---------------------------------------- --------------------------
1997 1998 1999 1999 2000
----------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue........................... $ 15,004 $ 354,381 $ 10,924,851 $ 865,745 $ 26,779,962
Revenue, related parties.......... -- -- 144,019 -- 808,691
----------- ----------- ------------ ----------- ------------
Total revenue........... 15,004 354,381 11,068,870 865,745 27,588,653
----------- ----------- ------------ ----------- ------------
Cost of revenue................... 602,615 1,988,549 13,140,768 878,923 22,382,617
Cost of revenue, related
parties......................... 335,892 548,366 1,689,810 374,270 3,560,292
----------- ----------- ------------ ----------- ------------
Total cost of revenue... 938,507 2,536,915 14,830,578 1,253,193 25,942,909
----------- ----------- ------------ ----------- ------------
Gross (loss) profit..... (923,503) (2,182,534) (3,761,708) (387,448) 1,645,744
----------- ----------- ------------ ----------- ------------
Operating expenses:
Sales and marketing............. 1,709,621 2,318,244 6,593,404 994,024 9,686,422
Research and development........ 1,359,370 960,692 -- -- --
General and administrative...... 658,425 1,130,765 1,104,292 155,546 2,064,344
Amortization of goodwill........ -- -- 2,589,267 -- 3,452,357
----------- ----------- ------------ ----------- ------------
Total operating
expenses.............. 3,727,416 4,409,701 10,286,963 1,149,570 15,203,123
----------- ----------- ------------ ----------- ------------
Loss from operations.............. (4,650,919) (6,592,235) (14,048,671) (1,537,018) (13,557,379)
Interest expense, principally
related party................... -- 95,041 574,976 191,776 829,798
----------- ----------- ------------ ----------- ------------
Net loss.......................... $(4,650,919) $(6,687,276) $(14,623,647) $(1,728,794) $(14,387,177)
=========== =========== ============ =========== ============
Unaudited pro forma basic and
diluted net loss per share...... $ (.28) $ (.08) $ (.13)
============ =========== ============
Unaudited pro forma weighted
average number of basic and
diluted shares outstanding...... 51,631,358 22,168,653 114,258,978
============ =========== ============
</TABLE>

See accompanying notes to consolidated financial statements.
F-113
<PAGE> 206

ADSMART CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
SERIES B
SERIES A CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- --------------- --------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- -------- ------ ------ ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1996...... -- $ -- -- $ -- 8,000,000 $ 80,000 $ -- $ (272,197)
Net loss.................... -- -- -- -- -- -- -- (4,650,919)
------- ------ ----- ------ ---------- -------- ---------- ------------
Balance at July 31, 1997...... -- -- -- -- 8,000,000 80,000 -- (4,923,116)
Reorganization.............. 800,000 8,000 -- -- (8,000,000) (80,000) 6,071,920 --
Exercise of stock options..... -- -- -- -- 50,000 500 -- --
Net loss.................... -- -- -- -- -- -- -- (6,687,276)
------- ------ ----- ------ ---------- -------- ---------- ------------
Balance at July 31, 1998...... 800,000 8,000 -- -- 50,000 500 6,071,920 (11,610,392)
Issuance of stock options... -- -- -- -- -- -- 1,639,046 --
Net loss.................... -- -- -- -- -- -- -- (14,623,647)
------- ------ ----- ------ ---------- -------- ---------- ------------
Balance at July 31, 1999...... 800,000 8,000 -- -- 50,000 500 7,710,966 (26,234,039)
Net loss.................... -- -- -- -- -- -- -- (14,387,177)
------- ------ ----- ------ ---------- -------- ---------- ------------
Balance at January 31, 2000... 800,000 $8,000 -- $ -- 50,000 $ 500 $7,710,966 $(40,621,216)
======= ====== ===== ====== ========== ======== ========== ============

TOTAL
STOCKHOLDERS'
DEFICIT
-------------
<S> <C>
Balance at July 31, 1996...... $ (192,197)
Net loss.................... (4,650,919)
------------
Balance at July 31, 1997...... (4,843,116)
Reorganization.............. 5,999,920
Exercise of stock options..... 500
Net loss.................... (6,687,276)
------------
Balance at July 31, 1998...... (5,529,972)
Issuance of stock options... 1,639,046
Net loss.................... (14,623,647)
------------
Balance at July 31, 1999...... (18,514,573)
Net loss.................... (14,387,177)
------------
Balance at January 31, 2000... $(32,901,750)
============
</TABLE>

See accompanying notes to consolidated financial statements.
F-114
<PAGE> 207

ADSMART CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
------------------------------------------ ---------------------------
1997 1998 1999 1999 2000
----------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................... $(4,650,919) $(6,687,276) $(14,623,647) $(1,728,794) $(14,387,177)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization............... 150,332 480,695 2,596,340 3,537 3,501,442
Changes in operating assets and liabilities:
Accounts receivable....................... (25,291) (322,525) (8,247,521) (173,489) (13,221,204)
Accounts receivable, related parties...... -- -- (60,305) -- (788,211)
Prepaid expenses and other current
assets................................. (19,311) (23,406) (24,967) (5,682) (5,676)
Accounts payable.......................... 221,104 170,832 6,771,140 142,447 1,205,461
Accounts payable, related parties......... -- -- 666,705 -- 4,187,464
Accrued lease liability................... -- 625,750 (377,631) (149,320) (248,119)
Accrued expenses.......................... 291,166 (10,267) 2,648,026 64,180 (1,847,713)
----------- ----------- ------------ ----------- ------------
Net cash used in operating
activities........................... (4,032,919) (5,766,197) (10,651,860) (1,847,121) (21,603,733)
----------- ----------- ------------ ----------- ------------
Cash flows from investing activities:
Net cash acquired from acquisition............ -- -- 359,535 -- --
Purchases of property and equipment........... (364,049) (185,579) (46,153) -- (80,720)
----------- ----------- ------------ ----------- ------------
Net cash provided by (used in)
investing activities................. (364,049) (185,579) 313,382 -- (80,720)
----------- ----------- ------------ ----------- ------------
Cash flows from financing activities:
Net change in debt to CMGI.................... 4,400,672 5,962,528 11,651,414 1,852,747 21,720,784
Payments of capital lease obligations......... (3,704) (11,252) (25,888) (5,626) (36,331)
Payments of long-term borrowings.............. -- -- (1,287,048) -- --
Employee stock option exercises............... -- 500 -- -- --
----------- ----------- ------------ ----------- ------------
Net cash provided by financing
activities........................... 4,396,968 5,951,776 10,338,478 1,847,121 21,684,453
----------- ----------- ------------ ----------- ------------
Net increase in cash............................ -- -- -- -- --
Cash, beginning of period....................... -- -- -- -- --
----------- ----------- ------------ ----------- ------------
Cash, end of period............................. $ -- $ -- $ -- $ -- $ --
=========== =========== ============ =========== ============
</TABLE>

See accompanying notes to consolidated financial statements.
F-115
<PAGE> 208

ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS

Adsmart Corporation (the "Company") is a provider of comprehensive Internet
advertising solutions. The Company combines the branding power of traditional
media with the precision and interactivity of new media to provide effective
marketing opportunities for advertisers, and a profitable advertising revenue
stream for Web publishers. The Company is headquartered in Andover, MA with
sales offices in the six major advertising markets: New York, Chicago, Detroit,
Los Angeles, Boston and San Francisco.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The Company is a majority owned subsidiary of CMGI, Inc. ("CMGI" or the
"Parent"). The Company commenced operations in April 1996. The accompanying
consolidated financial statements, which have been prepared as if the Company
had operated as a separate stand-alone entity for all periods presented, include
certain allocations from CMGI for certain general and administrative expenses
such as rent, legal services, insurance, and employee benefits. Allocations are
based primarily on headcount. Management believes that the method used to
allocate the costs and expenses is reasonable; however, such allocated amounts
may or may not necessarily be indicative of what actual expenses would have been
incurred had the Company operated independently of CMGI. The Company is
economically dependent upon CMGI for financing, which has principally been
through debt (note 5).

(b) Use of Estimates

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

Revenues are derived primarily from the delivery of advertising impressions
through third-party web sites comprising the Adsmart Network. Revenue is
recognized in the period the advertising impressions are delivered provided
collection of the resulting receivable is probable.

The Company is obligated to make payments to web sites, which have
contracted with the Company to be part of the Adsmart Network, in the period the
advertising impressions are delivered. From inception through July 31, 1998 the
Company did not make payments to the web sites until cash had been received from
the advertiser and, consequently, recognized revenue "net" of amounts paid to
web sites. Effective August 1, 1998 certain provisions of the web site contracts
were amended to require payment to the web sites regardless of whether amounts
were received from the advertisers and, consequently, the Company recognized
revenue "gross" of amounts paid to web sites.

(d) Loss Contracts

The Company has entered into certain contracts with web sites in which it
has guaranteed that the web site's inventory will be sold for a minimum cost per
thousand impressions. To the extent the Company cannot sell the related
inventory or cannot sell such inventory for an amount greater than the minimum
guarantee, the Company incurs a loss under the contract. Management assesses the
need to record a loss accrual when indicators of continuing losses are present.
Management reviews a number of factors, including the level of inventory
expected to be available in the future, the anticipated market value of this
inventory and other

F-116
<PAGE> 209
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

relevant market factors. During 1999, the Company accrued $2,962,046 for
possible losses related to such contracts. At January 31, 2000, $25,992 remains
accrued against future losses.

(e) Cash and non-cash financing activities

Under an arrangement with CMGI, the Company maintains a zero balance
account. Cash required by the Company for the funding of its operations was
provided as needed with a corresponding increase to the "Debt to CMGI" account.
Customer receipts and other cash receipts of the Company were remitted to CMGI
upon receipt by the Company and serve to reduce the "Debt to CMGI" account.

In April 1998, non-cash financing activities included the issuance of
800,000 shares of the Company's Series A Convertible Preferred Stock ("Series A
Preferred Stock") in exchange for 8,000,000 shares of the Company's common stock
and a $6,000,000 reduction in debt to CMGI (note 5).

During fiscal 1999, non-cash investing activities include the acquisition
of 2Can Media, Inc. ("2Can") in exchange for additional debt to CMGI of
$28,482,795 (note 3).

The Company incurred a capital lease obligation of $38,212 in 1997 when the
Company entered into a lease for new equipment.

(f) Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements and assets acquired under capital leases are amortized
using the straight-line method over the shorter of the lease term or the
estimated useful life of the asset. Expenditures for maintenance and repairs are
charged to expense as incurred.

(g) Goodwill

Goodwill relates to the Company's purchase of 2Can in March 1999 and is
being amortized on a straight-line basis over five years (note 3).

(h) Accounting for Impairment of Long-Lived Assets

The Company assesses the need to record impairment losses on long-lived
assets used in operations when indicators of impairment are present. On an
ongoing basis, management reviews the value and period of amortization or
depreciation of long-lived assets, including goodwill. During this review, the
significant assumptions used in determining the original cost of long-lived
assets are reevaluated. Although the assumptions may vary from transaction to
transaction, they generally include revenue growth, operating results, cash
flows and other indicators of value. Management then determines whether there
has been a permanent impairment of the value of long-lived assets by comparing
future undiscounted cash flows to the asset's carrying value. If the carrying
value of the asset exceeds the estimated future undiscounted cash flows of the
asset, a loss is recorded for the excess of the asset's carrying value over the
fair value.

(i) Income Taxes

F-117
<PAGE> 210
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

such, CMGI realizes the full benefit of all federal and part of the state net
operating losses that have been incurred by the Company. Therefore, such net
operating losses incurred by the Company will not be available for the Company.
The Company intends to enter into a tax sharing agreement between the Company
and CMGI under which CMGI will require the Company to reimburse CMGI for the
amounts it contributes to the consolidated tax liability of the CMGI group;
however, under the policy, CMGI is not obligated to reimburse the Company for
any losses utilized in the consolidated CMGI group.

(j) Advertising Costs

The Company recognizes advertising costs as incurred. Advertising expense
was $134,416, $37,683, $422,729 and $1,723,937 for the years ended July 31,
1997, 1998 and 1999, and the six months ended January 31, 2000, respectively.

(k) Financial Instruments and Concentration of Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash, accounts receivable, accounts
payable and accrued liabilities. At July 31, 1998, 1999, and January 31, 2000,
the fair value of these instruments approximated their financial statement
carrying value because of the short term maturity of these instruments. To date,
the majority of accounts receivable have been derived from advertising fees
billed to advertisers located in the United States. The Company generally
requires no collateral. The Company maintains reserves for potential credit
losses; historically, management believes that such losses have been adequately
reserved for and are within expectations.

(l) Stock-Based Compensation Plans

The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 123, Accounting for Stock-Based Compensation, which permits
entities to recognize as expense over the vesting period the fair value of
stock-based awards on the date of grant. For employee stock-based awards, SFAS
No. 123 allows entities to continue to apply the provisions of Accounting
Principles Board Opinion ("APB") No. 25 and provide pro forma net earnings
disclosures as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to apply the provisions of APB No. 25 and
provide the pro forma disclosures of SFAS No. 123.

The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.

(m) Historical and Unaudited Pro Forma Basic and Diluted Net Loss per Share

The Company has adopted SFAS No. 128, Earnings Per Share ("SFAS 128"). In
accordance with SFAS 128, basic earnings (loss) per share is computed using the
weighted average number of common shares outstanding during the period. Diluted
earnings (loss) per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period,
using either the "as-if-converted" method for convertible preferred stock or the
treasury stock method for options, unless such amounts are anti-dilutive.

Historical basic and diluted net loss per share have not been presented
because they are irrelevant due to the significant change in the Company's
capital structure and resultant basic and diluted loss per share that will
result upon conversion of the convertible preferred stock and debt to CMGI.

The unaudited pro forma basic and diluted net loss per share information
included in the accompanying consolidated statements of operations for the year
ended July 31, 1999 and the six months ended January 31, 1999 and 2000 reflects
the conversion of all preferred stock and amounts due to CMGI (note 5) as of the
F-118
<PAGE> 211
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

beginning of each period or date of issuance, if later, using the "if-converted"
method. Accordingly, diluted loss per share is the same as basic loss per share,
and has not been presented separately.

The reconciliation of the numerators and denominators of the unaudited pro
forma basic and diluted net loss per share computation for the Company's
reported net loss for the periods presented is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED --------------------------
JULY 31, JANUARY 31, JANUARY 31,
1999 1999 2000
------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Numerator:
Net loss............................................ $(14,623,647) $(1,728,794) $(14,387,177)
Denominator:
Basic and diluted weighted average number of common
shares outstanding............................... 50,000 50,000 50,000
Assumed conversion of debt to CMGI.................. 102,415,710 18,133,956 112,670,204
Assumed weighted conversion of preferred stock...... 8,000,000 8,000,000 8,000,000
------------ ----------- ------------
Weighted average number of pro forma basic and
diluted shares outstanding..................... 110,465,710 26,183,956 120,720,204
============ =========== ============
Unaudited pro forma basic and diluted net loss per
share............................................... $ (.13) $ (.07) $ (.12)
============ =========== ============
</TABLE>

(n) Segment Reporting

The Company has adopted the provision of SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information, effective August 1, 1998.
SFAS 131 establishes standards for the way that public business enterprises
report selected information about operating segments in annual and interim
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. SFAS 131
requires the use of the "management approach" in disclosing segment information,
based largely on how senior management generally analyzes the business
operations. The Company currently operates in only one segment and, as such, no
additional disclosures are required.

(o) New Accounting Pronouncements

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC"), issued Statement of
Position ("SOP") 98-1, Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use. SOP 98-1 requires the capitalization of certain
internal costs related to the implementation of computer software obtained for
internal use. The Company adopted this standard in the first quarter of fiscal
2000. The adoption of SOP 98-1 did not have a material impact on the Company's
financial position or its results of operations.

In April 1998, the AcSEC issued SOP 98-5, Reporting on the Costs of
Start-Up Activities. Under SOP 98-5, the costs of start-up activities should be
expensed as incurred. Start-up activities are broadly defined as those 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, commencing some new operation or organizing a new entity. The
Company adopted this standard in the first quarter of fiscal 2000. The adoption
of SOP 98-5 did not have a material impact on the Company's financial position
or its results of operations.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition in Financial
Statements. SAB No. 101 summarizes certain of the

F-119
<PAGE> 212
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements. Management believes the Company has
complied with the provisions of SAB No. 101.

(3) ACQUISITION OF 2CAN MEDIA, INC.

On March 11, 1999, CMGI acquired 2Can, an on-line advertising
representation firm in exchange for purchase consideration valued at
$28,482,795, including bridge notes receivable of $1,500,000. The acquisition
has been accounted for using the purchase method of accounting and, accordingly,
the purchase price has been allocated to the assets purchased and liabilities
assumed based upon their fair values at the date of acquisition. Concurrent with
CMGI's closing of the 2Can acquisition, CMGI contributed 2Can to the Company in
exchange for additional debt to CMGI of $28,482,795. This transaction was
accounted for as a transfer of entities under common control where the Company
recorded the assets and liabilities of 2Can at CMGI's recorded basis. The
results of operations of 2Can have been included in the Company's consolidated
financial statements since March 11, 1999.

Total purchase price was allocated as follows:

<TABLE>
<S> <C>
Working capital deficit, net of cash acquired of
$359,535.............................................. $(6,168,446)
Property and equipment.................................. 141,384
Goodwill................................................ 34,523,568
Prepaids and deposits................................... 32,379
Long-term obligations................................... (46,090)
-----------
Purchase price.......................................... $28,482,795
===========
</TABLE>

The portion of the purchase price allocated to goodwill is being amortized
on a straight-line basis over five years. Amortization of goodwill resulting
from the acquisition of 2Can was $2,589,267 for the period from March 11, 1999
through July 31, 1999, and $3,452,356 for the six months ended January 31, 2000.

Under the Agreement and Plan of Merger with 2Can, CMGI is obligated to pay
contingent consideration to 2Can based upon future earnings targets. This
additional consideration is payable based on the provisions of the merger
agreement and will be paid directly by CMGI. The Company will record additional
purchase price with the Debt to CMGI account being increased by a corresponding
amount. The amount of the contingent merger consideration was not determinable
as of January 31, 2000.

The following table represents the unaudited pro forma results of
operations of the Company for the years ended July 31, 1998 and 1999, as if the
2Can purchase had occurred at the beginning of the respective periods. These pro
forma results include adjustments for the amortization of goodwill. They have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made at the beginning of
the respective periods or of results that may occur in the future.

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------
1998 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues.................................................... $ 1,859,616 $ 13,294,990
------------ ------------
Net loss.................................................... $(14,581,035) $(24,840,609)
============ ============
Pro forma basic and diluted net Loss per common share....... $ (.20) $ (.26)
============ ============
Pro forma basic and diluted weighted average number of
common shares outstanding................................. 74,165,116 94,434,308
============ ============
</TABLE>

F-120
<PAGE> 213
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
JULY 31,
ESTIMATED -------------------- JANUARY 31,
USEFUL LIFE 1998 1999 2000
--------------- -------- -------- -----------
<S> <C> <C> <C> <C>
Office furniture and equipment............. 3-5 years $ 18,909 $ 41,166 $ 43,343
Computer equipment......................... 3-5 years 341,317 475,692 551,327
Software................................... 3 years 254,866 278,699 281,607
Leasehold improvements..................... 4 years or life
of lease -- 7,072 7,072
-------- -------- --------
Less: Accumulated depreciation............. 599,361 606,434 638,069
-------- -------- --------
$ 15,731 $196,195 $245,280
======== ======== ========
</TABLE>

Property and equipment recorded under capital leases amounted to $38,212 at
July 31, 1998 and $58,117 at July 31, 1999 and January 31, 2000. Total
accumulated depreciation related to these assets amounted to $15,916, $34,883,
and $45,603, at July 31, 1998 and 1999, and January 31, 2000, respectively.

(5) DEBT TO CMGI

Commencing in February 1998, advances made by CMGI to the Company accrued
interest at the annual rate of 7%. In April 1998, advances of $6,000,000 from
CMGI, including accrued interest thereon, and 8,000,000 shares of the Company's
common stock were converted into 800,000 shares of Series A Preferred Stock.
These advances were made by CMGI to the Company from inception through January
1998. The Company intends to formalize its borrowing arrangement with CMGI and
execute a secured convertible demand note with CMGI (the "Secured Convertible
Demand Note"). The Secured Convertible Demand Note covers advances made by CMGI
to the Company for periods commencing in May 1998. Under the Secured Convertible
Demand Note, advances and accrued interest may be prepaid without penalty.
Advances outstanding under this note are secured by substantially all assets and
intellectual property of the Company, and principal and accrued interest may be
converted at the option of CMGI into shares of Series B Convertible Preferred
Stock ("Series B Preferred Stock"). The number of Series B Preferred shares to
be issued upon conversion of each borrowing represented by the note is based on
the estimated fair value of the Company at the end of the quarter in which such
borrowing is made.

Average balances outstanding in Debt to CMGI for the years ended July 31,
1998 and 1999 and for the six month period ended January 31, 2000 amounted to
$3,875,224, $20,168,116, and $51,701,020, respectively. Interest does not accrue
on $28,482,795 Debt to CMGI incurred in connection with the purchase of 2 Can.

(6) ACCRUED LEASE LIABILITY

The Company acquired fixed assets and entered into an agreement to lease
certain equipment in connection with developing ad serving technology both with
an affiliate of CMGI. In January 1998, the Company made the decision to no
longer pursue the development of the related technology. As a result of this
decision, certain equipment became idle. The Company accrued $625,750 in July
1998 related to the present value of the future minimum lease payments, less any
amounts recoverable from the sale of the equipment, under these leases. The
company also recorded a write-down of fixed assets of $338,172 during fiscal
1998 related to the idle equipment owned by the Company.

F-121
<PAGE> 214
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(7) COMMITMENTS AND CONTINGENCIES

(a) Leases

The Company has entered into noncancelable operating leases for certain
office facilities and equipment related to its field offices which expire
through November 2001. In addition, the Company pays CMGI for office facilities
used as the Company's headquarters for which it is charged based upon an
allocation of the total costs for the facilities at market rates. Substantially
all leases for real property have been guaranteed by CMGI.

Total rent expense amounted to $187,516, $699,555, $927,550 and $945,981
for the years ended July 31, 1997, 1998, and 1999, and the six months ended
January 31, 2000, respectively. Rent expense for office facilities paid to CMGI
amounted to $84,334, $104,711, $79,869 and $205,417 for the years ended July 31,
1997, 1998 and 1999, and the six months ended January 31, 2000, respectively.
Rent expense for equipment paid to a subsidiary of CMGI amounted to $0,
$408,926, $432,491 and $242,118 for the years ended July 31, 1997, 1998 and
1999, and the six months ended January 31, 2000, respectively. All other rent
expense is with third parties.

Minimum annual rental commitments are as follows at January 31, 2000:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- --------
<S> <C> <C>
2000................................................. $ 669,004 $ 58,259
2001................................................. 580,849 6,432
2002................................................. 95,166 --
2003................................................. 4,901 --
---------- --------
$1,349,920 64,691
==========
Less amounts representing interest................... (6,843)
--------
Present value of future minimum lease payments....... 57,848
Less current portion of capital lease obligations.... (13,325)
--------
Long-term portion of capital lease obligations....... $ 44,523
========
</TABLE>

(b) Litigation

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
Company's consolidated financial position or results of operations.

(8) INCOME TAXES

No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses for all periods presented. The Company is
included in the filing of a consolidated tax return with its parent, CMGI, which
has utilized substantially all of the Company's current losses for federal tax
purposes. Thus, the Company does not have significant federal net operating
losses available to offset future taxable income, other than those related to
the pre-acquisition periods of 2 Can. The Company has recorded a full

F-122
<PAGE> 215
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

valuation allowance against its deferred tax assets since management believes
that, after considering all the available objective evidence, both positive and
negative, historical and prospective, with greater weight given to historical
evidence, it is more likely than not that these assets will not be realized. No
income tax benefit has been recorded for all periods presented because of the
valuation allowance.

<TABLE>
<CAPTION>
JULY 31,
------------------------ JANUARY 31,
1998 1999 2000
--------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for bad debts.................... $ 17,539 $ 328,552 $ 629,152
Deferred stock-based compensation.......... -- 669,550 669,550
Accruals and other reserves................ 273,707 1,839,315 683,908
Net operating losses....................... 130,108 1,630,530 1,675,826
Tax basis in excess of book basis of fixed
assets and intangibles.................. 95,372 94,149 220,297
--------- ----------- -----------
Total gross deferred tax assets............ 516,726 4,562,096 3,878,733
Less: Valuation allowance.................... (516,726) (4,562,096) (3,878,733)
--------- ----------- -----------
Net deferred taxes........................... $ -- $ -- $ --
========= =========== ===========
</TABLE>

The valuation allowance increased by $256,790, $4,045,370, and decreased by
$683,363 during the years ended July 31, 1998 and 1999, and the six months ended
January 31, 2000. As of January 31, 2000, $2,570,727 of the valuation allowance
is related to the acquired deferred tax assets of 2Can, the tax benefits of
which will be recorded as a decrease to goodwill and other non-current
intangible assets.

The Company has net operating loss carryforwards for Massachusetts tax
purposes of $2,087,000, $2,087,000 and $2,087,000 as of July 31, 1998 and 1999,
and January 31, 2000, respectively, which will expire in 2002. The Company has
net operating loss carryforwards for California tax purposes of $137,000,
$2,828,000 and $3,602,000 as of July 31, 1998 and 1999, and January 31, 2000,
respectively, which will expire from 2002 through 2005, of which, $1,907,000
million is related to the pre-acquisition period of 2Can. For federal tax
purposes, the Company has $3,818,000 and $3,818,000 of loss carryforwards as of
July 31, 1999 and January 31, 2000, expiring from 2011 through 2018, all of
which are related to the pre-acquisition period of 2Can. The tax benefits
related to net operating loss carryforwards from the pre-acquisition periods of
2Can will be recorded as a decrease to goodwill and other noncurrent intangible
assets. The utilization of these net operating losses may be limited pursuant to
Internal Revenue Code Section 382 as a result of prior ownership changes.

(9) STOCKHOLDERS' DEFICIT

(a) General

In December 1999, the Company increased the number of authorized shares of
preferred stock from 5,000,000 to 15,000,000 shares with a par value of $0.01
per share, of which 800,000 shares have been designated as Series A Preferred
Stock and 14,200,000 shares have been designated as Series B Preferred Stock.

Also in December 1999, the Company increased the number of authorized
shares of common stock from 20,000,000 to 160,000,000 shares with a par value of
$0.01 per share.

F-123
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ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(b) Stock Dividend

On February 25, 1998, the Board of Directors approved a 1,000 -- for -- 1
stock split effected in the form of a stock dividend. All common stock and per
share amounts in the prior periods have been restated to reflect this stock
dividend.

In April 1998, the Board of Directors authorized and issued 800,000 shares
of Series A Preferred Stock in exchange for 8,000,000 shares of common stock and
$6,000,000 in principal amount of Debt to CMGI. The Series A Preferred Stock is
entitled to receive non-cumulative annual dividends at 7% commencing February 1,
1998, payable when, as and if declared by the Board of Directors of the Company.
No dividends have been declared or paid by the Company. The Series A Preferred
Stock is voting and is convertible into 10 shares of common stock subject to
certain adjustments. In the event of any liquidation, dissolution or winding up
of the Company, the Series A Preferred Stock has a liquidation preference of
$13.3333 per share plus dividends of 7% compounded annually beginning on
February 1, 1998. As of January 31, 2000 cumulative dividends amounted to
$1,545,596. The Series A Preferred Stock is convertible into common stock
immediately at the option of the holder and automatically converts into common
stock upon the completion of the merger with Engage Technologies, Inc. (note
13).

At January 31, 2000, 8,000,000 shares of common stock have been reserved
for issuance upon the conversion of the Series A Preferred Stock.

(d) Series B Preferred Stock

In December 1999, the Board of Directors approved the designation of
14,200,000 shares of the Company's preferred stock as Series B Preferred Stock.
The Series B Preferred Stock is entitled to receive noncumulative annual
dividends at 7%, as and if declared. No dividends have been declared or paid by
the Company. The Series B Preferred Stock is fully participating, voting and
convertible into 10 shares of common stock, subject to certain adjustments. In
the event of any liquidation, dissolution or winding up of the Company, the
Series B Preferred Stock ranks pari passu with the Series A Preferred Stock, and
has a liquidation preference equal to its purchase price plus dividends computed
at 7% annually. The Series B Preferred Stock is convertible into common stock
immediately at the option of the holder .

(10) STOCK OPTION PLANS

(a) Adsmart 1996 Equity Incentive Plan

In August 1996, the Company's Board of Directors and Stockholders approved
the 1996 Equity Incentive Plan (the "1996 Plan"). Under the 1996 Plan,
non-qualified stock options or incentive stock options may be granted to the
Company's employees, directors and consultants, as defined, up to a maximum
number of shares of common stock not to exceed 2,000,000 shares. The Plan was
amended in December 1999 to increase the maximum number of shares of common
stock that may be granted under the 1996 Plan from 2,000,000 shares to 7,500,000
shares. The Board of Directors administers this plan, selects the individuals to
whom options will be granted and determines the number of shares and exercise
price of each option. Options are granted at estimated fair market value based
on third-party valuations. Options granted under the 1996 Plan have a five-year
maximum term and typically vest over a four year period, with 25% of options
granted becoming exercisable one year from the date of grant and the remaining
75% vesting monthly for the next

F-124
<PAGE> 217
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

thirty six (36) months. The following table reflects activity and historical
exercise prices of stock options under the Company's 1996 Plan for the periods
indicated:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------------ SIX MONTHS ENDED
1997 1998 1999 JANUARY 31, 2000
-------------------- -------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of period....... 412,500 $0.02 707,250 $0.02 709,027 $0.06 4,524,502 $0.15
Granted................... 401,000 0.02 679,850 0.07 4,507,309 0.16 219,250 0.53
Exercised................. (50,000) 0.01 -- 0.00 -- 0.00 -- 0.00
Cancelled................. (56,250) 0.02 (678,073) 0.03 (691,834) 0.14 (867,680) 0.23
--------- --------- --------- ---------
Options outstanding, end of
period.................... 707,250 $0.02 709,027 $0.06 4,524,502 $0.15 3,876,072 $0.14
========= ===== ========= ===== ========= ===== ========= =====
Options exercisable, end of
period.................... 102,600 $0.02 444,911 $0.04 1,214,311 $0.05 2,263,068 $0.08
========= ===== ========= ===== ========= ===== ========= =====
Options available for grant,
end of period............. 1,242,750 1,240,973 2,925,498 3,573,928
========= ========= ========= =========
</TABLE>

The following table summarizes information about the Company's stock
options outstanding at January 31, 2000.

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE OUTSTANDING PRICE
- --------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.00 - $0.19 2,966,598 2.4 $0.06 2,125,338 $0.06
$0.20 - $0.36 395,274 4.0 $0.35 43,981 $0.34
$0.37 - $0.53 514,200 4.0 $0.45 93,749 $0.42
--------- --- ----- --------- -----
3,876,072 2.7 $0.14 2,263,068 $0.08
========= ===== ========= =====
</TABLE>

(b) Adsmart Non-Employee Director Stock Option Plans

In December 1998, the Company's Board of Directors and Stockholders
approved the 1998 Stock Option Plan for Non-Employee Directors (the "1998
Director Plan"). Under the 1998 Director Plan, each Adsmart director (who is not
an employee of Adsmart or any of its subsidiaries or affiliates) is entitled to
receive, upon the date of his or her election, a non-statutory option to
purchase common stock, as defined. A maximum number of 100,000 shares of common
stock, are authorized for issuance under the 1998 Director Plan. Each automatic
grant will have an exercise price equal to the current fair market value of the
common stock at the time of grant and will have a maximum term of ten years,
subject to earlier termination following the optionees' cessation of service on
the board of directors. Each automatic option grant shall vest and become
exercisable with respect to 20% of the options granted on the first anniversary
of the date of the grant, and shall become exercisable with respect to an
additional 20% on the date of each annual stockholders' meeting at which the
option-holder is re-elected as director.

In August 1999, the Company's Board of Directors and Stockholders approved
the 1999 Stock Option Plan for Non-Employee Directors (the "1999 Director
Plan"). This plan supercedes and replaces the 1998 Director Plan. A total of
250,000 shares of common stock are reserved for issuance under the 1999 Director

F-125
<PAGE> 218
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Plan. Directors who are not Adsmart employees or otherwise affiliates,
employees, representative or designee of an institution or corporate investor
will be eligible to receive non-statutory stock options under the 1999 Director
Plan. Under the 1999 Director Plan, the Company will grant an initial option to
acquire 25,000 shares of commons stock to each eligible director who is elected
as a director for the first time.

The Company will also grant to eligible directors an additional option for
the purchase of 6,250 shares of common stock on the first, and each subsequent,
anniversary of the grant of each director's initial option if the director is
still serving as one of the Company's directors on that anniversary date. The
Board of Directors has discretion to increase to up to 100,000 shares the number
of shares of common stock subject to any initial option or additional option
covering any vesting period of up to 48 months that may be granted to an
eligible director after the date of the increase.

As of January 31, 2000, there were no options granted or outstanding under
the 1998 and 1999 Director Plans.

Certain Adsmart employees have been granted options for the purchase of
CMGI common stock under the CMGI 1986 Stock Option Plan (the "1986 Plan").
Options under the 1986 Plan are granted at fair market value on the date of the
grant and are generally exercisable in equal cumulative installments over a
four-to-ten year period beginning one year after the date of the grant.
Outstanding options under the 1986 Plan expire through 2007. Under the 1986
Plan, non-qualified stock options or incentive stock options may be granted to
CMGI's or its subsidiaries' employees, as defined, and the Company's employees
will continue to hold such CMGI options after the merger with Engage
Technologies, Inc. (note 13). The Board of Directors of CMGI administers this
plan, selects the individuals to whom options will be granted and determines the
number of shares and exercise price of each option. The following table reflects
activity and historical exercise prices of stock options granted to Company
employees under the 1986 Plan for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31,
JULY 31, 1999 2000
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Options outstanding, beginning of period.... -- -- 248,000 $ 6.07
Granted................................... 256,000 $6.04 89,650 42.75
Exercised................................. -- -- (37,308) 6.43
Cancelled................................. (8,000) 5.00 (17,300) 42.75
------- -------
Options outstanding, end of period.......... 248,000 $6.07 283,042 $15.40
======= ===== ======= ======
Options exercisable, end of period.......... -- $ -- 51,470 $ 5.68
======= ===== ======= ======
</TABLE>

The following table summarizes information about stock options granted to
Company employees under the 1986 Plan outstanding at January 31, 2000:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE OUTSTANDING PRICE
- --------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.00 - $10.53 210,692 8.7 $ 6.00 51,470 $5.68
$42.75 72,350 9.0 42.75 -- --
------- ------
283,042 $15.40 51,470 $5.68
======= ====== ====== =====
</TABLE>

F-126
<PAGE> 219
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(d) SFAS 123 Pro Forma Schedule

Had compensation cost for awards under the stock-based compensation plans
in which the Company's employees participate been determined based on the fair
value method set forth under SFAS 123, the pro forma effect on the Company's net
loss would have been as follows for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------- ------------------------- ---------------------------
1997 1998 1999
------------------------- ------------------------- ---------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ----------- ----------- ----------- ------------ ------------

<S> <C> <C> <C> <C> <C> <C>
Net loss applicable to common
stockholders.................... $(4,650,919) $(4,652,291) $(6,687,276) $(6,703,706) $(14,623,647) $(14,778,940)
=========== =========== =========== =========== ============ ============

<CAPTION>
SIX MONTHS ENDED JANUARY 31,
-------------------------------------------------------
1999 2000
------------------------- ---------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss applicable to common
stockholders.................... $(1,728,794) $(1,806,441) $(14,387,177) $(14,696,074)
=========== =========== ============ ============
</TABLE>

The fair value of each stock option granted under the 1996 Plan has been
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions for 1997, 1998 and 1999, and the six
months ended January 31, 1999 and 2000, respectively: volatility of 66.69%,
90.07%, 100%, 95.03% and 100%; risk-free interest rate of 6.19%, 5.50%, 5.16%,
5.29% and 5.16%; 4 year expected life of options for all years; and 0% dividend
yield for all years. The weighted average fair value per share of options
granted during 1997, 1998 and 1999, and the six months ended January 31, 2000
was $0.01, $0.05, $0.11, $.27 and $0.38, respectively.

The fair value of each stock option granted under the 1986 Plan has been
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions for 1999 and the six months ended
January 31, 1999 and 2000: volatility of 100%; risk-free interest rate of 5.16%;
expected life of options of 4.3 years; and 0% dividend yield for all periods.
The weighted average fair value per share of options granted during 1999 and the
six months ended January 31, 1999 and 2000 was $4.42, $4.42 and $31.31,
respectively. There were no stock option grants made to Company employees under
the 1986 Plan in fiscal 1997 and 1998.

(11) COMPREHENSIVE INCOME

The Company adopted SFAS No. 130, Reporting Comprehensive Income (SFAS
130). This statement requires that all components of comprehensive income be
reported in the financial statements in the period in which they were
recognized. For each period reported, comprehensive loss under SFAS 130 was
equivalent to the Company's net loss reported in the accompanying consolidated
statements of operations.

(12) RELATED PARTY TRANSACTIONS

CMGI has provided the Company with accounting, systems and related services
("enterprise services") at amounts that approximated the fair value of services
received in each of the periods presented in these financial statements. The
Company also occupies facilities that are leased by CMGI, whereby CMGI charges
the Company for its share of rent and related facility costs for CMGI's
corporate headquarters through an allocation based upon the Company's headcount
located on the premises in relation to total headcount for all CMGI companies
located in the premises. The Company has also purchased certain employee
benefits (including 401(k) plan participation by employees of the Company) and
insurance (including property and casualty insurance) through CMGI and employees
of the Company are eligible to participate in CMGI employee stock purchase plan.
CMGI also has provided the Company with internet marketing and business
development services. Amounts due CMGI are included in "Debt to CMGI" on the
consolidated balance

F-127
<PAGE> 220
ADSMART CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

sheets. The following table summarizes the expenses allocated to the Company by
CMGI for enterprise services, rent and facilities, and human resources:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Enterprise Services............ -- $ 16,196 $48,371 $10,711 $110,699
Rent and facilities............ $84,334 $124,069 $95,113 $25,333 $225,865
Human Resources................ -- $ 19,834 $56,947 $10,293 $181,594
</TABLE>

The Company has contracted with companies that CMGI has an investment
interest or a significant ownership interest to represent them within the
Adsmart advertising network. The related costs of these contracts are consistent
with the costs incurred on similar transactions with unrelated parties.

(13) MERGER TRANSACTION

In January 2000, the Company and CMGI signed a binding letter of intent for
the Company to be acquired by Engage Technologies, Inc. Upon the signing of a
definitive purchase agreement, the Company will become a wholly-owned subsidiary
of Engage Technologies, Inc. which, itself, is a majority-owned subsidiary of
CMGI.

F-128
<PAGE> 221

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Eisenberg Communications Group, Inc.:

We have audited the accompanying balance sheet of Eisenberg Communications
Group, Inc. as of September 29, 1998, and the related statements of operations,
stockholders' deficit, and cash flows for the period from January 1, 1998
through September 29, 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Eisenberg Communications
Group, Inc. as of September 29, 1998, and the results of its operations and its
cash flows for the period from January 1, 1998 through September 29, 1998, in
conformity with generally accepted accounting principles.

KPMG LLP

March 16, 2000
Boston, Massachusetts

F-129
<PAGE> 222

EISENBERG COMMUNICATIONS GROUP, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 29,
1998
-------------
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 58,527
Accounts receivable, net of allowance for doubtful
accounts of $206,617................................... 391,770
Prepaid expenses and other current assets................. 16,707
----------
Total current assets.............................. 467,004
----------
Property and equipment, net................................. 99,924
----------
Total assets...................................... $ 566,928
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable to bank...................................... $ 60,000
Note payable to stockholder............................... 39,291
Accrued interest on note payable to stockholder........... 10,774
Capital lease obligation, current portion................. 4,331
Due to 2Can Media, Inc.................................... 84,841
Accounts payable website, net of allowance of $147,004.... 540,609
Accounts payable, non-trade............................... 264,844
Accrued expenses.......................................... 50,449
----------
Total current liabilities......................... 1,055,139
----------
Capital lease obligations, net of current portion........... 12,512
Commitments and contingencies

Stockholders' deficit:
Common stock, no par value: 10,000 shares authorized;
2,500 shares issued and outstanding.................... 25,000
Accumulated deficit....................................... (525,723)
----------
Total stockholders' deficit....................... (500,723)
----------
Total liabilities and stockholders' deficit....... $ 566,928
==========
</TABLE>

See accompanying notes to the financial statements
F-130
<PAGE> 223

EISENBERG COMMUNICATIONS GROUP, INC.

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 1, 1998
THROUGH
SEPTEMBER 29, 1998
-----------------------
<S> <C>
Net revenues................................................ $ 298,426
Selling, general and administrative expenses................ 772,818
---------
Loss from operations........................................ (474,392)
Other income................................................ 2,585
Interest expense............................................ (9,122)
---------
Net loss.................................................... $(480,929)
=========
Basic and diluted net loss per share........................ $ (192.37)
=========

Weighted average number of basic and diluted shares
outstanding............................................... 2,500
=========
</TABLE>

See accompanying notes to the financial statements
F-131
<PAGE> 224

EISENBERG COMMUNICATIONS GROUP, INC.

STATEMENT OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
FOR THE PERIOD FROM JANUARY 1, 1998
THROUGH SEPTEMBER 29, 1998
-------------------------------------------------
COMMON STOCK TOTAL
----------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFICIT DEFICIT
------ ------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998...................... 2,500 $25,000 $ (44,794) $ (19,794)
Net loss........................................ (480,929) (480,929)
----- ------- --------- ---------
Balance at September 29, 1998................... 2,500 $25,000 $(525,723) $(500,723)
===== ======= ========= =========
</TABLE>

See accompanying notes to the financial statements
F-132
<PAGE> 225

EISENBERG COMMUNICATIONS GROUP, INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 1, 1998
THROUGH
SEPTEMBER 29, 1998
-----------------------
<S> <C>
Cash flows from operating activities
Net loss.................................................. $(480,929)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 8,532
Provision for doubtful accounts........................ 148,360
Provision for accounts payable allowance............... (103,311)
Changes in operating assets and liabilities:
Accounts receivable.................................. (400,028)
Prepaid expenses and other current assets............ (4,546)
Interest accrued on note payable -- stockholder...... 6,383
Deferred revenue..................................... (101,964)
Accounts payable..................................... 833,359
Accrued expenses..................................... 50,449
---------
Net cash used in operating activities............. (43,695)
---------
Cash flows from investing activities
Purchases of property and equipment....................... (85,034)
---------
Net cash used in investing activities............. (85,034)
---------
Cash flows from financing activities
Net proceeds under note payable to bank................... 55,000
Payment of note payable to stockholder.................... (64,999)
Proceeds from 2Can Media, Inc. advances................... 84,841
Payment of capital lease obligation....................... (967)
---------
Net cash provided by financing activities......... 73,875
---------
Net decrease in cash........................................ (54,854)

Cash, beginning of period................................... 113,381
---------
Cash, end of period......................................... $ 58,527
=========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 2,739
=========
Cash paid for taxes....................................... $ 3,067
=========
</TABLE>

See accompanying notes to the financial statements
F-133
<PAGE> 226

EISENBERG COMMUNICATIONS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS

Eisenberg Communications Group, Inc. (the "Company") is a provider of
comprehensive Internet advertising solutions. The Company was incorporated and
commenced operations in August 1992. The Company provides effective marketing
opportunities for advertisers, and a profitable advertising revenue stream for
Web publishers. Prior to engaging in Web-based advertising solutions, the
Company was engaged in selling traditional print media. The Company was
headquartered in Irvine, CA. On September 29, 1998, the Company was merged into
2Can Media, Inc. ("2Can"), the surviving corporation (note 9 and 11).

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Use of Estimates

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

(b) Revenue Recognition

Revenues are derived primarily from the delivery of advertising impressions
through third-party Web sites comprising the Eisenberg Communications Group
Network. Revenue is recognized in the period the advertising impressions are
delivered provided collection of the resulting receivable is probable.

For the period January 1, 1998 through September 29, 1998, the Company was
not obligated to make payments to third-party websites, which were contracted
with the Company to be part of the Network, until payment was received from the
customer. As such, the Company recognized revenue net of amounts paid to web
sites. The Company records allowances to reduce accounts payable to websites
corresponding to related uncollectible accounts receivable from advertisers.

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements and assets acquired under capital leases are amortized
using the straight-line method over the shorter of the lease term or the
estimated useful life of the asset. Expenditures for maintenance and repairs are
charged to expense as incurred.

(d) Accounting for Impairment of Long-Lived Assets

The Company assesses the need to record impairment losses on long-lived
assets used in operations whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future estimated undiscounted net cash flows expected to be
generated by the asset. If the carrying value of the asset exceeds the estimated
undiscounted cash flows of the asset, a loss is recorded as the excess of the
assets carrying value over the fair value.

(e) Income Taxes

F-134
<PAGE> 227
EISENBERG COMMUNICATIONS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.

(f) Advertising Costs

The Company recognizes advertising costs as incurred. Advertising expense
was $1,908 for the period from January 1, 1998 through September 29, 1998.

(g) Financial Instruments

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash, accounts receivable, accounts
payable, accrued expenses and notes payable. At September 29, 1998, the fair
value of these instruments approximated their financial statement carrying value
because of the short-term maturity of these instruments.

The majority of accounts receivable have been derived from advertising fees
billed to advertisers located in the United States. The Company performs
periodic credit evaluations of its customers' financial condition and generally
does not require collateral or other security against trade receivable balances;
however, it does maintain an allowance for potential credit losses and such
losses have been within management's expectations.

At September 29, 1998, the Company's allowance for bad debts represents
accounts receivable amounts that had not been collected as of December 31, 1999.

(h) New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information ("SFAS
131"). SFAS 131 establishes standards for the way that public business
enterprises report selected information about operating segments in annual and
interim financial statements. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS 131 requires the use of the "management approach" in disclosing segment
information, based largely on how senior management generally analyzes the
business operations. SFAS 131 was effective for the Company beginning in fiscal
1999 and did not affect the financial statements or related disclosures of the
Company.

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC") issued Statement of Position
("SOP") 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use. SOP 98-1 requires the capitalization of certain
internal costs related to the implementation of computer software obtained for
internal use. The Company adopted this standard in the first quarter of 1999,
and its adoption did not have a material impact on the Company's financial
position or operating results.

In April 1998, the AcSEC issued SOP 98-5, Reporting on the Costs of
Start-Up Activities. Under SOP 98-5, the costs of start-up activities should be
expensed as incurred. Start-up activities are broadly defined as those 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, commencing some new operation or organizing a new entity. SOP
98-5 was effective for the Company's 1999 financial statements, and its adoption
did not have a material impact on the Company's financial position or operating
results.

(i) Basic and Diluted Net Loss Per Share

SFAS 128, Earnings per Share, requires the presentation of basic earnings
per share and diluted earnings per share for all periods presented. As the
Company did not have any potentially dilutive common shares, as

F-135
<PAGE> 228
EISENBERG COMMUNICATIONS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

defined by SFAS 128, diluted net loss per share is the same as basic net loss
per share, and has not been presented separately.

(3) PROPERTY AND EQUIPMENT

At September 29, 1998, property and equipment is as follows:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-----------
<S> <C> <C>
Computer equipment.................................. 3 years $105,276
Leasehold improvements.............................. 5 years or 15,394
life-of-lease
Furniture and fixtures.............................. 7 years 4,451
--------
125,121
Less: Accumulated depreciation...................... (25,197)
--------
$ 99,924
========
</TABLE>

The Company leases certain computer equipment under a capital lease
obligation. At September 29, 1998, the cost and accumulated depreciation
relating to equipment under a capital lease obligation were $19,905 and $4,147,
respectively.

(4) COMMITMENTS AND CONTINGENCIES

(a) Leases

The Company has entered into non-cancelable operating leases for certain
office facilities and equipment related to its corporate and field offices,
which expire through 2000. Rent expense amounted to $61,281 for the period from
January 1, 1998 through September 29, 1998.

The Company also leases certain equipment under a capital lease obligation
which expires in November 2001.

Future net minimum lease payments under non-cancelable operating leases and
the capital lease obligation are as follows as of September 29, 1998:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASE
--------- -------
<S> <C> <C>
1999.................................................... $ 63,558 $ 7,017
2000.................................................... 63,558 7,017
2001.................................................... -- 7,017
2002.................................................... -- 1,169
2003.................................................... -- --
Thereafter.............................................. -- --
-------- -------
$127,116 22,220
========
Less amounts representing interest...................... (5,377)
-------
Present value of future minimum lease payments.......... 16,843
Less current portion of capital lease obligation........ (4,331)
-------
Long-term portion of capital lease obligation........... $12,512
=======
</TABLE>

F-136
<PAGE> 229
EISENBERG COMMUNICATIONS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(b) Litigation

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position or results from operations of the Company.

(5) NOTE PAYABLE TO BANK

Note payable to bank represents a $250,000 line of credit bearing interest
at prime plus 1 (9.5% at September 29, 1998). The line is collateralized by
accounts receivable and equipment. At September 29, 1998, the outstanding
balance under this line of credit amounted to $60,000.

(6) NOTE PAYABLE TO STOCKHOLDER

Note payable to stockholder consists of a $129,500 unsecured demand note,
bearing interest at 10% annually, payable in annual installments of
interest-only commencing on June 30, 1998. At September 29, 1998, the
outstanding balance due under this note amounted to $39,291. Interest expense
incurred on this note during the period from January 1, 1998 through September
29, 1998 amounted to $6,383.

(7) INCOME TAXES

No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses for the period presented.

Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
deferred tax assets (liabilities) are comprised of the following:

<TABLE>
<CAPTION>
SEPTEMBER 29,
1998
-------------
<S> <C>
Deferred tax assets:
Accrual to cash adjustments............................... $ 192,504
Net operating losses...................................... 16,540
Depreciation and amortization............................. 575
---------
Total gross deferred tax assets............................. 209,619
Less: Valuation allowance................................... (209,619)
---------
Net deferred taxes.......................................... $ --
=========
</TABLE>

At September 29, 1998, the Company had approximately $44,000 of federal and
$22,000 of state net operating loss carryforwards available to offset future
taxable income. The federal net operating loss carryforwards will expire in 2011
and the state net operating loss carryforwards will expire in 2002. The Company
has recorded a full valuation allowance against its deferred tax assets since
management believes that, after considering all the available objective
evidence, both positive and negative, historical and prospective, with greater
weight given to historical evidence, it is not more likely than not that these
assets will be realized. No income tax benefit has been recorded for the period
presented because of the valuation allowance.

(8) COMPREHENSIVE INCOME

The Company adopted SFAS No. 130, Reporting Comprehensive Income ("SFAS
130"). This statement requires that all components of comprehensive income be
reported in the financial statements in the period in which they were
recognized. For the period from January 1, 1998 through September 29, 1998,

F-137
<PAGE> 230
EISENBERG COMMUNICATIONS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

comprehensive loss under SFAS 130 was equivalent to the Company's net loss
reported in the accompanying statement of operations.

(9) DUE TO 2CAN MEDIA, INC.

During the period from January 1, 1998 through September 29, 1998, 2Can
advanced funds to the Company for working capital purposes, in anticipation of
its acquisition of the Company. These advances are non-interest bearing due to
their short-term nature, and amounted to $84,841 at September 29, 1998.

(10) CONCENTRATION OF CREDIT RISK

For the period from January 1, 1998 through September 29, 1998, 28% of the
Company's cost of sales related to one website. At September 29, 1998, this
website accounted for approximately 18% of gross trade accounts payable.
Additionally, at September 29, 1998, another website accounted for approximately
13% of gross trade accounts payable.

For the period from January 1, 1998 through September 29, 1998, 12% of the
Company's cost of sales related to one vendor that provides ad servicing. Such
vendor is a related party of the Company. At September 29, 1998, this vendor
accounted for approximately 17% of gross trade accounts payable.

(11) SUBSEQUENT EVENT

On September 29, 1998, all the outstanding stock of the Company was
acquired by 2Can, a provider of comprehensive Internet advertising solutions,
which was accounted for under the purchase method of accounting. The purchase
price was comprised of 2,333,333 shares of 2Can common stock valued at
approximately $6,300,000.

F-138
<PAGE> 231

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
2Can Media, Inc.:

We have audited the accompanying balance sheets of 2Can Media, Inc. as of
December 31, 1998 and March 10, 1999, and the related statements of operations,
stockholders' equity, and cash flows for the year ended December 31, 1998 and
the period from January 1, 1999 through March 10, 1999. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of 2Can Media, Inc. as of
December 31, 1998 and March 10, 1999, and the results of its operations and its
cash flows for the year ended December 31, 1998 and the period from January 1,
1999 through March 10, 1999, in conformity with generally accepted accounting
principles.

KPMG LLP

March 16, 2000
Boston, Massachusetts

F-139
<PAGE> 232

2CAN MEDIA, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 10,
1998 1999
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 81,461 $ 359,535
Accounts receivable, net of allowance for doubtful
accounts of $1,347,597 and $1,865,185, respectively..... 1,723,493 2,106,189
Prepaid expenses and other current assets................. 48,521 31,649
----------- -----------
Total current assets............................... 1,853,475 2,497,373
----------- -----------

Property and equipment, net................................. 152,615 141,384
Deposits.................................................... 31,055 31,055
Debt issuance costs, net of accumulated amortization of $202
and $359, respectively.................................... 1,481 1,324
Goodwill, net of accumulated amortization of $338,981 and
$564,969, respectively.................................... 6,440,653 6,178,165
----------- -----------
Total assets....................................... $ 8,479,279 $ 8,849,301
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable.............................................. $ 236,828 $ --
Due to CMGI............................................... -- 1,500,000
Notes payable to stockholders............................. 770,402 1,276,274
Capital lease obligations, current portion................ 47,774 50,721
Accrued interest on notes payable to stockholder.......... 13,274 14,242
Accounts payable, net of allowance of $731,515 and
$877,911, respectively.................................. 3,030,072 3,253,346
Accounts payable, related parties......................... 277,398 542,398
Accrued expenses.......................................... 142,058 155,712
Deferred gain, current portion............................ 2,205 2,205
----------- -----------
Total current liabilities.......................... 4,520,011 6,794,898
----------- -----------
Capital lease obligations, net of current portion........... 59,932 46,090
Deferred gain, net of current portion....................... 1,745 1,377
Stockholders' equity:
Series A Convertible Preferred Stock, $.0001 par value;
3,000,000 shares authorized; 327,779 and 329,739 shares
issued and outstanding, respectively (liquidating
preference of $885,003 and $890,295, respectively)...... 33 33
Series A Common stock, $.0001 par value; 15,000,000 shares
authorized; 7,073,417 and 7,262,733 shares issued and
outstanding, respectively............................... 707 726
Series B Common stock, $.0001 par value; 5,000,000 shares
authorized; 268,425 and 0 shares issued and outstanding,
respectively............................................ -- 27
Additional paid-in-capital................................ 10,187,396 10,789,908
Deferred compensation..................................... (1,481,748) (1,505,809)
Receivable from stockholders.............................. -- (69,390)
Accumulated deficit....................................... (4,808,797) (7,208,559)
----------- -----------
Total stockholders' equity......................... 3,897,591 2,006,936
----------- -----------
Total liabilities and stockholders' equity......... $ 8,479,279 $ 8,849,301
=========== ===========
</TABLE>

See accompanying notes to financial statements.
F-140
<PAGE> 233

2CAN MEDIA, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31, 1999 THROUGH
1998 MARCH 10, 1999
------------ --------------
<S> <C> <C>
Revenue:
Advertising............................................... $ 991,505 $ 1,379,005
Commission................................................ 867,743 150,130
----------- -----------
Total revenue..................................... 1,859,248 1,529,135
Cost of advertising revenue................................. 817,536 1,272,281
----------- -----------
Gross profit.............................................. 1,041,712 256,854
----------- -----------
Operating expenses:
Selling, general and administrative expenses.............. 4,202,889 2,400,955
Stock compensation........................................ 1,547,468 85,378
----------- -----------
Total operating expenses.......................... 5,750,357 2,486,333
----------- -----------
Loss from operations........................................ (4,708,645) (2,229,479)
Other income (expense):
Interest expense.......................................... (167,030) (176,013)
Other income.............................................. 59,382 5,730
----------- -----------
Net loss.................................................... $(4,816,293) $(2,399,762)
=========== ===========
Basic and diluted loss per share............................ $ (1.29) $ (0.33)
=========== ===========
Basic and diluted weighted average number of common shares
outstanding............................................... 3,747,190 7,279,459
=========== ===========
</TABLE>

See accompanying notes to financial statements.
F-141
<PAGE> 234

2CAN MEDIA, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A
CONVERTIBLE SERIES A SERIES B
PREFERRED STOCK COMMON STOCK COMMON STOCK WEBREP LLC ADDITIONAL
---------------- ------------------ ------------------- MEMBERS' PAID IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT OWNERSHIP CAPITAL
------- ------ --------- ------ ------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998........ -- $-- -- $ -- -- $ -- $ 414,103 $ --
Member distributions............. -- -- -- -- -- -- (60,450) --
Conversion of debt to members
ownership units................ -- -- -- -- -- -- 305,895 --
Issuance of members' ownership
units.......................... -- -- -- -- -- -- 1,250 --
Issuance of restricted members'
ownership units................ -- -- -- -- -- -- 186,756 --
Amortization of deferred
stock-based compensation....... -- -- -- -- -- -- -- --
Issuance of members' ownership
units in connection with the
issuance of debt............... -- -- -- -- -- -- 16,101 --
Reverse merger of 2Can Media,
Inc. and WebRep, LLP, net of
stock issuance costs........... 206,668 21 4,718,476 472 -- -- (863,655) 1,127,352
Acquisition of Eisenberg
Communications Group, Inc. net
of stock issuance costs........ -- -- 2,333,333 233 -- -- -- 6,250,261
Issuance of preferred stock, net
of issuance costs.............. 121,111 12 -- -- -- -- -- 310,772
Deferred stock-based compensation
related to options granted..... -- -- -- -- -- -- -- 2,386,210
Amortization of deferred
stock-based compensation....... -- -- -- -- -- -- -- --
Issuance of common stock to
consultants.................... -- -- 21,608 2 -- -- -- 58,340
Issuance of Series A common stock
warrants in connection with the
issuance of debt............... -- -- -- -- -- -- -- 52,778
Issuance of Series A preferred
stock warrants in connection
with the issuance of debt...... -- -- -- -- -- -- -- 1,683
Net loss......................... -- -- -- -- -- -- -- --
------- --- --------- ---- ------- --------- ---------- -----------
Balance at December 31, 1998...... 327,779 33 7,073,417 707 -- -- -- 10,187,396
Issuance of Series A common stock
warrants in connection with the
issuance of debt............... -- -- -- -- -- -- -- 37,778
Exercise of Series A preferred
stock warrants................. 1,960 -- -- -- -- -- -- 5,292
Deferred stock-based compensation
related to options granted..... -- -- -- -- -- -- -- 109,439
Issuance of Series A common stock
options to a financing
company........................ -- -- -- -- -- -- -- 121,371
Amortization of deferred
stock-based compensation....... -- -- -- -- -- -- -- --
Exercise of Series A common stock
options........................ -- -- 108,019 11 -- -- -- 36,694
Exercise of Series B common stock
options........................ -- -- -- -- 268,425 27 -- 72,448
Issuance of common stock to
consultants.................... -- -- 11,852 1 -- -- -- 31,999
Exercise of common stock
warrants....................... -- -- 69,445 7 -- -- -- 187,491
Net loss......................... -- -- -- -- -- -- -- --
------- --- --------- ---- ------- --------- ---------- -----------
Balance at March 10, 1999......... 329,739 $33 7,262,733 $726 268,425 $ 27 $ -- $10,789,908
======= === ========= ==== ======= ========= ========== ===========

RECEIVABLE TOTAL
DEFERRED FROM ACCUMULATED STOCKHOLDERS'
COMPENSATION STOCKHOLDER DEFICIT EQUITY
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998........ $ (456,250) $ -- $ 7,496 $ (34,651)
Member distributions............. -- -- -- (60,450)
Conversion of debt to members
ownership units................ -- -- -- 305,895
Issuance of members' ownership
units.......................... -- -- -- 1,250
Issuance of restricted members'
ownership units................ (186,756) -- -- --
Amortization of deferred
stock-based compensation....... 643,006 -- -- 643,006
Issuance of members' ownership
units in connection with the
issuance of debt............... -- -- -- 16,101
Reverse merger of 2Can Media,
Inc. and WebRep, LLP, net of
stock issuance costs........... -- -- -- 264,190
Acquisition of Eisenberg
Communications Group, Inc. net
of stock issuance costs........ -- -- -- 6,250,494
Issuance of preferred stock, net
of issuance costs.............. -- -- -- 310,784
Deferred stock-based compensation
related to options granted..... (2,386,210) -- -- --
Amortization of deferred
stock-based compensation....... 904,462 -- -- 904,462
Issuance of common stock to
consultants.................... -- -- -- 58,342
Issuance of Series A common stock
warrants in connection with the
issuance of debt............... -- -- -- 52,778
Issuance of Series A preferred
stock warrants in connection
with the issuance of debt...... -- -- -- 1,683
Net loss......................... -- -- (4,816,293) (4,816,293)
----------- -------- ----------- -----------
Balance at December 31, 1998...... (1,481,748) -- (4,808,797) 3,897,591
Issuance of Series A common stock
warrants in connection with the
issuance of debt............... -- -- -- 37,778
Exercise of Series A preferred
stock warrants................. -- -- -- 5,292
Deferred stock-based compensation
related to options granted..... (109,439) -- -- --
Issuance of Series A common stock
options to a financing
company........................ -- -- -- 121,371
Amortization of deferred
stock-based compensation....... 85,378 -- -- 85,378
Exercise of Series A common stock
options........................ -- (13,505) -- 23,200
Exercise of Series B common stock
options........................ -- (55,885) -- 16,590
Issuance of common stock to
consultants.................... -- -- -- 32,000
Exercise of common stock
warrants....................... -- -- 187,498
Net loss......................... -- -- (2,399,762) (2,399,762)
----------- -------- ----------- -----------
Balance at March 10, 1999......... $(1,505,809) $(69,390) $(7,208,559) $ 2,006,936
=========== ======== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-142
<PAGE> 235

2CAN MEDIA, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED JANUARY 1, 1999
DECEMBER 31, THROUGH MARCH 10,
1998 1999
------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(4,816,293) $(2,399,762)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation............................................ 27,907 14,160
Amortization of debt issuance costs on stockholder notes
payable.............................................. 27,341 41,307
Amortization of goodwill................................ 338,981 262,488
Stock Compensation...................................... 1,605,810 117,378
Interest cost incurred related to stock issued as
consideration for financing.......................... 121,996 121,371
Provision for doubtful accounts......................... 1,071,815 517,588
Provision of accounts payable allowance................. (464,092) (146,396)
Amortization of deferred gain........................... (460) (368)
Changed in operating assets and liabilities:
Accounts receivable.................................. (1,610,018) (907,034)
Prepaid expenses and other current assets............ (31,814) 16,872
Deposits............................................. (25,005) --
Accounts payable..................................... 1,924,842 409,415
Accrued interest on notes payable stockholder........ 2,500 968
Accounts payable due to related parties.............. 215,008 225,255
Accrued expenses..................................... 118,787 13,654
----------- -----------
Net cash used in operating activities.............. (1,492,695) (1,713,104)
----------- -----------
Cash flows from investing activities:
Net cash acquired from acquisition........................ 341,829 --
Proceeds from advances made to related party prior to
acquisition............................................. 36,937 --
Purchases of property and equipment....................... (32,530) (2,929)
----------- -----------
Net cash provided by (used in) investing
activities....................................... 346,236 (2,929)
----------- -----------
Cash flows from financing activities
Proceeds from debt to CMGI................................ -- 1,333,654
Proceeds from stockholder debt, net....................... 800,000 500,000
Payments of capital lease obligations..................... (10,563) (10,895)
Proceeds from (payments of) notes payable, net............ 38,205 (70,482)
Proceeds from issuance of Series A preferred stock, net of
issuance costs.......................................... 310,784 5,292
Exercise of Series A common stock warrants................ -- 187,498
Exercise of Series A common stock options................. -- 23,200
Exercise of Series B common stock options................. -- 16,590
Proceeds from issuance of Series A common stock
warrants................................................ -- 9,250
Proceeds from sale/leaseback of fixed assets.............. 105,836 --
Stock issuance costs...................................... (89,770) --
Proceeds received from 2Can prior to acquisition.......... 78,255 --
Issuance of membership ownership units.................... 1,250
Distribution to members of WebRep, LLC.................... (60,450) --
----------- -----------
Net cash provided by financing activities.......... 1,173,547 1,994,107
----------- -----------
Net increase in cash........................................ 27,088 278,074
Cash and equivalents, beginning of period................... 54,373 81,461
----------- -----------
Cash and equivalents, end of period......................... $ 81,461 $ 359,535
=========== ===========
Supplemental disclosure of cash flows information:
Cash paid for interest.................................... $ 6,199 $ 13,218
=========== ===========
</TABLE>

See accompanying notes to financial statements.
F-143
<PAGE> 236

2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS

2Can Media, Inc. ("2Can"), is the surviving entity in a reverse merger with
WebRep, L.L.C. ("WebRep"), on August 18, 1998. Subsequent to this transaction,
2Can acquired Eisenberg Communications Group, Inc. ("ECG") (note 3). 2Can is a
leading provider of comprehensive Internet advertising solutions. 2Can combines
the branding power of traditional media with the precision and interactivity of
new media to provide effective marketing opportunities for advertisers, and a
profitable advertising revenue stream for Web publishers. 2Can was headquartered
in Irvine, CA with branch offices in major advertising markets, including New
York, Chicago, Detroit, and San Francisco. The Company was incorporated in May
1998. WebRep commenced operations in 1996.

2Can, together with WebRep, is hereinafter referred to as the "Company".
Certain references to share issuances are after the recapitalization
transaction, on August 18, 1998, in which each ownership unit of WebRep was
converted into .2386 shares of 2Can series A common stock. On March 10, 1999,
the Company was merged with 2Can Acquisition Corporation, a wholly owned
subsidiary of CMGI, Inc. ("CMGI"). 2Can, the surviving entity, was later merged
into Adsmart Corporation ("Adsmart"), a majority owned subsidiary of CMGI.
Adsmart was the surviving corporation in this transaction.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The accompanying financial statements include the financial position of the
Company, as of December 31, 1998 and March 10, 1999. Results of operations of
the Company are presented for the year ended December 31, 1998 and the period
from January 1, 1999 through March 10, 1999. Operating results for the year
ended December 31, 1998 include the operating results of WebRep since January 1,
1998, 2Can since August 18, 1998 and ECG since September 29, 1998.

(b) Use of Estimate

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

Revenues are derived primarily from the delivery of advertising impressions
through third-party web sites comprising the 2Can Media Network. Revenues are
recognized in the period the advertising impressions are delivered, provided
collection of the resulting receivable is probable.

For run-of-network ad campaigns, the Company becomes obligated to make
payments to third-party web sites, which have contracted with the Company to be
part of the Network, in the period the advertising impressions are delivered.
For these types of contracts, revenue is recognized gross of the payment due to
the site. Such payments are classified as cost of revenues in the statement of
operations. For site-specific campaigns, the Company is not obligated to make
payments to the third-party sites until they receive payment from the customer.
In these types of arrangements, revenue is presented net of the payment to the
site as a commission.

In December 1999 the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition in Financial
Statements. SAB No. 101 summarizes certain of the

F-144
<PAGE> 237
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements. Management believes the Company has
complied with the provisions of SAB No. 101.

(d) Loss Contracts

(e) Cash and Equivalents

(f) Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements and assets acquired under capital leases are amortized
using the straight-line method over the shorter of the lease term or the
estimated useful life of the asset. Expenditures for maintenance and repairs are
charged to expense as incurred.

(g) Goodwill

Goodwill is related to the Company's purchase of ECG on September 29, 1998
(note 3). Such costs are being amortized on a straight-line basis over five
years.

(h) Accounting for Impairment of Long-Lived Assets

The Company assesses the need to record impairment losses on long-lived
assets used in operations when indicators of impairment are present. On an
ongoing basis, management reviews the value and period of amortization or
depreciation of long-lived assets, including goodwill. During this review, the
significant assumptions used in determining the original cost of long-lived
assets are re-evaluated. Although the assumptions may vary from transaction to
transaction, they generally include revenue growth, operating results, cash
flows and other indicators of value. Management then determines whether there
has been a permanent impairment of the value of long-lived assets by comparing
future undiscounted cash flows to the asset's carrying value. If the carrying
value of the asset exceeds the estimated future undiscounted cash flows of the
asset, a loss is recorded as the excess of the asset's carrying value over the
fair value.

(i) Income Taxes

F-145
<PAGE> 238
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

period that includes the enactment date. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.

(j) Advertising Costs

The Company recognizes advertising costs as incurred. Advertising expense
was $34,391 and $5,334 for the year ended December 31, 1998 and the period from
January 1, 1999 through March 10, 1999, respectively.

(k) Financial Instruments and Concentration of Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of accounts receivable, accounts payable,
accrued liabilities and notes payable. At December 31, 1998 and March 10, 1999,
the fair value of these instruments approximated their financial statement
carrying value because of the short-term maturity of these instruments.

To date, the majority of accounts receivable have been derived from
advertising fees billed to advertisers located in the United States. The Company
performs periodic credit evaluations of its customers' financial condition and
generally does not require collateral or other security against trade receivable
balances; however, it does maintain an allowance for potential credit losses and
such losses have been within management's expectations.

As of December 31, 1998 and during the year then ended, the Company
factored certain accounts receivable, with recourse, under an arrangement with a
financial institution. At December 31, 1998 and March 10, 1999, $265,383 and $0,
respectively, of accounts receivable on the accompanying balance sheet were
factored under this arrangement (note 6).

(l) Stock-Based Compensation Plans

(m) Segment Reporting

The Company has adopted the provision of SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information ("SFAS 131"), effective August
1, 1998. SFAS establishes standards for the way that public business enterprises
report selected information about operating segments in annual and interim
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. SFAS 131
requires the use of the "management approach" in disclosing segment information,
based largely on how senior management generally analyzes the business
operations. The Company currently operates in only one segment, and as such, no
additional disclosures are required.

F-146
<PAGE> 239
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(n) Basic and Diluted Net Loss Per Share

SFAS 128, Earnings Per Share, requires the presentation of basic earnings
per share and diluted earnings per share for all periods presented. Dilutive
potential common shares, as defined by SFAS 128, have been excluded from the
earnings per share calculation as the effect would be anti-dilutive. Diluted net
loss per share is the same as basic net loss per share, and has not been
presented separately.

(o) New Accounting Pronouncements

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC"), issued Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use ("SOP 98-1"). SOP 98-1 requires the capitalization of
certain internal costs related to the implementation of computer software
obtained for internal use. The Company adopted this standard in the first
quarter of 1999, and its adoption did not have a material impact on the
Company's financial position or operating results.

In April 1998, the AcSEC issued SOP 98-5, Reporting on the Costs of
Start-Up Activities. Under SOP 98-5, the costs of start-up activities should be
expensed as incurred. Start-up activities are broadly defined as those 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, commencing some new operation or organizing a new entity. SOP
98-5 was adopted by the Company in the first quarter of 1999, and its adoption
did not have a material impact on the Company's financial position or operating
results.

(3) ACQUISITIONS

(a) 2Can Media, Inc.

On August 18, 1998, 2Can Media, Inc., a shell corporation with no
operations, acquired all of the outstanding capital stock of WebRep, L.L.C.
through a merger in which 2Can was the surviving corporation. Since the members
of WebRep received a majority of the voting interest in the combined entity,
WebRep was the acquiring enterprise for financial reporting purposes. The
transaction was recorded as a reverse acquisition whereby the members ownership
interests of WebRep were adjusted for the fair value of the acquired tangible
net assets of 2Can, and converted into 2,385,143 shares of 2Can Series A common
stock in a recapitalization.

Because WebRep is the acquirer for accounting purposes, the financial
statements presented as of and for the year ended December 31, 1998 are those of
WebRep and include the results of operations for 2Can since August 18, 1998. The
operating results reflected in the accompanying statement of operations do not
include 2Can's operating activities prior to August 18, 1998, the date of
merger. The following summarized proforma information assumes the merger
occurred on May 8, 1998, the date of 2Can's inception.

<TABLE>
<S> <C>
Revenue................................................. $ 1,859,248
Net loss................................................ (5,070,339)
Net loss per share...................................... (.99)
</TABLE>

(b) Eisenberg Communications Group, Inc.

On September 29, 1998, the Company acquired ECG, an online advertising
representation firm. The total purchase price of ECG was valued at approximately
$6,300,000, paid in the form of 2,333,333 shares of 2Can Series A common stock
valued at $2.70 per share.

F-147
<PAGE> 240
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Total purchase price was allocated as follows:

<TABLE>
<S> <C>
Working capital deficit, net of cash acquired of
$58,527................................................ $ (646,662)
Property and equipment................................... 121,013
Goodwill................................................. 6,779,634
Long-term obligations.................................... (12,512)
----------
Purchase price, net of cash acquired..................... $6,241,473
==========
</TABLE>

The acquisition has been accounted for using the purchase method.
Accordingly, the purchase price has been allocated to the assets purchased and
liabilities assumed based upon their fair values at the date of acquisition. The
results of operations of ECG have been included in the Company's financial
statements since September 29, 1998.

The portion of the purchase price allocated to goodwill is being amortized
on a straight-line basis over five years. Amortization of goodwill resulting
from the acquisition of ECG was $338,981 and $262,488 for the year ended
December 31, 1998 and the period from January 1, 1999 through March 10, 1999,
respectively.

(4) RECEIVABLE FROM STOCKHOLDER

Receivable from stockholder represents non-interest bearing amounts due
upon demand from a stockholder, related to the exercise of stock options for
50,019 shares of Series A common stock and 206,981 shares of Series B common
stock (notes 10 and 11). As of December 31, 1998 and March 10, 1999, the balance
was $0 and $69,390, respectively.

(5) PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 1998 and March 10, 1999 consisted
of the following:

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31, MARCH 10,
USEFUL LIFE 1998 1999
----------- ------------ ---------
<S> <C> <C> <C>
Office furniture and computer equipment................. 3 - 7 years $192,635 $195,564
Leasehold improvements.................................. 5 years 15,393 15,393
-------- --------
208,028 210,957
Less: Accumulated depreciation and amortization......... (55,413) (69,573)
-------- --------
$152,615 $141,384
======== ========
</TABLE>

At March 10, 1999, the Company leased certain equipment under capital lease
obligations. The cost and accumulated amortization of equipment held under
capital leases amounted to $121,331 and $20,306 respectively.

F-148
<PAGE> 241
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(6) NOTES PAYABLE AND DUE TO CMGI

Notes payable and amounts due to CMGI, as of December 31, 1998 and March
10, 1999, consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 10,
1998 1999
------------ ----------
<S> <C> <C>
Revolving loan payable to a bank bearing interest at 13%
annually, due upon demand, with a maximum out-standing
balance of $50,000. Accounts receivable and certain
equipment collateralize the loan. The outstanding balance
of this note was repaid in February 1999. $ 39,529 $ --
Loan payable to a bank, under a factoring arrangement,
collateralized by accounts receivable, with a maximum
available balance of $750,000, due upon demand. Under the
terms of this arrangement, the Company factors certain
trade accounts receivable with a bank for a fee equal to
.5% of the factored receivables Additionally, the bank
charges the Company a fee of 21% annually on the average
daily outstanding balance This arrangement was terminated
in February 1999, when the outstanding balance of $166,346
was repaid by CMGI (see below). 197,299 --
Note payable to CMGI, secured by substantially all assets of
the Company, due upon demand, bearing interest at 5%
annually. -- 1,500,000
-------- ----------
Total and current maturities $236,828 $1,500,000
======== ==========
</TABLE>

(7) NOTES PAYABLE TO STOCKHOLDERS

Notes payable to stockholders as of December 31, 1998 and March 10, 1999,
consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 10,
1998 1999
------------ ----------
<S> <C> <C>
Note payable to stockholder consists of an unsecured demand
note with an original balance of $129,000, bearing
interest at 10% annually. The outstanding balance of
$39,291,was assumed in the acquisition of ECG. The note
payable and accrued interest was repaid by Adsmart
subsequent to the Company's merger with 2Can Acquisition
Corporation. $ 39,291 $ 39,291
$500,000 note payable to a stockholder, maturing on December
31, 1998, bearing interest at 8% annually, convertible to
Series A common stock. In connection with the issuance of
this note, the Company also issued detachable five-year
warrants to the note holder, enabling the note holder to
purchase up to 27,778 shares of the Company's Series A
common stock for $2.70 per share. A discount of $27,139,
net of $6,750 received in cash, was allocated to the fair
value of the warrants. The discount was fully amortized
during 1998. This loan was repaid on January 11, 1999, in
connection with the issuance of a $500,000 note to a
stockholder (see below). The related common stock warrants
were exercised in 1999, prior to the Company's merger with
2Can Acquisition Corporation. 500,000 --
</TABLE>

F-149
<PAGE> 242
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 10,
1998 1999
------------ ----------
<S> <C> <C>
$250,000 note payable to a stockholder, maturing on March
31, 1999, bearing interest at 8% annually. This bridge
loan was repaid in full by Adsmart subsequent to the
Company's merger with 2Can Acquisition Corporation. In
connection with the issuance of this note, the Company
also issued detachable five-year warrants to the
stockholder, enabling the note holder to purchase up to
13,889 shares of the Company's Series A common stock for
$2.70 per share. A discount of $18,889 was allocated to
the fair value of the warrants. At December 31, 1998 and
March 10, 1999 the unamortized discount amounted to
$18,889 and $4,198, respectively. The related common stock
warrants were exercised in 1999, prior to the Company's
merger with 2Can Acquisition Corporation. 231,111 245,802
$500,000 note payable to a stockholder, maturing on March
31, 1999, bearing interest at 8% annually. On January 11,
1999, the proceeds from this note were paid directly by
the Stockholder to an individual owed $500,000 by the
Company (see above). This loan was repaid in full by
Adsmart subsequent to the Company's merger with 2Can
Acquisition Corporation. -- 500,000
$500,000 note payable to a stockholder, maturing on March
31, 1999, bearing interest at 8% annually. This bridge
loan was repaid in full by Adsmart subsequent to the
merger with 2Can Acquisition Corp. In connection with the
issuance of this note, the Company also issued detachable
five-year warrants to the note holder, enabling the note
holder to purchase up to 27,778 shares of the Company's
Series A common stock for $2.70 per share A discount of
$35,278, net of $2,500 received in cash, was allocated to
the fair value of the warrants. At March 10, 1999, the
unamortized discount amounted to $8,819. The Company also
issued options to purchase 58,000 shares of Series A
common stock with a strike price and fair value of $.40
and $2.09 per share, respectively. The related common
stock warrants and options were exercised in 1999, prior
to the Company's merger with 2Can Acquisition Corporation. -- 491,181
-------- ----------
Total $770,402 $1,276,274
======== ==========
</TABLE>

(8) COMMITMENTS AND CONTINGENCIES

(a) Leases

The Company has entered into noncancelable operating leases for certain
office facilities and equipment related to its field offices that expire through
November 30, 2001. Total rent expense amounted to $149,116 and $81,051 for the
year ended December 31, 1998 and the period from January 1, 1999 through March
10, 1999, respectively. The Company also leases certain equipment under capital
lease obligations.

F-150
<PAGE> 243
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum net lease payments under non-cancelable operating leases and
capital leases are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- --------
<S> <C> <C>
Twelve months ending March 10,
2000...................................................... $176,151 $ 68,373
2001...................................................... 158,118 46,151
2002...................................................... 82,509 4,677
-------- --------
Total............................................. $416,778 119,201
========
Less amounts representing interest.......................... 22,390
--------
Present value of future minimum lease payments............ 96,811
Less current portion of capital lease obligations........... 50,721
--------
Long-term portion of capital lease obligations............ $ 46,090
========
</TABLE>

During the year ended December 31, 1998, the Company sold certain equipment
with an original cost and net book value of $105,836 and $101,426, respectively,
to a leasing agent. The equipment was then leased back to the Company under a
capital lease obligation. In connection with this transaction, the Company
received $105,836 in cash, and recorded a deferred gain on the equipment
amounting to $4,410. The gain is being amortized over the two year life of the
lease. The equipment capitalized and the related lease obligation amounted to
$101,426. In connection with the sale lease-back transaction, the Company issued
1,960 preferred stock warrants to the lessor. On March 10, 1999, this lessor
exercised preferred stock warrants and purchased 1,960 shares of Series A
preferred stock for $2.70 per share (note 10). The fair value of the warrants,
using a Black-Scholes Option Model, amounted to $1,683, which was recorded at
the inception of the lease (October 1998) as a deferred financing cost, and is
being amortized over the life of the lease. The Company was obligated to this
lessor under capital lease arrangements amounting to $91,875 and $82,032 at
December 31, 1998 and March 10, 1999, respectively. Interest expense incurred
and paid to this lessor amounted to $3,997 and $5,503 during the year ended
December 31, 1998 and the period from January 1, 1999 through March 10, 1999,
respectively.

(b) Litigation

(9) INCOME TAXES

No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses for all periods presented.

F-151
<PAGE> 244
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 10,
1998 1999
------------ -----------
<S> <C> <C>
Deferred tax assets
Net operating loss carryovers............................. $ 843,687 $ 1,447,830
Bad debts................................................. 550,493 761,928
Accrued interest.......................................... 5,422 5,818
Deferred stock-based compensation......................... 632,141 667,018
Tax basis in excess of fixed assets and intangible
assets................................................. 2,528,614 2,492,225
----------- -----------
Total gross deferred tax assets........................... 4,560,357 5,374,819
Less: Valuation allowance................................... (4,560,357) (5,374,819)
----------- -----------
Net deferred taxes.......................................... $ -- $ --
=========== ===========
</TABLE>

At March 10, 1999, the Company had approximately $3,818,000 of federal net
operating loss carryforwards and $1,908,000 of state net operating loss
carryforwards available to offset future taxable income. The federal net
operating losses will expire from 2016 through 2018 and the state net operating
loss will expire from 2002 to 2003. The Company has recorded a full valuation
allowance against its deferred tax assets since management believes that after
considering all available objective evidence, both positive and negative,
historical and prospective, with greater weight given to historical evidence, it
is not more likely than not that these assets will be realized. No income tax
benefit has been recorded for all periods presented because of the valuation
allowance.

(10) STOCKHOLDERS' EQUITY

2CAN MEDIA INC., CAPITAL STOCK

(a) General

At March 10, 1999, the Company's stockholders had authorized the issuance
of 25,000,000 shares of capital stock. Of this amount, 5,000,000 shares have
been designated as preferred stock, of which 3,000,000 shares have been
designated Series A Convertible Preferred Stock. The Company is authorized to
issue 20,000,000 shares of common stock, of which 15,000,000 shares have been
designated as Series A Common Stock and 5,000,000 shares have been designated as
Series B Common Stock. Series A common stockholders retain voting rights, while
series B common stockholders do not have voting rights. Series A and B common
stockholders have the same liquidation rights.

(b) Series A Convertible Preferred Stock

In May 1998, 2Can's board of directors authorized the issuance of up to
3,000,000 shares of Series A convertible preferred stock, for $2.70 per share.
Series A convertible preferred stock is entitled to accrue non-cumulative
dividends at a rate of 8% annually, on the original purchase price of $2.70 per
share, when and if declared. No such dividends have been declared as of December
31, 1998 and March 10, 1999. Series A convertible preferred stockholders are
entitled to a liquidation preference of $2.70 per share, plus any unpaid,
accrued dividends.

Series A convertible preferred stock is convertible into one share of
Series A common stock at the option of the holder, upon an initial public
offering of the Company's common stock at $7.50 per share or more, or upon
consent of a majority of the preferred stockholders.

F-152
<PAGE> 245
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

During the year ended December 31, 1998 and the period from January 1, 1999
through March 10, 1999, the Company issued 327,779 shares and 1,960 shares (see
note 8), respectively, of preferred stock for cash proceeds of $2.70 per share.
206,668 of these shares were issued prior to the merger of 2Can and WebRep.

At March 10, 1999, 329,739 shares of common stock have been reserved for
issuance upon the conversion of the Series A Preferred Stock.

During the year ended December 31, 1998 and the period from January 1, 1999
through March 10, 1999, the Company issued 7,073,417 and 189,316 shares of
Series A common stock, respectively. During the year ended December 31, 1998,
the Company issued 2,333,333 to the founder, in exchange for intellectual
property, prior to the reverse merger with WebRep. 2,385,143 of the shares
issued during 1998 were issued in connection with the merger with WebRep.
2,333,333 shares were issued in connection with the merger with ECG.

During the period from January 1, 1999 through March 10, 1999, proceeds
related to the issuance of Series A common stock amounted to $210,698 in cash,
and $13,505 in the form of a receivable from a shareholder (see note 4).

Included in the shares issued during 1998 and 1999 are shares issued as
payment for certain consulting services provided to the Company. During the year
ended December 31, 1998 and the period from January 1, 1999 through March 10,
1999, the Company issued 21,608 shares and 11,852 shares of Series A common
stock, respectively, as consideration for the consulting services. The value of
these shares and the related services received during the year ended December
31, 1998 and the period from January 1, 1999 through March 10, 1999 was $58,342
and $32,000, respectively.

108,019 of the shares issued during the period from January 1, 1999 through
March 10, 1999, were issued through the exercise of stock options under the 1998
Series A Equity Incentive Plan (note 11), while the remaining 69,445 shares were
issued through the exercise of warrants (notes 7). Of the 69,445 detachable
common stock warrants exercised during 1999, 41,667 were issued in 1998 and
27,778 were issued in 1999. The fair value of these warrants, using a Black
Scholes Model, amounted to $52,778 and $37,778, respectively, at the date of
issue.

At December 31, 1998 and March 10, 1999, certain shareholders, holding
6,640,666 shares of Series A common stock are subject to certain restrictions
with regard to the disposition of these shares. Under the "Restricted Common
Stock Agreement", the Company has the right of first refusal in repurchasing
certain "unvested" shares of the shareholders upon their termination of
employment with the Company, for a fixed price of $2.70, per share. Under these
arrangements, the shareholders vest in 50% of their shares on the date of
issuance and 2.083% per month thereafter. At December 31, 1998 and March 10,
1999, 2,632,221 and 2,255,030 shares, respectively, were subject to these
restrictions.

(d) Series B Common Stock

During the period from January 1, 1999 through March 10, 1999, the Company
issued 268,425 shares of series B common stock, for $.27 per share. Proceeds
related to the issuance of series B common stock amounted to $72,475, of which
$16,590 was received in cash and $55,885 was received in the form of a note
receivable from a stockholder (note 4). These shares were issued through the
exercise of stock options issued under the 1998 Series B Equity incentive plan
(note 11).

F-153
<PAGE> 246
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(e) WebRep, L.L.C. Members Ownership

At August 18, 1998, WebRep had 10,000,000 authorized, issued and
outstanding membership units. 835,000 of these units were issued to certain
employees under the 1997 Restricted Membership Interest Plan of WebRep LLC (the
"1997 Plan"). Under the 1997 Plan, WebRep retained the right of first refusal in
repurchasing certain "unvested" restricted membership interests from employee
members (limited to 1,000,000 units). Employees were restricted from selling
these units to third parties, and upon termination of employment, must convey
these units back to WebRep. Units issued under the 1997 Plan were to vest over a
four-year period. Restrictions on 25% of the issued units were to lapse each
year thereafter, on the anniversary of the issuance date of the units.

In December 1997, 725,000 restricted units were issued to employees below
the fair market value. WebRep valued these restricted units at $465,642 based on
the fair market value of the Company at the date of issuance. An additional
110,000 restricted units were issued to employees and 180,000 units were issued
to consultants for services rendered. The total value of both issuances was
valued at $186,756, based on the fair value of the Company at the date of
issuance.

As a result of the merger, all 835,000 membership units had their vesting
accelerated. Accordingly, compensation expense of $643,006 was recognized during
1998 and no deferred compensation related to WebRep membership units was
outstanding after the merger with 2Can.

WebRep also granted membership units to certain individuals in exchange for
debt financing. Interest expense recognized during the year ended December 31,
1998, related to these units amounted to $121,996.

(11) STOCK OPTION PLANS

(a) Series A Equity Incentive Plans

In 1998, the Company's Board of Directors and Stockholders approved the
1998 Series A Equity Incentive Plan ("the 1998 Series A Plan"), which superceded
a plan previously in effect. Under the 1998 Series A Plan, the Company, at the
discretion of the Board of Directors, can issue incentive stock options,
non-statutory stock options, stock bonuses and rights to acquire restricted
stock. Eligible participants are employees, directors, consultants and officers
of 2Can. A maximum number of 1,000,000 shares of Series A common stock is
authorized for issuance under the 1998 Series A Plan, and no employee can be
granted more than 600,000 options in any one calendar year. Participants that
hold more than 10% of the Company's common stock are not eligible to receive
certain incentive stock option grants. Generally, each incentive stock option
grant must have an exercise price equal to or greater than the current fair
market value of the common stock at the time of grant. Generally, non-statutory
grants must have an exercise price of no less than 85% of the fair market value
of the common stock at the time of the grant. Options under the 1998 Series A
plan must vest at a rate of no less than 20% per year. However, options granted
to officers, consultants or directors may, at the discretion of the Board of
Directors, become fully exercisable during any period of time. All options
issued under this plan expire on November 13, 2008, the termination date of the
plan. Generally, options issued under the 1998 Series A Plan cliff-vest 25% on
the first anniversary date of the grant, and ratably each month thereafter, over
the next three years.

F-154
<PAGE> 247
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about the Company's outstanding
stock options at December 31, 1998 and March 10, 1999, under the 1998 Series A
Plan:

<TABLE>
<CAPTION>
1998 1999
------------------- --------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE
------- -------- -------- --------
<S> <C> <C> <C> <C>
Options outstanding, beginning of period........... -- $ -- 82,426 $.27
Granted.......................................... 82,426 .27 58,000 .40
Exercised........................................ -- -- (108,019) .34
------- ---- -------- ----
Options outstanding, end of period................. 82,426 $.27 32,407 $.27
======= ==== ======== ====
Options exercisable, end of period................. 50,019 $.27 -- --
======= ==== ======== ====
Options available for grant, end of period......... 917,574 859,574
======= ========
</TABLE>

The following table summarizes information about the Company's Series A
common stock options outstanding at March 10, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE OUTSTANDING PRICE
- --------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
.27..$.... 32,407 9.7 $.27 -- $ --
====== === ==== === ====
</TABLE>

The deemed fair value of series A common stock was $2.70 per share. The
weighted average fair market value of Series A common stock options issued
during the year ended December 31, 1998 and the period from January 1, 1999
through March 10, 1999 was $2.21 and $1.98, respectively. The Company valued the
Series A options under the Black-Scholes valuation model, assuming a risk free
rate of 5.5% annually, dividend yield of 0%, volatility of 50% and an expected
life of 4.0 and 4.0 years, respectively.

(b) Series B Equity Incentive Plans

In 1998, the Company's Board of Directors and Stockholders approved the
1998 Series B Equity Incentive Plan ("the 1998 Series B Plan"), which superceded
a plan previously in effect. Under the 1998 Series B Plan, the Company, at the
discretion of the Board of Directors, can issue incentive stock options, non-
statutory stock options, stock bonuses and rights to acquire restricted stock.
Eligible participants are employees, directors, consultants and officers of 2Can
Media, Inc. A maximum number of 1,000,000 shares of Series B common stock is
authorized for issuance under the 1998 Series B Plan, and no employee can be
granted more than 600,000 options in any one calendar year. Participants that
hold more than 10% of the Company's common stock are not eligible to receive
certain incentive stock option grants. Generally, each incentive stock option
grant must have an exercise price equal to or greater than the current fair
market value of the common stock at the time of grant. Generally, non-statutory
grants must have an exercise price of no less than 85% of the fair market value
of the common stock at the time of the grant. Options under the 1998 Series B
plan must vest at a rate of no less than 20% per year. However, options granted
to officers, consultants or directors may, at the discretion of the Board of
Directors, become fully exercisable during any period of time. All options
issued under this plan expire on November 13, 2008, the termination date of the
plan. Generally, options issued under the 1998 Series B Plan cliff-vest 25% on
the first anniversary date of the grant, and ratably each month thereafter, over
the next three years.

F-155
<PAGE> 248
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about the Company's stock
options outstanding at December 31, 1998 and March 10, 1999, under the 1998
Series B Plan:

<TABLE>
<CAPTION>
1998 1999
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Options outstanding, beginning of period......... -- $ -- 961,593 $.27
Granted........................................ 1,000,000 $.27 53,594 $.40
Exercised...................................... -- $ -- (268,425) $.27
Cancelled...................................... (38,407) $.27 (44,630) $.27
--------- ---- -------- ----
Options outstanding, end of period............... 961,593 $.27 702,132 $.28
========= ==== ======== ====
Options exercisable, end of period............... 326,907 $.27 68,221 $.27
========= ==== ======== ====
Options available for grant, end of period....... 38,407 29,443
========= ========
</TABLE>

The following table summarizes information about the Company's Series B
common stock options outstanding at March 10, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE OUTSTANDING PRICE
- --------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$.27 649,834 9.7 $ .27 68,221 $.27
$.40 52,298 9.7 $ .40 -- $ --
------- --- ----- ------ ----
702,132 9.7 $0.28 68,221 $.27
======= === ===== ====== ====
</TABLE>

The deemed fair value of series B common stock was $2.70 per share. The
weighted average fair market value of Series B common stock options issued
during the year ended December 31, 1998 and the period from January 1, 1999
through March 10, 1999 was $2.21 and $1.98, respectively. The Company valued
these series B options under the Black-Scholes valuation model, assuming a risk
free rate of 5.5% annually, dividend yield of 0%, volatility of 50% and an
expected life of 4.0 and 4.0 years, respectively.

At December 31, 1998 and March 10, 1999, unamortized deferred compensation
expense related to the issuance of Series A and B common stock options,
amounting to $1,481,748 and $1,505,809, respectively, is included in the
accompanying statements of stockholders' equity and balance sheets. Common stock
options outstanding under both 1998 plans were converted to Adsmart, Inc.
options, subsequent to the merger with 2Can Acquisition Company.

If compensation cost for awards under such plans had been determined based
on the fair value method set forth under SFAS 123, the pro forma effect on the
Company's net loss would have been as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1999
YEAR ENDED THROUGH
DECEMBER 31, 1998 MARCH 10, 1999
-------------------------- --------------------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss.............................. $(4,816,293) $(4,921,829) $(2,399,762) $(2,417,294)
=========== =========== =========== ===========
Net loss per share.................... $ (1.29) $ (1.31) $ (.33) $ (.33)
=========== =========== =========== ===========
</TABLE>

F-156
<PAGE> 249
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(12) COMPREHENSIVE INCOME

The Company adopted SFAS No. 130, Reporting Comprehensive Income (SFAS
130). This statement requires that all components of comprehensive income be
reported in the financial statements in the period in which they were
recognized. For each year reported, comprehensive loss under SFAS 130 was
equivalent to the Company's net loss reported in the accompanying statements of
operations.

(13) CONCENTRATION OF CREDIT RISK

At December 31, 1998, one customer accounted for approximately 14% of the
Company's gross trade accounts receivable.

For the year ended December 31, 1998, 12% and 11% of the Company's cost of
advertising revenues related to two web sites. This cost of advertising revenues
includes the cost incurred on both gross advertising revenues and commissions.
At December 31, 1998, these two web sites accounted for approximately 7% and 11%
of gross trade accounts payable.

For the period from January 1, 1999 through March 10, 1999, 15% of the
Company's cost of sales related to one vendor that provides ad servicing. This
vendor is a related party of the Company. At March 10, 1999, this vendor
accounted for approximately 13% of gross trade accounts payable.

(14) RELATED PARTY TRANSACTIONS

During the year ended December 31, 1998 and the period from January 1, 1999
through March 10, 1999, the Company incurred ad-serving fees, amounting to
$270,104 and $325,254, respectively, with an entity owned in part by a
stockholder of the Company. These amounts are included in cost of advertising
revenue on the accompanying statements of operations. At December 31, 1998 and
March 10, 1999, balances due to this entity, amounted to $277,938 and $542,398,
respectively. These amounts are included in accounts payable to related parties
on the accompanying balance sheets.

During the year ended December 31, 1998 and the period from January 1, 1999
through March 10, 1999, the Company incurred web-hosting expenses, amounting to
$531 and $6,777, respectively, with an entity owned in part by a stockholder of
the Company. These amounts are included in selling, general and administrative
expenses on the accompanying statements of operations. At December 31, 1998 and
March 10, 1999, balances due to this entity, amounted to $531 and $0,
respectively. These amounts are included in accounts payable on the accompanying
balance sheets.

At December 31, 1997, WebRep was indebted to an individual for $50,000.
During the year ended December 31, 1998, the same individual loaned WebRep an
additional $50,000. The total outstanding debt of $100,000 was repaid during the
year ended December 31, 1998. Additionally, this individual was issued 25,000
membership units in WebRep during the year ended December 31, 1998. Total
interest expense incurred on these notes amounted to $21,116 during the year
ended December 31, 1998. This interest expense was comprised of cash paid of
$5,015 and imputed interest of $16,101 (see note 10). The imputed interest
relates to the sale of WebRep units to the member for an amount that was less
than fair market value of the units.

During the year ended December 31, 1998 and the period from January 1, 1999
and March 10, 1999, the Company incurred $2,500 and $968 of interest expense,
respectively, on the note payable to stockholder, assumed in the ECG acquisition
(note 8). During the period between August 18, 1998 and September 29, 1999, 2Can
received $36,937 from ECG, related to the repayment of portions of advances
previously made by 2Can. The total advances due from ECG at September 29, 1998
were included in the purchase accounting adjustments related to the acquisition.

F-157
<PAGE> 250
2CAN MEDIA INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

During the period from January 1, 1998 through August 18, 1998, WebRep
received advances from 2Can amounting to $78,255. These amounts were owed to
2Can on August 18, 1998 and have been included in the purchase accounting
adjustments related to the reverse merger with 2Can.

(15) SUBSEQUENT EVENT

On March 10, 1999, the Company was merged with 2Can Acquisition Company, a
wholly owned subsidiary of CMGI. 2Can, the surviving entity, was later merged
into Adsmart, a majority owned subsidiary of CMGI. Adsmart was the surviving
corporation in this transaction. On January 20, 2000, Adsmart and CMGI signed a
binding letter of intent for Adsmart to be acquired by Engage Technologies, Inc.
Upon signing a definitive purchase agreement, 2Can will become a wholly-owned
subsidiary of Engage Technologies, Inc. which itself is a majority owned
subsidiary of CMGI.

F-158
<PAGE> 251

UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

In April 1999, Engage acquired I/PRO, a provider of Web-site traffic
measurement and audit services, for approximately $32.7 million, including
direct acquisition costs of $244,000. The purchase price consisted of $1.6
million in net cash, $20.9 million in CMGI common shares and $10.2 million in
Engage common shares and stock options to acquire Engage common shares. In
addition, CMGI must pay up to $3.0 million to the former I/PRO stockholders if
stated performance goals are met by I/PRO one year after the closing. Engage
must reimburse CMGI for any payments, due under stated performance goals, in
cash or by issuance of shares of Engage's Series C convertible preferred stock
at its then fair market value, at CMGI's election. Any additional payments will
be treated as additional purchase price.

In December 1999, Engage completed its acquisition of AdKnowledge Inc.
("AdKnowledge"), a provider of products and services which allow online
marketers and ad agencies to plan, target, serve, track and analyze advertising
campaigns. Previously, on September 23, 1999, Engage, CMGI, AK Acquisition
Corp., a wholly-owned subsidiary of CMGI, AdKnowledge, and Steve Findley, John
Mracek and Kevin Wandryk (collectively, the "Shareholder Representative")
executed an Agreement and Plan of Merger and Contribution (the "Merger
Agreement"). Upon the completion of the transactions contemplated by the Merger
Agreement, AdKnowledge became a wholly owned subsidiary of Engage. Specifically,
the Merger Agreement contemplated:

First, a merger of a transitory sub with and into AdKnowledge, with
AdKnowledge being the surviving corporation (the "Surviving Corporation"). In
this merger, all the AdKnowledge preferred shareholders received CMGI common
stock and a new class of AdKnowledge common stock ("Surviving Corporation Common
Stock"), and all common shareholders of AdKnowledge received shares of Surviving
Corporation Common Stock. Upon completion of this merger on November 30, 1999,
CMGI owned approximately 88% of the Surviving Corporation Common Stock. Second,
CMGI and other shareholders of Surviving Corporation contributed their Surviving
Corporation Common Stock to Engage in exchange for approximately 10.3 million
shares of Engage common stock (the "Contribution"). Engage issued common stock
from its authorized but unissued capital stock. Third, Engage consummated a
California short-form merger (the "Short-Form Merger") between Surviving
Corporation and a wholly-owned subsidiary of Engage ("Engage Sub"), pursuant to
which Engage Sub merged with and into Surviving Corporation, with Surviving
Corporation being the surviving corporation in such merger. Any remaining
holders of Surviving Corporation Common Stock received Engage common stock in
this merger.

Total purchase consideration was valued at approximately $161.0 million,
net of cash acquired of $3.0 million. Included in the purchase consideration was
$3.8 million in direct acquisition costs. In connection with the contribution
and the Short-Form Merger, Engage issued approximately 9.8 million shares of its
common stock to CMGI for CMGI's 88% interest in Surviving Corporation and
approximately 506,000 shares of its common stock directly to shareholders of
Surviving Corporation, valued at approximately $142.4 million in the aggregate.
Additionally, stock options to acquire Engage's common stock issued in the
contribution, valued at approximately $18 million, have been included in the
purchase consideration.

Contingent consideration, comprised of approximately 414,000 shares of CMGI
common stock (adjusted for stock splits), has been placed in escrow (the "Escrow
Shares") to satisfy certain performance goals and indemnifications. The value of
the Escrow Shares has not been reflected in the aggregate purchase consideration
and will be recorded as additional purchase price at the then-fair value upon
the attainment of certain performance goals measured through November 30, 2000.
Engage issued approximately 1,116,000 of its common shares to CMGI in
consideration for the Escrow Shares. No value has been ascribed to the value of
these shares. If the performance goals are met and the Escrow Shares are
released to the AdKnowledge shareholders, Engage will record the fair value of
the CMGI shares issued to AdKnowledge shareholders on the release date as
additional purchase price. Any difference in the fair value of Engage shares at
the release date compared to the value of the Escrow Shares will be recorded as
a capital transaction between entities under common control. Under the terms of
an Intercompany Agreement between Engage and CMGI, in the event that any Escrow
Shares are returned to CMGI, CMGI shall pay Engage, in cash or other property, a
sum equal to the value of the returned Escrow Shares.

F-159
<PAGE> 252

In January 2000, Engage and CMGI, the majority stockholder of the Engage,
executed an Agreement and Plan of Merger and Contribution (the "Agreement")
pursuant to which Engage will acquire Adsmart Corporation ("Adsmart") and
Flycast Communications Corporation ("Flycast"). Under the terms of the
Agreement, Engage will acquire Flycast and Adsmart from CMGI and will issue to
CMGI approximately 65 million shares of common stock of Engage. The transaction
will be accounted for as a combination of entities under common control (i.e.,
"as if pooling"), and is subject to customary conditions, including the approval
of Engage's stockholders. CMGI has agreed to vote the shares of common stock of
Engage held by it in favor of the transaction. The fair value of Engage's
purchase consideration to be issued to CMGI in excess of CMGI's carrying values
of the net assets of Flycast and Adsmart on the consummation date will be
charged to equity. The transaction is expected to be completed in April or May
2000. Direct costs incurred by the Company for the Adsmart and Flycast
acquisitions, consisting primarily of investment banker, legal and accounting
fees approximating $4.7 million, will be expensed upon the closing of the
acquisitions.

Included in the pending acquisition of Adsmart is the Adsmart acquisition
of 2Can Media, Inc. ("2Can"). CMGI completed the acquisition of 2CAN for initial
consideration of approximately $28.5 million, net of cash acquired of $360,000.
Immediately following the completion of the acquisition, on March 11, 1999, 2Can
was merged with and into Adsmart, with Adsmart becoming the surviving
corporation. 2Can was a Los Angeles, California-based full-service interactive
media company serving the entire online advertising community with site-focused
sales and advertising representation and was comprised of five distinct sales
channels: WebRep, Pinnacle Interactive, ECG, MediaPlus and Grupo NetFuerza. As
the primary component of the initial consideration paid for 2Can, CMGI issued
convertible promissory notes (the "Promissory Notes") in the aggregate principal
amount of $27.0 million. The Promissory Notes bear interest at an annual rate of
6.5% and are due and payable in full, with accrued interest, on March 11, 2004.
The holders of the Promissory Notes can elect at any time prior to March 11,
2004,to convert all or a portion of the outstanding principal and accrued
interest (the "Conversion Amount") into the following: 14.66% of the Conversion
Amount will be paid in cash, 14.66% of the Conversion Amount will be paid in
shares of CMGI common stock and 70.68% of the Conversion Amount will be paid in
either shares of CMGI common stock or Adsmart common shares based on the
election of the Promissory Note holders. Under the Agreement and Plan of Merger
with 2Can, CMGI is obligated to pay contingent consideration to 2Can based upon
future earnings targets. The amount of the contingent merger consideration was
not determinable as of January 31, 2000.

The following unaudited pro forma condensed consolidated financial
statements give effect to Engage's acquisitions of I/PRO, AdKnowledge, Adsmart
and Flycast. The acquisitions of I/PRO and AdKnowledge have been accounted for
under the purchase method of accounting. The acquisitions of Adsmart and
Flycast, upon their completion, will be accounted for as a combination of
entities under common control (i.e., "as if pooling"). The unaudited pro forma
condensed balance sheet as of January 31, 2000 gives effect to the acquisitions
of Adsmart and Flycast as if these transactions had occurred on that date. The
unaudited pro forma condensed balance sheet is based on the historical balance
sheets of Engage and Adsmart as of January 31, 2000 and the historical balance
sheet of Flycast as of December 31, 1999. The unaudited pro forma condensed
consolidated statements of operations presented herein include:

- Unaudited pro forma condensed consolidated statement of operations for
the six months ended January 31, 2000 reflecting the historical results
of operations of Engage and Adsmart for the six months ended January 31,
2000, the historical results of operations of AdKnowledge for the period
August 1, 1999 through November 30, 1999, and the historical results of
operations of Flycast for the six months ended December 31, 1999. Engage
has accounted for the AdKnowledge and I/PRO acquisitions under the
purchase method of accounting and the Flycast and Adsmart acquisitions
under the as if pooling method of accounting.

- Unaudited pro forma condensed consolidated statement of operations for
the year ended July 31, 1999 reflecting the historical results of
operations of Engage and Adsmart for the year ended July 31, 1999, the
historical results of operations of I/PRO for the period August 1, 1998
through March 31, 1999, the historical results of operations of
AdKnowledge and Flycast for the twelve months ended June 30, 1999, and
the historical results of operations of 2Can, WebRep and Eisenberg
Communications Group, Inc. ("ECG") for the period August 1, 1998 through
March 10, 1999. Engage has accounted for the
F-160
<PAGE> 253

AdKnowledge and I/PRO acquisitions under the purchase method of
accounting and the Flycast and Adsmart acquisitions under the as if
pooling method of accounting. Adsmart accounted for its acquisition of
2Can under the purchase method of accounting.

- Unaudited pro forma condensed consolidated statements of operations for
the years ended July 31, 1998 and 1997 reflecting the historical results
of operations of Engage and Adsmart accounted for under the as if pooling
method of accounting.

The pro forma financial information is presented for illustrative purposes only
and is not necessarily indicative of the future financial position or future
results of operations of the Consolidated Company after the acquisitions of
I/PRO, AdKnowledge, Adsmart and Flycast, or of the financial position or results
of operations of the Consolidated Company that would have actually occurred had
the acquisitions occurred as of the dates described above.

F-161
<PAGE> 254

ENGAGE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JANUARY 31, 2000
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ENGAGE ADSMART FLYCAST ADJUSTMENTS AS ADJUSTED
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 44,010 $ -- $ 9,973 $ -- $ 53,983
Available-for-sale securities..... 44,678 -- 46,217 -- 90,895
Accounts receivable, net.......... 12,861 23,923 21,386 (608)(b) 57,562
Accounts receivable, related
parties........................ -- 849 -- 344(a) 1,193
Prepaid expenses.................. 1,978 206 1,800 -- 3,984
-------- -------- -------- ----------- -----------
Total current assets.............. 103,527 24,978 79,376 (264) 207,617
-------- -------- -------- ----------- -----------
Long-term assets.................... 12,254 245 11,673 -- 24,172
Intangible assets, net.............. 193,765 28,482 -- 860,985(c) 1,083,232
-------- -------- -------- ----------- -----------
Total assets................... $309,546 $ 53,705 $ 91,049 $ 860,721 $ 1,315,021
======== ======== ======== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt........................... $ 2,028 $ -- $ 1,914 $ -- $ 3,942
Obligation under capital lease.... 1,041 13 883 -- 1,937
Due to CMGI and affiliates........ 1,878 66,419 -- (608)(b)
(66,419)(d) 1,270
Accounts payable and accrued
expenses....................... 22,869 20,130 17,498 29,198(e) 89,695
Deferred revenue.................. 5,162 -- -- -- 5,162
-------- -------- -------- ----------- -----------
Total current liabilities...... 32,978 86,562 20,295 (37,829) 102,006
-------- -------- -------- ----------- -----------
Deferred revenue.................... 1,067 -- -- -- 1,067
Other long-term liabilities......... 5,023 44 2,812 -- 7,879

Stockholders' equity:
Preferred stock................... -- 8 -- (8)(a) --
Common stock...................... 1,082 1 109,037 (109,038)(a)
650(f) 1,732
Additional paid-in capital........ 367,361 7,711 -- (7,711)(a)
3,281,198(f) 3,648,559
Stockholder note receivable....... -- -- (344) 344(a) --
Deferred compensation............. (2,025) -- (1,269) 1,269(a) (2,025)
Accumulated other comprehensive
income......................... 442 -- -- -- 442
Accumulated deficit............... (96,382) (40,621) (39,482) (29,198)(d)
80,103(a)
(2,319,059)(g) (2,444,639)
-------- -------- -------- ----------- -----------
Total stockholders' equity..... 270,478 (32,901) 67,942 898,550 1,204,069
-------- -------- -------- ----------- -----------
Total liabilities and
stockholders' equity......... $309,546 $ 53,705 $ 91,049 $ 860,721 $ 1,315,021
======== ======== ======== =========== ===========
</TABLE>

F-162
<PAGE> 255

NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
AS OF JANUARY 31, 2000

(a) The following represents the allocation of the purchase price over the
historical net book values of the acquired assets and liabilities of IPRO at
March 31, 1999, AdKnowledge at November 30, 1999, Flycast at December 31,
1999, and Adsmart at January 31, 2000 and is for illustrative purposes only.
Actual fair values for the Adsmart and Flycast acquisitions will be based on
financial information as of the acquisition date. Assuming the pending
transaction occurred on January 31, 2000, the allocation would have been as
follows(in thousands);

<TABLE>
<CAPTION>
CONSUMMATED PENDING
---------------------- ----------------------
I/PRO ADKNOWLEDGE FLYCAST ADSMART
------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Working capital (deficit), net of cash
acquired of $347 for I/PRO, $3,044 for
AdKnowledge, $0 for Adsmart and $9,973
for Flycast............................ $ (498) $ (7,954) $ 24,635 $ 4,835
Property plant and equipment............. 1,676 4,311 11,357 245
Other assets............................. 230 515 316 --
In-process research and development...... 4,500 2,317 -- --
Long-term obligations.................... (465) (4,809) (2,812) (44)
Goodwill................................. 22,288 160,144 860,985 28,482
Developed technology..................... 3,000 1,763 -- --
Other identifiable intangible assets..... 1,920 4,745 -- --
Dividend to CMGI......................... -- -- 1,790,158 528,902
------- -------- ---------- --------
Purchase price, net of cash acquired... $32,651 $161,032 $2,684,639 $562,420
======= ======== ========== ========
</TABLE>

(b) Represents the elimination of intercompany accounts receivable and accounts
payable.

(c) Represents estimated goodwill per the allocation in (a) above to be recorded
by CMGI for the Flycast acquisition, adjusted for the pro forma accrual of
investment banker and legal fees to be paid by Flycast of $24,473 (see also
note (e)). Engage will assume this goodwill as well as the historical
goodwill of $28,482 recorded by Adsmart in the 2Can acquisition upon closing
of the as if pooling between CMGI and Engage.

(d) Reflects the conversion of Adsmart's debt to CMGI prior to the closing of
the acquisition.

(e) Reflects the accrual of investment banker and legal fees owed by Flycast as
a result of Flycast being acquired by CMGI ($24,473) and the accrual of
estimated investment banker and legal and accounting fees to be incurred by
Engage($4,725) in the closing of the Adsmart and Flycast acquisitions .

(f) Reflects the issuance of approximately 65 million shares of Engage common
stock to CMGI for the stock of Adsmart and Flycast. For purposes of the
unaudited pro forma financial statements, the Engage common shares are
valued at approximately $50.00 (post-split), the closing average per-share
price for the five days before and after January 19, 2000, the date that a
binding agreement was reached with CMGI.

(g) Represents the non-cash dividend to CMGI for the excess fair value of the
Engage common shares issuable to CMGI in excess of CMGI's historical cost
basis in Adsmart and Flycast.

F-163
<PAGE> 256
ENGAGE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
(A) ------------------------ (A) (A) -------------------------
ENGAGE ADKNOWLEDGE ADJUSTMENTS SUBTOTAL ADSMART FLYCAST ADJUSTMENTS TOTAL
-------- ----------- ----------- -------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product revenue......... $ 18,367 $ 3,179 $ -- $ 21,546 $ 27,589 $ 34,619 $ (1,187)(g) $ 82,567
Services and support
revenue.............. 2,704 -- -- 2,704 -- -- -- 2,704
-------- -------- -------- -------- -------- -------- --------- ---------
Total revenue........ 21,071 3,179 -- 24,250 27,589 34,619 (1,187) 85,271
-------- -------- -------- -------- -------- -------- --------- ---------
Cost of revenue:
Cost of product
revenue.............. 10,622 2,629 196(b) 13,447 25,943 23,881 (687)(g) 62,584
Cost of services and
support revenue...... 2,911 -- -- 2,911 -- -- -- 2,911
-------- -------- -------- -------- -------- -------- --------- ---------
Total cost of
revenue............ 13,533 2,629 196 16,358 25,943 23,881 (687) 65,495
-------- -------- -------- -------- -------- -------- --------- ---------
Gross profit
(loss)............. 7,538 550 (196) 7,892 1,646 10,738 (500) 19,776
-------- -------- -------- -------- -------- -------- --------- ---------
Operating expenses:
In-process research and
development.......... 2,317 -- (2,317)(c) -- -- -- -- --
Research and
development.......... 7,885 3,109 -- 10,994 -- 5,084 -- 16,078
Selling and marketing... 18,071 1,571 -- 19,642 9,686 12,816 -- 42,144
General and
administrative....... 4,985 6,487 -- 11,472 2,064 7,210 -- 20,746
Stock compensation...... 326 531 -- 857 -- 663 -- 1,520
Amortization of goodwill
and other
intangibles.......... 13,728 255 18,066(d) 32,049 3,453 -- 143,497(h) 178,999
-------- -------- -------- -------- -------- -------- --------- ---------
Total operating
expenses........... 47,312 11,953 15,749 75,014 15,203 25,773 143,497 259,487
-------- -------- -------- -------- -------- -------- --------- ---------
Loss from operations...... (39,774) (11,403) (15,945) (67,122) (13,557) (15,035) (143,997) (239,711)
Other income (expense):
Equity in loss of joint
venture.............. (700) -- -- (700) -- -- -- (700)
Other income (expense),
net.................. 2,573 (404) 150(e) 2,319 (830) 616 -- 2,105
-------- -------- -------- -------- -------- -------- --------- ---------
Net loss.................. $(37,901) $(11,807) $(15,795) $(65,503) $(14,387) $(14,419) $(143,997) $(238,306)
======== ======== ======== ======== ======== ======== ========= =========
Pro forma basic and
diluted net loss per
share................... $ (0.38) $ (0.61)(f) $ (1.38)(i)
======== ======== =========
Pro forma weighted average
number of basic and
diluted shares
outstanding............. 100,935 107,788(f) 172,786(i)
======== ======== =========
</TABLE>

F-164
<PAGE> 257

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000

(a) Reflects the pre-acquisition results of AdKnowledge for the period August 1,
1999 through November 30, 1999, the pre-acquisition period for which
AdKnowledge results were not consolidated with Engage. Reflects the results
of Adsmart for the six months ended January 31, 2000 and Flycast for the six
months ended December 31, 1999.

(b) Reflects additional amortization expense of developed technology (per the
allocation in (a) in the Notes to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of January 31, 2000) acquired in the purchase
of AdKnowledge. Developed technology is being amortized over three years for
AdKnowledge, using the straight-line method.

(c) Adjustment to in-process research and development ("IPRD") reflects the
elimination of $2.3 million expensed to IPRD for the acquisition of
AdKnowledge in December 1999.

(d) Reflects additional goodwill and other intangible asset amortization expense
(per the allocation in (a) in the Notes to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of January 31, 2000) related to the
acquisition of AdKnowledge. Amortization periods for goodwill and other
intangible assets for AdKnowledge are as follows.

<TABLE>
<S> <C>
Goodwill.................................................... 3
Workforce................................................... 3
Tradename................................................... 3
Database of cookies......................................... 3
</TABLE>

(e)Reflects a reduction in interest expense related to interest expense recorded
by AdKnowledge at interest rates in excess of Engage's incremental borrowing
rate.

(f)Since the pro forma statement of operations results in a loss from continuing
operations, the pro forma basic and diluted loss from continuing operations
per common share is computed by dividing the loss from continuing operations
available to common stockholders by the weighted average number of common
shares outstanding. The calculation of the pro forma weighted average number
of common shares outstanding assumes that the 10,336,212 shares of Engage
common stock issued in the AdKnowledge acquisition were outstanding for the
entire period presented.

(g)Represents the elimination of intercompany revenues and cost of revenues and
$500 recorded as revenue by Engage for software which was capitalized by
Flycast in January 2000.

(h)Reflects amortization of goodwill and other intangible assets (per the
allocation in (a) in the Notes to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of January 31, 2000) that would have been
recorded by CMGI, and later by Engage, had the Flycast acquisition occurred
at the beginning of the period presented. The pro forma adjustment is based
on the assumption that the entire amount identified as goodwill and other
intangible assets in the Flycast acquisition will be amortized over a three
year period. CMGI has not yet completed the valuation of the actual
intangible assets acquired in the Flycast acquisition. When completed,
certain amounts identified as intangible assets may be amortized over periods
other than the three-year period represented in the pro forma statement of
operations. Additionally, a portion of the purchase price may be identified
IPRD. Any amount identified as IPRD will be charged to operations.

(i)Since the pro forma statement of operations results in a loss from continuing
operations, the pro forma basic and diluted loss from continuing operations
per common share is computed by dividing the loss from continuing operations
available to common stockholders by the weighted average number of common
shares outstanding. Under the terms of the Agreement and Plan of Merger and
Contribution the ("Agreement"), the maximum number of Engage common shares
issuable to CMGI in exchange for Adsmart and Flycast is 64,997,634. The
number of Engage common shares issuable to CMGI in exchange for Adsmart and
Flycast is subject to reduction, based on a formula defined in the Agreement,

F-165
<PAGE> 258

for the number of outstanding Adsmart and Flycast stock options which may
convert into Engage stock options. Flycast employees received CMGI stock
options upon CMGI's closing the Flycast acquisition; Flycast employees may
elect to convert their CMGI stock options into Engage stock options upon the
closing of the acquisition. Adsmart employees are required to convert their
outstanding Adsmart stock options into Engage stock options upon the closing
of the acquisition. All option conversions will be based on the conversion
ratios as defined in the Agreement. For purposes of the Unaudited Pro Forma
Financial Statements, the calculation of the pro forma weighted average
number of common shares outstanding assumes that Engage issued 64,997,634
shares for Adsmart and Flycast at the beginning of the period presented.

F-166
<PAGE> 259

ENGAGE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
(A) (A) ------------------------- (A) (G)
ENGAGE I/PRO ADKNOWLEDGE ADJUSTMENTS SUBTOTAL ADSMART 2CAN
-------- ------- ----------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product revenue................... $ 14,167 $ 3,902 $ 2,986 $ -- $ 21,055 $ 11,069 $ 2,370
Services and support revenue...... 1,856 -- -- -- 1,856 -- --
-------- ------- -------- -------- --------- -------- -------
Total revenue................... 16,023 3,902 2,986 -- 22,911 11,069 2,370
-------- ------- -------- -------- --------- -------- -------
Cost of revenue:
Cost of product revenue........... 3,494 2,658 4,190 988(b) 11,330 14,831 1,613
Cost of services and support
revenue......................... 5,957 -- -- -- 5,957 -- --
-------- ------- -------- -------- --------- -------- -------
Total cost of revenue........... 9,451 2,658 4,190 988 17,287 14,831 1,613
-------- ------- -------- -------- --------- -------- -------
Gross profit (loss)............. 6,572 1,244 (1,204) (988) 5,624 (3,762) 757
-------- ------- -------- -------- --------- -------- -------
Operating expenses:
In-process research and
development..................... 4,500 -- -- (4,500)(c) -- -- --
Research and development.......... 8,699 1,775 4,531 -- 15,005 -- --
Selling and marketing............. 12,776 2,499 3,797 -- 19,072 6,593 1,494
General and administrative........ 4,115 2,323 2,149 -- 8,587 1,104 4,027
Stock compensation................ 5,829 -- 633 -- 6,462 -- 990
Amortization of goodwill and other
intangibles..................... 1,455 -- 765 57,510(d) 59,730 2,589 601
-------- ------- -------- -------- --------- -------- -------
Total operating expenses........ 37,374 6,597 11,875 53,010 108,856 10,286 7,112
-------- ------- -------- -------- --------- -------- -------
Loss from operations................ (30,802) (5,353) (13,079) (53,998) (103,232) (14,048) (6,355)
Other income (expense):
Equity in loss of joint venture... (723) -- -- -- (723) -- --
Other income (expense), net....... (478) 428 (228) 129(e) (149) (575) (148)
-------- ------- -------- -------- --------- -------- -------
Net loss............................ $(32,003) $(4,925) $(13,307) $(53,869) $(104,104) $(14,623) $(6,503)
======== ======= ======== ======== ========= ======== =======
Pro forma basic and diluted net loss
per share......................... $ (0.45) $ (1.16)(f)
======== =========
Pro forma weighted average number of
basic and diluted shares
outstanding....................... 71,862 89,566(f)
======== =========

<CAPTION>
PRO FORMA
(A) -------------------------
FLYCAST ADJUSTMENTS TOTAL
-------- ----------- ---------
<S> <C> <C> <C>
Revenue:
Product revenue................... $ 18,596 $ (259)(h) $ 52,831
Services and support revenue...... -- -- 1,856
-------- --------- ---------
Total revenue................... 18,596 (259) 54,687
-------- --------- ---------
Cost of revenue:
Cost of product revenue........... 13,012 (259)(h) 40,527
Cost of services and support
revenue......................... -- -- 5,957
-------- --------- ---------
Total cost of revenue........... 13,012 (259) 46,484
-------- --------- ---------
Gross profit (loss)............. 5,584 -- 8,203
-------- --------- ---------
Operating expenses:
In-process research and
development..................... -- -- --
Research and development.......... 4,736 -- 19,741
Selling and marketing............. 12,347 -- 39,506
General and administrative........ 3,149 -- 16,867
Stock compensation................ 2,114 -- 9,566
Amortization of goodwill and other
intangibles..................... -- 290,709(i) 353,629
-------- --------- ---------
Total operating expenses........ 22,346 290,709 439,309
-------- --------- ---------
Loss from operations................ (16,762) (290,709) (431,106)
Other income (expense):
Equity in loss of joint venture... -- -- (723)
Other income (expense), net....... (38) -- (910)
-------- --------- ---------
Net loss............................ $(16,800) $(290,709) $(432,739)
======== ========= =========
Pro forma basic and diluted net loss
per share......................... $ (2.80)(j)
=========
Pro forma weighted average number of
basic and diluted shares
outstanding....................... 154,564(j)
=========
</TABLE>

F-167
<PAGE> 260

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1999

(a) Reflects the pre-acquisition results of I/PRO for the period August 1, 1998
through March 31, 1999, the pre-acquisition period for which I/PRO results
were not consolidated with Engage. Reflects the results of AdKnowledge and
Flycast for the six months ended June 30, 1999 and Adsmart for the six
months ended July 31, 1999.

(b) Reflects additional amortization expense of developed technology acquired in
the purchase of I/PRO ($400) and AdKnowledge ($588). Developed technology is
being amortized over five years for I/PRO and three years for AdKnowledge,
both using the straight-line method.

(c) Adjustment to in-process research and development reflects the elimination
of $4.5 million expensed to in-process research and development ("IPRD")
related to the acquisition of I/PRO in April 1999.

(d) Reflects additional goodwill and other intangible asset amortization expense
(per the allocation in (a) in Notes to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet) related to the acquisition of AdKnowledge and
I/PRO. Amortization periods for goodwill and other intangible assets are as
follows:

<TABLE>
<CAPTION>
I/PRO ADKNOWLEDGE
----- -----------
<S> <C> <C>
Goodwill........................................ 5 3
Workforce....................................... 2 3
Tradename....................................... 5 3
Database of cookies............................. n/a 3
</TABLE>

(e) Reflects a reduction in interest expense related to I/PRO borrowings that
would have been settled by I/PRO had the acquisition been consummated at the
beginning of the period presented and interest expense recorded by
AdKnowledge at rates in excess of Engage's incremental borrowing rate.

(f) Since the pro forma statement of operations results in a loss from
continuing operations, the pro forma basic and diluted loss from continuing
operations per common share is computed by dividing the loss from continuing
operations by the weighted average number of common shares outstanding. The
calculation of the pro forma weighted average number of common shares
outstanding assumes that the 10,336,212 common shares of Engage common stock
issued in the AdKnowledge acquisition and 10,758,768 common shares issued in
the I/PRO acquisition were outstanding for the entire period presented.

(g) On March 11, 1999, CMGI acquired 2Can for purchase consideration valued at
approximately $28.5 million, including bridge notes receivable of $1.5
million. CMGI accounted for the acquisition using the purchase method of
accounting. Concurrent with CMGI's closing of the 2Can acquisition, CMGI
contributed 2Can to Adsmart in exchange for additional debt to CMGI of
approximately $28.5 million. Prior to its acquisition of CMGI, 2Can acquired
in August 1998 all of the outstanding common stock of WebRep L.L.C.
("WebRep") through a merger in which 2Can was the surviving corporation. The
members of WebRep received a majority of the voting interest in the combined
entity, and accordingly, WebRep was the acquiring company for accounting
purposes. The transaction was recorded as a reverse acquisition whereby the
members' ownership interests of WebRep were adjusted for the fair value of
the acquired tangible net assets of 2Can, and converted into shares of 2Can
common stock in a recapitalization.

On September 29, 1998, 2Can acquired Eisenberg Communications Group, Inc.
("ECG") for common stock valued at $6.3 million. The acquisition was
accounted for using the purchase method of accounting, resulting in goodwill
at the acquisition date of approximately $6.8 million. The historical
unaudited results of 2Can (including WebRep) for the period from August 1,
1998 through March 10, 1999

F-168
<PAGE> 261

(CMGI's acquisition date of 2Can) and the historical unaudited results of
ECG for the period from August 1, 1998 through September 29, 1999 (2Can's
acquisition date of ECG) are presented below:

<TABLE>
<CAPTION>
ADSMART ACQUISITIONS
(FROM AUGUST 1, 1998 -- MARCH 10, 1999, THE PERIOD PRIOR
TO THE INCLUSION WITH ADSMART RESULTS)
---------------------------------------------------------
2CAN ECG ADJUSTMENTS TOTAL
---------- -------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue......................... $ 2,304 $ 66 $ -- $ 2,370
Cost of revenue................. 1,613 -- -- 1,613
------- ----- ---- -------
Gross profit............... 691 66 -- 757
------- ----- ---- -------
Operating expenses:
Selling and marketing......... 1,396 98 -- 1,494
General and administrative.... 3,954 73 -- 4,027
Stock compensation............ 990 -- -- 990
Amortization of goodwill and
other intangibles.......... 601 -- -- 601
------- ----- ---- -------
Total operating expenses... 6,941 171 -- 7,112
------- ----- ---- -------
Loss from operations............ (6,250) (105) -- (6,355)
Other expense................... (146) (2) -- (148)
------- ----- ---- -------
Net loss........................ $(6,396) $(107) $ -- $(6,503)
======= ===== ==== =======
</TABLE>

(h) Represents the elimination of intercompany revenues and cost of revenues.

(i) Reflects amortization of goodwill and other intangible assets of $286,995
(per the allocation in (a) in Notes to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet) that would have been recorded by CMGI, and later
by Engage, had the Flycast acquisition occurred at the beginning of the
period presented. In addition, represents $3,714 of additional goodwill
amortization expense related to CMGI's acquisition of 2Can. The pro forma
adjustment is based on the assumption that the entire amount identified as
goodwill and other intangible assets in the Flycast acquisition will be
amortized over a three year period. CMGI has not yet completed the valuation
of the actual intangible assets acquired in August 1999. When completed,
certain amounts identified as intangible assets may be amortized over
periods other than the three-year period represented in the pro forma
statement of operations. Additionally, a portion of the purchase price may
be identified as in-process research and development ("IPRD"). Any amount
identified as IPRD will be charged to operations by CMGI and later by
Engage.

(j) Since the pro forma statement of operations results in a loss from
continuing operations, the pro forma basic and diluted loss from continuing
operations per common share is computed by dividing the loss from continuing
operations by the weighted average number of common shares outstanding.
Under the terms of the Agreement and Plan of Merger and Contribution the
("Agreement"), the maximum number of Engage common shares issuable to CMGI
is 64,997,634. The number of Engage common shares issuable to CMGI is
subject to reduction, based on a formula defined in the Agreement, for the
number of outstanding Adsmart and Flycast stock options which may convert
into Engage stock options. Flycast employees received CMGI stock options
upon CMGI's closing the Flycast acquisition; Flycast employees may elect to
convert their CMGI stock options into Engage stock options upon the closing
of the acquisition. Adsmart employees are required to convert their
outstanding Adsmart stock options into Engage stock options upon the closing
of the acquisition. All option conversions will be based on the conversion
ratios as defined in the Agreement. The calculation of the pro forma
weighted average number of common shares outstanding assumes that Engage
issued 64,997,634 shares for Adsmart and Flycast at the beginning of the
period presented.

F-169
<PAGE> 262

ENGAGE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
-----------------------
ENGAGE ADSMART ADJUSTMENTS TOTAL
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Revenue:
Product revenue............................... $ 1,945 $ 354 $ -- $ 2,299
Services and support revenue.................. 272 -- -- 272
-------- ------- ------- --------
Total revenue.............................. 2,217 354 -- 2,571
-------- ------- ------- --------
Cost of revenue:
Cost of product revenue....................... 185 2,537 -- 2,722
Cost of services and support revenue.......... 2,053 -- -- 2,053
-------- ------- ------- --------
Total cost of revenue...................... 2,238 2,537 -- 4,775
-------- ------- ------- --------
Gross profit (loss)........................ (21) (2,183) -- (2,204)
-------- ------- ------- --------
Operating expenses:
In-process research and development........... 9,200 -- (9,200)(a) --
Research and development...................... 5,859 961 -- 6,820
Selling and marketing......................... 4,015 2,318 -- 6,333
General and administrative.................... 1,993 1,131 -- 3,124
Stock compensation............................ 426 -- -- 426
Amortization of goodwill and other
intangibles................................ 1,391 -- -- 1,391
-------- ------- ------- --------
Total operating expenses................... 22,884 4,410 (9,200) 18,094
-------- ------- ------- --------
Loss from operations............................ (22,905) (6,593) 9,200 (20,298)
Other income (expense):
Gain on sale of product rights................ 9,240 -- -- 9,240
Other income (expense), net................... (172) (95) -- (267)
-------- ------- ------- --------
Net loss........................................ $(13,837) $(6,688) $ 9,200 $(11,325)
======== ======= ======= ========
Pro forma basic and diluted net loss per
share......................................... $ (0.41) $ (0.25)(b)
======== ========

Pro forma weighted average number of basic and
diluted shares outstanding.................... 33,500 44,724(b)
======== ========
</TABLE>

F-170
<PAGE> 263

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1998

(a) Adjustment to in-process research and development reflects the elimination
of $9.2 million expensed to in-process research and development ("IPRD")
related to the acquisition of Accipiter in April 1998.

(b) Since the pro forma statement of operations results in a loss from
continuing operations, the pro forma basic and diluted loss from continuing
operations is computed by dividing the loss from continuing operations by
the weighted average number of common shares outstanding. Under the terms of
the Agreement and Plan of Merger and Contribution the ("Agreement"), the
maximum number of Engage common shares issuable to CMGI for Adsmart is
11,223,704. The number of Engage common shares issuable to CMGI is subject
to reduction, based on a formula defined in the Agreement, for the number of
outstanding Adsmart stock options which may convert into Engage stock
options. Adsmart employees are required to convert their outstanding Adsmart
stock options into Engage stock options upon the closing of the acquisition.
All option conversions will be based on the conversion ratios as defined in
the Agreement. For purposes of the Unaudited Pro Forma financial statements,
the calculation of the pro forma weighted average number of common shares
outstanding assumes that Engage issued 11,223,704 shares for Adsmart at the
beginning of the period presented.

F-171
<PAGE> 264

ENGAGE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1997
(IN THOUSANDS)

F-172
<PAGE> 265

AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION

BY AND AMONG

CMGI, INC., ADSMART CORPORATION, FLYCAST COMMUNICATIONS CORPORATION

AND

ENGAGE TECHNOLOGIES, INC., AND FCET CORP.

JANUARY 19, 2000

A-1
<PAGE> 266

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I -- THE MERGER..................................... A-5
1.1 The Merger........................................ A-5
1.2 The Merger Closing................................ A-5
1.3 Actions at the Merger Closing..................... A-5
1.4 Additional Action................................. A-5
1.5 Conversion of Shares.............................. A-5
1.6 Dissenting Shares................................. A-6
1.7 Fractional Shares................................. A-6
1.8 Options........................................... A-7
1.9 Conversion of Notes Held by CMGI.................. A-7
1.10 Conversion of Preferred Stock...................... A-7
1.11 Notes.............................................. A-7
1.12 Certificate of Incorporation and By-laws........... A-7
1.13 No Further Rights.................................. A-7
1.14 Closing of Transfer Books.......................... A-8
ARTICLE II -- THE CONTRIBUTION.............................. A-8
2.1 The Contribution.................................. A-8
2.2 The Contribution Closing.......................... A-8
2.3 Actions at the Contribution Closing............... A-8
2.4 Conversion of Shares.............................. A-8
2.5 Options........................................... A-8
2.6 InterStep Escrow.................................. A-9
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF CMGI....... A-9
3.1 Organization, Qualification and Corporate Power... A-9
3.2 Authorization..................................... A-9
3.3 Noncontravention.................................. A-9
3.4 No Broker......................................... A-9
3.5 Investment........................................ A-9
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF CMGI AND
ADSMART AS TO ADSMART.......................... A-10
4.1 Organization, Qualification and Corporate Power... A-10
4.2 Capitalization.................................... A-10
4.3 Authorization of Transaction...................... A-11
4.4 Noncontravention.................................. A-11
4.5 Subsidiaries...................................... A-11
4.6 Financial Statements.............................. A-12
4.7 Absence of Certain Changes........................ A-12
4.8 Undisclosed Liabilities........................... A-12
4.9 Tax Matters....................................... A-12
4.10 Assets............................................. A-13
4.11 Owned Real Property................................ A-13
4.12 Real Property Leases............................... A-13
4.13 Intellectual Property.............................. A-13
4.14 Contracts.......................................... A-14
4.15 Insurance.......................................... A-15
4.16 Litigation......................................... A-15
4.17 Employees.......................................... A-15
</TABLE>

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<TABLE>
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<S> <C>
4.18 Employee Benefits.................................. A-16
4.19 Environmental Matters.............................. A-17
4.20 Legal Compliance................................... A-17
4.21 Permits............................................ A-17
4.22 Business Activity Restrictions..................... A-18
4.23 Year 2000 Compliance............................... A-18
4.24 Customers.......................................... A-19
4.25 Absence of Improper Payments....................... A-19
4.26 Brokers' Fees...................................... A-19
4.27 Proxy Statement.................................... A-19
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF CMGI AND
FLYCAST AS TO FLYCAST........................... A-19
5.1 Flycast Merger Agreement.......................... A-19
5.2 Capitalization.................................... A-20
5.3 Flycast-CMGI Option............................... A-20
5.4 Non-competition Agreements........................ A-20
5.5 Intercompany Balance.............................. A-20
ARTICLE VI -- REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY.................. A-20
6.1 Organization, Qualification and Corporate Power... A-20
6.2 Capitalization.................................... A-21
6.3 Authorization of Transaction...................... A-21
6.4 Noncontravention.................................. A-21
6.5 Reports and Financial Statements.................. A-21
6.6 Absence of Material Adverse Change................ A-22
6.7 Litigation........................................ A-22
6.8 Interim Operations of the Transitory Subsidiary... A-22
6.9 Brokers' Fees..................................... A-22
6.10 Proxy Statement.................................... A-22
ARTICLE VII -- COVENANTS.................................... A-22
7.1 Closing Efforts................................... A-22
7.2 Governmental and Third-Party Notices and
Consents............................................... A-22
7.3 Operation of Adsmart and Flycast Businesses....... A-23
7.4 Expenses.......................................... A-25
7.5 Indemnification................................... A-25
7.6 Listing of Merger Shares.......................... A-25
7.7 Rights Arising From Prior Acquisitions............ A-25
7.8 Buyer Management Agreement........................ A-26
7.9 Non-Solicitation.................................. A-26
ARTICLE VIII -- CONDITIONS TO CLOSING....................... A-26
8.1 Condition to Each Party's Obligations............. A-26
8.2 Conditions to Obligations of the Buyer and the
Transitory Subsidiary.................................. A-26
8.3 Conditions to Obligations of CMGI and Adsmart..... A-27
ARTICLE IX -- INDEMNIFICATION............................... A-27
9.1 Indemnification by CMGI........................... A-27
9.2 Indemnification Claims............................ A-27
9.3 Survival of Representations and Warranties........ A-29
9.4 Limitations....................................... A-29
</TABLE>

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<TABLE>
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<S> <C>
ARTICLE X -- TERMINATION.................................... A-30
10.1 Termination of Agreement........................... A-30
10.2 Effect of Termination.............................. A-30
ARTICLE XI -- DEFINITIONS................................... A-30
ARTICLE XII -- MISCELLANEOUS................................ A-33
12.1 Press Releases and Announcements................... A-33
12.2 No Third Party Beneficiaries....................... A-33
12.3 Entire Agreement................................... A-33
12.4 Succession and Assignment.......................... A-33
12.5 Counterparts Facsimile Signature................... A-33
12.6 Headings........................................... A-33
12.7 Notices............................................ A-33
12.8 Governing Law...................................... A-34
12.9 Amendments and Waivers............................. A-34
12.10 Severability....................................... A-34
12.11 Construction....................................... A-34
</TABLE>

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AGREEMENT AND PLAN OF MERGER

Agreement entered into as of January 19, 2000 by and among Engage
Technologies, Inc., a Delaware corporation (the "Buyer"), FCET Corp., a Delaware
corporation and a wholly-owned subsidiary of Buyer (the "Transitory
Subsidiary"), CMGI, Inc., a Delaware corporation ("CMGI"), ADSmart Corporation,
a Delaware corporation ("Adsmart") and Flycast Communications Corporation, a
Delaware corporation ("Flycast"). The Buyer, the Transitory Subsidiary, CMGI and
Adsmart are referred to collectively herein as the "Parties."

This Agreement contemplates (i) a merger of the Transitory Subsidiary into
Adsmart, pursuant to which the stockholders of Adsmart will receive common stock
of Buyer in exchange for their capital stock and (ii) a contribution of all of
the outstanding shares of common stock of Flycast by CMGI to Buyer in exchange
for shares of common stock of Buyer.

Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.

ARTICLE I

THE MERGER

1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into Adsmart (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and Adsmart shall continue as
the surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which the Surviving Corporation files a
certificate of merger or other appropriate documents prepared and executed in
accordance with Section 251(c) of the Delaware General Corporation Law (the
"Certificate of Merger") with the Secretary of State of the State of Delaware.
The Merger shall have the effects set forth in Section 259 of the Delaware
General Corporation Law.

1.2 The Merger Closing. The closing of the Merger (the "Merger Closing")
shall take place at the offices of Hale and Dorr LLP in Boston, Massachusetts,
on a date agreed upon by CMGI and Buyer, which shall not be later than three
business days after the satisfaction or waiver of all conditions (excluding the
delivery of any documents to be delivered at the Closing by any of the Parties)
set forth in Article VIII hereof (the "Closing Date"). The Merger Closing shall
take place concurrently with and is conditioned upon the Contribution Closing
(as defined below).

1.3 Actions at the Merger Closing. At the Merger Closing:

(a) the Surviving Corporation shall file with the Secretary of State
of the State of Delaware the Certificate of Merger;

(b) each of the stockholders of record of Adsmart immediately prior to
the Effective Time (the "Adsmart Stockholders") shall deliver to the Buyer
the certificate(s) representing his, her or its Adsmart Shares (as defined
below), and

(c) the Buyer shall deliver certificates for the Merger Shares (as
defined below) to each Adsmart Stockholder in accordance with Section 1.5.

1.4 Additional Action. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either Adsmart or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.

1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:

(a) Each share of common stock, $.01 par value per share, of Adsmart
("Adsmart Common Shares") issued and outstanding immediately prior to the
Effective Time (other than Adsmart Common

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Shares owned beneficially by the Buyer or the Transitory Subsidiary,
Dissenting Shares (as defined below) and Adsmart Common Shares held in
Adsmart's treasury) shall be converted into and represent the right to
receive such number of shares (the "Merger Shares") of common stock, $.01
par value per share, of the Buyer ("Buyer Common Stock") as is determined
by dividing 5,611,852 by the sum of the number of Adsmart Common Shares
outstanding immediately prior to the Effective Time and the number of
Adsmart Common Shares subject to outstanding Adsmart Options (as defined
below) immediately prior to the Effective Time (the "Conversion Ratio").

(b) The Conversion Ratio shall be subject to equitable adjustment in
the event of any stock split, stock dividend, reverse stock split or
similar event affecting the Buyer Common Stock between the date of this
Agreement and the Effective Time.

(c) Each Adsmart Share held in Adsmart's treasury immediately prior to
the Effective Time and each Adsmart Share owned beneficially by the Buyer
or the Transitory Subsidiary shall be cancelled and retired without payment
of any consideration therefor.

(d) Each share of common stock, $.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into and thereafter evidence one share of
common stock, $.01 par value per share, of the Surviving Corporation.

1.6 Dissenting Shares.

(a) For purposes of this Agreement, "Dissenting Shares" means Adsmart
Common Shares held as of the Effective Time by an Adsmart Stockholder who has
not voted such Adsmart Common Shares in favor of the adoption of this Agreement
and the Merger and with respect to which appraisal shall have been duly demanded
and perfected in accordance with Section 262 of the Delaware General Corporation
Law and not effectively withdrawn or forfeited prior to the Effective Time.
Dissenting Shares shall not be converted into or represent the right to receive
shares of Buyer Common Stock in the Merger, unless such Adsmart Stockholder
shall have forfeited his, her or its right to appraisal under the Delaware
General Corporation Law or properly withdrawn, his, her or its demand for
appraisal. If such Adsmart Stockholder has so forfeited or withdrawn his, her or
its right to appraisal of Dissenting Shares, then (i) as of the occurrence of
such event, such holder's Dissenting Shares shall cease to be Dissenting Shares
and shall be converted into and represent the right to receive the shares of
Buyer Common Stock issuable in respect of such Adsmart Common Shares pursuant to
Section 1.5, and (ii) promptly following the occurrence of such event, the Buyer
shall deliver to the holder thereof a certificate representing shares of Buyer
Common Stock to which such holder is entitled pursuant to Section 1.5.

(b) Adsmart shall give the Buyer (i) prompt notice of any written demands
for appraisal of any Adsmart Common Shares, withdrawals of such demands, and any
other instruments that relate to such demands received by Adsmart and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the Delaware General Corporation Law. Adsmart shall not,
except with the prior written consent of the Buyer, make any payment with
respect to any demands for appraisal of Adsmart Common Shares or offer to settle
or settle any such demands.

1.7 Fractional Shares. No certificates or scrip representing fractional
shares shall be issued to former Adsmart Stockholders upon the surrender for
exchange of certificates, and such former Adsmart Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
shares that would have otherwise been issued to such former Adsmart
Stockholders. In lieu of any fractional shares that would have otherwise been
issued, each former Adsmart Stockholder that would have been entitled to receive
a fractional share shall, upon proper surrender of such person's certificates,
receive a cash payment equal to the closing price per share of the Buyer Common
Stock on the Nasdaq National Market, as reported by Nasdaq, on the business day
immediately preceding the Closing Date, multiplied by the fraction of a share
that such Adsmart Stockholder would otherwise be entitled to receive.

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1.8 Options.

(a) As of the Effective Time, all options to purchase Adsmart Common Shares
issued by Adsmart pursuant to its stock option plans or otherwise ("Adsmart
Options"), whether vested or unvested, shall be assumed by the Buyer.
Immediately after the Effective Time, each Adsmart Option outstanding
immediately prior to the Effective Time shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such
Adsmart Option at the Effective Time, such number of shares of Buyer Common
Stock as is equal to the number of Adsmart Common Shares subject to the
unexercised portion of such Adsmart Option multiplied by the Conversion Ratio
(with any fraction resulting from such multiplication to be rounded down to the
nearest whole number). The exercise price per share of each such assumed Adsmart
Option shall be equal to the exercise price of such Adsmart Option immediately
prior to the Effective Time, divided by the Conversion Ratio (rounded up to the
nearest whole cent). The term, exercisability, vesting schedule, status as an
"incentive stock option" under Section 422 of the Internal Revenue Code of 1986
(as amended, the "Code"), if applicable, and all of the other terms of Adsmart
Options shall otherwise remain unchanged.

(b) As soon as practicable after the Effective Time, the Buyer or the
Surviving Corporation shall deliver to the holders of Adsmart Options
appropriate notices setting forth such holders' rights pursuant to such Adsmart
Options, as amended by this Section 1.8, and the agreements evidencing such
Adsmart Options shall continue in effect on the same terms and conditions
(subject to the amendments provided for in this Section 1.8 and such notice).

(c) The Buyer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Buyer Common Stock for delivery upon
exercise of Adsmart Options assumed in accordance with this Section 1.8. As soon
as practicable after the Effective Time (subject to the availability of all
required financial statements), the Buyer shall file a Registration Statement on
Form S-8 (or any successor form) under the Securities Act of 1933 (as amended,
the "Securities Act") with respect to all shares of Buyer Common Stock subject
to such Adsmart Options that may be registered on a Form S-8, and shall use
reasonable efforts to maintain the effectiveness of such Registration Statement
for so long as such Adsmart Options remain outstanding.

1.9 Conversion of Notes Held by CMGI. Prior to the Effective Time, CMGI
shall convert all of the convertible promissory notes of Adsmart held by it into
shares of Series B Convertible Preferred Stock, $.01 par value per share (the
"Adsmart Series B Preferred Stock"), of Adsmart.

1.10 Conversion of Preferred Stock. Prior to the Effective Time, CMGI
shall convert all of its shares of Series A Convertible Preferred Stock, $.01
par value per share (the "Adsmart Series A Preferred Stock"), and the Adsmart
Series B Preferred Stock (collectively, the "Adsmart Preferred Shares") into
Adsmart Common Shares.

1.11 [Reserved]

1.12 Certificate of Incorporation and By-laws.

(a) The Certificate of Incorporation of the Surviving Corporation
immediately following the Effective Time shall be the same as the Certificate of
Incorporation of the Transitory Subsidiary immediately prior to the Effective
Time, except that (1) the name of the corporation set forth therein shall be
changed to the name of Adsmart and (2) the identity of the incorporator shall be
deleted.

(b) The By-laws of the Surviving Corporation immediately following the
Effective Time shall be the same as the By-laws of the Transitory Subsidiary
immediately prior to the Effective Time, except that the name of the corporation
set forth therein shall be changed to the name of Adsmart.

1.13 No Further Rights. From and after the Effective Time, no Adsmart
Common Shares shall be deemed to be outstanding, and holders of certificates
therefor shall cease to have any rights with respect thereto, except as provided
herein or by law.

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1.14 Closing of Transfer Books. At the Effective Time, the stock transfer
books of Adsmart shall be closed and no transfer of Adsmart Common Shares shall
thereafter be made.

ARTICLE II

THE CONTRIBUTION

2.1 The Contribution. Upon and subject to the terms and conditions of
this Agreement, CMGI shall contribute to the Buyer all of the outstanding shares
of common stock, $.01 par value, of Flycast ("Flycast Common Stock") in exchange
for shares of Buyer Common Stock, at the Contribution Closing (as defined below)
(the "Contribution"). The Contribution is intended to qualify as a transaction
under Section 351 of the Code.

2.2 The Contribution Closing. The closing of the Contribution (the
"Contribution Closing") shall take place concurrently with and is conditioned
upon the Merger Closing. The Contribution Closing and Merger Closing are
referred to collectively as the "Closing."

2.3 Actions at the Contribution Closing. At the Contribution Closing:

(a) CMGI shall deliver to Buyer a stock certificate for all of the
then outstanding shares of Flycast Common Stock; and

(b) Buyer shall deliver a certificate for the Contribution Shares (as
defined below) to CMGI (or any designated subsidiary thereof).

2.4 Conversion of Shares. At the Contribution Closing, Buyer shall issue
to CMGI 26,886,965 shares of Buyer Common Stock (the "Contribution Shares"). The
number of Contribution Shares shall be subject to equitable adjustment in the
event of any stock split, stock dividend, reverse stock split or similar event
affecting the Buyer Common Stock between the date of this Agreement and the date
of the Contribution Closing.

2.5 Options. If (i) prior to the Closing any of the employees and
consultants of Flycast holding options to purchase shares of CMGI Common Stock
("Flycast-CMGI Options") elect to exchange, with the consent of CMGI and Buyer,
such options for options to purchase Buyer Common Stock upon terms mutually
acceptable to CMGI and the Buyer or (ii) following the Closing Date any such
Flycast-CMGI Options expire unexercised, in whole or in part, CMGI shall be
obligated to deliver to the Buyer a number of shares of Buyer Common Stock equal
to the number of shares of CMGI Common Stock subject to the exchanged or expired
option multiplied by 1.441, rounded down to the nearest share. In addition, upon
any exercise of a Flycast-CMGI Option that has not been exchanged for an option
to purchase shares of Buyer Common Stock, CMGI shall deliver to Buyer the amount
of the exercise price received by CMGI upon such exercise. If such exercise
price is paid in cash, CMGI shall deliver the amount of such exercise price to
Buyer in cash. If the amount of such exercise price is paid to CMGI through
surrender of shares of CMGI Common Stock or any other method, CMGI shall deliver
the amount of such exercise price in the form of shares of Buyer Common Stock
valued at $77.96 per share (subject to equitable adjustment for any stock
splits, stock dividends or other recapitalizations or exchanges affecting such
shares). Commencing on the last day of the first fiscal quarter of CMGI ending
after the Closing Date and on the last day of each fiscal quarter of CMGI
thereafter, CMGI shall deliver to the Buyer the shares of Buyer Common Stock and
any exercise price required to be delivered to the Buyer pursuant to this
Section 2.5. If CMGI is required to deliver any shares of Buyer Common Stock to
Buyer hereunder, it shall concurrently deliver to Buyer any dividends or
distributions received by it with respect to such shares or any securities into
which such shares have been changed, recapitalized or reclassified.
Notwithstanding the foregoing, if any Flycast-CMGI Option is exercised for
shares of CMGI Common Stock after any merger, consolidation, sale of assets or
other similar transaction in which more than 50% of the outstanding shares of
Buyer Common Stock are exchanged for stock, cash or other property of an
acquiring or successor entity (an "Engage Sale"), then upon such exercise, CMGI
shall cause to be delivered to Buyer (or its successor), in lieu of shares of
Buyer Common Stock, the stock, cash or other property issued in such

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Engage Sale with respect to the number of shares of Buyer Common Stock otherwise
deliverable by CMGI under this Section 2.5.

2.6 InterStep Escrow. To the extent that after the Closing, any shares of
CMGI Common Stock held in escrow under the Escrow Agreement dated as of August
30, 1999 by and between Flycast, the representatives of certain shareholders of
InterStep, Inc. ("InterStep") and others are released to Flycast from such
escrow, Flycast shall deliver and transfer all of such shares to CMGI in
exchange for the transfer and delivery by CMGI to Buyer of a number of shares of
Buyer Common Stock equal to the number of shares of CMGI Common Stock so
transferred, multiplied by 1.441.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF CMGI

CMGI represents and warrants to the Buyer that the statements contained in
this Article III are true and correct.

3.1 Organization, Qualification and Corporate Power. CMGI is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. CMGI is duly qualified to
conduct business and is in corporate and tax good standing under the laws of the
Commonwealth of Massachusetts. CMGI has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.

3.2 Authorization. CMGI has all requisite power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by CMGI of this Agreement and the consummation by CMGI of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of CMGI. This Agreement has been duly
and validly executed and delivered by CMGI and constitutes a valid and binding
obligation of CMGI, enforceable against CMGI in accordance with its terms.

3.3 Noncontravention. Subject to the filing of the Certificate of Merger
as required by the Delaware General Corporation Law, neither the execution and
delivery by CMGI of this Agreement, nor the consummation by CMGI of the
transactions contemplated hereby, will (a) conflict with or violate any
provision of the Certificate of Incorporation or By-laws of CMGI, (b) require on
the part of CMGI any filing with, or any permit, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party the right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which CMGI is a party or by which CMGI is bound or to
which any of its assets is subject, except for (i) any conflict, breach,
default, acceleration, termination, modification or cancellation which would not
have a CMGI Material Adverse Effect (as defined below) and would not adversely
affect the consummation of the transactions contemplated hereby or (ii) any
notice, consent or waiver the absence of which would not have a CMGI Material
Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby, or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to CMGI or any of its properties
or assets. For purposes of this Agreement, "CMGI Material Adverse Effect" means
a material adverse effect on the assets, business, condition (financial or
otherwise), or results of operations of CMGI and its subsidiaries, taken as
whole.

3.4 No Broker. None of CMGI, Adsmart or Flycast has entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of Adsmart, Flycast or Buyer to pay any fee or commission to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.

3.5 Investment. CMGI is acquiring shares of Buyer Common Stock pursuant
to Merger and Contribution for investment and not with a view to the
distribution thereof.

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CMGI
AND ADSMART AS TO ADSMART

CMGI and Adsmart represent and warrant to the Buyer that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule provided by CMGI and Adsmart to the Buyer on the date hereof
and accepted in writing by the Buyer (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify other paragraphs in this
Article IV only to the extent it is clear from a reading of the disclosure that
such disclosure is applicable to such other paragraphs. For purposes of this
Article IV, the phrase "to the knowledge of Adsmart" or any phrase of similar
import shall be deemed to refer to matters which the executive officers of
Adsmart actually know.

4.1 Organization, Qualification and Corporate Power. Adsmart is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. Adsmart is duly qualified to
conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have an Adsmart Material Adverse
Effect (as defined below). Adsmart has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Adsmart has furnished to the Buyer complete
and accurate copies of its Restated Certificate of Incorporation and Amended and
Restated By-laws. For purposes of this Agreement, "Adsmart Material Adverse
Effect" means a material adverse effect on the assets, business, condition
(financial or otherwise) or results of operations of Adsmart and its
Subsidiaries (as defined below), taken as a whole, excluding any material
adverse effect (a) demonstrably shown to have been proximately caused by the
public announcement of this Agreement or any of the transactions contemplated
thereby, or (b) arising or resulting from general industry, economic or stock
market conditions that affect Adsmart (or the markets in which Adsmart competes)
in a manner not disproportionate to the manner in which such conditions affect
other companies in the industries or markets in which Adsmart competes.

4.2 Capitalization. The authorized capital stock of Adsmart consists of
(a) 160,000,000 Adsmart Common Shares, of which, as of the date of this
Agreement, 749,910 shares were issued and outstanding and no shares were held in
the treasury of Adsmart and (b) 15,000,000 Adsmart Preferred Shares, of which
(i) 800,000 shares have been designated as Adsmart Series A Preferred Stock, of
which, as of the date of this Agreement, all shares were issued and outstanding
and (ii) 14,200,000 shares have been designated as Adsmart Series B Preferred
Stock, of which, as of the date of this Agreement, none of which shares were
issued and outstanding. Section 4.2 of the Disclosure Schedule sets forth a
complete and accurate list of (i) all stockholders of Adsmart, indicating the
number and class or series of shares held by each stockholder and (for shares
other than Adsmart Common Shares) the number of Adsmart Common Shares (if any)
into which such shares are convertible, (ii) all outstanding Adsmart Options,
indicating (A) the holder thereof, (B) the number and class or series of Adsmart
Shares subject to each Adsmart Option and (for Adsmart Common Shares other than
Common Shares) the number of Adsmart Common Shares (if any) into which such
Adsmart Company Shares are convertible, (C) the exercise price, date of grant,
vesting schedule and expiration date for each Adsmart Option, and (D) any terms
regarding the acceleration of vesting, and (iii) all stock option plans and
other stock or equity-related plans of Adsmart. All of the issued and
outstanding Adsmart Common Shares are, and all Adsmart Common Shares that may be
issued upon exercise of Adsmart Options or Adsmart Warrants will be (upon
issuance in accordance with their terms), duly authorized, validly issued, fully
paid, nonassessable and free of all preemptive rights. Other than Adsmart
Options listed in Section 4.2 of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, rights, agreements or commitments
to which Adsmart is a party or which are binding upon Adsmart providing for the
issuance or redemption of any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
Adsmart. There are no agreements to which Adsmart is a party or by which it is
bound with respect to the voting (including without limitation voting trusts or
proxies),

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registration under the Securities Act, or sale or transfer (including without
limitation agreements relating to pre-emptive rights, rights of first refusal,
co-sale rights or "drag-along" rights) of any securities of Adsmart. To the
knowledge of Adsmart, there are no agreements among other parties, to which
Adsmart is not a party and by which it is not bound, with respect to the voting
(including without limitation voting trusts or proxies) or sale or transfer
(including without limitation agreements relating to rights of first refusal,
co-sale rights or "drag-along" rights) of any securities of Adsmart.

4.3 Authorization of Transaction. Adsmart has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by Adsmart of this Agreement and, subject
to the adoption of this Agreement and approval of the Merger by a majority of
the votes represented by the outstanding Adsmart Company Shares entitled to vote
on this Agreement and the Merger ("Adsmart Stockholder Approval"), the
consummation by Adsmart of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of Adsmart.
This Agreement has been duly and validly executed and delivered by Adsmart and
constitutes a valid and binding obligation of Adsmart, enforceable against
Adsmart in accordance with its terms.

4.4 Noncontravention. Subject to the filing of the Certificate of Merger
as required by the Delaware General Corporation Law, neither the execution and
delivery by Adsmart of this Agreement, nor the consummation by Adsmart of the
transactions contemplated hereby, will (a) conflict with or violate any
provision of the Restated Certificate of Incorporation or Amended and Restated
By-laws of Adsmart or the charter, By-laws or other organizational document of
any Subsidiary (as defined below), (b) require on the part of Adsmart or any
Subsidiary any filing with, or any permit, authorization, consent or approval
of, any Governmental Entity, (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any party the
right to terminate, modify or cancel, or require any notice, consent or waiver
under, any contract or instrument to which Adsmart or any Subsidiary is a party
or by which Adsmart or any Subsidiary is bound or to which any of their assets
is subject, except for (i) any conflict, breach, default, acceleration,
termination, modification or cancellation which would not have an Adsmart
Material Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby or (ii) any notice, consent or waiver the
absence of which would not have an Adsmart Material Adverse Effect and would not
adversely affect the consummation of the transactions contemplated hereby, (d)
result in the imposition of any Security Interest (as defined below) upon any
assets of Adsmart or any Subsidiary or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Adsmart, any Subsidiary or any
of their properties or assets. For purposes of this Agreement: "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge or
other lien (whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of Adsmart and not material to Adsmart; and
"Ordinary Course of Business" means the ordinary course of Adsmart's business,
consistent with past custom and practice.

4.5 Subsidiaries.

(a) Section 4.5 of the Disclosure Schedule sets forth: (i) the name of each
corporation, partnership, joint venture or other entity in which Adsmart has,
directly or indirectly, an equity interest representing 50% or more of the
capital stock thereof or other equity interests therein (individually, a
"Subsidiary" and, collectively, the "Subsidiaries"); (ii) the number and type of
outstanding equity securities of each Subsidiary and a list of the holders
thereof; (iii) the jurisdiction of organization of each Subsidiary; (iv) the
names of the officers and directors of each Subsidiary; and (v) the
jurisdictions in which each Subsidiary is qualified or holds licenses to do
business as a foreign corporation.

(b) Each Subsidiary is a corporation duly organized, validly existing and
in corporate and tax good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary is duly qualified to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in which the
nature of its businesses or the ownership or leasing of its properties requires
such qualification, except where the failure to

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be so qualified or in good standing, individually or in the aggregate, has not
had and would not reasonably be expected to have an Adsmart Material Adverse
Effect. Each Subsidiary has all requisite power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Adsmart has delivered to the Buyer complete and accurate copies of
the charter, By-laws or other organizational documents of each Subsidiary. No
Subsidiary is in default under or in violation of any provision of its charter,
By-laws or other organizational documents. All of the issued and outstanding
shares of capital stock of each Subsidiary are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. All shares of each
Subsidiary that are held of record or owned beneficially by either Adsmart or
any Subsidiary are held or owned free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
claims, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities and demands. There are no outstanding or authorized
options, warrants, rights, agreements or commitments to which Adsmart or any
Subsidiary is a party or which are binding on any of them providing for the
issuance, disposition or acquisition of any capital stock of any Subsidiary.
There are no outstanding stock appreciation, phantom stock or similar rights
with respect to any Subsidiary. There are no voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary.

(c) Adsmart does not control directly or indirectly or have any direct or
indirect equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture, trust or other business
association which is not a Subsidiary.

4.6 Financial Statements. Adsmart has provided to the Buyer (a) the
unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity and cash flows of Adsmart as of and for each of the last
two fiscal years; and (b) the unaudited consolidated balance sheet and
statements of income, changes in stockholders' equity and cash flows as of and
for the three months ended as of October 31, 1999 (the "Most Recent Balance
Sheet Date") (collectively, the "Adsmart Financial Statements"). Prior to the
Closing, Adsmart shall provide to the Buyer the audited financial statements
shown on Section 4.6 of the Disclosure Schedule (the "Adsmart Audited Financial
Statements"), which shall include an audited balance sheet of Adsmart as of
October 31, 1999 (the "Most Recent Audited Balance Sheet"). Any Adsmart Audited
Financial Statements (i) shall be prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
period presented (except with respect to the notes to such financial statements)
and (ii) shall fairly present the consolidated financial position of Adsmart and
its Subsidiaries as of such dates and the consolidated results of its operations
and cash flows for the periods indicated, except for the interim financial
statements shall be subject to the normal and recurring year and adjustments
which are not expected to be material in amount.

4.7 Absence of Certain Changes. Since the Most Recent Balance Sheet Date,
(a) there has occurred no event or development which has had, or could
reasonably be expected to have in the future, an Adsmart Material Adverse
Effect, and (b) neither Adsmart nor any Subsidiary has taken any of the actions
set forth in paragraphs (a) through (l) of Section 7.3.

4.8 Undisclosed Liabilities. None of Adsmart and its Subsidiaries has any
liability (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), except for (a)
liabilities shown on the Most Recent Audited Balance Sheet, (b) liabilities
which have arisen since the date of the Most Recent Audited Balance Sheet (the
"Most Recent Audited Balance Sheet Date") in the Ordinary Course of Business and
(c) contractual and other liabilities incurred in the Ordinary Course of
Business which are not required by GAAP to be reflected on a balance sheet.

4.9 Tax Matters.

(a) For purposes of this Agreement, the following terms shall have the
following meanings:

(i) "Taxes" means all taxes, charges, fees, levies or other similar
assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, unemployment
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license,

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lease, service, service use, severance, stamp, occupation, windfall
profits, customs, duties, franchise and other taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to
tax resulting from, attributable to or incurred in connection with any tax
or any contest or dispute thereof.

(ii) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a taxing
authority in connection with Taxes.

(b) Each of Adsmart and the Subsidiaries has filed on a timely basis all
Tax Returns that it was required to file, and all such Tax Returns were correct
and accurate, except for any errors and omissions that would not, individually
or in the aggregate, have an Adsmart Material Adverse Effect. Each of Adsmart
and the Subsidiaries has paid on a timely basis all Taxes that were due and
payable. The unpaid Taxes of Adsmart and the Subsidiaries for tax periods
through the Most Recent Balance Sheet Date do not exceed in any material respect
the accruals and reserves for Taxes (excluding accruals and reserves for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the Most Recent Balance Sheet. All Taxes that Adsmart or
any Subsidiary is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity.

(c) No examination or audit of any Tax Return of Adsmart or any Subsidiary
by any Governmental Entity is currently in progress or, to the knowledge of
Adsmart, threatened or contemplated. Neither Adsmart nor any Subsidiary has
waived any statute of limitations with respect to Taxes or agreed to an
extension of time with respect to a Tax assessment or deficiency.

4.10 Assets. Each of Adsmart and the Subsidiaries owns or leases all
tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used.
No asset of Adsmart or any Subsidiary (tangible or intangible) is subject to any
Security Interest.

4.11 Owned Real Property. Neither Adsmart nor or any Subsidiary currently
owns or, to the knowledge of Adsmart, has ever owned any real property.

4.12 Real Property Leases. Section 4.12 of the Disclosure Schedule lists
all real property leased or subleased to or by Adsmart or any Subsidiary. With
respect to each lease and sublease listed in Section 4.12 of the Disclosure
Schedule:

(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect;

(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing
in accordance with the terms thereof as in effect immediately prior to the
Closing; and

(c) neither Adsmart nor any Subsidiary nor, to the knowledge of
Adsmart, any other party, is in breach or violation of, or default under,
any such lease or sublease, and no event has occurred, is pending or, to
the knowledge of Adsmart, is threatened, which, after the giving of notice,
with lapse of time, or otherwise, would constitute a material breach or
default by Adsmart or any Subsidiary or, to the knowledge of Adsmart, any
other party under such lease or sublease.

4.13 Intellectual Property.

(a) Adsmart and its Subsidiaries own, or are licensed or otherwise posses
legally enforceable rights to use, without any obligation to make any fixed or
contingent payments, including any royalty payments, all patents, trademarks,
trade names, domain names, service marks and copyrights, any applications for
and registrations of such patents, trademarks, trade names, domain names,
service marks and copyrights, and all processes, formulae, methods, schematics,
technology, know-how, computer software programs or applications and tangible or
intangible proprietary information or material that are used or necessary to
conduct the

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business of Adsmart and its Subsidiaries as currently conducted or as presently
proposed to be conducted, except any whose absence would not have an Adsmart
Material Adverse Effect (the "Adsmart Intellectual Property Rights").

(b) The execution and delivery of this Agreement and consummation of the
Merger and the other transactions contemplated hereby will not result in the
breach of, or create on behalf of any third party the right to terminate, modify
or enter into any material license, sublicense or other agreement relating to
the Adsmart Intellectual Property Rights, or any license, sublicense and other
agreement as to which Adsmart or any of its Subsidiaries is a party and pursuant
to which Adsmart or any of its Subsidiaries is authorized to use any third party
patents, trademarks, copyrights or trade secrets, including software that is
used in the manufacture of, incorporated in, or forms a part of any product or
service sold by or expected to be sold by Adsmart or any of its Subsidiaries.

(c) All patents, registered trademarks, service marks and copyrights which
are held by Adsmart or any of its Subsidiaries and which are material to the
business of Adsmart and its Subsidiaries, taken as a whole, are valid and
subsisting. Adsmart and its Subsidiaries have taken reasonable measures to
protect the proprietary nature of the Adsmart Intellectual Property Rights that
are material to the business of Adsmart and its Subsidiaries, taken as a whole,
and to maintain in confidence all trade secrets and confidential information
owned or used by Adsmart or any of its Subsidiaries and that are material to the
business of Adsmart and its Subsidiaries, taken as a whole. To the knowledge of
Adsmart, no other person or entity is infringing, violating or misappropriating
any of Adsmart Intellectual Property Rights and none of the activities or
business previously or currently conducted by Adsmart or any of the Subsidiaries
infringes, violates or constitutes a misappropriation of, any patents,
trademarks, trade names, service marks and copyrights or any processes,
formulae, methods, schematics, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
of any other person or entity, except for any infringement, violation or
misappropriation that would not have an Adsmart Material Adverse Effect. Neither
Adsmart nor any of its Subsidiaries has received any written complaint, claim or
notice alleging any such infringement, violation or misappropriation.

4.14 Contracts.

(a) Section 4.14 of the Disclosure Schedule lists the following agreements
(written or oral) to which Adsmart or any Subsidiary is a party as of the date
of this Agreement:

(i) any agreement (or group of related agreements) for the lease of
personal property from or to third parties providing for lease payments in
excess of $250,000 per annum or having a remaining term longer than twelve
(12) months;

(ii) any agreement (or group of related agreements) for the purchase
or sale of products or for the furnishing or receipt of services (A) which
calls for performance over a period of more than one year or (B) which
involves more than the sum of $250,000 (other than (x) campaign insertion
orders with customers of Adsmart entered into in the ordinary course of
business and (y) standard representation agreements, which agreements have
been made available to Buyer and the standard form of which is provided in
Section 4.14 of the Disclosure Schedule);

(iii) any agreement establishing a partnership or joint venture;

(iv) any agreement (or group of related agreements) under which it has
created, incurred, assumed or guaranteed (or may create, incur, assume or
guarantee) indebtedness (including capitalized lease obligations) involving
more than $250,000 or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;

(v) any agreement concerning noncompetition or containing terms that
stipulate Adsmart must sell its products and services to such other person
on the most advantageous terms that Adsmart sells products or services to
any other person;

(vi) any employment or consulting agreement;

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(vii) any agreement involving any officer or director of Adsmart;

(viii) any agreement under which the consequences of a default or
termination would reasonably be expected to have an Adsmart Material
Adverse Effect;

(b) Except for the agreements listed in Section 4.13 or Section 4.14 of the
Disclosure Schedule, neither Adsmart nor any of its Subsidiaries is a party to
or bound by any other agreement which would have to be disclosed in an annual
report on Form 10-K pursuant to Item 601 of SEC Regulation S-K if Adsmart were
subject to the reporting requirements under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").

(c) Section 4.14 of the Disclosure Schedule sets forth (i) a complete list
of each contract or agreement to which Adsmart or any of its Subsidiaries is a
party or bound with CMGI or any majority-owned subsidiary of CMGI (other than
any subsidiary which is a direct, wholly-owned Subsidiary of Adsmart) which
resulted in revenue or expenses of Adsmart of more than $100,000 for the year
ended July 31, 1999, and (ii) the revenue recognized by Adsmart on a
consolidated basis for the year ended July 31, 1999 and the three months ended
October 31, 1999 as a result of such contract or agreement. Except as disclosed
in Section 4.14 of the Disclosure Schedule, neither Adsmart nor any of its
Subsidiaries has entered into any transaction with any officer, director or
other affiliate (other than any Subsidiary which is a direct, wholly-owned
Subsidiary of Adsmart) that would be subject to proxy statement disclosure
pursuant to Item 404 of SEC Regulation S-K if Adsmart were subject to the
reporting requirements under the Exchange Act.

(d) Adsmart has made available to the Buyer a complete and accurate copy of
each agreement listed in Section 4.13 or Section 4.14 of the Disclosure
Schedule. With respect to each agreement so listed: (i) the agreement is legal,
valid, binding and enforceable and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect immediately prior to the Closing; and (iii) neither Adsmart nor any
Subsidiary nor, to the knowledge of Adsmart, any other party, is in material
breach or violation of, or material default under, any such agreement, and no
event has occurred, is pending or, to the knowledge of Adsmart, is threatened,
which, after the giving of notice, with lapse of time, or otherwise, would
constitute a material breach or default by Adsmart or any Subsidiary or, to the
knowledge of Adsmart, any other party under such contract.

4.15 Insurance. Section 4.15 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which Adsmart
or any Subsidiary is a party. Such insurance policies are of the type and in
amounts customarily carried by organizations conducting businesses or owning
assets similar to those of Adsmart and the Subsidiaries. There is no material
claim pending under any such policy as to which coverage has been questioned,
denied or disputed by the underwriter of such policy.

4.16 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity or before any arbitrator (a "Legal Proceeding") which is pending or, to
the knowledge of Adsmart, threatened in writing against Adsmart or any
Subsidiary which (a) could reasonably be expected to have an Adsmart Material
Adverse Effect or (b) in any manner challenges or seeks to prevent, enjoin,
alter or delay the transactions contemplated by this Agreement. There are no
judgments, orders or decrees outstanding against Adsmart or any of its
Subsidiaries.

4.17 Employees.

(a) Section 4.17 of the Disclosure Schedule contains a list of all
employees of Adsmart and each Subsidiary whose annual rate of compensation
exceeds $75,000 per year, along with the position and the annual rate of
compensation of each such person. Each such employee has entered into a
confidentiality/ assignment of inventions agreement with Adsmart or a
Subsidiary, a copy of which has previously been delivered to the Buyer. To the
knowledge of Adsmart, no officer or other key employee or group of employees has
any plans to terminate employment with Adsmart or any Subsidiary.

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(b) Neither Adsmart nor any Subsidiary is a party to or bound by any
collective bargaining agreement, nor has any of them experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. Adsmart has no knowledge of any organizational effort made or
threatened, either currently or within the past two years, by or on behalf of
any labor union with respect to employees of Adsmart or any Subsidiary.

4.18 Employee Benefits.

(a) For purposes of this Agreement, the following terms shall have the
following meanings:

(i) "Employee Benefit Plan" means any "employee pension benefit plan"
(as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation.

(ii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.

(iii) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or
the regulations under Section 414(o) of the Code), any of which includes or
included Adsmart or a Subsidiary.

(b) Section 4.18(b) of the Disclosure Schedule contains a complete and
accurate list of all Employee Benefit Plans maintained, or contributed to, by
Adsmart, any Subsidiary or any ERISA Affiliate. Each Employee Benefit Plan has
been administered in all material respects in accordance with its terms and each
of Adsmart, the Subsidiaries and the ERISA Affiliates has in all material
respects met its obligations with respect to such Employee Benefit Plan and has
made all required contributions thereto. Adsmart, each Subsidiary, each ERISA
Affiliate and each Employee Benefit Plan are in compliance in all material
respects with the currently applicable provisions of ERISA and the Code and the
regulations thereunder.

(c) There are no Legal Proceedings (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with respect
to qualified domestic relations orders) against or involving any Employee
Benefit Plan or asserting any rights or claims to benefits under any Employee
Benefit Plan that could give rise to any material liability.

(d) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of Adsmart or
any Subsidiary (or to any beneficiary of any such employee), including but not
limited to retiree health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under Section 4980B of
the Code or other applicable law and insurance conversion privileges under state
law. The assets of each Employee Benefit Plan which is funded are reported at
their fair market value on the books and records of such Employee Benefit Plan.

(e) No act or omission has occurred and no condition exists with respect to
any Employee Benefit Plan maintained by Adsmart, any Subsidiary or any ERISA
Affiliate that would subject Adsmart, any Subsidiary or any ERISA Affiliate to
any material fine, penalty, tax or liability of any kind imposed under ERISA or
the Code.

(f) Section 4.18(f) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of Adsmart or any Subsidiary (A) the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving Adsmart or any Subsidiary of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from Adsmart or any Subsidiary that may be subject
to the tax imposed by Section 4999 of the Code or included in the

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determination of such person's "parachute payment" under Section 280G of the
Code; and (iii) agreement or plan binding Adsmart or any Subsidiary, including
without limitation any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan or Employee
Benefit Plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.

(g) All of the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost.

4.19 Environmental Matters.

(a) To the knowledge of Adsmart, each of Adsmart and the Subsidiaries has
complied with all applicable Environmental Laws (as defined below), except for
violations of Environmental Laws that, individually or in the aggregate, have
not had and would not reasonably be expected to have an Adsmart Material Adverse
Effect. There is no pending or, to the knowledge of Adsmart, threatened civil or
criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any Governmental
Entity, relating to any Environmental Law involving Adsmart or any Subsidiary.
For purposes of this Agreement, "Environmental Law" means any federal, state or
local law, statute, rule or regulation or the common law relating to the
environment, including without limitation any statute, regulation,
administrative decision or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous materials or
substances or solid or hazardous waste; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; (iv) the release or threatened release
into the environment of industrial, toxic or hazardous materials or substances,
or solid or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(v) the protection of wild life, marine life and wetlands, including without
limitation all endangered and threatened species; (vi) storage tanks, vessels,
containers, abandoned or discarded barrels, and other closed receptacles; and
(vii) manufacturing, processing, using, distributing, treating, storing,
disposing, transporting or handling of materials regulated under any law as
pollutants, contaminants, toxic or hazardous materials or substances or oil or
petroleum products or solid or hazardous waste. As used above, the terms
"release" and "environment" shall have the meaning set forth in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA").

(b) To the knowledge of Adsmart, there have been no releases of any
Materials of Environmental Concern (as defined below) into the environment at
any parcel of real property or any facility formerly or currently owned,
operated or controlled by Adsmart or a Subsidiary. For purposes of this
Agreement, "Materials of Environmental Concern" means any chemicals, pollutants
or contaminants, hazardous substances (as such term is defined under CERCLA),
solid wastes and hazardous wastes (as such terms are defined under the Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products or any other material subject to regulation under any Environmental
Law.

4.20 Legal Compliance. Each of Adsmart and the Subsidiaries, and the
conduct and operations of their respective businesses, are in compliance with
each applicable law (including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, except for any
violations or defaults that, individually or in the aggregate, have not had and
would not reasonably be expected to have an Adsmart Material Adverse Effect.

4.21 Permits. Section 4.21 of the Disclosure Schedule sets forth a list
of all permits, licenses, registrations, certificates, orders or approvals from
any Governmental Entity (including without limitation those issued or required
under Environmental Laws and those relating to the occupancy or use of owned or
leased real property) ("Permits") issued to or held by Adsmart or any
Subsidiary. Such listed Permits are the

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only Permits that are required for Adsmart and the Subsidiaries to conduct their
respective businesses as presently conducted or as proposed to be conducted,
except for those the absence of which, individually or in the aggregate, have
not had and would not reasonably be expected to have an Adsmart Material Adverse
Effect. Each such Permit is in full force and effect and, to the knowledge of
Adsmart, no suspension or cancellation of such Permit is threatened and there is
no basis for believing that such Permit will not be renewable upon expiration.
Each such Permit will continue in full force and effect immediately following
the Closing.

4.22 Business Activity Restrictions. There is no non-competition or other
similar agreement, commitment, judgement, injunction or order to which Adsmart
or any Subsidiary of Adsmart is a party or subject to that has or could
reasonably be expected to have the effect of prohibiting or impairing the
conduct of the business by Adsmart in any material respect. Adsmart has not
entered into any agreement under which it is restricted in any material respect
from selling, licensing or otherwise distributing any of its technology or
products, or providing services to customers or potential customers or any class
of customers, in any geographic area, during any period of time or any segment
of the market or line of business.

4.23 Year 2000 Compliance.

(a) Adsmart has conducted "year 2000" audits with respect to (i) all of the
internal systems of Adsmart and each of its Subsidiaries used in the business or
operations of Adsmart or any of its Subsidiaries, including, without limitation,
computer hardware systems, software applications, firmware, equipment firmware
and other embedded systems, and (ii) the software, hardware, firmware and other
technology which constitute part of the products and services marketed or sold
by Adsmart or any of its Subsidiaries or licensed by Adsmart or any of its
Subsidiaries to third parties. Adsmart has obtained "year 2000" certificates
with respect to all material third-party systems used in connection with the
business or operations of Adsmart and its Subsidiaries.

(b) All of (i) the material internal systems of Adsmart and each of its
Subsidiaries used in the business or operations of Adsmart or any of its
Subsidiaries, as the case may be, including, without limitation, computer
hardware systems, software applications, firmware, equipment containing embedded
microchips and other embedded systems, and (ii) the software, hardware, firmware
and other technology which constitute part of the products and services marketed
or sold by Adsmart or any of its Subsidiaries or licensed by Adsmart or any of
its Subsidiaries to third parties are Year 2000 Compliant.

(c) Adsmart has no knowledge of any failure to be Year 2000 Compliant of
any material third-party system used in connection with the business or
operations of Adsmart and its Subsidiaries.

(d) For purposes of this Agreement, "Year 2000 Compliant" means that the
applicable system or item:

(i) accurately receives, records, stores, provides, recognizes and
processes all date and time data from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years;

(ii) accurately performs all date-dependent calculations and
operations (including, without limitation, mathematical operations,
sorting, comparing and reporting) from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years; and

(iii) does not malfunction, cease to function or provide invalid or
incorrect results as a result of (x) the change of years from 1999 to 2000
or from 2000 to 2001, (y) date data, including date data which represents
or references different centuries, different dates during 1999 and 2000, or
more than one century or (z) the occurrence of any particular date;

in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system or item which are not owned or licensed by
Adsmart or any of its Subsidiaries correctly exchange date data with or provide
data to such system or item.

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(e) Neither Adsmart nor any of its Subsidiaries has provided any guarantee
or warranty for any product sold or licensed, or service provided, by Adsmart or
any Subsidiary to the effect that such product or service (i) complies with or
accounts for the fact of the arrival of the year 2000, (ii) will not be
adversely affected with respect to functionality, interoperability, performance
or volume capacity (including, without limitation, the processing and reporting
of data) by virtue of the arrival of the year 2000 or (iii) is otherwise Year
2000 Compliant.

4.24 Customers. Section 4.24 of the Disclosure Schedule lists the ten
(10) customers from which Adsmart derived the greatest amount of revenue on a
consolidated basis during the year ended July 31, 1999, and during the three
months ended October 31 1999 and the amount of revenue attributable to each. No
customer of Adsmart or any of its Subsidiaries that represented 5% or more of
Adsmart's consolidated revenues in the year ended July 31, 1999 or the three
months ended October 31, 1999 has indicated to Adsmart or any of its
Subsidiaries that it will stop, or decrease the rate of, buying products or
services for Adsmart or any of its Subsidiaries.

4.25 Absence of Improper Payments. Neither Adsmart nor any of its
Subsidiaries (a) has made any contributions, payments or gifts of its property
to or for the private use of any governmental official, employee or agent where
either the payment or the purpose of such contribution, payments or gift is
illegal under the laws of the United States, any state thereof or any other
jurisdiction (foreign or domestic); (b) has established or maintained any
unrecorded fund or asset for any purpose, or has any purpose, or has made any
false or artificial entries on its books or records for any reason; (c) has made
any payments to any person with the intention or understanding that any part of
such payment was to be used for any other purpose other than that described in
the documents supporting the payment; or (d) has made any contribution, or has
reimbursed any political gift or contribution made by any other person, to
candidates for public office, whether Federal, state or local, where such
contribution would be in violation of applicable law.

4.26 Brokers' Fees. Neither Adsmart nor any Subsidiary has any liability
or obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.

4.27 Proxy Statement. The information to be supplied by CMGI and Adsmart
for inclusion in the Proxy Statement (as defined in Section 7.2(b)) shall not at
the time the Proxy Statement is first mailed to stockholders of Buyer and at the
time of the meeting of Buyer's stockholders to vote upon the transactions
contemplated hereby contain any untrue statement of a material fact or omit to
state any material fact required to be stated in the Proxy Statement or
necessary in order to make the statements in the Proxy Statement not misleading.
If at any time prior to the Closing any event relating to CMGI or Adsmart should
be discovered by CMGI or Adsmart which should be set forth in a supplement to
the Proxy Statement, CMGI shall promptly so inform the Buyer.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF CMGI AND FLYCAST
AS TO FLYCAST

CMGI and Flycast represent and warrant to the Buyer as follows:

5.1 Flycast Merger Agreement. CMGI has provided to Buyer true and
complete copies of (i) the Agreement and Plan of Merger by and among CMGI,
Freemont Corporation and Flycast, dated as of September 29, 1999 (the "Flycast
Merger Agreement"), (ii) the Disclosure Schedules pertaining to the Flycast
Merger Agreement and any amendment or supplement thereto, and (iii) the
officers' certificate delivered pursuant to Section 7.2(a) of the Flycast Merger
Agreement. For purposes of this Article V, the phrase "to the knowledge of
Flycast" or any phrase of similar import shall be deemed to refer to matters
which the executive officers of Flycast actually know. The Merger Agreement is
in full force and effect, and CMGI has not waived any breaches or defaults by
Flycast thereunder. To the knowledge of Flycast, all of the representations and
warranties made by Flycast in Article III of the Flycast Merger Agreement are
true and

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correct (except as set forth in the Disclosure Schedule delivered by Flycast to
CMGI, a copy of which has been provided to Buyer).

5.2 Capitalization. At the Contribution Closing, CMGI will have good and
marketable title to all of the outstanding shares of Flycast Common Stock and
will have the full right, power and authority to sell, transfer, convey, assign
and deliver to Buyer at the Contribution Closing all of such outstanding shares
of Flycast Common Stock. At the Contribution Closing, Buyer will acquire from
CMGI good and marketable title to all of such shares of Flycast Common Stock,
free and clear of all Security Interests other than those created or arising by
reason of any action of the Buyer. At the Contribution Closing, there will be no
outstanding options, warrants, rights, agreements, obligations or commitments
providing for the issuance, disposition or acquisition of any shares of capital
stock of Flycast, or any securities exercisable for, or convertible into, shares
of capital stock of Flycast. At the Contribution Closing, there will be no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to Flycast, and there will be no agreements, voting trusts, proxies
or understandings with respect to the voting, or registration under the
Securities Act, of any capital stock of Flycast.

5.3 Flycast-CMGI Options. As of January 13, 2000, there are outstanding
Flycast-CMGI Options, held by the individuals and in the amounts shown on
Section 5.3 of the Disclosure Schedule.

5.4 Non-competition Agreements. CMGI has delivered to Buyer true and
complete copies of those certain non-competition agreements between current and
former employees of Flycast and CMGI executed in connection with Flycast Merger
Agreement (the "Flycast Non-competition Agreements").

5.5 Intercompany Balance. From the closing under the Flycast Merger
Agreement to the date hereof, CMGI has not withdrawn any cash from the accounts
of Flycast. As of the Closing Date, the aggregate amount of the cash and cash
equivalents of Flycast and the intercompany payable from CMGI to Flycast shall
not be less than the amount of cash and cash equivalents of Flycast as of the
date of this Agreement, less any amounts expended by Flycast in the ordinary
course of business.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF
THE BUYER AND THE TRANSITORY SUBSIDIARY

Each of the Buyer and the Transitory Subsidiary represents and warrants to
CMGI and Adsmart as follows:

6.1 Organization, Qualification and Corporate Power. Each of the Buyer
and the Transitory Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The Buyer
is duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Buyer
Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. For purposes of this
Agreement, "Buyer Material Adverse Effect" means a material adverse effect on
the assets, business, condition (financial or otherwise) or results of
operations prospects of the Buyer and its subsidiaries, taken as a whole,
excluding any material adverse effect (a) demonstrably shown to have been
proximately caused by the public announcement of this Agreement or any of the
transactions contemplated thereby, (b) attributable to any legal proceeding
brought by or on behalf of stockholders of Buyer alleging that the Board of
Directors of Buyer breached its fiduciary duties in connection with its approval
of this Agreement and the transaction contemplated hereby, or (c) arising or
resulting from general industry, economic or stock market conditions that affect
Buyer (or the markets in which the Buyer competes) in a manner not
disproportionate to the manner in which such conditions affect other companies
in the industries or markets in which Buyer competes.

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6.2 Capitalization. The authorized capital stock of the Buyer consists of
(a) 150,000,000 shares of Buyer Common Stock, of which 48,762,837 shares were
issued and outstanding as of November 30, 1999, and (b) 5,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. All of the Merger Shares and Contribution Shares
(collectively, the "Transaction Shares") will be, when issued in accordance with
this Agreement, duly authorized, validly issued, fully paid, nonassessable and
free of all preemptive rights.

6.3 Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and thereunder. The execution
and delivery by the Buyer and the Transitory Subsidiary of this Agreement and,
subject to the adoption of this Agreement and the approval of the Merger by the
stockholders of Buyer in accordance with the requirements of the Nasdaq National
Market (the "Engage Stockholder Approval"), the consummation by the Buyer and
the Transitory Subsidiary of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer and Transitory Subsidiary, respectively. This Agreement has been duly and
validly executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms.

6.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificate of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery by the
Buyer or the Transitory Subsidiary of this Agreement, nor the consummation by
the Buyer or the Transitory Subsidiary of the transactions contemplated hereby
or thereby, will (a) conflict with or violate any provision of the charter or
By-laws of the Buyer or the Transitory Subsidiary, (b) require on the part of
the Buyer or the Transitory Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party any right to terminate, modify or cancel, or require any
notice, consent or waiver under, any contract or instrument to which the Buyer
or the Transitory Subsidiary is a party or by which either is bound or to which
any of their assets are subject, except for (i) any conflict, breach, default,
acceleration, termination, modification or cancellation which would not have a
Buyer Material Adverse Effect or adversely affect the consummation of the
transactions contemplated hereby or (ii) any notice, consent or waiver the
absence of which would not have a Buyer Material Adverse Effect or adversely
affect the consummation of the transactions contemplated hereby, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or the Transitory Subsidiary or any of their properties or assets.

6.5 Reports and Financial Statements. The Buyer has previously furnished
or made available to CMGI and Adsmart complete and accurate copies, as amended
or supplemented, and all reports filed by the Buyer under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the Securities
Exchange Commission (collectively, the "Buyer Reports"). The Buyer Reports
constitute all of the documents required to be filed by the Buyer under Section
13 or subsections (a) or (c) of Section 14 of the Exchange Act with the SEC
through the date of this Agreement. The Buyer Reports complied as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder when filed. As of their respective dates, the Buyer
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited financial statements (if any) and unaudited interim
financial statements of the Buyer included in the Buyer Reports (i) complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto when filed, (ii)
were prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as permitted by Form
10-Q under the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of

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the Buyer as of the respective dates thereof and for the periods referred to
therein, and (iv) are consistent with the books and records of the Buyer.

6.6 Absence of Material Adverse Change. Since October 31, 1999, there has
occurred no event or development which has had, or could reasonably be expected
to have in the future, a Buyer Material Adverse Effect.

6.7 Litigation. Except as disclosed in the Buyer Reports there is no
Legal Proceeding which is pending or has been, to the knowledge of Buyer,
threatened against the Buyer or any subsidiary of the Buyer which (a) could
reasonably be expected to have a Buyer Material Adverse Effect or (b) in any
manner challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement.

6.8 Interim Operations of the Transitory Subsidiary. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.

6.9 Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.

6.10 Proxy Statement. The information in the Proxy Statement (as defined
in Section 7.2(b)) (except for information supplied by CMGI, Adsmart or Flycast
for inclusion in the Proxy Statement, as to which the Buyer makes no
representation) shall not at the time the Proxy Statement is first mailed to
stockholders of Buyer and at the time of the meeting of Buyer's stockholders to
vote upon the transactions contemplated hereby contain any untrue statement of a
material fact or omit to state any material fact required to be stated in the
Proxy Statement or necessary in order to make the statements in the Proxy
Statement not misleading. If at any time prior to the Closing any event relating
to the Buyer should be discovered by the Buyer which should be set forth in a
supplement to the Proxy Statement, the Buyer shall promptly so inform CMGI.

ARTICLE VII

COVENANTS

7.1 Closing Efforts. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.

7.2 Governmental and Third-Party Notices and Consents.

(a) Each Party shall use its Reasonable Best Efforts to obtain, at its
expense, all waivers, permits, consents, approvals or other authorizations from
Governmental Entities, and to effect all registrations, filings and notices with
or to Governmental Entities, as may be required for such Party to consummate the
transactions contemplated by this Agreement and to otherwise comply with all
applicable laws and regulations in connection with the consummation of the
transactions contemplated by this Agreement.

(b) The Buyer shall use its Reasonable Best Efforts to obtain, as promptly
as practicable, the Engage Stockholder Approval at a special meeting of
stockholders. In connection with such special meeting of stockholders, the Buyer
shall provide to its stockholders a written proxy or information statement (the
"Proxy Statement") which complies with the requirements of the Exchange Act.

(c) The Board of Directors of the Buyer shall recommend that the
stockholders of the Buyer vote in favor of the issuance of its shares to CMGI
pursuant to the Merger and Contribution, which recommendation shall be supported
by the special committee of the directors of the Buyer who are not directors or
executive officers of or otherwise affiliated with CMGI (the "Special
Committee").

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(d) With respect to the stockholder approval of the issuance of Buyer
shares to CMGI pursuant to the Merger and Contribution, CMGI agrees as follows:

(i) Until the termination of this Agreement in accordance with the
terms hereof, at any meeting of the stockholders of the Buyer, however
called, and in any action by written consent of the stockholders of the
Buyer, CMGI shall vote, or cause to be voted, all shares of Buyer stock
beneficially owned by CMGI (the "CMGI Buyer Shares") in favor of the
issuance of Buyer shares to CMGI pursuant to the Merger and Contribution.
CMGI shall be present, in person or by proxy, at any such meeting so that
all CMGI Buyer Shares may be counted for the purpose of determining the
presence of a quorum at such meeting.

(ii) Until the termination of this Agreement in accordance with the
terms hereof, CMGI will not directly or indirectly, (1) sell, assign,
transfer (including by merger or otherwise by operation of law), pledge,
encumber or otherwise dispose of any of CMGI Buyer Shares owned by CMGI, or
(2) deposit any of such shares into a voting trust or enter into a voting
agreement or arrangement with respect to such shares or grant any proxy or
power of attorney with respect thereto which is inconsistent with this
Agreement, unless in each case the transferee first executes an instrument,
in form and substance reasonably acceptable to the Buyer, whereby such
transferee agrees to be bound by the terms of this subsection (d).

(e) With respect to Adsmart Stockholder Approval:

(i) Adsmart shall use its Reasonable Best Efforts to obtain, as
promptly as possible, the Adsmart Stockholder Approval at a special meeting
of stockholders or in an action by written consent of stockholders.

(ii) Until the termination of this Agreement in accordance with the
terms hereof, CMGI will not directly or indirectly, (1) sell, assign,
transfer (including by merger or otherwise by operation of law), pledge,
encumber or otherwise dispose of any of Adsmart Common Shares owned by
CMGI, or (2) deposit any of such shares into a voting trust or enter into a
voting agreement or arrangement with respect to such shares or grant any
proxy or power of attorney with respect thereto which is inconsistent with
this Agreement, unless in each case the transferee first executes an
instrument, in form and substance reasonably acceptable to the Buyer,
whereby such transferee agrees to be bound by the terms of this subsection
(e).

(iii) Until the termination of this Agreement in accordance with the
terms hereof, if required by law or requested by the Buyer, at any meeting
of the stockholders of Adsmart, however called, or in any action by written
consent of the stockholders of Adsmart, CMGI shall vote, or cause to be
voted, all shares of Adsmart common stock beneficially owned by CMGI (the
"CMGI Adsmart Shares") in favor of the adoption and approval of this
Agreement and the Merger. CMGI shall be present, in person or by proxy, at
any such meeting of Adsmart stockholders so that all CMGI Adsmart Shares
may be counted for the purpose of determining the presence of a quorum at
such meeting.

7.3 Operation of Adsmart and Flycast Businesses. Except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement to the Closing, each of Adsmart and Flycast shall (and shall cause
each of its Subsidiaries to) conduct its operations in the Ordinary Course of
Business and in compliance with all applicable laws and regulations and, to the
extent consistent therewith, use its Reasonable Best Efforts to preserve intact
its current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect. With respect to Flycast, "Ordinary Course of
Business" shall mean the ordinary course of Flycast's business, consistent with
past custom and practice. Without limiting the generality of the foregoing,
prior to the Effective Time, each of Adsmart and Flycast shall not (and shall
cause each of its Subsidiaries not to), without the written consent of the
Buyer, which shall not be unreasonably withheld:

(a) except as set forth on Section 7.3 of the Disclosure Schedule,
issue or sell, or redeem or repurchase, any of its stock or other
securities or any rights, warrants or options to acquire any such stock

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or other securities (except pursuant to the conversion or exercise of
convertible securities or Adsmart Options outstanding on the date hereof),
or amend any of the terms of (including without limitation the vesting of)
any such convertible securities or Adsmart Options;

(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock;

(c) create, incur or assume any indebtedness for borrowed money
(including obligations in respect of capital leases), other than
indebtedness which either does not exceed $100,000 in the aggregate or is
converted into Adsmart Common Shares prior to the Effective Time; assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person or entity; or make any loans, advances or capital contributions to,
or investments in, any other person or entity;

(d) acquire, sell, lease, license or dispose of any assets or property
(including without limitation any shares or other equity interests in or
securities of any Subsidiary or any corporation, partnership, association
or other business organization or division thereof), other than purchases
and sales of assets in the Ordinary Course of Business;

(e) mortgage or pledge any of its property or assets;

(f) amend its charter, by-laws or other organizational documents;

(g) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable
change in GAAP;

(h) make or commit to make any capital expenditure in excess of
$250,000 per item;

(i) institute, compromise or settle any Legal Proceeding;

(j) enter into an agreement with respect to any merger, consolidation,
liquidation or business combination, or any acquisition or disposition of
all or substantially all of its assets or securities or any of its
Subsidiaries;

(k) issue or sell any of its (or its Subsidiaries') debt securities or
warrants or other rights to acquire any debt securities, guarantee any debt
securities of another person, enter into any "keep well" or other agreement
to maintain any financial statement condition of another person or enter
into any arrangement having the economic effect of any of the foregoing;

(l) (A) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
Ordinary Course of Business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, its most recent consolidated financial statements (or the
notes thereto)(to the extent so reflected or reserved against) or incurred
thereafter in the Ordinary Course of Business, or (B) waive any material
benefits of any confidentiality, standstill or similar agreements to which
it or any of its Subsidiaries is a party;

(m) modify, amend or terminate any material contract or agreement to
which it or any of its Subsidiaries is party, or knowingly waive, release
or assign any material rights or claims (including any write-off or other
compromise of any of its (or its Subsidiaries') accounts receivable);

(n) except in the Ordinary Course of Business, (A) enter into any
material contract or agreement or (B) license any material intellectual
property rights to or from any third party;

(o) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date hereof, (A) adopt, enter into,
terminate or amend any employment, severance or similar agreement or
benefit plan described in Section 4.18 of this Agreement or Section 3.13 of
the Flycast Merger Agreement, as the case maybe, for the benefit or welfare
of any current or former director, officer or employee or any collective
bargaining agreement, (B) increase in any respect the compensation or

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fringe benefits of, or pay any bonus to, any director, officer or key
employee, (C) accelerate the payment, right to payment or vesting of any
compensation or benefits, including any outstanding options or restricted
stock awards, (D) pay any benefit not provided for as of the date of this
Agreement under any benefit plan, (E) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or benefit
plan (including the grant of stock options, stock appreciation rights,
stock based or stock related wards, performance units or restricted stock,
or the removal of existing restrictions in any benefit plans or agreements
or awards made thereunder), or (F) take any action other than in the
Ordinary Course of Business to fund or in any other way secure the payment
of compensation or benefits under any employee plan, agreement, contract or
arrangement or benefit plan;

(p) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of Adsmart
set forth in this Agreement becoming untrue or (ii) any of the conditions
to the Merger set forth in Article 8.2 not being satisfied; or

(q) agree in writing or otherwise to take any of the foregoing
actions.

7.4 Expenses. Each of the Parties shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.

7.5 Indemnification.

(a) The Buyer shall comply fully with the provisions of Section 6.13 of the
Flycast Merger Agreement relating to the indemnification of former directors of
Flycast.

(b) From and after the Effective Time, Buyer agrees that it will, and will
cause the Surviving Corporation to, indemnify and hold harmless each present and
former director and officer of Adsmart (the "Adsmart Indemnified Parties"),
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities or amounts paid in settlement incurred in
connection with any claim, action, suit, proceedings or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent permitted under Delaware law (and Buyer and the Surviving Corporation
shall also advance expenses as incurred to the fullest extent permitted under
applicable law, provided the Adsmart Indemnified Party to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Adsmart Indemnified Party is not entitled to
indemnification). The provisions of this Section 7.5(b) are intended to be an
addition to the rights otherwise available to the current officers and directors
of Adsmart by law, charter, statute, bylaw or agreement, and shall operate for
the benefit of, and shall be enforceable by, each of the Adsmart Indemnified
Parties, their heirs and their representatives.

7.6 Listing of Merger Shares. The Buyer shall use its best efforts to
list the Merger Shares and the Contribution Shares on the Nasdaq National
Market.

7.7 Rights Arising From Prior Acquisitions.

(a) Effective as of the Effective Time, CMGI hereby releases any and all
claims that it or any of its Subsidiaries may have against Flycast arising out
of the Flycast Merger Agreement and the transactions contemplated thereby.
Effective as of the Effective Time, CMGI hereby assigns to the Buyer, to the
extent assignable, any and all claims that it or any of its Subsidiaries may
have against any party other than Flycast arising out of the Flycast Merger
Agreement and the transactions contemplated thereby.

(b) Effective as of the Effective Time, CMGI hereby assigns to the Buyer,
to the extent assignable, any and all claims that it or any of its Subsidiaries
may have against 2Can or any other party arising out of the Agreement and Plan
of Merger, dated as of February 10, 1999, among CMGI, 2Can Acquisition
Corporation, 2Can Media, Inc. and certain stockholders of 2Can Media (the "2Can
Merger Agreement"), including without limitation, to the extent assignable,
CMGI's claims to indemnification under the 2Can Merger Agreement.

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7.8 Buyer Management Agreement. CMGI and the Buyer shall amend that
certain Management Agreement between them such that effective as of the
Effective Time Adsmart, Flycast and their respective subsidiaries shall receive
from CMGI the same management services that CMGI provides to the Buyer, which
services shall be provide on the same terms that apply to the Buyer as of the
date of this Agreement.

7.9 Non-solicitation. For a period of eighteen (18) months after the date
of this Agreement, CMGI shall not, and shall use reasonably efforts to cause its
majority-owned Subsidiaries not to, solicit the employment of any employee of
Adsmart or Flycast, other than as a result of a general solicitation not
directed specifically to employees of Adsmart or Flycast.

ARTICLE VIII

CONDITIONS TO CLOSING

8.1 Condition to Each Party's Obligations. The respective obligations of
each Party to consummate the Transactions are subject to the satisfaction of the
following conditions:

(a) the Engage Stockholder Approval shall have been obtained; and

(b) the Adsmart Stockholder Approval shall remain in full force and
effect;

(c) the Merger Shares and Contribution Shares shall have been
authorized for listing on the Nasdaq National Market upon official notice
of issuance;

(d) No Government Entity of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any order, executive order, stay,
decree judgment or injunction (each an "Order") or statute, rule or
regulation which is in effect and which has the effect of making the Merger
or the Contribution illegal or otherwise prohibiting consummation of the
Merger or the Contribution.

8.2 Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligation of each of the Buyer and the Transitory Subsidiary
to consummate the Transactions is subject to the satisfaction (or waiver by the
Buyer) of the following additional conditions:

(a) all outstanding convertible promissory notes of Adsmart held by
CMGI shall have been converted into Adsmart Series B Preferred Stock;

(b) all outstanding Adsmart Preferred Shares shall have converted into
Adsmart Common Shares;

(c) the number of Dissenting Shares shall not exceed 3% of the number
of outstanding Adsmart Common Shares as of the Effective Time;

(d) Adsmart and the Subsidiaries shall have obtained (and shall have
provided copies thereof to the Buyer) all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 4.4 which are
required on the part of Adsmart or the Subsidiaries, except for any the
failure of which to obtain or effect would not have an Adsmart Company
Material Adverse Effect or a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement;

(e) the representations and warranties set forth in Articles III, IV
and V of this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing as though made as of the Closing, except to
the extent that such representations and warranties are specifically made
as of a particular date (in which case such representations and warranties
should be true and correct as of such date) and except for any failures to
be true and correct (without regard to any materiality, material adverse
effect or knowledge qualification contained therein) that would not have a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement, an Adsmart Material Adverse
Effect or a "Company Material Adverse Effect" (as defined in the Flycast
Merger Agreement) and the Buyer shall have received a certificate signed on
behalf of the Company, Adsmart and Flycast by an executive officer of CMGI,
Adsmart and Flycast, respectively, to such effect;

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(f) each of CMGI, Adsmart and Flycast shall have performed or complied
with in all material respects its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the
Closing;

(g) The Adsmart Audited Financial Statements shall have been delivered
to the Buyer and the revenue, net income (loss) and stockholders' equity
reflected in the Adsmart Audited Financial Statements shall not differ from
the same line items reflected in the Adsmart Financial Statements as of the
same dates and for the same periods in a manner that would have an Adsmart
Material Adverse Effect; and

(h) there shall have been no Company Material Adverse Effect (as
defined above) from the date of the Flycast Closing to the date of the
Contribution Closing.

8.3 Conditions to Obligations of CMGI and Adsmart. The obligations of
CMGI and Adsmart to consummate the Transactions is subject to the satisfaction
of the following additional conditions:

(a) the representations and warranties of the Buyer and the Transitory
Subsidiary set forth in this Agreement shall be true and correct, as of the
date of this Agreement and as of the Closing as though made as of the
Closing, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such
representations and warranties shall be true and correct as of such date)
and except for failures to be true and correct (without regard to any
materiality, material adverse effect or knowledge qualification contained
therein) any that would not have a material adverse effect on the ability
of the Parties to consummate the transactions contemplated by this
Agreement or a Buyer Material Adverse Effect and CMGI shall have received a
certificate signed on behalf of the Buyer by an executive officer of the
Buyer to such effect; and

(b) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with in all material respects its agreements and
covenants required to be performed or complied with under this Agreement as
of or prior to the Closing.

ARTICLE IX

INDEMNIFICATION

9.1 Indemnification by CMGI. CMGI shall indemnify the Buyer in respect
of, and hold it harmless against, any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, reasonable fees and expenses of attorneys,
accountants, financial advisors and other experts, and other reasonable expenses
of litigation) ("Damages") incurred by the Surviving Corporation or the Buyer
resulting from, relating to or constituting any breach by CMGI or Adsmart of any
representation, warranty or covenant set forth in Articles III or IV or, solely
as to Adsmart, Article VII of this Agreement, net of any insurance proceeds
collectible by the Surviving Corporation or the Buyer with respect thereto.

9.2 Indemnification Claims.

(a) A party entitled, or seeking to assert rights, to indemnification under
this Article IX (an "Indemnified Party") shall give written notification to the
party from whom indemnification is sought (an "Indemnifying Party") of the
commencement of any suit or proceeding relating to a third party claim for which
indemnification pursuant to this Article IX may be sought. Such notification
shall be given within 20 business days after receipt by the Indemnified Party of
notice of such suit or proceeding, and shall describe in reasonable detail (to
the extent known by the Indemnified Party) the facts constituting the basis for
such suit or proceeding and the amount of the claimed damages; provided,
however, that no delay on the part of the Indemnified Party in notifying the
Indemnifying Party shall relieve the Indemnifying Party of any liability or
obligation hereunder except to the extent of any damage or liability caused by
or arising out of such failure. Within 20 days after delivery of such
notification, the Indemnifying Party may, upon written notice thereof to

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the Indemnified Party, assume control of the defense of such suit or proceeding
with counsel reasonably satisfactory to the Indemnified Party provided that the
Indemnifying Party in such notice acknowledges that any Damage resulting
therefrom is subject to the provisions of this Article IX. If the Indemnifying
Party does not so assume control of such defense, the Indemnified Party shall
control such defense. The party not controlling such defense (the
"Non-controlling Party") may participate therein at its own expense. The party
controlling such defense (the "Controlling Party") shall keep the
Non-controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
suit or proceeding. The Indemnifying Party shall not agree to any settlement of,
or the entry of any judgment arising from, any such suit or proceeding without
the prior written consent of the Indemnified Party, which shall not be
unreasonably withheld or delayed; provided that the consent of the Indemnified
Party shall not be required if the Indemnifying Party agrees in writing to pay
any amounts payable pursuant to such settlement or judgment and such settlement
or judgment includes a complete release of the Indemnified Party from further
liability and has no other adverse effect on the Indemnified Party. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld or
delayed.

(b) In order to seek indemnification under this Article IX, an Indemnified
Party shall give written notification (a "Claim Notice") to the Indemnifying
Party which contains (i) a description and the amount (the "Claimed Amount") of
any Damages incurred or reasonably expected to be incurred by the Indemnified
Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article IX for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the manner
provided in paragraph (c) below) in the amount of such Damages.

(c) Within 20 days after delivery of a Claim Notice, the Indemnifying Party
shall deliver to the Indemnified Party a written response (the "Response") in
which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case the Response shall
be accompanied by a payment by the Indemnifying Party to the Indemnified Party
of the Claimed Amount, by check or by wire transfer, (ii) agree that the
Indemnified Party is entitled to receive part, but not all, of the Claimed
Amount (the "Agreed Amount") (in which case the Response shall be accompanied by
a payment by the Indemnifying Party to the Indemnified Party of the Agreed
Amount, by check or by wire transfer, or (iii) dispute that the Indemnified
Party is entitled to receive any of the Claimed Amount. If the Indemnifying
Party in the Response disputes its liability for all or part of the Claimed
Amount, the Indemnifying Party and the Indemnified Party shall follow the
procedures set forth in Section 9.2(d) for the resolution of such dispute (a
"Dispute").

(d) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Indemnifying Party and the Indemnified Party shall use
good faith efforts to resolve the Dispute. If the Dispute is not resolved within
such 60-day period, the Indemnifying Party and the Indemnified Party shall
discuss in good faith the submission of the Dispute to a mutually acceptable
alternative dispute resolution procedure (which may be non-binding or binding
upon the parties, as they agree in advance) (the "ADR Procedure"). In the event
the Indemnifying Party and the Indemnified Party agree upon an ADR Procedure,
such parties shall, in consultation with the chosen dispute resolution service
(the "ADR Service"), promptly agree upon a format and timetable for the ADR
Procedure, agree upon the rules applicable to the ADR Procedure, and promptly
undertake the ADR Procedure. The provisions of this Section 9.2(d) shall not
obligate the Indemnifying Party and the Indemnified Party to pursue an ADR
Procedure or prevent either such party from pursuing the Dispute in a court of
competent jurisdiction; provided that, if the Indemnifying Party and the
Indemnified Party agree to pursue an ADR Procedure, neither the Indemnifying
Party nor the Indemnified Party may commence litigation or seek other remedies
with respect to the Dispute prior to the completion of such ADR Procedure. Any
ADR Procedure undertaken by the Indemnifying Party and the

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Indemnified Party shall be considered a compromise negotiation for purposes of
federal and state rules of evidence, and all statements, offers, opinions and
disclosures (whether written or oral) made in the course of the ADR Procedure by
or on behalf of the Indemnifying Party, the Indemnified Party or the ADR Service
shall be treated as confidential and, where appropriate, as privileged work
product. Such statements, offers, opinions and disclosures shall not be
discoverable or admissible for any purposes in any litigation or other
proceeding relating to the Dispute (provided that this sentence shall not be
construed to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used by
the Indemnifying Party and the Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party.

9.3 Survival of Representations and Warranties. All representations and
warranties in Articles III and IV of this Agreement shall survive the Closing
and shall expire on the date one year following the Closing Date. All other
representations and warranties in this Agreement shall expire upon the Closing,
except that the representation and warranty in Section 5.2 shall survive
indefinitely. If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or warranty, either a Claim Notice based upon a
breach of such representation or warranty, or a notice that, as a result a legal
proceeding instituted by or written claim made by a third party, the Indemnified
Party reasonably expects to incur Damages as a result of a breach of such
representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice.

9.4 Limitations.

(a) Notwithstanding anything to the contrary herein, the aggregate
liability of CMGI, for Damages under this Article IX shall not exceed
$437,500,000, and CMGI shall not be liable under this Article IX unless and to
the extent that the aggregate Damages for which it would otherwise be liable
exceed $10,000,000. In no event shall CMGI have any liability for any incidental
or consequential damages claimed by Buyer or any third party. If the Damages
indemnified against under this Article IX do not involve the payment of cash by
the Indemnified Party to a third party, the Indemnifying Party may elect to
satisfy any indemnification claim with respect to such Damages by transferring
to the Indemnified Party shares of Buyer Common Stock (valued at $77.96 per
share, subject to equitable adjustment for stock splits, stock dividends,
recapitalizations and other similar events affecting such shares).

(b) Notwithstanding anything to the contrary in this Agreement, if any
facts or circumstances giving rise to a claim for indemnification under this
Agreement also serve as a basis for a claim by the Surviving Corporation
pursuant to the indemnification provisions of the 2Can Merger Agreement, the
Surviving Corporation shall take reasonable steps to exhaust its remedies under
the 2Can Merger Agreement before seeking to recover any amounts under this
Article IX, and any amounts collected pursuant to the 2Can Merger Agreement
shall be offset against any Damages otherwise indemnified against hereunder.

(c) Except with respect to claims based on fraud, after the Closing, the
rights of the Buyer under this Article IX shall be the exclusive remedy of the
Buyer with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement.

(d) CMGI shall not have any right of contribution against Adsmart or the
Surviving Corporation with respect to any breach by Adsmart of any of its
representations, warranties, covenants or agreements in this Agreement.

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ARTICLE X

TERMINATION

10.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Closing (whether before or after the Engage Stockholder Approval),
as provided below:

(a) the Parties may terminate this Agreement by mutual written
consent;

(b) the Buyer may terminate this Agreement by giving written notice to
CMGI in the event CMGI, Adsmart or Flycast is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i)
would cause the conditions set forth in clauses (e) or (f) of Section 8.2
not to be satisfied and (ii) is not cured within 20 days following delivery
by the Buyer to CMGI of written notice of such breach;

(c) CMGI may terminate this Agreement by giving written notice to the
Buyer in the event the Buyer or the Transitory Subsidiary is in breach of
any representation, warranty or covenant contained in this Agreement, and
such breach, individually or in combination with any other such breach, (i)
would cause the conditions set forth in clauses (a) or (b) of Section 8.3
not to be satisfied and (ii) is not cured within 20 days following delivery
by CMGI to the Buyer of written notice of such breach;

(d) any Party may terminate this Agreement by giving written notice to
the other Parties at any time after the Buyer stockholders have voted on
whether to approve the Merger and the Contribution in the event the Merger
and the Contribution failed to receive the Engage Stockholder Approval;

(e) any Party may terminate this Agreement if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger or the Contribution;

(f) the Buyer may terminate this Agreement by giving written notice to
Adsmart if the Closing shall not have occurred on or before August 30, 2000
by reason of the failure of any condition precedent under Section 8.1 or
8.2 hereof (unless the failure results primarily from a breach by the Buyer
or the Transitory Subsidiary of any representation, warranty or covenant
contained in this Agreement); or

(g) CMGI may terminate this Agreement by giving written notice to the
Buyer and the Transitory Subsidiary if the Closing shall not have occurred
on or before August 30, 2000 by reason of the failure of any condition
precedent under Section 8.1 or 8.3 hereof (unless the failure results
primarily from a breach by CMGI, Adsmart or Flycast of any representation,
warranty or covenant contained in this Agreement).

10.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party for willful breaches of this Agreement).

ARTICLE XI

DEFINITIONS

For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.

<TABLE>
<CAPTION>
DEFINED TERM SECTION
- --------------------
<S> <C>
2Can Merger Agreement....................................... 1.11(b)
ADR Procedure............................................... 9.2(d)
ADR Service................................................. 9.2(d)
Adsmart..................................................... Introduction
</TABLE>

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<TABLE>
<CAPTION>
DEFINED TERM SECTION
- --------------------
<S> <C>
Adsmart Audited Financial Statements........................ 4.6
Adsmart Common Shares....................................... 1.5(a)
Adsmart Financial Statements................................ 4.6
Adsmart Indemnified Parties................................. 7.5(b)
Adsmart Intellectual Property............................... 4.13(a)
Adsmart Material Adverse Effect............................. 4.1
Adsmart Notes............................................... 1.11(a)
Adsmart Options............................................. 1.8(a)
Adsmart Preferred Shares.................................... 1.10
Adsmart Series A Preferred Stock............................ 1.10
Adsmart Series B Preferred Stock............................ 1.19
Adsmart Stockholder Approval................................ 4.3
Adsmart Stockholders........................................ 1.3(b)
Agreed Amount............................................... 9.2(c)
Buyer....................................................... Introduction
Buyer Common Stock.......................................... 1.5(a)
Buyer Material Adverse Effect............................... 6.1
Buyer Reports............................................... 6.5
CERCLA...................................................... 4.19(a)
Certificate of Merger....................................... 1.1
Claim Notice................................................ 9.2(b)
Claimed Amount.............................................. 9.2(b)
Closing..................................................... 2.2
Closing Date................................................ 1.2
CMGI........................................................ Introduction
CMGI Adsmart Shares......................................... 7.2(e)
CMGI Buyer Shares........................................... 7.2(d)(i)
CMGI Material Adverse Effect................................ 3.3
Code........................................................ 1.8(a)
Company Material Adverse Effect............................. 8.2(e)
Contribution................................................ 2.1
Contribution Closing........................................ 2.2
Contribution Shares......................................... 2.4
Controlling Party........................................... 9.2(a)
Conversion Ratio............................................ 1.5(a)
Damages..................................................... 9.1
Disclosure Schedule......................................... Article IV
Dispute..................................................... 9.2(c)
Dissenting Shares........................................... 1.6(a)
Effective Time.............................................. 1.1
Employee Benefit Plan....................................... 4.18(a)(i)
</TABLE>

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<TABLE>
<CAPTION>
DEFINED TERM SECTION
- --------------------
<S> <C>
Engage Sale................................................. 2.5
Engage Stockholder Approval................................. 6.3
Environmental Law........................................... 4.19(a)
ERISA....................................................... 4.18(a)(ii)
ERISA Affiliate............................................. 4.18(a)(iii)
Exchange Act................................................ 4.14(b)
Expected Claim Notice....................................... 9.3
Flycast..................................................... Introduction
Flycast-CMGI Options........................................ 2.5
Flycast Common Stock........................................ 2.1
Flycast Merger Agreement.................................... 5.1
Flycast Noncompetition Agreements........................... 5.4
Financial Statements........................................ 4.6
GAAP........................................................ 4.6
Governmental Entity......................................... 3.3
Indemnified Party........................................... 9.2(a)
Indemnifying Party.......................................... 9.2(a)
InterStep................................................... 2.6
Legal Proceeding............................................ 4.16
Materials of Environmental Concern.......................... 4.19(a)
Merger...................................................... 1.1
Merger Closing.............................................. 1.2
Merger Shares............................................... 1.5(a)
Most Recent Audited Balance Sheet........................... 4.6
Most Recent Audited Balance Sheet Date...................... 4.8
Most Recent Balance Sheet Date.............................. 4.6
Non-controlling Party....................................... 9.2(a)
Order....................................................... 8.1(d)
Ordinary Course of Business................................. 4.4
Parties..................................................... Introduction
Permits..................................................... 4.21
Proxy Statement............................................. 7.2(b)
Reasonable Best Efforts..................................... 7.1
Response.................................................... 9.2(c)
Securities Act.............................................. 1.8(c)
Security Interest........................................... 4.4
Special Committee........................................... 7.2(c)
Subsidiary.................................................. 4.5(a)
Substitute Options.......................................... 2.5(a)
Surviving Corporation....................................... 1.1
Taxes....................................................... 4.9(a)(i)
</TABLE>

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<TABLE>
<CAPTION>
DEFINED TERM SECTION
- --------------------
<S> <C>
Tax Returns................................................. 4.9(a)(ii)
Transaction Shares.......................................... 6.2
Transitory Subsidiary....................................... Introduction
Year 2000 Compliant......................................... 4.23(d)
</TABLE>

ARTICLE XII

MISCELLANEOUS

12.1 Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule.

12.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.

12.3 Entire Agreement. This Agreement (including the Disclosure Schedule
and other documents referred to herein) constitutes the entire agreement among
the Parties and supersedes any prior understandings, agreements or
representations by or among the Parties, written or oral, with respect to the
subject matter hereof.

12.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.

12.5 Counterparts Facsimile Signature. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This Agreement may
be executed by facsimile signature.

12.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

12.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next-day delivery via
a reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:

<TABLE>
<S> <C>
IF TO CMGI: COPY TO:
CMGI, Inc. Hale and Dorr LLP
100 Brickstone Square, 1st Floor 60 State Street
Andover, MA 01810 Boston, MA 02109
Attn: General Counsel Attn: Mark G. Borden, Esq.
IF TO ADSMART: COPY TO:
Adsmart, Inc. Hale and Dorr LLP
100 Brickstone Square, 5th Floor 60 State Street
Andover, MA 01810 Boston, MA 02109
Attn: President Attn: Susan W. Murley, Esq.
</TABLE>

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<PAGE> 298
<TABLE>
<S> <C>
IF TO THE BUYER OR
THE TRANSITORY SUBSIDIARY: COPY TO:
Engage Technologies, Inc. Nutter, McClennen & Fish, LLP
100 Brickstone Square, 1st Floor One International Place
Andover, MA 01810 Boston, MA 02110
Attn: General Counsel Attn: Constantine Alexander, Esq.
</TABLE>

Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.

12.8 Governing Law. Except to the extent expressly governed by the
Delaware General Corporation Law, this Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction)
that would cause the application of laws of any jurisdictions other than those
of the Commonwealth of Massachusetts.

12.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; provided, however,
that any amendment effected subsequent to Engage Stockholder Approval or Adsmart
Stockholder Approval shall be subject to any restrictions contained in the
Delaware General Corporation Law. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver of any right or remedy hereunder shall be valid unless
the same shall be in writing and signed by the Party giving such waiver. No
waiver by any Party with respect to any default, misrepresentation or breach of
warranty or covenant hereunder shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.

12.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.

12.11 Construction.

(a) The language used in this Agreement shall be deemed to be the language
chosen by the Parties to express their mutual intent, and no rule of strict
construction shall be applied against any Party.

(b) Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.

A-34
<PAGE> 299

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.

ENGAGE TECHNOLOGIES, INC.

/s/ PAUL SCHAUT
By:
--------------------------------------
Title:
--------------------------------------

FCET CORP.

/s/ PAUL SCHAUT
By:
--------------------------------------
Title:
--------------------------------------

CMGI, INC.

/s/ ANDREW HAJDUCKY
By:
--------------------------------------
Title:
--------------------------------------

ADSMART CORPORATION

/s/ JOHN FEDERMAN
By:
--------------------------------------
Title:
--------------------------------------

FLYCAST COMMUNICATIONS CORPORATION

/s/ ANDREW HAJDUCKY
By:
--------------------------------------
Title:
--------------------------------------

A-35
<PAGE> 300

ANNEX B

[BEAR STEARNS LETTERHEAD]
January 19, 2000

Special Committee to the Board of Directors
Engage Technologies, Inc.
100 Brickstone Square
Andover, MA 01810

Gentlemen:

We understand that Engage Technologies, Inc. ("Engage") has entered into an
Agreement and Plan of Merger and Contribution with FCET Corp., a wholly owned
subsidiary of Engage, CMGI, Inc. ("CMGI"), Flycast Communications Corporation
("Flycast"), and Adsmart Corporation ("Adsmart") dated January 19, 2000 (the
"Agreement"), pursuant to which Engage has agreed to acquire Flycast and Adsmart
in exchange for 32.499 million shares of Engage common stock (the "Purchase
Price")(the "Transaction"). You have provided us with a copy of the Agreement in
final form.

You have asked us to render our opinion as to whether the Purchase Price is
fair, from a financial point of view, to the shareholders of Engage, excluding
CMGI and its affiliates.

In the course of performing our review and analyses for rendering this
opinion, we have:

- reviewed the Agreement in final form;

- reviewed Engage's Registration Statement on Form S-1 dated July 19, 1999,
its Annual Report on Form 10-K for the period ended July 31, 1999 and its
Quarterly Report on Form 10-Q for the period ended October 31, 1999;

- reviewed certain operating and financial information, including
projections, provided to us by management relating to Engage's business
and prospects;

- met with certain members of Engage's senior management to discuss
Engage's business, operations, historical and projected financial results
and future prospects;

- reviewed Flycast's Registration Statement on Form S-1 dated May 3, 1999
and its Quarterly Reports on Form 10-Q for the periods ending June 30,
1999 and September 30, 1999;

- reviewed certain operating and financial information, including
projections, provided to us by Flycast's and Adsmart's management
relating to Flycast's and Adsmart's respective business and prospects;

- met with certain members of Flycast's and Adsmart's senior management to
discuss Flycast's and Adsmart's respective business, operations,
historical and projected financial results and future prospects;

- reviewed the historical prices, trading multiples and trading volumes of
the common shares of Engage and Flycast (prior to its purchase by CMGI);

B-1
<PAGE> 301
Engage Technologies, Inc.
January 19, 2000
Page 2

- reviewed publicly available financial data, stock market performance data
and trading multiples of companies which we deemed generally comparable
to Engage, Flycast and Adsmart;

- reviewed the terms of recent mergers and acquisitions involving companies
which we deemed generally comparable to Flycast and Adsmart and the
Transaction;

- reviewed the pro forma financial results, financial condition and
capitalization of Engage giving effect to the Transaction; and

- conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.

We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information, including
without limitation the projections provided to us by Engage, Flycast and
Adsmart, and the synergy estimates provided to us by Engage. With respect to
Engage's, Flycast's and Adsmart's projected financial results and the potential
synergies that could be achieved upon consummation of the Transaction, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior managements of Engage,
Flycast and Adsmart as to the expected future performance of Engage, Flycast and
Adsmart, respectively. We have not assumed any responsibility for the
independent verification of any such information or of the projections and
synergy estimates provided to us, and we have further relied upon the assurances
of the senior managements of Engage, Flycast and Adsmart that they are unaware
of any facts that would make the information, projections and synergy estimates
provided to us incomplete or misleading.

We have assumed for all purposes material to our analysis the accuracy of
the representations and warranties, performance of all covenants and
satisfaction of all conditions with respect to the Merger Agreement.

In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities of any of Engage, Flycast or
Adsmart, nor have we been furnished with any such appraisals. We have assumed
that the Transaction will qualify as tax-free "reorganizations" and/or
"contributions" within the meaning of Sections 368 and 351 of the Internal
Revenue Code. Our opinion is necessarily based on economic, market and other
conditions, and the information made available to us, as of the date hereof.

We do not express any opinion as to the price or range of prices at which
the shares of common stock of Engage may trade subsequent to the announcement of
the Transaction or as to the price or range of prices at which the shares of
common stock of Engage may trade subsequent to the consummation of the
Transaction.

We have acted as a financial advisor to the Special Committee of the Board
of Directors of Engage in connection with the Transaction and will receive a fee
for such services, a significant portion of which is contingent upon
consummation of the Transaction, or a part thereof. In addition, Engage has
agreed to indemnify us for certain liabilities arising out of our engagement.
Bear Stearns has been previously engaged by Engage to provide certain investment
banking and financial advisory services in connection with its initial public
offering. In the ordinary course of business, Bear Stearns may actively trade
the equity and debt securities of Engage and/or CMGI and/or their affiliates for
our own account and for the account of our customers and, accordingly, may at
any time hold a long or short position in such securities.

It is understood that this letter is intended for the benefit and use of
the Special Committee of the Board of Directors of Engage and does not
constitute a recommendation to the Special Committee of the Board of Directors
of Engage or any holders of Engage common stock as to how to vote in connection
with the Transaction. This opinion does not address Engage's underlying business
decision to pursue the Transaction. This letter is not to be used for any other
purpose, or be reproduced, disseminated, quoted from or referred to at any time,
in whole or in part, without our prior written consent; provided, however, that
this letter may be

B-2
<PAGE> 302
Engage Technologies, Inc.
January 19, 2000
Page 3

included in its entirety in any joint proxy statement/prospectus to be
distributed to the holders of Engage common stock in connection with the
Transaction.

Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Purchase Price is fair, from a financial point of view, to the
shareholders of Engage, excluding CMGI and its affiliates.

Very truly yours,

BEAR, STEARNS & CO. INC.

By: /s/
------------------------------------
Senior Managing Director

B-3
<PAGE> 303
ENGAGE TECHNOLOGIES, INC.

SPECIAL MEETING OF STOCKHOLDERS

To be held on , 2000

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY

The undersigned, revoking all prior proxies, hereby appoints Michael K.
Baker and Stefan J. Vounessea, and each of them, with full power of
substitution, as proxies to represent and vote as designated hereon all shares
of stock of Engage Technologies, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Special Meeting of
Stockholders of the Company to be held on , , 2000, at 10:00
a.m., Eastern Standard Time, at 100 Brickstone Square, 5th Floor, Andover,
Massachusetts, and at any adjournment thereof, with respect to the matters set
forth on the reverse side hereof.

[X] Please mark votes as in this example.

IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.

1. To approve an amendment to the Company's Amended and Restated Certificate of
Incorporation increasing from 150,000,000 to 350,000,000 the number of
authorized shares of the Company's Common Stock.

[_] For [_] Withheld [_] Abstain

2. To approve an amendment to the Company's Amended and Restated Certificate of
Incorporation changing the name of the Company to Engage, Inc.

[_] For [_] Withheld [_] Abstain

3. To approve an amendment to the Company's 1995 Equity Incentive Plan to
increase from 30,000,000 to 36,000,000 the number of shares of the Company's
Common Stock reserved for issuance under the Plan.

[_] For [_] Withheld [_] Abstain
<PAGE> 304
4. To approve the issuance of shares of the Company's Common Stock in two
concurrent interested party transactions between the Company and CMGI, Inc., the
majority stockholder of the Company, pursuant to which the Company will acquire,
in exchange for shares of the Company's Common Stock, Adsmart Corporation, a
subsidiary of CMGI, and Flycast Communications Corporation, a wholly-owned
subsidiary of CMGI .

[_] For [_] Withheld [_] Abstain

5. To transact such other business as may properly come before the Meeting or
any adjournments thereof.

[_] For [_] Withheld [_] Abstain

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

SEE REVERSE SIDE
<PAGE> 305
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment thereof.

MARK HERE FOR ADDRESS
CHANGE AND NOTE AT
LEFT [_]

MARK HERE IF YOU PLAN
TO ATTEND THE
MEETING [_]

Please sign exactly as name appears
hereon. If the stock is registered
in the names of two or more
persons, each should sign. When
signing as an executor,
administrator, trustee, guardian,
or attorney, please give full
corporate name by an authorized
officer. If a partnership, please
sign in full partnership name by an
authorized person.

Signature: ___________

Date: ________________

Signature: ___________

Date: ________________

PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED RETURN ENVELOPE.