COOLSAVINGS COM INC, S-1/A, 2000-05-19

COOLSAVINGS COM INC
S-1/A, 2000-05-19
BUSINESS SERVICES, NEC

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As filed with the Securities and Exchange Commission on May 19, 2000
Registration No. 333-94677
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SECURITIES AND EXCHANGE COMMISSION

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Washington, D.C. 20549

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Amendment No. 10
to
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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coolsavings.com inc.
(Exact name of registrant as specified in its charter)

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Michigan 7379 38-3216102
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)

360 N. Michigan Avenue
Suite 1900
Chicago, Illinois 60601
(312) 224-5000
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)

Steven M. Golden
360 N. Michigan Avenue
Suite 1900
Chicago, Illinois 60601
(312) 224-5000
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)

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with copies to:

PETER SUGAR DAVID R. LAMARRE
JEFFREY M. WEISS DAVINA K. KAILE
Jaffe, Raitt, Heuer & Weiss, P.C. DANIEL T. DASHIELL
One Woodward Avenue, Suite 2400 Pillsbury Madison & Sutro LLP
Detroit, Michigan 48226 P.O. Box 7880
(313) 961-8380 San Francisco, California 94120
(415) 983-1000

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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.

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

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

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

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

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

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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. +
+Underwriters may not confirm sales of these securities until the registration +
+statement filed with the Securities and Exchange Commission becomes +
+effective. This prospectus is not an offer to sell these securities and it is +
+not soliciting offers to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED MAY 19, 2000

PROSPECTUS

3,300,000 Shares

[LOGO OF COOLSAVINGS.COM APPEARS HERE]

Common Stock

This is an initial public offering of common stock by coolsavings.com inc.
All of the shares of common stock are being sold by CoolSavings. The estimated
initial offering price will be between $7.00 and $8.00 per share.

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There is currently no public market for the common stock. Our common stock
has been approved for listing on the Nasdaq National Market under the symbol
CSAV.

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When the offering is completed, our principal stockholders, executive
officers and directors will, in the aggregate, beneficially own approximately
60.8% of our outstanding common stock.

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<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to CoolSavings, before expenses.................... $ $
</TABLE>

CoolSavings has granted the underwriters an option for a period of 30 days to
purchase up to 495,000 additional shares of common stock.

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Investing in the common stock involves a high degree of risk.
See "Risk Factors" beginning on page 5.

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

CHASE H&Q

LEHMAN BROTHERS

THOMAS WEISEL PARTNERS LLC

, 2000
<PAGE>

Inside Front Cover

Comprehensive E-Marketing Services

[Logo]

coolsavings.com

attract advertisers attracts consumers

active shoppers online and office advertisers

variety of multiple venues
promotional incentives personalized
permission based

household targeting

tracking
screenshot of coolsavings.com
home page

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FIRST PAGE OF GATEFOLD

Screenshot of advertisers'
site offer Tracking leads to
more effective campaigns

Broad array of incentives
on our web site customer logos

Building one-to-one
relationships
Screenshot of targeted e-mail

Variety of places for redemption
and in our targeted e-mails online retailers mall stores national and
regional chains
<PAGE>

SECOND PAGE OF GATEFOLD

Advertisers can deliver, target
and track a wide array of incentives
Broad range of promotional to promote
incentives products or
services in any
online or offline
environment
graphic of
member database
We capture and store
incentives drive detailed member
sales demographic information,
track shopping preferences
and behavior, and
neighborhood businesses with advertiser
cooperation can
track redemption of
these incentives back
to the member household

We use sophisticated
data mining to create
predictive models to
make future targeting
even more effective
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................................................. 1

Risk Factors....................................................... 5

Forward-Looking Statements......................................... 20

Use of Proceeds.................................................... 21

Dividend Policy.................................................... 21

Capitalization..................................................... 22

Dilution........................................................... 23

Selected Financial Data............................................ 24

Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 25

Business........................................................... 35

Management......................................................... 50

Certain Transactions and Relationships............................. 58

Principal Stockholders............................................. 61

Description of Capital Stock....................................... 63

Shares Eligible For Future Sale.................................... 68

Underwriting....................................................... 70

Legal Matters...................................................... 72

Experts............................................................ 72

Where You Can Find Additional Information.......................... 72

Index to Financial Statements...................................... F-1
</TABLE>

i
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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including "Risk Factors" and
the financial statements, before making an investment decision.

CoolSavings

We provide a comprehensive set of e-marketing services used by online and
offline advertisers to build one-to-one customer relationships. Under our
established brand, advertisers can deliver, target and track a wide array of
incentives to promote their products or services. We deliver these incentives
to targeted segments of our large audience of consumers, known as members, who
have registered their demographic profiles with us and have given us permission
to deliver personalized savings opportunities to them. These incentives can be
redeemed by our members either online or in stores depending on the particular
promotion. We generate substantially all of our revenues by providing e-
marketing services to our advertisers. Approximately 1% of our revenues are
generated from royalty and license fees and other miscellaneous sources. The
top ten advertisers from which we generated the most revenues in 1999 were
Bigstar, eNutrition.com, First USA, InsWeb, Kids "R" Us, MCI WorldCom,
overstock.com, petopia.com, petsmart.com and SmarterKids.com. During 1999, no
advertiser accounted for more than 6.8% of our revenues. During the first
quarter of 2000, no advertiser accounted for more than 10.9% of our revenues.
As of March 31, 2000, we had over 6.6 million registered members, representing
nearly 5.4 million households.

The compelling advantages of the Internet as a direct marketing medium have
led to the development of e-marketing services that are designed to enable
businesses to acquire and retain customers and build customer loyalty. The
Direct Marketing Association projects that online direct marketing expenditures
will increase from approximately $1.3 billion in 1999 to approximately $8.6
billion in 2004. In our experience, while online companies are the most
frequent users of our e-marketing services, traditional offline businesses such
as national retailers and consumer packaged goods manufacturers are
increasingly seeking to use our e-marketing services to drive offline sales and
build customer relationships. Furthermore, we believe many online companies and
traditional businesses are devoting larger portions of their marketing budgets
to Internet direct marketing.

Our web site, coolsavings.com, offers convenient and personalized incentives
for goods and services from a broad range of advertisers, including online
retailers, national brick-and-mortar chains, consumer packaged goods
manufacturers, large consumer service providers and neighborhood businesses. We
offer a wide array of promotional services for advertisers including printed
and electronic coupons, personalized e-mails, rebates, samples, sales notices,
gift certificates, contests and banner advertisements. According to Media
Metrix, for March 2000, CoolSavings was the eleventh most frequently visited
shopping web site and the eighth most frequently visited shopping site by
women. During the first quarter of 2000, we sent an average of approximately
22.8 million e-mails to our members per month.

With our members' permission, we capture and store detailed member
demographic information, track shopping preferences and behavior, and with
advertiser cooperation can track redemption of these incentives back to our
members' households. In doing so, we have developed an extensive database of
information that we use for the benefit of our advertisers. Although we keep
our members' identities private, we analyze our database with sophisticated
data analysis, targeting and tracking technology to help our advertisers
execute effective promotional campaigns. As our members use the incentives we
offer, we gather extensive shopping behavior and preference information which
further enriches our member profiles for future database marketing.

Our objective is to be the leading provider of e-marketing services to
advertisers. To achieve this objective, we plan to continue to add to our base
of members and advertisers through an active online and

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<PAGE>

offline marketing program that enhances the CoolSavings brand. We must also
continue to enrich our database and develop deeper data for predictive modeling
and targeting purposes.

Our business is subject to risks. In particular, we have incurred
significant losses since our inception, including net losses of $16.9 million
in 1999. Our accumulated deficit as of March 31, 2000 was $28.7 million, and we
expect to continue to incur losses for the foreseeable future. Furthermore, we
operate in an emerging and highly competitive market with relatively low
barriers to entry.

We were incorporated as Interactive Coupon Marketing Group, Inc. in Michigan
in December 1994. In November 1998, we changed our corporate name to
coolsavings.com inc. Our corporate offices are located at 360 N. Michigan
Avenue, Suite 1900, Chicago, Illinois 60601. Our telephone number at that
location is (312) 224-5000. Our Internet address is http://www.coolsavings.com.
Information contained on our web site is not a part of this prospectus.

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The Offering

<TABLE>
<C> <S>
Common stock offered by CoolSavings................. 3,300,000 shares
Common stock to be outstanding after this offering.. 38,678,021 shares
Use of proceeds..................................... For general corporate
purposes, including
operational expenses,
such as personnel and
sales and marketing, and
capital expenditures
Proposed Nasdaq National Market Symbol.............. CSAV
</TABLE>

Unless otherwise indicated, share information in this prospectus:

. is based on our shares outstanding as of March 31, 2000;

. assumes conversion of our convertible subordinated notes into 793,076
shares of common stock upon completion of this offering, based on an
assumed initial public offering price of $7.00 per share;

. assumes conversion of our Series A convertible preferred stock into
2,822,133 shares of common stock upon completion of this offering;

. gives effect to a 1,150-for-1 stock split which occurred on April 7,
2000; and

. assumes the underwriters' over-allotment option is not exercised.

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The number of shares to be outstanding after this offering excludes, as of
March 31, 2000:

. 6,352,562 shares of common stock reserved for issuance under our 1997
Stock Option Plan, of which 4,282,600 shares are subject to outstanding
options at a weighted average exercise price of $4.23 per share;

. 324,737 shares subject to options granted outside of our 1997 Stock
Option Plan at an exercise price of $0.28 per share; and

. 635,256 shares of common stock reserved for issuance under our 1999 Non-
Employee Director Stock Option Plan, of which 63,250 shares are subject
to outstanding options at a weighted average exercise price of $4.69 per
share.

Unless otherwise indicated, all statistical data regarding CoolSavings
referenced in this prospectus is as of March 31, 2000. This prospectus contains
statistical data regarding Internet usage and the advertising and marketing
industry that we obtained from industry publications, including reports
generated by International Data Corporation, the Direct Marketing Association,
Mediamark Research Inc., NPD Online Research and Media Metrix, Inc.

We own service mark registrations for the mark COOLSAVINGS, as well as
several other service marks, including, among others, COOLMALLS, COOLTRAVEL,
COOLSAMPLES and COOLCATALOGS, in the United States. We also own common law
rights in these and other marks. In addition, we have applied for United States
federal registrations of several service marks, including our stylized piggy-
bank logo, SAVE. THEN SHOP., SQUEALS OF THE DAY, COOLSAVINGS COUPON MANAGER and
SAVINGSCENTER. We have also obtained a trademark registration in Australia for
COOLSAVINGS and have registration applications pending in the United Kingdom
and Canada. All other trademarks or service marks appearing in this prospectus
are trademarks or service marks of others.

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<PAGE>

The summary financial data presented below are derived from the financial
statements of CoolSavings. The pro forma balance sheet data includes the
automatic conversion of our convertible subordinated notes and Series A
convertible preferred stock upon the completion of this offering. The pro forma
as adjusted balance sheet data reflects the receipt of the net proceeds from
the sale of the 3,300,000 shares of common stock offered by CoolSavings at an
assumed initial public offering price of $7.00 per share and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses. The pro forma loss per common share for the year ended December 31,
1999 and the three months ended March 31, 2000 reflects the effects of a deemed
dividend of $19,868,000 representing the beneficial conversion feature of the
Series A convertible preferred stock and a beneficial conversion feature of
$555,000 relating to the conversion of the convertible subordinated notes. The
shares used to compute pro forma loss per share at December 31, 1999 and March
31, 2000 were calculated by adding to the historical weighted average common
shares outstanding the number of shares which will be issued upon the
conversion of the convertible subordinated notes and the Series A convertible
preferred stock using the if converted method from the respective dates of
issuance.

Summary Financial Data
(in thousands, except share and per share data)

<TABLE>
<CAPTION>
March 31, 2000
---------------------------
Pro Pro Forma
Actual Forma As Adjusted
------- ------- -----------
(unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $ 9,543 $ 9,543 $30,830
Working capital................................... 6,907 11,904 32,304
Total assets...................................... 25,122 25,122 45,522
Long-term debt, including current portion......... 825 825 825
Total stockholders' equity........................ 11,585 16,581 36,981
</TABLE>

4
<PAGE>

RISK FACTORS

You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially and adversely affect our business and
quarterly and annual results of operations and could result in a complete loss
of your investment.

Risks Related to Our Business

Our unproven business model makes it difficult to evaluate our business

We launched our web site in February 1997 and operate in a market that is
new and changing rapidly. Because we have an unproven business model, it may be
difficult for you to evaluate an investment in our common stock. In addition,
we face risks, uncertainties, expenses and difficulties frequently encountered
by early stage companies in new and rapidly evolving markets, including the
Internet advertising and direct marketing market. To address these risks and
uncertainties, we must, among other things:

. maintain relationships with existing advertisers and attract additional
advertisers;

. attract members who actively take advantage of our offers and make
purchases, request information and otherwise interact with our
advertisers;

. attract, integrate, motivate and retain qualified personnel;

. enhance our brand recognition;

. develop new promotions and services;

. continue to upgrade and develop our systems and infrastructure to
accommodate potential growth;

. anticipate and adapt to the evolving Internet advertising and direct
marketing market and changes in advertisers' promotional needs and
policies;

. maintain and defend our intellectual property rights; and

. respond to changes in government regulations.

We may not be successful in accomplishing these objectives. Our failure to
do so could harm our business, results of operations and financial condition.

We have a history of losses, we had an accumulated deficit of $28.7 million as
of March 31, 2000 and we anticipate future losses

We incurred net losses of $5.7 million in 1998, $16.9 million in 1999 and
$7.6 million for the three months ended March 31, 2000. As of March 31, 2000,
our accumulated deficit was $28.7 million. We expect to continue to incur
significant operating losses and capital expenditures. In particular, we expect
to invest heavily in sales and marketing activities, hiring new personnel,
enhancing services and technology, expanding and relocating our facilities and
defending our intellectual property. As a result, we will need to generate
significant revenues to achieve and maintain profitability. Although our
revenues have grown in recent quarters, this growth may not be sustained and we
may never become profitable. Even if we do achieve profitability, we may not
sustain or increase profitability on a quarterly or annual basis.

Our quarterly financial results may fluctuate, making our future financial
results difficult to forecast

Our future operating results may vary significantly due to a variety of
factors, including the following which may be beyond our control:

. advertisers' demand for and use of our services;

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. performance-based contracts, under which our revenues depend on our
members' responsiveness to advertisers' offers;

. our members' demand for our services and response to the offers we make
available to them; and

. litigation costs.

As a result, we believe that quarter-to-quarter comparisons of our operating
results may not be meaningful. Moreover, these factors make our revenues
difficult to forecast. In addition, we plan to significantly increase our sales
and marketing, product development and other operating expenses. We base our
estimated expenses in part on projections of future revenue, which are
inherently uncertain. We may be unable to reduce spending quickly enough to
offset any unexpected revenue shortfall, which could cause our business and
operating results to suffer. This would likely affect the market price of our
common stock in a manner which may be unrelated to our long-term operating
performance. It is likely that in one or more future quarters our operating
results will fall below the expectations of securities analysts and investors.
If this happens, our stock price will likely decline, perhaps significantly.

We derive most of our revenues from short-term contracts with our advertisers

Approximately 80% of our current advertising contracts have stated terms of
less than three months. We may be unsuccessful in securing longer commitments.
Some advertisers prefer short-term contracts because they use our service to
promote limited-time promotional events or seasonal products and services. In
addition, new advertisers often request a short-term trial to assess the
effectiveness of our services, particularly because Internet-based promotional
services are relatively new and unproven. The limited duration of our
advertising contracts makes it difficult for us to forecast our revenues. If we
cannot renew our contracts or attract new advertisers, our results of
operations and financial condition will be seriously harmed.

Our operating results are subject to seasonal fluctuations

We believe our operating results will be subject to seasonal fluctuations
that may make our stock price more volatile. Advertising sales in traditional
media, such as television and radio, generally are lower in the first and third
calendar quarters of each year. We anticipate that our future revenues will
reflect these seasonal patterns. However, our limited operating history and the
evolving nature of the Internet advertising market make it difficult for us to
predict the precise future impact of seasonal factors on our business.

We depend on compelling promotional offers by our advertisers

Our members' usage of our services, and the resulting attractiveness of our
service to advertisers, depend upon the quality of the promotional offers we
deliver and our members' interest in them. In addition, under some of our
advertising contracts, our revenues depend on members' responsiveness to
specific promotions. We currently consult with our advertisers about the type
and frequency of incentives they offer, but we cannot control their choice of
promotions or their fulfillment of incentives. If our advertisers' promotional
offers are not attractive to our members, we will not be able to maintain or
expand our membership or generate adequate revenues based on the size of our
membership or on the responses we produce. Moreover, if our members are not
satisfied with the offers our advertisers make available to them, or with the
products or services they receive upon redemption of offers, their negative
experiences might result in publicity that could damage our reputation, which
would harm our efforts to attract and retain members and advertisers.

We depend on the successful introduction of new services and features

To retain and attract members and advertisers, we intend to introduce
additional services and new features on our web site. For example, we plan to
offer advertisers the ability to deliver promotional

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incentives to small businesses, in addition to individual consumers. These new
features and services will require us to spend significant funds on product
development and on educating our advertisers and consumers about our new
service offerings. New services and features may contain errors or defects that
are discovered only after introduction. Correcting these defects may result in
significant costs, service interruptions, loss of advertisers' and members'
goodwill and damage to our reputation. In addition, our successful introduction
of new technologies will depend on our advertisers' ability to adapt to use
these technologies, over which we have no control. If we introduce a service or
feature that is not favorably received, our current members may use our web
site and other services less frequently, our existing advertisers may not renew
their contracts and we may be unable to attract new members and advertisers.

We must be able to establish and maintain relationships with operators of other
web sites to attract new members

We advertise on third-party web sites using banner advertisements and
sponsorships to attract potential new members. Historically, approximately 70%
of our members were referred to our web site through third-party web sites.
Competition for banner and sponsorship placements on the highest traffic web
sites is intense, and we may not be able to enter into these relationships on
commercially reasonable terms, or at all. Moreover, we may have to pay
significant fees to establish these relationships. For instance, during the
first quarter of 2000, we paid operators of third-party web sites approximately
$2.8 million to attract potential new members. Depending on the particular web
site operator, these fees were paid on the basis of each member registration we
received, each impression delivered or each click-through to our web site. Even
if we enter into or maintain our current relationships with other web site
operators, those sites may not attract significant numbers of users or increase
traffic to our web site. Some operators of other web sites, and parties such as
Netcentives with which we create new incentive programs for our members, may
also offer competing services, alone or through an arrangement with one of our
competitors. These operators may be reluctant to enter into or expand their
relationships with us. Our business could be harmed if we do not establish and
maintain relationships with other web site operators on commercially reasonable
terms or if our relationships do not result in additional member registrations
on our web site. In addition, to attract new members, we may enter into
agreements with organizations that have established subscription bases. These
agreements may contain exclusivity provisions that restrict our ability to
enter into similar agreements with other organizations in the same business
category. For example, our agreement with The Parenting Group prohibits us from
establishing promotional programs similar to the one we operate with The
Parenting Group. These types of exclusive arrangements may limit or eliminate
sources of members and revenues that otherwise may be available to us.

Intellectual property litigation against us can be costly and could result in
the loss of significant rights

We expect that, as the number of services and competitors in Internet
advertising and direct marketing grows, we will be increasingly subject to
intellectual property infringement, unfair competition and related claims
against us. Third parties may also seek to invalidate our United States
Patents, No. 5,761,648, entitled "Interactive Marketing Network and Process
Using Electronic Certificates" and No. 5,855,007, entitled "Electronic Coupon
Communication System." Currently, we are a defendant in five lawsuits filed by
competitors, each of which alleges that our technology or business methods
infringe on the competitor's patent. The lawsuits seek, among other things, to
prevent us from using methods that allegedly violate the competitors' patents.
In addition, some of these competitors have in the past, and may in the future,
name our customers as defendants in these suits, which may cause these
customers to terminate their relationships with us which, in turn, could harm
our business. While we intend to defend these actions vigorously, our efforts
may not be successful. Our failure to prevail in this litigation could result
in:

. our paying monetary damages, which could be tripled if the infringement
is found to have been willful;

. an injunction requiring us to stop offering our services in their current
form;

. our having to redesign our technology and business methods, which could
be costly and time-consuming even where a redesign is feasible; or

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<PAGE>

. our having to pay fees to license intellectual property rights, which may
result in unanticipated or higher costs.

Because of the ongoing technical efforts of others in our market and the
relatively recent introduction of our technology, we may be involved with one
or more of our competitors in legal proceedings to determine the parties'
rights to various intellectual property, including the right to our continued
ownership of our existing patents. Our failure to prevail in these proceedings
could harm our business.

We cannot predict whether other third parties will assert claims of
infringement or similar charges against us, or whether any past or future
claims will harm our business. For example, we were recently notified of two
patents believed to be relevant to our business. We recently purchased one of
these patents. We are currently evaluating the other patent for any potential
infringement issues and for any usefulness to our business. We expect that
other potentially relevant patents may come to our attention from time to time
in the future. We believe that participants in our market are increasingly
attempting to obtain patent protection for their business methods, and some
competitors such as Catalina Marketing and e-centives have announced that they
have applied for additional patents. We cannot predict when or if patents will
result from these efforts, or whether any of these third parties' patents will
cover aspects of our business. The details of currently pending United States
patent applications are not publicly disclosed until the patent is issued. Any
third-party claim, with or without merit, could be time-consuming, result in
costly litigation and damages, cause us to reduce or alter our services, delay
or prevent service enhancements or require us to enter into royalty or
licensing agreements.

In addition, legal standards regarding the validity, enforceability and
scope of intellectual property in Internet-related businesses are unproven and
continue to evolve. In this legal environment, we may be required to license
other parties' proprietary rights in an effort to clarify our ability to
conduct business or develop new services. For example, we have entered into two
license agreements with the owner of patents covering aspects of the issuance
of printed coupons and the conduct of interactive games and contests. Further
royalty or licensing agreements, if required, might not be available on terms
acceptable to us, or at all. If there is a successful claim of infringement
against us and we are unable to develop non-infringing technology or license
the infringed or similar technology on a timely basis, our business could be
substantially harmed. Please see "Business--Legal Proceedings."

Protecting our patents, trademarks and proprietary rights may be costly and may
distract our management

We regard the protection of our patent rights, copyrights, service marks,
trademarks, trade dress and trade secrets as critical to our future success.
However, the steps we take to protect these and other proprietary rights will
be costly, may require significant management resources and may be inadequate.
For example, we incurred approximately $600,000 in legal fees and expenses in
in the first quarter of 2000 to protect our proprietary rights. If we are
unsuccessful in protecting our proprietary rights, our business will be
seriously harmed.

Patents

We have two issued United States patents and three pending United States and
17 foreign patent applications directed to different aspects of our technology
and business processes. Nevertheless, it is possible that:

. our U.S. patents and any other patent we may obtain could be successfully
challenged by third parties, which could deprive us of the right to
prevent others from exploiting the electronic certificate issuing and
processing method or other inventions claimed in our current or future
patents;

. current and future competitors could devise new methods of competing with
our business that are not covered by our issued patents or any patents we
may obtain, or against which our patents and any other patent we may
obtain may be ineffective;

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<PAGE>

. our pending patent applications may not result in the issuance of
patents; and

. a third party may have or obtain one or more patents that cause specific
aspects of our business to be restricted or that require us to pay
license fees.

In addition, we cannot predict how recently enacted United States laws may
impact our proprietary rights. For example, the American Inventor's Protection
Act, which became law in October 1999, may grant partial or full immunity to
certain qualified methods of doing business from the full exclusionary rights
otherwise afforded to validly issued patents. There currently is no substantial
judicial precedent addressing this new law. We are also uncertain as to whether
countries other than the United States will grant patents for inventions
pertaining to Internet-related businesses, or as to the extent of protection
those foreign patents would afford if issued. As in the United States, the
legal standards applied abroad for intellectual property in Internet-related
businesses are evolving and unproven. Any ruling or legislation that reduces
the validity or enforceability of our patents will seriously harm our business.

We presently have six lawsuits pending against companies we believe have
infringed on our patents. This litigation has been and will continue to be
costly, and is likely to continue over the course of several years. These
lawsuits are at an early stage, and the outcome of these lawsuits, as well as
any other lawsuits we may file, may not be favorable to us. We may not prevail
and prevent others from infringing on our patents and using our proprietary
rights. Furthermore, some of the companies we have sued have filed
counterclaims or separate lawsuits against us seeking damages or to prevent us
from using features of our system or business, and competitors are taking steps
in the United States Patent and Trademark Office to contest our patent rights.
Other defendants and competitors may take similar actions. Please see
"Business--Legal Proceedings."

Trademarks, Copyrights and Trade Secrets

We rely on a combination of laws and contractual restrictions to establish
and protect our proprietary rights. We generally have entered into
confidentiality and invention assignment agreements with our employees and
contractors, and into non-disclosure agreements with parties with which we
conduct business, in order to limit access to and disclosure of our proprietary
information. These contractual arrangements and other steps we have taken to
protect our intellectual property may not prevent misappropriation of our
proprietary rights or deter independent third-party development or use of
similar intellectual property. In addition, we have registered and have applied
for registration of trademarks and service marks in the United States and in
other countries. However, our pending registrations might not be issued and our
registered marks may not prevent others from using similar marks.

Domain Names

We currently hold the Internet domain name coolsavings.com, as well as
various other related names. The requirements for holding domain names could
change. As a result, we may not acquire or maintain the "coolsavings.com"
domain name in all of the countries in which we conduct business or in which we
wish to conduct business in the future. This could impair our efforts to build
brand recognition and to increase traffic to our web site. We also could be
subject to disputes over our ownership of our domain names, which could be
costly and disruptive.

Licenses

In the future, we may license portions of our intellectual property,
including our issued patents, to third parties. To date, we have granted one
competitor immunity from suit under one of our patents, on the condition that
the competitor restrict its coupon distribution in ways acceptable to us.
Similarly, we have also licensed two other competitors under this same patent
on the condition that they restrict their coupon distribution in ways
acceptable to us. If the nature or scope of the immunity or licenses were
disputed, we would need to institute proceedings to enforce our rights under
these agreements or under our patents.

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We may lose business or incur liabilities to our advertisers due to
uncertainties or inaccuracies in our database information

It is important to our advertisers that we accurately track our members'
demographics, our delivery of offers and advertisements and, in some instances,
redemptions of incentives offered through CoolSavings. We have developed
systems designed to record information about our members' demographic profiles,
usage of our web site and other member information. If these systems do not
perform as intended, we may not be able to evaluate accurately our members'
household characteristics or the success of an advertiser's promotional
campaign. Advertisers' willingness to use our services depends in part on the
size of our membership base. In addition, in some cases our advertising rates
increase as our registered membership increases and some of our advertising
contracts require us to maintain or attain specified membership or usage
levels. It is difficult to report our membership numbers accurately because
some individuals may register more than once under different e-mail addresses,
and members of households already registered with us may subsequently register
themselves individually. Many of our members were registered on our web site by
other members of their households and tend to use our web site less frequently
than the members who registered them, if at all. Furthermore, we rely on the
accuracy of the demographic, income and other information provided by our
registering members. If advertisers perceive our tracking and evaluations to be
unreliable or if our members' self-reported information proves to be
inaccurate, we may lose current and potential advertisers, suffer erosion in
our advertising rates or face disputes over proper advertising charges.

Failure to promote and protect our brand will harm our business

We believe that strengthening our brand will be increasingly important
because our market is competitive and has low barriers to entry. Our ability to
promote and position our brand depends on the success of our marketing efforts
and whether we can provide high quality services that motivate our members to
use CoolSavings. To promote our brand, we will need to invest heavily in
marketing to create and maintain brand loyalty among members. We intend to
continue to expand our offline marketing efforts in such media as broadcast and
print, where we have limited experience. These initiatives have involved and
will continue to involve significant expenses. For instance, during the first
quarter of 2000, we spent approximately $5.1 million to promote our brand. The
outcome of our marketing efforts is difficult to predict. If our brand
enhancement strategy is unsuccessful, our business will be harmed. In addition,
we rely on co-branding relationships as sources for new members. These co-
branded programs function together with our advertisers' established
promotional vehicles to direct consumers to a special CoolSavings web address.
To the extent anyone we co-brand with is subject to negative publicity, the
goodwill associated with our brand may be harmed.

We may not be able to compete successfully against current and future
competitors

The market for e-marketing services is new, rapidly evolving and intensely
competitive. Barriers to entry for companies in our market are low, and current
and potential competitors can launch new web sites and e-marketing services at
relatively low cost.

Currently, we compete directly with online marketing companies in several
fields:

. direct marketers, such as FreeShop, LifeMinders and YesMail;

. incentive services, such as Cybergold, MyPoints and Netcentives;

. coupon providers, such as the online division of Catalina Marketing, e-
centives and planet U; and

. sweepstakes providers, such as Promotions.com.

We also face competition from traditional direct marketers, including
leading distributors of traditional coupons by mail or newspaper inserts and
from companies offering affinity rewards tied to responses to advertisements.
We expect that some of the leading distributors of traditional newspaper-insert
coupons,

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which have significant existing relationships with advertisers such as consumer
packaged goods companies, will compete against us directly by delivering their
promotions over the Internet. For example, Valassis Communications, a leading
distributor of newspaper-insert coupons, recently began to offer online
services. We also compete with other web sites, portals and advertising
networks, as well as traditional offline media such as television, radio and
print, for a share of advertisers' total advertising budgets and for consumers'
attention.

Many of our current and potential competitors have longer operating
histories, greater brand recognition, larger customer or user bases, and
significantly greater financial, marketing, technical and other resources than
we do. In addition, our competitors may be acquired by, receive investments
from or enter into other commercial relationships with larger, well-established
and well-financed companies. Therefore, some of our competitors may be able to
devote greater resources to marketing and promotional campaigns, adopt more
aggressive pricing policies and devote substantially more resources to web site
and systems development. They may also try to attract advertisers by offering
free services. Increased competition may cause us to lose brand recognition and
market share and could otherwise harm our business.

In the first quarter of 2000, approximately 37.6% of our revenues were derived
from our five largest advertisers, with overstock.com accounting for
approximately 10.9% of our revenues, and our revenues may be concentrated
among a limited number of advertisers in the future

During 1999, although no advertiser accounted for more than 6.8% of our
revenues, approximately 21.6% of our revenues were derived from our five
largest advertisers. In addition, during the first quarter of 2000,
approximately 37.6% of our revenues were derived from our five largest
advertisers, with our largest advertiser, overstock.com, accounting for
approximately 10.9% of our revenues. We believe that a relatively small number
of advertisers may account for a substantial portion of our revenues in future
periods. If any of our major advertisers were to reduce their advertising
purchases substantially or to stop using our services, our business would be
seriously harmed.

Many of our customers are emerging Internet companies that represent credit
risks

A significant portion of our revenues is derived from sales of advertising
to online retailers and service providers. For instance, in 1999, approximately
51% of our revenues were generated from promotional services used predominantly
by online retailers and service providers and approximately 22% of our revenues
were generated from promotional services used by companies with both an online
and offline presence. Many of these companies have limited operating histories,
are incurring substantial losses and have limited access to capital. Many of
these companies represent credit risks and could fail. If these advertisers
experience financial difficulties or fail to achieve commercial success, our
business will suffer.

If we do not manage our growth, our business will be seriously harmed

During 1999 and through the first quarter of 2000, we experienced rapid
growth in our operations and we anticipate that further expansion will be
required to address potential growth in our member and advertiser base and
market opportunities. During 1999, we expanded from 53 to 121 employees and,
during the first quarter of 2000, we expanded to 184 employees. Our new
employees include a number of managerial, marketing, planning, technical and
operations personnel who have not yet been fully integrated into our business,
and we expect to add additional personnel in the near future. This expansion
has placed a significant strain on our management, operational and financial
resources, and we expect that strain to continue.

To manage the expected growth of our operations, we will need to improve our
existing and implement new operational and financial systems, procedures and
controls. We will also need to expand our finance, administrative, client
services and operations staff and train and manage our growing employee base
effectively. Our current and planned personnel, systems, procedures and
controls may not be adequate to support our future operations. Additionally, we
recently relocated our headquarters to downtown Chicago,

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which could continue to be disruptive. We anticipate that this relocation will
cost approximately $450,000. If our new office space proves to be inadequate
for our growth, we may have to spend additional resources to accommodate our
operations.

We may also pursue acquisition or investment opportunities that would
complement our current business. If we are unable to make these acquisitions or
investments, or have difficulty integrating any new entities or technologies,
our business could be harmed. Our business, results of operations and financial
condition will suffer if we do not effectively manage our growth.

Our failure to attract, assimilate and retain highly skilled personnel would
seriously harm our business

Our future success depends on the continued services of our senior
management and other key sales and technical personnel, particularly Steven M.
Golden, our Chairman, Chief Executive Officer and President, David H. Jacobson,
our Executive Vice President, Finance and Chief Financial Officer, Matthew
Moog, our Executive Vice President, Sales and Marketing, John J. Adams, our
Executive Vice President, Operations and Technology, and Jonathan J. Smith, our
Executive Vice President, Strategic Business Development. We do not have long-
term employment agreements with any of our key personnel and maintain no "key
person" life insurance policies. The loss of the services of any of our
executive officers or other key employees would likely have a negative effect
on our business, results of operations and financial condition.

Our future success also depends on our ability to identify, attract, retain
and motivate highly skilled employees, particularly additional technical, sales
and marketing personnel. Competition for employees in our industry is intense.
We have occasionally encountered and expect to continue to encounter
difficulties in hiring and retaining highly skilled employees, particularly
qualified software developers for our web site and database systems. We may be
unable to retain our key employees or identify, attract, assimilate or retain
other highly qualified employees in the future, which may in turn harm our
business.

Our reputation and business could be damaged if we encounter system
interruptions or capacity limitations

We seek to generate a high volume of traffic and transactions on our web
site. Our database must also handle a large volume of member data and
information about members' usage of our web site. The satisfactory performance,
reliability and availability of our web site, database systems and network
infrastructure are critical to our reputation and our ability to attract and
retain large numbers of members. Our revenues depend on promotional offers
being readily available for members and our ability to process their coupon
downloads, e-mail responses or other transactions on our web site. Any system
interruptions that result in the unavailability of our service or reduced
member activity would impair the effectiveness of our service for advertisers.
Interruptions of service may also inhibit our ability to attract and retain
members, which in turn will hinder our sales and marketing efforts. We have
experienced periodic system interruptions, which may occur from time to time in
the future. For instance, for two weeks during the summer of 1998, we
experienced network access interruptions that lasted minutes at a time because
of a problem with the access routers in the local access network of our primary
Internet service provider.

Additionally, recent acts of sabotage, known as denial of service attacks,
on prominent, high traffic web sites have caused extended interruption of
services on those web sites. Like other operators of web sites, we could also
face system interruption or shutdown as a result of a denial of service attack.

A substantial increase in rate of traffic on our web site will require us to
expand and upgrade our technology, processing systems and network
infrastructure. Any unexpected upgrades could be disruptive and costly. In
addition, our existing systems may encounter unexpected problems as our member
base expands. Our failure to handle the growth of our databases could lead to
system failures, inadequate response times or corruption of our data, and could
negatively affect our business, results of operations and

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<PAGE>

financial condition. We may be unable to expand and upgrade our systems and
infrastructure to accommodate this growth in a timely manner. Any failure to
expand or upgrade our systems could damage our reputation and our business.

Furthermore, the increased use of the Internet has caused frequent
interruptions and delays in accessing and transmitting data over the Internet.
If the use of the Internet continues to grow rapidly, the Internet's
infrastructure may not continue to support the demands placed on it and its
performance and reliability may decline. Interruptions or delays in Internet
transmissions will disrupt our members' ability to access advertisers' offers
on our web site and our ability to send targeted e-mail, which may in turn
seriously harm our business and financial results. We also rely on web browser
technology to create and target promotional offers. If access to these web-
based systems is interrupted, our ability to disseminate new offers will be
impaired, which could cause lost revenues or disputes with our advertisers.

We rely on third-party service providers, and any disruption or failure in the
services they provide will harm our business

We rely on three third-party service providers to provide access to our web
site and support its operation. One of these third parties provides a co-
location facility that houses our web servers and our database, another is an
Internet service provider and the third provides telecommunication services.
Any interruption or failure in these services or a deterioration in their
performance could disrupt our business. Our support arrangements with these
providers are for a term of one year and may be canceled on 30 days notice in
certain circumstances. In the event these arrangements are terminated, we may
not be able to find alternative service providers on a timely basis or on terms
acceptable to us, or at all, which in turn would harm our business. In
addition, we rely on software licenses from third parties, such as two software
packages from L-Soft International, Inc. that we use to transmit e-mail to our
members. If these licenses are terminated, we may not be able to find and
install satisfactory alternate software on a timely basis or on terms
acceptable to us, or at all, which will harm our business.

Our business could be damaged by natural disasters and other unexpected
problems

Our success and our ability to attract new members and motivate our members
to respond to our advertisers' offers depend on the efficient and uninterrupted
operation of our computer and communications hardware systems. Our web servers
and the database behind our system as well as the servers we use to perform
data analysis are currently located at an Exodus Communications data center in
Oak Brook, Illinois. Currently, all site traffic is directed to the Exodus
system and we maintain a fully redundant version of our entire system at our
Chicago headquarters. The computer systems at each of our two hosting sites are
vulnerable to damage or interruption from floods, fires, power loss,
telecommunication failures, and other natural disasters. In addition, the
backup system in our Chicago facility has only two hours of emergency back-up
power. The occurrence of a natural disaster or other unanticipated problems at
our facility or at the Exodus facility could result in interruptions in or
degradation of our services. Our business interruption insurance may not
adequately compensate us for resulting losses.

Furthermore, the computer servers running our system are vulnerable to
general mechanical breakdown or component failure, computer viruses, physical
or electronic break-ins, sabotage, vandalism and similar disruptions, which
could lead to loss or corruption of data or prevent us from posting offers on
our web site, sending e-mail notifications of new offers or delivering coupons
or other certificates to our members. System failure or degradation resulting
from under-capacity or from any of these risks could harm our business.

We may be subject to claims as a result of our data analysis activities, which
could result in loss of members

The information in our database is an integral part of our business. We have
designed our technology infrastructure and services to allow us to aggregate
data regarding specific member behavior. We have a

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strict privacy policy that governs how we use information about our members. We
currently do not sell member-identifying information to third parties without
the consent of the member and have no plans to do so in the future.
Furthermore, our e-mail notices are only sent to members who have elected to
receive them. However, some people who receive promotions from us may still be
unhappy that we contacted them. In addition, while we strictly protect the
identity of individual members, we do provide advertisers with aggregate
information regarding member demographics, shopping preferences and past
behavior. Our use of this aggregated information may cause dissatisfaction
among our members or otherwise lead to negative publicity. There has been
substantial publicity, governmental investigations and litigation regarding
privacy issues involving the Internet and Internet-based advertising. To the
extent that our data mining activities conflict with any privacy protection
initiatives or if any private information is inadvertently made public, we may
be subject to legal claims. If our members become unhappy with our use of the
information in our database, or if we are subject to legal proceedings or
governmental investigations regarding our use of our database, our business
will be harmed.

Our business will be harmed if our online security measures fail

Because our efforts to attract and retain members depend on potential
members' expectations of privacy in using our services, our business could be
damaged by any security breach of our database or web site. We may be required
to spend significant capital and other resources to protect against security
breaches or to alleviate problems caused by these breaches. Someone
circumventing our security measures could misappropriate proprietary
information, corrupt our database or otherwise interrupt our operations. We
could also be subject to liability as a result of any security breach or
misappropriation of our members' personal data. This could include claims for
unauthorized purchases with credit card information, impersonation or other
similar fraud claims, as well as claims based upon other misuses of personal
information, such as unauthorized marketing. These claims could result in
costly litigation and could limit our ability to attract and retain advertisers
and members. Our security measures may fail to prevent security breaches. Any
failure to prevent security breaches will damage our reputation and harm our
business.

We may be liable for supplying inaccurate promotional information to consumers

We may face liability if the promotional information in the offers available
to our members is inaccurate. Our employees may make errors in posting our
advertisers' promotions. In addition, our advertisers may make errors entering
promotional offers directly into CoolSavings using our SavingsCenter software,
and we do not proofread or otherwise verify all of these offers. Any
liabilities which we may incur because of inaccurate information in the offers
we deliver could harm our business, results of operations and financial
condition. Additionally, any negative publicity generated as a result of
inaccurate information in the offers we deliver could damage our reputation and
diminish the value of our brand name.

We may be harmed if our advertisers fail to honor their promotions on our web
site or to comply with applicable laws

Our success depends largely upon retailers honoring our printed coupons and
upon advertisers reliably delivering and accurately representing the listed
goods and services. We have occasionally received, and expect to continue to
receive, complaints from our members about retailers' failure to honor our
coupons or about the quality of the goods and services featured in our
promotions. These complaints may be accompanied by requests for reimbursement
or threats of legal action against us. Any resulting reimbursements or related
litigation could be costly for us, divert management attention, increase our
costs of doing business or otherwise harm our business, financial condition or
results of operations. In addition, our advertisers' promotion of their goods
and services may not comply with federal, state and local laws. Our role in
facilitating advertisers' sales activities may expose us to liability under
these laws. If we are exposed to this kind of liability, we could be required
to pay substantial fines or penalties, redesign our web site or business
processes, discontinue some of our services or otherwise spend resources to
avoid liability.

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<PAGE>

Expanding internationally could be costly and disruptive

We intend to expand our business internationally, which will require
significant management attention and financial resources. Our international
expansion efforts will focus initially on Canada, Australia and the United
Kingdom, and we expect to expand into other countries in the long term. We have
no experience in operating internationally, and we may be unable to compete
effectively in international markets. We believe that our expansion efforts
into Canada, Australia, the United Kingdom or any other country will be subject
to a number of risks and uncertainties, including:

. potentially more stringent regulation and liability standards;

. unexpected changes in regulatory requirements;

. difficulties and costs of staffing and managing international operations;

. differing technological standards;

. varying and evolving legal standards for intellectual property covering
Internet-related inventions;

. inadequate protection of intellectual property in some countries;

. difficulties and costs involved in tailoring our services to local
advertising practices and customer preferences;

. difficulties in collecting accounts receivable through foreign legal
systems;

. fluctuations in the value of the U.S. dollar relative to other
currencies; and

. potentially adverse tax consequences.

Any of these factors could impair our ability to expand into international
markets, or could significantly increase our expenses in future periods. In
addition, we may pursue our international expansion strategy by entering into
joint ventures or licensing our intellectual property to third parties. We may
be unable to control these parties' activities, which could hinder our
expansion efforts and could damage our brand.

We are a defendant in a securities-related lawsuit

We have been named as a co-defendant in a lawsuit filed in 1999 against our
Chief Executive Officer by his ex-wife. This lawsuit is based upon the
plaintiff's sale of shares of our common stock to our Chief Executive Officer
in March 1998 and makes various allegations including fraud. The suit seeks
damages in excess of $6.5 million. While we believe that this lawsuit lacks
merit, a negative outcome in this litigation could subject us to substantial
damages and negative publicity. Our defense of this litigation, even if
successful, could be costly and time-consuming.

Risks Related To Our Industry

We depend on widespread acceptance of online direct marketing and promotions
and the continued growth of online commerce

Our success depends on the continued growth and acceptance by both consumers
and advertisers of online direct marketing and other promotional services
available through the Internet. Although incentive promotions and direct
marketing have been provided for many years through newspaper inserts, direct
mailing and other conventional marketing and sales channels, they have only
recently been offered on the Internet. Many of our current or potential
advertising customers, particularly traditional offline businesses, have little
or no experience using the Internet for advertising purposes, and may be
reluctant to spend money on our services. As a result, we face a longer sales
cycle when dealing with traditional offline businesses. At times, these sales
cycles can last more than a year. In addition, some traditional retailers may
not readily accept our computer-generated certificates as valid, in part
because of their cashiers' lack of familiarity with them and the perceived risk
that these coupons can be counterfeited. The other services we

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offer, including the use of targeted e-mails to alert consumers to savings
opportunities, also represent new marketing methods whose acceptance by
consumers and advertisers is less certain than traditional marketing methods.
Although we do not send unsolicited e-mail, known as "spam," negative public
perception associated with "spam" could reduce the demand for our services.

In addition, we are dependent upon the continued growth of the Internet as a
medium for commerce. Demand for services and products sold over the Internet is
uncertain for a number of reasons, including concerns related to the security
of transactions, network reliability and poor performance. Changes in or
insufficient availability of telecommunications services to support the
Internet also could result in slower response times and reduce usage of the
Internet. If use of the Internet does not continue to grow, grows more slowly
than expected or does not become a viable commercial marketplace, our business,
results of operations and financial condition will suffer.

Changes in consumer and advertiser trends could harm our business

We derive substantially all of our revenues from fees charged to advertisers
for our promotional services. Therefore, we will be affected by changing trends
in retail advertising, such as the trend away from periodic promotions and
toward "everyday low prices." In addition, many of our advertisers are national
retailers and suppliers of consumer products and services. These businesses are
affected by the general economy as well as consumer confidence, which has at
times diminished despite otherwise strong financial conditions. Consumer
spending also can be affected by trends related to lifestyle, such as changing
tastes in fashion or entertainment. Any decline in demand for our services as a
result of changes in consumer or advertiser trends could harm our business,
results of operations and financial condition.

We may not be able to keep up with rapid technological developments and
evolving industry standards

The Internet is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product announcements,
introductions and enhancements and changing consumer and advertiser demands.
Our future success will depend on our ability to adapt our services to rapidly
changing technologies and evolving industry standards and to continually
improve the performance, features and reliability of our services. For example,
we may be required to adapt our services to be compatible with Internet-
connected devices other than traditional personal computers, such as handheld
and wireless devices. We may also need to adapt to evolving standards resulting
from the convergence of the Internet, television and other media. The
widespread adoption of new Internet, networking or telecommunications
technologies or other technological changes could require us to incur
substantial expenditures to modify or adapt our services or infrastructure.

Federal, state and local governments may further regulate the Internet and
Internet advertising, which could substantially harm our business

The adoption or modification of laws or regulations relating to the Internet
and Internet-based advertising could harm our business. In particular, our
business could be severely damaged by any regulatory restrictions on our
collection or use of information about our members.

Laws and regulations that apply to Internet advertising and communications
and Internet users' privacy are becoming more prevalent. For example, the
United States Congress and Federal Trade Commission recently adopted laws and
regulations regarding the online collection and use of information from
children and the content of Internet communications, and various states
regulate e-mail marketing. However, even in areas where there has been some
legislative action, the laws governing the Internet remain largely unsettled.
There is no single government body overseeing our industry, and some existing
state laws have different and sometimes inconsistent application to our
business. It may take years to determine whether and how existing laws, such as
those governing intellectual property, privacy, libel, taxation and the need to
qualify to do

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business in a particular state, apply to the Internet and Internet advertising.
Also, we conduct trivia quizzes and other contests and sweepstakes on our web
site, which may be subject to gaming and sweepstakes laws. Our attempts to
comply with these laws may be inadequate, in part because the effect of these
laws on our activities is often unclear.

We expect that regulation of the Internet and Internet advertising will
intensify. New laws could slow the growth in Internet use and decrease the
acceptance of the Internet as a commercial medium, which would harm our
business. For example, a number of proposals to restrict the collection of
information about Internet users and to tax Internet-based transactions are
under consideration by federal, state, local and foreign governmental
organizations. A three-year federal moratorium on new state Internet sales tax
legislation is currently in effect, but it is scheduled to expire in 2001 and
does not preempt existing state tax laws. An increase in the taxation of online
transactions or other new regulations could increase our costs of doing
business or otherwise harm us by making the Internet less attractive for
consumers and businesses. In addition, existing laws such as those governing
intellectual property and privacy may be interpreted to apply to the Internet
and Internet advertising. Our strategy to expand into international markets
will likely subject us to additional regulation. Foreign countries, for example
those in the European Union, often regulate areas such as Internet user privacy
more strictly than the United States.

Any application of existing laws and regulations to the Internet, new
legislation or regulation that imposes stricter restrictions on privacy,
consumer protection or advertising practices, any government investigation of
our privacy practices or other business methods, or the application of laws
from jurisdictions whose laws do not currently apply to us could:

. create uncertainty in the marketplace that could reduce demand for our
services;

. limit our ability to collect and to use data from our members, which
could prevent us from attracting and retaining advertisers;

. result in expensive litigation, costly and disruptive efforts to respond
to governmental investigations and burdensome fines or penalties;

. require us to redesign our web site, registration process, database or
targeting methods, any of which could be expensive and disruptive to our
business;

. increase the cost of delivering our services to advertisers;

. require us to qualify to do business in additional jurisdictions, or
subject us to liability for having failed to qualify to do business
wherever our members reside;

. reduce the efficacy of our targeted promotional services; or

. in some other manner harm our business, results of operations and
financial condition.

Our business may suffer if the security of Internet commerce is compromised

Concerns about the security of transactions conducted on the Internet and
consumer privacy may inhibit the growth of the Internet generally, and online
commerce in particular. Any compromise of security involving Internet-based
transactions could result in negative publicity and deter people from using the
Internet or from using it to conduct transactions that involve transmitting
confidential information, such as registering for membership or purchasing
goods and services. This could harm our business because most of our
advertisers use our services to encourage people to purchase goods or services
on the Internet.

We may be adversely affected by problems relating to the Year 2000 issue

Problems associated with software and computer systems' use of two digits to
define the year, referred to as "Year 2000" issues, could harm our business.
Although to date we are not aware of any significant Year 2000 issues relating
to our principal internally developed programs and systems, or systems provided
to us by others, these systems could experience Year 2000 problems at any time
during 2000 and beyond. These

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<PAGE>

problems could disrupt our business and require us to incur significant,
unanticipated expenses to remedy them. They could also result in claims and
litigation against us, which could subject us to significant costs and could
require substantial attention from our management. Similarly, our business
could be severely harmed if our Internet service providers and other third
parties on which our services depend encounter Year 2000 issues, or if Year
2000 problems cause malfunctions at our facilities or at Exodus Communications'
facilities. In addition, Year 2000 problems may arise, limiting our members'
ability to access the Internet, "click-through" to our advertisers' web sites
or otherwise respond to offers we deliver, which would harm our operating
results.

Risks Related To This Offering

We may be unable to meet our future capital requirements

We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to satisfy our anticipated needs
for working capital, capital expenditures and business expansion for at least
the next 12 months. After that time, we may need additional capital. However,
if our growth rate exceeds our expectations, we may need to raise additional
funds sooner in order to fund expansion, to develop new or enhanced products or
services, to make strategic acquisitions or to respond to competitive
pressures.

We have two bank lines of credit for $7.5 million in the aggregate. We
currently do not have any other commitments for additional financing.
Additional financing may not be available to us on favorable terms or at all.
If adequate funds are not available on acceptable terms, we may not be able to
continue or expand our business operations. This in turn could harm our
business, results of operations and financial condition. If we raise additional
funds through the issuance of equity or convertible debt securities, the
percentage ownership of our existing stockholders will be diluted. Furthermore,
any new securities could have rights, preferences and privileges senior to
those of our common stock.

Our principal stockholders, executive officers and directors will beneficially
own approximately 60.8% of our outstanding common stock after this offering
and, therefore, will exercise significant control over us, and third parties
may be deterred from acquiring us

Our executive officers, directors and entities affiliated with them will, in
the aggregate, beneficially own approximately 60.8% of our outstanding common
stock immediately after this offering. As a result, these stockholders, if
acting together, will have the ability to control all matters requiring
approval by our stockholders, including the election and removal of directors
and the approval of any merger, consolidation or sale of all or substantially
all of our assets. This could discourage others from initiating potential
merger, takeover or other change of control transactions, which could cause our
stock price to decline.

In addition, provisions of our articles of incorporation, our bylaws and
Michigan law could make it difficult for a third party to acquire us or change
our management, even if doing so would be beneficial to our stockholders. These
provisions include:

. authorizing the board to issue one or more series of preferred stock;

. limiting the persons who may call special meetings of stockholders;

. prohibiting stockholder action by written consent;

. prohibiting stockholders to fill any vacancy on the board; and

. establishing advance notice requirements for nominations for election of
directors or for proposing matters that can be acted on by stockholders
at stockholder meetings.

Please see "Description of Capital Stock."

18
<PAGE>

Our stock price is likely to be highly volatile, and you may not be able to
sell your shares at a profit

The market price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations in response to factors such as the
following, many of which are beyond our control:

. quarterly variations in our operating results;

. operating results that vary from the expectations of securities analysts
and investors;

. changes in expectations as to our future financial performance, including
financial estimates by securities analysts and investors;

. changes in market valuations of other Internet companies;

. governmental regulation of the Internet or Internet advertising,
including any governmental inquiry of another Internet company;

. loss of a major advertiser;

. resolution of our pending or future patent litigation or other changes in
the status of our intellectual property rights;

. announcements of significant claims or legal proceedings against us;

. announcements of technological innovations or new services by us or our
competitors;

. announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;

. departures of key personnel; and

. future sales of our common stock.

Domestic and international stock markets often experience extreme price and
volume fluctuations. The market prices of the securities of Internet-related
and technology companies, particularly following an initial public offering,
are often highly volatile and subject to wide fluctuations that bear little
relation to actual operating performance of these companies. As a result,
investors may be unable to sell shares of our common stock at or above the
price they paid for the stock.

In the past, some companies that have experienced volatility in the market
price of their stock have been the object of securities class action
litigation. Securities class action litigation involving CoolSavings would
result in substantial costs and a diversion of management's attention and
resources, and would harm our stock price.

19
<PAGE>

Substantial sales of our common stock could cause our stock price to fall

After this offering, we will have approximately 38,678,021 shares of common
stock outstanding, or 39,173,021 shares if the underwriters' over-allotment
option is exercised in full. The 3,300,000 shares sold in this offering, or
3,795,000 shares if the underwriters' over-allotment option is exercised in
full, will be freely tradable without restriction or further registration under
the federal securities laws unless purchased by our affiliates. The remaining
35,378,021 shares of common stock outstanding after this offering will be
available for sale in the public market as follows:

<TABLE>
<CAPTION>
Number of Shares Date of Availability for Sale
---------------- -----------------------------
<S> <C>
323,035 Immediately after the date of this prospectus
120,120 At various times after the date of this prospectus and prior to
180 days after the effective date of the registration statement
containing this prospectus
32,065,353 180 days after the effective date of the registration statement
containing this prospectus (subject in some cases to volume
limitations)
2,869,513 At various times after 180 days following the effective date
of the registration statement containing this prospectus
</TABLE>

The above table assumes the effectiveness of lock-up arrangements with the
underwriters under which substantially all of our stockholders have agreed not
to sell or otherwise dispose of their shares of common stock. Most of the
shares that will be available for sale after the expiration of the lock-up
period will be subject to volume limitations because they are held by our
affiliates. In addition, Chase Securities Inc. may remove these lock-up
restrictions prior to the expiration of the lock-up period without prior
notice.

If our stockholders sell substantial amounts of common stock in the public
market, the market price of our common stock could fall. These sales also might
make it more difficult for us to sell equity or equity-related securities in
the future at a time and price that we deem appropriate. Please see "Shares
Eligible for Future Sale."

Our management has broad discretion over the use of the offering proceeds and
might not use them in a manner which yields a favorable return

The net proceeds from this offering are estimated to be approximately $20.4
million after deducting the estimated underwriting discounts and estimated
offering expenses. Our management will retain broad discretion over how to use
the proceeds of this offering. Our investments of these proceeds may not yield
a favorable return, and purchasers of common stock in this offering may
disagree with the manner in which our management elects to use these proceeds.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to our future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "could," "anticipates,"
"expects," "plans," "estimates," "intends," "believes," "predicts" and similar
expressions. Our actual results could differ materially from those discussed in
these statements. Factors that could contribute to these differences include,
but are not limited to, those discussed above under "Risk Factors" and
elsewhere in this prospectus. We do not undertake to update any of the forward-
looking statements after the date of this prospectus to conform these
statements to actual results, unless required by applicable securities laws.

20
<PAGE>

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the 3,300,000 shares of
common stock offered by us will be approximately $20.4 million, or $23.6
million if the underwriters' overallotment option is exercised in full,
assuming an initial public offering price of $7.00 per share, and after
deducting estimated underwriting discounts and commissions and other estimated
offering expenses.

The principal purposes of this offering are to increase our working capital,
create a public market for our common stock, facilitate our future access to
the public capital markets and increase our visibility in our marketplace. We
intend to use the net proceeds of this offering for general corporate purposes,
including operational expenses, such as sales and marketing, and capital
expenditures. We presently anticipate that we will spend between $13.0 million
and $16.0 million of the net proceeds on sales and marketing activities in 2000
to promote our brand and attract members and advertisers. We further anticipate
that we will spend between $2.0 million and $4.0 million of the net proceeds on
capital expenditures primarily associated with expanding our hardware
infrastructure and upgrading our technology and systems. The remainder of the
net proceeds will be used for general corporate purposes, including working
capital. We may also use a portion of the net proceeds, currently intended for
general corporate purposes, to acquire or invest in complementary businesses,
technologies, products or services. We have no present plans or commitments and
we are not currently engaged in negotiations for any such transactions. Our
management will retain broad discretion in the allocation of the net proceeds
of this offering.

Pending these uses, we intend to invest the net proceeds in short-term,
investment grade, interest-bearing securities.

DIVIDEND POLICY

We have never declared nor paid any cash dividends on our common stock. We
currently anticipate that we will retain any future earnings for the
development and operation of our business. In addition, our credit facility
currently prohibits the payment of cash dividends on our capital stock.
Accordingly, we do not anticipate paying cash dividends on our capital stock in
the foreseeable future.

21
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000:

. on an actual basis;

. on a pro forma basis after giving effect to the conversion of all
outstanding convertible subordinated notes into 793,076 shares of common
stock assuming an initial public offering price of $7.00 per share and
the conversion of all outstanding Series A convertible preferred stock
into 2,822,133 shares of common stock, both of which will occur
automatically upon completion of this offering, and the inclusion of a
beneficial conversion features of $19,868,000 related to the Series A
convertible preferred stock and $555,000 related to the conversion of the
convertible subordinated notes, both of which have been reflected as
additional paid-in capital; and

. on the same pro forma basis as adjusted to reflect the receipt of the
estimated net proceeds from our sale of 3,300,000 shares of common stock
in this offering at an assumed initial public offering price of $7.00 per
share.

You should read the following table with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
March 31, 2000
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(unaudited, in thousands)
<S> <C> <C> <C>
Convertible subordinated and long-term debt,
including current portion..................... $ 5,821 $ 825 $ 825
Stockholders' equity:
Series A convertible preferred stock, no par
value, 5,000 shares authorized; 2,197.650
issued and outstanding actual; no shares
issued and outstanding pro forma; no shares
issued and outstanding pro forma, as
adjusted.................................... 4,967 -- --
Common stock, no par value, 69,000,000 shares
authorized and 31,762,812 shares issued and
outstanding actual; 69,000,000 shares
authorized and 35,378,021 shares outstanding
pro forma; 100,000,000 shares authorized and
38,678,021 shares outstanding pro forma, as
adjusted.................................... 27,948 52,812 73,212
Additional paid-in capital................... 10,237 (4,109) (4,109)
Notes receivable from related parties........ (2,817) (2,817) (2,817)
Accumulated deficit.......................... (28,750) (29,305) (29,305)
-------- -------- --------
Total stockholders' equity................. 11,585 16,581 36,981
-------- -------- --------
Total capitalization..................... $ 17,406 $ 17,406 $ 37,806
======== ======== ========
</TABLE>

Share information is based on our shares outstanding as of March 31, 2000,
and excludes:

. 6,352,562 shares of common stock reserved for issuance under our 1997
Stock Option Plan, of which 4,282,600 shares were subject to outstanding
options as of March 31, 2000 at a weighted average exercise price of
$4.23 per share;

. 324,737 shares of common stock subject to options granted outside of our
1997 Stock Option Plan and outstanding as of March 31, 2000 at an
exercise price of $0.28 per share; and

. 635,256 shares of common stock reserved for issuance under our 1999 Non-
Employee Director Stock Option Plan, of which 63,250 shares were subject
to outstanding options as of March 31, 2000 at a weighted average
exercise price of $4.69 per share.

22
<PAGE>

DILUTION

Our pro forma net tangible book value as of March 31, 2000 was approximately
$15.7 million, or $0.45 per share of common stock. Pro forma net tangible book
value per share is equal to our net tangible assets less total liabilities,
divided by the pro forma number of shares of common stock outstanding as of
March 31, 2000, after giving effect to the conversion of outstanding
convertible subordinated notes into 793,076 shares of common stock and the
conversion of 2,197.650 shares of outstanding Series A convertible preferred
stock into 2,822,133 shares of common stock. After giving effect to the sale of
3,300,000 shares of common stock in this offering at an assumed initial public
offering price of $7.00 per share, less estimated underwriting discounts and
commissions and offering expenses, our pro forma as adjusted net tangible book
value at March 31, 2000 would have been approximately $37.0 million, or $0.96
per share of common stock. This amount represents an immediate increase in pro
forma net tangible book value of $0.51 per share to existing stockholders and
an immediate dilution in net tangible book value of $6.04 per share to new
investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $7.00
Pro forma net tangible book value per share at March 31, 2000... $0.45
Increase per share attributable to new investors................ 0.51
-----
Pro forma net tangible book value per share after the offering.... 0.96
-----
Dilution per share to new investors............................... $6.04
=====
</TABLE>

The following table summarizes, as of March 31, 2000 on the pro forma basis
described above, the total number of shares of common stock purchased from us,
the total consideration paid to us, and the average price per share paid by our
existing stockholders and by new investors purchasing shares from us in the
offering, at an assumed initial public offering price of $7.00 per share,
before deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 35,378,021 91.5% $52,811,750 69.6% $ 1.49
New investors........... 3,300,000 8.5 23,100,000 30.4 7.00
---------- ----- ----------- -----
Total............... 38,678,021 100.0% $75,911,750 100.0%
========== ===== =========== =====
</TABLE>

If the underwriters exercise their over-allotment option in full, the number
of shares of common stock held by new investors will be increased to 3,795,000
or 9.7% of the total number of shares of common stock to be outstanding
immediately after this offering.

Share information is based on our shares outstanding as of March 31, 2000,
and excludes:

. 324,737 shares of common stock subject to options granted outside of our
1997 Stock Option Plan and outstanding as of March 31, 2000 at an
exercise price of $0.28 per share; and

23
<PAGE>

SELECTED FINANCIAL DATA

The statement of operations data for the three month periods ended March 31,
1999 and 2000 and the balance sheet data as of March 31, 2000 are derived from
unaudited financial statements included in this prospectus. The balance sheet
data as of March 31, 1999 are derived from unaudited financial statements that
do not appear in this prospectus. The statement of operations data set forth
below for the years ended December 31, 1997, 1998 and 1999 and the balance
sheet data as of December 31, 1997 and 1998 have been derived from our
financial statements, which have been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon is included elsewhere in this
prospectus. The statement of operations data for the period ended December 31,
1996 and the balance sheet data as of December 31, 1996 and 1997 are derived
from audited financial statements that do not appear in this prospectus. The
statement of operations data for the period from inception through December 31,
1995 are derived from unaudited financial statements that do not appear in this
prospectus.

You should read the selected financial data set forth below with the
financial statements and related notes and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which are included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
Inception Three Months Ended
through Year Ended December 31, March 31,
December 31, ---------------------------------------------- ----------------------
1995 1996 1997 1998 1999 1999 2000
------------ ---------- ---------- ---------- ---------- ---------- ----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues........... $ -- $ -- $ 110 $ 1,143 $ 12,916 $ 890 $ 8,086
Cost of revenues....... -- -- 148 428 1,818 256 1,069
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit (loss).... -- -- (38) 715 11,098 634 7,017
Operating expenses:
Sales and
marketing.......... -- 253 1,202 2,494 17,838 1,325 10,265
Product
development........ -- 131 719 1,217 4,503 998 1,605
General and
administrative..... 16 499 766 2,350 5,890 1,005 2,860
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses............. 16 883 2,687 6,061 28,231 3,328 14,730
---------- ---------- ---------- ---------- ---------- ---------- ----------
Loss from operations.. (16) (883) (2,725) (5,346) (17,133) (2,694) (7,713)
Interest income
(expense), net..... -- 9 (3) 40 265 70 75
Amortization of debt
discount........... -- -- (4) (435) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net loss.............. $ (16) $ (874) $ (2,732) $ (5,741) $ (16,868) $ (2,624) $ (7,638)
========== ========== ========== ========== ========== ========== ==========
Historical loss per
common share, basic
and diluted.......... $ (0.00) $ (0.06) $ (0.15) $ (0.27) $ (0.57) $ (0.10) $ (0.40)
========== ========== ========== ========== ========== ========== ==========
Weighted average
shares used to
compute historical
basic and diluted
loss per common
share................ 10,962,809 13,697,334 18,266,572 21,547,177 29,804,681 25,249,484 31,729,705
========== ========== ========== ========== ========== ========== ==========
Pro forma loss per
common share, basic
and diluted
(unaudited).......... $ (1.24) $ (0.79)
========== ==========
Shares used to compute
pro forma basic and
diluted loss per
common share
(unaudited).......... 30,058,750 35,340,788
========== ==========

</TABLE>

<TABLE>
<CAPTION>
December 31, March 31,
--------------------------------- ---------------
1996 1997 1998 1999 1999 2000
------- ------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents.............. $ 449 $ 64 $ 4,895 $17,489 $ 7,419 $ 9,543
Working capital
(deficit)................ 283 (886) 3,788 15,703 5,759 6,907
Total assets.............. 466 353 6,371 29,590 9,786 25,122
Long-term debt, including
current portion.......... 300 241 300 878 473 825
Total stockholders' equity
(deficit)................ (4) (775) 4,594 19,120 6,969 11,585
</TABLE>

24
<PAGE>

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

You should read the following discussion of our financial condition and
results of operations with the financial statements and the related notes
included elsewhere in this prospectus. This discussion contains forward-looking
statements based on our current expectations, assumptions, estimates and
projections. These forward-looking statements involve risks and uncertainties.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of numerous factors, many of which are
described in the "Risk Factors" section and elsewhere in this prospectus. We
are under no duty to update any of the forward-looking statements after the
date of this prospectus to conform these statements to actual results, unless
required by applicable securities laws.

Overview

We provide a comprehensive set of e-marketing solutions used by online and
offline advertisers to build one-to-one customer relationships. Under our
established brand, advertisers can deliver, target and track a wide array of
incentives, including printed and electronic coupons, personalized e-mails,
rebates, samples, sales notices, gift certificates, contests and banner
advertisements to promote sales of products or services in stores or online. We
were incorporated in December 1994 as Interactive Coupon Marketing Group, Inc.
and changed our corporate name to coolsavings.com inc. in November 1998. From
inception through February 1997, our primary activities consisted of initiating
sales and marketing efforts, developing our business model, building our
software and hardware infrastructure, developing and protecting our
intellectual property, raising capital and recruiting employees. We launched
our web site in February 1997 and thereafter began generating revenues.

We generate substantially all of our revenues by providing online marketing,
or e-marketing, services to our advertisers. Approximately 1% of our revenues
are generated from royalty and license fees and other miscellaneous sources. We
charge our advertisers on a variety of bases, the most common of which include:

. the number of offers delivered to members, commonly sold on a cost per
thousand, or CPM, basis;

. the number of times members click on an incentive linking the member to
the advertiser's web site (known as a click-through response);

. the number of purchases made or qualified leads generated; and

. the number of registered members in our database.

Our pricing depends upon a variety of factors, including, without
limitation, the degree of targeting, the duration of the advertising contract
and the number of offers delivered. The degree of targeting refers to the
number of identified household or member attributes, such as gender, age or
product or service preferences, used to select the audience for an offer. Our
advertising rates often are negotiated on a case-by-case basis. Generally, the
rates we charge our advertisers increase as the degree of targeting and
customization increases. Revenues subject to time-based contracts are
recognized ratably over the duration of the contract. For contracts based on
certain performance or delivery criteria, revenues are recognized in the month
performance is delivered to the customer. Most of our advertising contracts
have stated terms of less than one year and include earlier termination
provisions. In 1999, our largest advertiser accounted for approximately 6.8% of
our revenues and our top five advertisers together accounted for approximately
21.6% of our revenues. For the three months ended March 31, 2000, our largest
advertiser accounted for approximately 10.9% of our revenues and our top five
advertisers together accounted for approximately 37.6% of our revenues.

Our revenues for each period depend on a number of factors, including the
number of advertisers sending promotional offers to our members, the size of
our membership base and the responsiveness of our members to each promotion. We
believe that our revenues will be subject to seasonal fluctuations in
accordance with general patterns of retail advertising spending, which is
typically highest during the fourth quarter. In addition, expenditures by
advertisers tend to be cyclical, reflecting overall general economic conditions
and consumer buying patterns.

25
<PAGE>

Our cost of revenues consists primarily of Internet connection charges, web
site equipment depreciation, salaries of operations personnel and other related
operations costs. Although our cost of revenues as a percentage of revenues
declined significantly for the year ended December 31, 1999, we have recently
expanded, and expect to continue to expand significantly, our web server
capacity and our investment in data mining tools and personnel. This will
require us to commit relatively large fixed expenses in advance of potential
future revenues. As a result, we expect to incur substantially higher cost of
revenues during future periods. We have added, and anticipate that we will
continue to add, new advertisers, necessitating this investment in
infrastructure. Due to these anticipated increases in our web server capacity
and other infrastructure expenditures, our fixed costs to operate our business
will rise and our gross profit will suffer in the near term until increased
revenues are realized. The demand for our services is subject to seasonal
variations. We will likely experience declines in our gross margin from quarter
to quarter.

We have incurred significant losses since our inception. As of March 31,
2000, our accumulated deficit was approximately $28.7 million. We expect to
continue to incur significant operating losses and capital expenditures. In
particular, we expect to invest heavily in sales and marketing activities,
hiring new personnel, enhancing services and technology, expanding and
relocating facilities and defending intellectual property rights. These sales
and marketing activities will include both online advertising on third-party
web sites, such as banner advertisements, to directly acquire member
registrations and offline advertising, such as television and radio
advertisements and billboards. In addition, we presently have six lawsuits
pending against companies we believe have infringed our patent, and are
defending against counterclaims in these lawsuits and against five lawsuits
filed against us. This litigation has been, and will continue to be, costly and
is likely to continue over the course of several years. For instance, during
the first quarter of 2000, we spent approximately $650,000 in legal fees and
expenses on this litigation. Because litigation is unpredictable, future
expenses may exceed that amount and any amounts we budget for litigation costs
in the future.

Results of Operations

From our inception until December 31, 1996, we were engaged in start-up
activities and incurred approximately $899,000 of operating expenses. These
operating expenses primarily consisted of investments in technology and
personnel. We earned no revenues during this period. As a result, we believe
comparisons between the period ended December 31, 1996 and the year ended
December 31, 1997 are not meaningful.

The following is a table of our results of operations for the years ended
December 31, 1997, 1998 and 1999 and the three months ended March 31, 1999 and
2000 expressed as a percentage of net revenues represented by each line item.
Figures below are rounded to the nearest whole percentage, and thus line items
representing subtotal and total percentages may differ, due to rounding, from
the sum of the percentages for each line item.

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
----------------------------- -------------------
1997 1998 1999 1999 2000
--------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues.............. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues.......... 134.4 37.4 14.1 28.7 13.2
--------- ------- ------- -------- -------
Gross profit (loss)....... (34.4) 62.6 85.9 71.3 86.8
Operating expenses:
Sales and marketing..... 1,097.2 218.3 138.1 148.9 127.0
Product development..... 657.1 106.5 34.9 112.2 19.8
General and
administrative......... 699.7 205.6 45.6 113.0 35.4
--------- ------- ------- -------- -------
Total operating
expenses............... 2,454.0 530.4 218.6 374.1 182.2
--------- ------- ------- -------- -------
Loss from operations...... (2,488.4) (467.8) (132.7) (302.8) (95.4)
Other income:
Interest income
(expense), net......... (2.1) 3.5 2.1 7.9 0.9
Amortization of debt
discount............... (3.8) (38.1) -- -- --
--------- ------- ------- -------- -------
Net loss.................. (2,494.3)% (502.4)% (130.6)% (294.9)% (94.5)%
========= ======= ======= ======== =======
</TABLE>

26
<PAGE>

Three Months Ended March 31, 2000 and 1999

Net Revenues

Net revenues increased 809% to $8.1 million in the three months ended March
31, 2000, from $890,000 in the three months ended March 31, 1999. The increase
in net revenues was primarily due to an increase in the number of advertisers
to 106 at March 31, 2000 from 48 at March 31, 1999, increases in our
advertising rates due to expanded service offerings, and application of those
rates to an expanded membership base. Our member base grew to over 6.6 million
registered members at March 31, 2000 from approximately 2.7 million at March
31, 1999.

Cost of Revenues

Cost of revenues increased to $1.1 million in the three months ended March
31, 2000, from $256,000 in the three months ended March 31, 1999. Gross profit
increased as a percentage of net revenues to 86.8% in the three months ended
March 31, 2000, from 71.3% in the three months ended March 31, 1999. The
absolute dollar increase in cost of revenues was primarily due to building our
server and networking infrastructure in response to our increased member base,
the increased activity of our members and the hiring of 37 additional
operations personnel to service our increased advertiser base. The increased
costs were approximately $500,000 for server and networking infrastructure and
$300,000 for operations personnel costs. However, our gross profit as a
percentage of net revenues increased because cost of revenues increased more
slowly than net revenues.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of
advertising, salaries of sales and marketing personnel, commissions paid to our
sales personnel and other marketing related expenses. Sales and marketing
expenses increased to $10.3 million, or 127% of net revenues, in the three
months ended March 31, 2000, from $1.3 million, or 149% of net revenues, in the
three months ended March 31, 1999. The $9.0 million increase in sales and
marketing expenses was primarily due to increased expenses associated with
promotional and marketing efforts, the hiring of 63 additional sales and
marketing personnel and increased sales commissions. Our promotional and
marketing efforts included online advertising, such as banner advertisements on
high-traffic web sites, used to acquire member registrations. This online
advertising is placed primarily with operators of high-traffic web sites who
are paid a fee on the basis of each member registration we receive, each
impression delivered or each click-through to our web site. We also place some
online advertising with operators of lower traffic web sites that generally
receive a fee for each member registration we receive. We spent approximately
$2.8 million for online advertising in the three months ended March 31, 2000,
up from approximately $700,000 in the three months ended March 31, 1999. Fees
to operators of web sites are expensed in the periods incurred. Our promotional
and marketing efforts also included offline advertising, such as television and
radio advertisements and billboards. While we incurred no offline advertising
expenses in the three months ended March 31, 1999, we incurred offline
advertising expenses of approximately $5.1 million in the three months ended
March 31, 2000. Sales and marketing expenses as a percentage of net revenues
decreased due to the growth in net revenues. We expect that sales and marketing
expenses will grow in absolute dollars for the foreseeable future as we pursue
an aggressive customer acquisition strategy and hire additional sales and
marketing personnel.

Product Development. Product development expenses consist primarily of
salaries of software development personnel and expenditures related to third-
party technical consultants. Product development expenses increased to $1.6
million, or 19.8% of net revenues, in the three months ended March 31, 2000,
from $1.0 million, or 112% of net revenues, in the three months ended March 31,
1999. The absolute dollar increase in product development expenses was
primarily due to the hiring of 21 additional personnel and associated software
costs related to enhancing the features and functionality of our web site.
Product development expenses decreased as a percentage of net revenues due to
the growth in net revenues. To date, all product development expenditures have
been expensed as incurred. We believe that significant investments in product
development will be necessary to remain competitive, and as a result we expect
our product development expenses will increase in absolute dollars for the
foreseeable future.

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General and Administrative. General and administrative expenses consist
primarily of salaries and related expenses for executive and administrative
personnel, facilities, professional services, including legal expenses relating
to protection of our patent rights, travel and other general corporate
expenses. General and administrative expenses increased to $2.9 million, or
35.4% of net revenues, in the three months ended March 31, 2000, from $1.0
million, or 113% of net revenues, in the three months ended March 31, 1999. The
absolute dollar increase in general and administrative expenses was primarily
due to the hiring of 15 additional personnel to support the growth of our
business, recruiting costs related to filling key management positions and
legal fees. General and administrative expenses decreased as a percentage of
net revenues due to the growth in net revenues. We expect that general and
administrative expenses will grow in absolute dollars for the foreseeable
future as a result of a higher occupancy expense associated with our recent
move to larger office space and as we continue to expand our administrative
systems to support our planned growth and operations as a public company.

Years Ended December 31, 1999 and 1998

Net Revenues

Net revenues increased 1,030% to $12.9 million in 1999, from $1.1 million in
1998. The increase in net revenues was primarily due to an increase in the
number of advertisers from 38 at December 31, 1998 to 124 at December 31, 1999,
increases in our advertising rates due to expanded service offerings, and
application of those rates to an expanded membership base. Our member base grew
from approximately 1.9 million registered members on December 31, 1998 to over
5.0 million on December 31, 1999.

Cost of Revenues

Cost of revenues increased to $1.8 million in 1999, from $428,000 in 1998.
Gross profit increased as a percentage of net revenues to 85.9% in 1999, from
62.6% in 1998. The absolute dollar increase in cost of revenues was primarily
due to building our server and networking infrastructure in response to the
growth in activity by our members and the hiring of 18 additional operations
personnel to service our increased advertiser base. The increased costs were
approximately $660,000 for infrastructure and $830,000 for operations personnel
costs. However, our gross profit as a percentage of net revenues increased
because cost of revenues increased more slowly than net revenues.

Operating Expenses

Sales and Marketing. Sales and marketing expenses increased to $17.8
million, or 138% of net revenues, in 1999, from $2.5 million, or 218% of net
revenues, in 1998. The $15.3 million increase in sales and marketing expenses
was primarily due to increased expenses associated with promotional and
marketing efforts, the hiring of 22 additional sales and marketing personnel
and increased sales commissions. We spent approximately $4.1 million for online
advertising in 1999, up from approximately $1.3 million in 1998. While we
incurred no offline advertising expenses in 1998, we incurred offline
advertising expenses of approximately $9.4 million in 1999. Sales and marketing
expenses as a percentage of net revenues decreased due to the growth in net
revenues.

Product Development. Product development expenses increased to $4.5 million,
or 34.9% of net revenues, in 1999, from $1.2 million, or 106% of net revenues,
in 1998. The absolute dollar increase in product development expenses was
primarily due to the hiring of 14 additional personnel and associated software
costs related to enhancing the features and functionality of our web site and
costs incurred in our Year 2000 readiness effort. Product development expenses
decreased as a percentage of net revenues due to the growth in net revenues.

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<PAGE>

General and Administrative. General and administrative expenses increased to
$5.9 million, or 45.6% of net revenues, in 1999, from $2.3 million, or 206% of
net revenues, in 1998. The absolute dollar increase in general and
administrative expenses was primarily due to the hiring of 14 additional
personnel to support the growth of our business, recruiting costs related to
filling key management positions and legal fees. General and administrative
expenses decreased as a percentage of net revenues due to the growth in net
revenues.

Interest Income, Net

Interest income, net, includes income from our cash and investments and
expenses related to our financing obligations. Interest income, net, increased
to $264,000 in 1999, from $40,000 in 1998. The increase in interest income was
primarily due to a higher average cash balance during 1999 as a result of the
receipt of $8.5 million from the sale of shares of our common stock, $5.0
million from the sale of our convertible subordinated notes and $20.0 million
from the sale of shares of our Series A convertible preferred stock.

Income Taxes

As of December 31, 1999, we had approximately $23.5 million of federal and
state net operating loss carryforwards, which may be available to offset future
taxable income. Our federal and state net operating loss carryforwards expire
beginning in 2018. From our formation through June 1, 1998, we elected, under
Section 1362(a) of the Internal Revenue Code, to be treated as an S-corporation
for income tax purposes. Accordingly, we were not liable for federal income
taxes during that period and any taxable income was included in the tax returns
of our stockholders.

Years Ended December 31, 1998 and 1997

Net Revenues

Net revenues increased 944% to $1.1 million in 1998, from $110,000 in 1997.
The increase in net revenues was primarily due to an increase in the number of
advertisers, from six at December 31, 1997 to 38 at December 31, 1998, and an
increase in our advertising rates and application of those rates to our
expanded membership base.

Cost of Revenues

Cost of revenues increased to $428,000 in 1998, from $147,000, in 1997.
Gross profit increased as a percentage of net revenues to 62.6% in 1998. We do
not believe gross profit comparisons with 1997 are meaningful. In 1997, we
incurred fixed costs associated with the development of our technology
infrastructure and services prior to the realization of meaningful revenues. We
were able to use this investment in 1998 to generate revenues which accounted
for our increased gross profit.

Operating Expenses

Sales and Marketing. Sales and marketing expenses increased to $2.5 million,
or 218% of net revenues, in 1998, from $1.2 million, or 1,097% of net revenues,
in 1997. The absolute dollar increase in sales and marketing expenses was
primarily due to the addition of a direct sales force which we began building
in the second half of 1998 and increases in customer acquisition and marketing
expenses. Sales and marketing expenses as a percentage of net revenues
decreased due to the growth in net revenues.

Product Development. Product development expenses increased to $1.2 million,
or 106% of net revenues, in 1998, from $720,000, or 657% of net revenues, in
1997. The absolute dollar increase in product development expenses was
primarily due to the hiring of eight additional personnel and related costs to
support enhancement of our web site features and functionality. Product
development expenses as a percentage of net revenues decreased due to the
growth in net revenues.

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<PAGE>

General and Administrative. General and administrative expenses increased to
$2.3 million, or 206% of net revenues, in 1998, from $766,000, or 700% of net
revenues, in 1997. The absolute dollar increase in general and administrative
expenses was primarily due to the hiring of four additional general and
administrative personnel and increases in professional services and facility
expenses to support the growth of our operations. General and administrative
expenses as a percentage of net revenues decreased due to the growth in net
revenues.

Interest Income (Expense), Net

Interest income, net, increased to $40,000 in 1998, from an interest
expense, net, of $2,000 in 1997. This increase was primarily due to a higher
average cash balance as a result of the receipt of $10.7 million from the sale
of shares of our common stock in 1998.

Amortization of Debt Discount

Amortization of debt discount increased to $435,000, or 38.1% of net
revenues, in 1998, from $4,000, or 3.8% of net revenues, in 1997. In December
1997 and during the period between January and April 1998, we entered into loan
agreements with detachable warrants. Amortization of debt discount is a non-
cash charge representing the difference between the stated value and the fair
market value of the loan.

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<PAGE>

Quarterly Results of Operations

The following table presents unaudited quarterly statement of operations
data for each of the four quarters ended December 31, 1999 and the quarter
ended March 31, 2000, as well as the percentage of net revenues represented by
each item. This information is unaudited and in our opinion has been prepared
substantially on the same basis as our audited financial statements, which are
included elsewhere in this prospectus. All necessary adjustments, consisting
only of normal recurring adjustments, have been included in these amounts to
present fairly the unaudited quarterly results of operations. You should read
these quarterly data together with our audited financial statements and the
related notes. Our future operating results are difficult to predict and may
vary significantly. Accordingly, you should not view our results of operations
for any period as an indication of our results of operations for any future
period.

<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31,
1999 1999 1999 1999 2000
--------- -------- --------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues.............. $ 890 $ 2,075 $ 3,276 $ 6,675 $ 8,086
Cost of revenues.......... 256 343 416 803 1,069
------- ------- ------- ------- -------
Gross profit.............. 634 1,732 2,860 5,872 7,017
Operating expenses:
Sales and marketing..... 1,325 1,819 4,887 9,807 10,265
Product development..... 998 1,129 1,136 1,240 1,605
General and
administrative......... 1,005 1,281 1,636 1,968 2,860
------- ------- ------- ------- -------
Total operating expenses.. 3,328 4,229 7,659 13,015 14,730
------- ------- ------- ------- -------
Loss from operations...... (2,694) (2,497) (4,799) (7,143) (7,713)
Interest income, net.... 70 105 74 16 75
------- ------- ------- ------- -------
Net loss.................. $(2,624) $(2,392) $(4,725) $(7,127) $(7,638)
======= ======= ======= ======= =======
<CAPTION>
As a Percentage of Net Revenues
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues.............. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue........... 28.7 16.5 12.7 12.0 13.2
------- ------- ------- ------- -------
Gross profit.............. 71.3 83.5 87.3 88.0 86.8
Operating expenses:
Sales and marketing..... 148.9 87.7 149.2 146.9 127.0
Product development..... 112.2 54.4 34.7 18.6 19.8
General and
administrative......... 113.0 61.7 49.9 29.5 35.4
------- ------- ------- ------- -------
Total operating expenses.. 374.1 203.8 233.8 195.0 182.2
------- ------- ------- ------- -------
Loss from operations...... (302.8) (120.3) (146.5) (107.0) (95.4)
Interest income, net.... 7.9 5.0 2.3 0.2 0.9
------- ------- ------- ------- -------
Net loss.................. (294.9)% (115.3)% (144.2)% (106.8)% (94.5)%
======= ======= ======= ======= =======
</TABLE>

Our quarterly results are subject to fluctuations. For example, for the
quarter ended September 30, 1999, we initiated an offline advertising campaign
in which we spent $2.6 million. This resulted in a significant increase, in
absolute dollars as well as a percentage of net revenues, in our sales and
marketing expenses.

Our future operating results may vary significantly due to a variety of
factors, many of which are beyond our control. In addition, we believe that
quarter-to-quarter comparisons of our operating results may not be meaningful.
Factors affecting our operating results may include:

. advertisers' demand for and use of our services;

. seasonality of our advertisers' offers and their budgeting cycles;

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<PAGE>

. performance-based contracts, under which our revenues depend on members'
responsiveness to advertisers' offers;

. loss of advertisers, many of which are under short-term contracts with
us;

. changes in our pricing policies or those of our competitors;

. the mix of advertisements and services we sell;

. our members' demand for our services and response to the offers we make
available to them;

. litigation costs;

. the timing and amount of costs related to the expansion of our
operations; and

. changes in and the timing of the costs we incur to attract members.

As a result, our revenues are difficult to forecast. In addition, we plan to
significantly increase our sales and marketing, product development and other
operating expenses. We may be unable to reduce spending quickly enough to
offset any unexpected revenue shortfall, which could cause our business and
operating results to suffer. Our limited operating history and rapid growth
also make it difficult for us to assess the impact of seasonal factors on our
business. Advertising sales in traditional media, such as television and radio,
generally are lower in the first and third calendar quarters of each year. Our
revenues may be affected by these seasonal factors and by any seasonal and
cyclical patterns in Internet advertising spending which may develop. Please
see "Risk Factors--Our quarterly financial results may fluctuate, making our
future financial results difficult to forecast."

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through the
private placement of our capital stock and convertible subordinated notes. As
of March 31, 2000, we had approximately $9.5 million in cash and cash
equivalents.

Net cash used in operating activities was $17.4 million, $4.8 million and
$2.4 million in the years ended December 1999, 1998 and 1997, respectively. Net
cash used in operating activities was $6.5 million and $2.0 million in the
three month periods ended March 31, 2000 and 1999, respectively. In each
period, net cash used in operating activities resulted primarily from our net
losses and increases in accounts receivable, partially offset by increases in
accounts payable and accrued expenses. During the three months ended March 31,
2000, operating cash was also used for costs related to this offering.

Net cash used in investing activities was $3.7 million, $1.1 million and
$225,000 in the years ended December 31, 1999, and 1998 and 1997, respectively.
Net cash used in investing activities was $1.5 million and $600,000 in the
three month periods ended March 31, 2000 and 1999, respectively. In each
period, net cash used in investing activities resulted from purchases of
property and equipment and amounts used in developing our database.

Net cash provided by financing activities was $33.6 million, $10.7 million
and $2.2 million in the years ended December 31, 1999, 1998 and 1997,
respectively. Net cash provided by financing activities was $50,000 and $5.2
million in the three month periods ended March 31, 2000 and 1999, respectively.
Net cash provided by financing activities in the three months ended March 31,
2000 resulted from proceeds from the exercise of stock options, partially
offset by repayment of short-term debt. Net cash provided by financing
activities in the years ended December 31, 1999, 1998 and 1997 and the three
months ended March 31, 2000 resulted primarily from the cash proceeds received
from our issuance of shares of common stock. We invested these proceeds in
money market funds with maturities not exceeding 90 days. We intend to continue
investing our excess cash in similar securities.

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<PAGE>

On January 31, 2000, we obtained a $6.5 million bank line of credit. We had
no borrowings under this line of credit as of March 31, 2000. $3.5 million of
the line is payable in installments at an interest rate of prime plus 1.25%.
The final installment payment is due on June 30, 2003. $3.0 million of the line
of credit is a promissory note due on April 30, 2001 at an interest rate of
prime plus 1%. Borrowings under this line of credit are collateralized by trade
accounts receivable and fixed assets. In May 2000, we borrowed $1,482,000 on
this bank line of credit. The proceeds were used to purchase new equipment.

As of March 31, 2000 we also had a bank line of credit of $1.0 million.
Borrowings under this line of credit were $825,000. This credit facility
provides for a $1.0 million revolving facility for capital equipment purchases,
and bears interest at the bank's prime rate plus 1.0% which, as of March 31,
2000, was 10.0%. Borrowings under this line of credit are collateralized by the
specific equipment purchased. Principal balances under these borrowings are
repaid over 36 or 48 months.

In October 1999, Lend Lease International Pty. Limited purchased
approximately $3.5 million of our convertible subordinated notes, under its
commitment entered into in April 1999. In December 1999, we completed a private
placement of 2,197.650 shares of Series A convertible preferred stock for an
aggregate purchase price of $20.0 million.

Our future liquidity and capital requirements depend on numerous factors,
including market acceptance of our services, the resources we devote to
marketing and selling our services and our investment in developing and
promoting our brand. We have experienced a substantial increase in capital
expenditures since our inception consistent with the growth in our operations
and staffing, and we anticipate that this will continue for the foreseeable
future. We recently relocated our headquarters to downtown Chicago and we
anticipate that this relocation will cost approximately $450,000. Additionally,
we will continue to evaluate possible investments in businesses, products and
technologies, and plan to expand our sales and marketing programs and conduct
more aggressive brand promotions. We currently anticipate that the net proceeds
of this offering, together with our existing line of credit and available
funds, will be sufficient to meet our anticipated needs for working capital and
capital expenditures for at least the next 12 months. If this offering is not
completed, we have the ability to revise our business plan to reduce our
operating costs, including deferring new hiring and reducing discretionary
advertising expenditures, so that cash on hand coupled with cash flow from
operations will be sufficient to satisfy our anticipated capital needs for at
least the next twelve months. Based on our current expectations, we believe we
will not require additional funds beyond the twelve months following the
offering. However, if our growth rate exceeds our expectations, if we make
strategic acquisitions, if we expend significant funds to develop new or
enhanced products or services, or if this offering is not completed, we may
require additional equity or debt financing. Additional financing may not be
available to us on favorable terms, or at all. If adequate funds are not
available on acceptable terms, we may not be able to continue or expand our
business operations which could harm our business, results of operations and
financial condition.

Year 2000 Compliance

Problems associated with software and computer systems' use of two digits to
define the year and the inability of computer systems to process dates
occurring in the year 2000 or beyond are referred to as "Year 2000" issues.
Although to date we have not experienced any significant Year 2000 issues
relating to our principal internally developed programs and systems, or systems
provided to us by others, these systems could experience Year 2000 problems at
any time during 2000 and beyond. These problems could disrupt our business and
require us to incur significant, unanticipated expenses to remedy them. We
cannot guarantee that our Internet service providers and other third parties on
which our services depend will not encounter Year 2000 issues.

In 1998, we engaged an independent consultant to assess the Year 2000
readiness of our systems and software. The consultant concluded its work in
1999. The items we examined for Year 2000 issues include: our web site and its
supporting software and hardware; our telecommunications systems and networking

33
<PAGE>

infrastructure; the systems supporting our office facilities; and the hardware
and software used by our employees, vendors and partners. We also sought
assurances on Year 2000 compliance from our telecommunications providers,
material hardware and software vendors, the management company for our office
facilities and other key third-party vendors.

As of March 31, 2000, we had incurred approximately $300,000 in connection
with identifying and evaluating Year 2000 compliance issues and mitigating
identified deficiencies. However, if future expenses relating to Year 2000
compliance are higher than anticipated, it could have a material adverse effect
on our business, results of operations and financial condition.

Recent Accounting Pronouncements

In May 2000, the Emerging Issues Task Force ("EITF") released Issue No. 00-
2, "Accounting for Web Site Development Costs". EITF Issue No. 00-2 establishes
standards for determining the capitalization or expensing of incurred costs
relating to the development of Internet web sites based upon the respective
stage of development. The Issue is effective for fiscal quarters beginning
after June 30, 2000 (including costs incurred for projects in process at the
beginning of the quarter of adoption). We are currently evaluating the effect
of EITF No. 00-2 on our financial results.

In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements", which provides additional
guidance in applying generally accepted accounting principles for revenue
recognition. We believe our revenue recognition policy is in compliance with
SAB No. 101.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and hedging activities and
requires recognition of all derivatives as assets or liabilities in the
statement of financial position and measurement of those instruments at fair
value. The statement, as amended, is effective for fiscal years beginning after
June 15, 2000. As we do not have any derivative instruments or hedging
activities, SFAS No. 133 is not expected to have a material effect on our
financial results.

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<PAGE>

BUSINESS

CoolSavings provides a comprehensive set of e-marketing services used by
online and offline advertisers to build one-to-one customer relationships.
Under our established brand, advertisers can deliver, target and track a wide
array of incentives, including printed and electronic coupons, personalized e-
mail, rebates, samples, sales notices, gift certificates, contests and banner
advertisements, to promote their products or services. We deliver these
incentives to targeted segments of our large audience of consumers through our
web site, coolsavings.com, or direct e-mails. These incentives can be redeemed
by our members either online or offline depending on the particular promotion.
Our members have registered their demographic profiles with us on our web site
and have given us permission to deliver personalized savings opportunities to
them. As of March 31, 2000, we had over 6.6 million registered members,
representing nearly 5.4 million households. Although we keep our members'
identities private, we analyze our database of member registration and shopping
preference data with sophisticated data analysis, targeting and tracking
technology to help our advertisers execute effective promotional campaigns. As
our members use the incentives we offer, we gather extensive shopping behavior
and preference information. This information further enriches our member
database allowing us to provide our advertisers with a higher degree of
targeting. The top ten advertisers from which we generated the most revenues in
1999 were Bigstar, eNutrition.com, First USA, InsWeb, Kids "R" Us, MCI
WorldCom, overstock.com, petopia.com, petsmart.com and SmarterKids.com. During
1999, no advertiser accounted for more than 6.8% of our revenues. During the
first quarter of 2000, no advertiser accounted for more than 10.9% of our
revenues.

Industry Background

The Growth of the Internet as an Advertising and Direct Marketing Medium

The Internet has emerged as a unique global communications medium, enabling
millions of people to interact and conduct business electronically.
International Data Corporation, commonly referred to as IDC, estimates that the
number of Internet users worldwide will grow to approximately 502 million by
the end of 2003 from approximately 196 million in 1999. The rapid expansion of
the Internet combined with its business efficiencies have led to significant
growth in electronic commerce and attracted a broad group of buyers and
sellers. IDC estimates that the total value of commerce over the Internet will
increase to $1.3 trillion in 2003 from $111 billion in 1999. IDC further
estimates that the percentage of Internet users buying goods and services on
the Internet will increase to approximately 36% in 2003 from approximately 24%
at the end of 1999.

The growth of Internet use has prompted e-commerce companies to increase
their spending on advertising and direct marketing on the Internet. It has also
spurred traditional businesses to devote larger portions of their marketing
budgets to advertising and direct marketing online. During the early stages of
the development of online advertising, most businesses used the Internet to
build general brand awareness and for customer acquisition. Consequently, the
rapidly growing market for Internet marketing was dominated by banner
advertising and unsolicited e-mails sent to lists of consumers. While these
advertisements may be targeted to a limited extent by the content on the web
page or by demographic information, they generally have not permitted the
advertiser to re-contact the consumer unless the consumer makes a purchase or
voluntarily provides personal information.

The Emergence of E-Marketing Services

Advertisers use direct marketing in order to generate a specific response or
action from a targeted group of consumers. Traditionally, advertisers have used
direct mail, telemarketing and direct response television, or infomercials, in
their direct marketing campaigns. These campaigns typically provide consumers
with access to coupons, rebates, sweepstakes and loyalty programs. These types
of promotions have been recognized in offline marketing as a means to develop
and foster long-term customer relationships. According to the Direct Marketing
Association, expenditures on direct marketing, including both online direct
marketing and traditional direct marketing, are expected to grow to $240.7
billion in 2004 from $176.5 billion in 1999.

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<PAGE>

Effective and efficient means of marketing have become more important as
advertisers seek to lower the costs of customer acquisition and retention. As
pressures from competitors raise these acquisition and retention costs,
businesses seek sophisticated and cost-effective direct marketing methods to
increase the loyalty and lifetime value of a customer through repeat visits and
purchases. At the same time, advertisers are sensitive to the growing concerns
of consumers and the government regarding the privacy of personal data and the
intrusion of unwanted advertising messages. Online and offline advertisers are
increasingly using the Internet for direct marketing to exploit its unique
interactivity and cost advantages relative to traditional methods. The Direct
Marketing Association projects that online direct marketing expenditures will
increase from approximately $1.3 billion in 1999 to approximately $8.6 billion
in 2004.

. deliver personalized promotions to those consumers most likely to
respond;

. deliver multiple forms of targeted and controlled promotions at a
household or individual level (for instance, many online advertisers seek
to reach a target audience of women, who are the principal shoppers in
approximately 72% of U.S. households, according to Mediamark Research
Inc.);

. allow businesses to take advantage of consumer-specific data, such as
registration and transaction information;

. provide marketing messages with promotions that motivate immediate
consumer response;

. enable tracking of campaign performance and shopper behavior allowing an
advertiser to learn and adjust campaigns in near real time; and

. enable data mining to target consumers based on demographic data and
shopping preference information learned from past activity.

In our experience, while online companies are the most frequent users of our
e-marketing services, traditional offline businesses such as national retailers
and consumer packaged goods manufacturers are increasingly seeking to use our
e-marketing services to drive offline sales and build customer relationships.
In addition, through e-marketing services, offline businesses that also sell
online can potentially integrate their offline and online marketing campaigns
and provide their customers the choice of shopping in stores or online.

Market Opportunity for a Comprehensive E-Marketing Solution

To date, advertisers wishing to employ e-marketing services have had to rely
on several different service providers in order to deliver a range of specific
promotional or advertising services. In addition, many e-marketing services
have been focused only on online promotional activities and have not provided
an integrated online and offline solution.

We believe there is a substantial market opportunity for a comprehensive e-
marketing solution that provides the following:

. a single source of both online and offline promotional services for
advertisers that extends over the different stages of a customer
relationship, from first-time purchase to repeat usage;

. access to a large audience of consumers who are actively seeking savings
and who are willing to share demographic data that can be used to better
target and personalize their shopping experiences;

. one-stop shopping for consumers with access to a wide range of both
online and offline promotional offers from high-quality advertisers;

. an established and consistent brand that consumers find credible; and

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<PAGE>

. the ability to track consumer demographics and shopping preferences on an
individual and household level and to leverage that information across a
large consumer base to make promotions increasingly targeted and cost-
effective.

The CoolSavings Solution

CoolSavings provides a comprehensive set of e-marketing services used by
online and offline advertisers to build one-to-one customer relationships.
Under our established brand, advertisers can deliver, target and track a wide
array of incentives, including printed and electronic coupons, personalized e-
mails, rebates, samples, sales notices, gift certificates, contests and banner
advertisements, to promote products or services. We deliver these incentives to
targeted segments of our large audience of consumers, who have registered their
demographic profiles with us on our web site and have given us permission to
deliver personalized savings opportunities redeemable in stores or online. With
our members' permission, we store detailed member demographic information,
track shopping preferences and behavior, and with advertiser cooperation can
track redemption of these incentives back to the member households. In doing
so, we have developed an extensive database of information that we use for the
benefit of our advertisers. Although we keep our members' identities private,
we analyze our database information with sophisticated data analysis, targeting
and tracking technology to help our advertisers execute effective promotional
campaigns. The diversity of the incentives we offer and the variety of places
where our members can redeem them further enrich our member profiles for future
data analysis, known as data mining, and targeting.

Our web site, which is designed to be a leading destination for consumer
savings, offers convenient and personalized incentives for goods and services
from a broad range of advertisers, including online retailers, national brick-
and-mortar chains, consumer packaged goods manufacturers, large consumer
service providers and neighborhood businesses. Our member base grew from
approximately 1.9 million registered members as of December 31, 1998 to over
6.6 million as of March 31, 2000, representing nearly 5.4 million households.
In a recent national survey by NPD Online Research, an independent market
research firm, 51% of online coupon users reported that they had used our site.
Of those who have registered their households with us, 62% are women, the
target consumers preferred by many of our advertisers. According to Media
Metrix, for March 2000, CoolSavings was the eleventh most frequently visited
shopping web site and the eighth most frequently visited shopping site by
women.

The benefits to advertisers of using CoolSavings include:

. Single source e-marketing solution. We offer advertisers a single source
for a full range of promotions that can be redeemed online or in stores
and targeted to any stage in the customer relationship. These tools
include printable coupons and gift certificates for brick-and-mortar
stores, electronic certificates for online purchases, mail-in rebates,
lead generation for trial subscriptions and samples, notices of ongoing
sales where no certificate is necessary, promotional contests and banner
advertisements. Advertisers can also use combinations of incentives for
customized promotions.

. Access to a large audience of qualified, receptive shoppers. Advertisers
are able to access our large audience of consumers, who visit our web
site looking for shopping values and are willing to provide demographic
data about themselves and others in their households. Of those who have
registered their households with us, 62% are women, the target consumers
for many of our advertisers. Approximately 77% of our registered
households have requested e-mail bulletins about offers available on our
web site.

. Cost-effective performance. We believe we provide advertisers with a
cost-effective solution for customer acquisition and retention. Unlike
most other direct marketing providers, we can immediately learn from each
campaign, regardless of the promotions used, to make future campaigns
more effective, to re-target responding members with more focused offers
and to convert new customers into loyal customers. We continually update
our members' profiles by tracking their page views of and responses to
promotions and, upon the request of an advertiser, the redemption of
incentives. Our tracking capabilities allow our advertisers to target
information about ongoing sales

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promotions and events to the appropriate customers at the appropriate
times. For example, an advertiser can retarget our members who have
previously responded to its offers with follow-on promotions.

. Insight into shopping behavior. Most advertisers have only limited means
of tracking their customers' preferences and behavior. With our member's
permission, we acquire information from the initial member registration,
as well as from each time a member uses our web site or e-mail to respond
to offers. As a result, we have much richer data to analyze for insight
into the interests and preferences of an advertiser's customers.
Advertisers can use our consolidated database to find predictive
correlations that can lead to more effective targeting regardless of the
types of promotions used. This information can be used by our advertisers
to acquire new customers with appropriate incentives, refine follow-on
promotions and identify co-promotion opportunities.

. Ability to coordinate online and offline promotions. For advertisers that
have both an online and offline presence, we can identify prospective
customers and then track their activities whether shopping in stores or
online. We enable these businesses to provide incentives, such as coupons
and gift certificates, redeemable in their offline stores. If the
advertiser returns the redeemed coupons to us, we can track the
redemption of in-store coupons by scanning their unique bar codes and
adding the shopping preference information to our database. For
advertisers with only an online presence, we enable them to provide
offline incentives, such as coupons and gift certificates, redeemable in
the stores of their promotional partners. We also help offline companies
without a web presence identify and reward customers with online
incentives that their customers can bring into a store or use on another
web site.

. Lower total cost of ownership and improved time to market. Our
investments in infrastructure, technology and technical personnel allow
our advertisers to deploy their promotional campaigns without the need to
lease, buy or continually upgrade the required hardware and software
systems, providing significant cost savings over an in-house solution. In
addition, using both our infrastructure and our e-marketing processes and
expertise, we enable our advertisers to deploy their e-marketing
campaigns rapidly and reliably. As a result, our advertisers can remain
focused on their core businesses while still providing compelling offers
to consumers.

Strategy

Our objective is to be the leading provider of comprehensive e-marketing
services for advertisers. Key elements of our strategy to achieve this
objective are to:

. Extend brand awareness and expand member and advertiser base. We believe
strong brand recognition is a powerful tool to attract new advertisers
and members. We plan to increase brand recognition with offline
advertising campaigns that include television, print and outdoor media.
We also intend to continue to promote our brand online, with advertising
campaigns on high-traffic web sites and cooperative campaigns with
advertisers and affiliate networks. We believe our marketing efforts will
expand our member base while preserving its current demographic
characteristics, which will strengthen the services we provide to
advertisers. As we expand our membership, we expect that our service will
be attractive to additional advertisers, which will in turn make our site
more attractive to additional consumers by providing a broader array of
available incentives.

. Enhance member profiles. As we make available additional promotional
offers and services on our web site and through e-mail, we believe the
shopping activities of our members will increase. As our members use our
site and respond to advertiser promotions, we continually enrich our
database and develop deeper data for predictive modeling and targeting
purposes. We plan to continue upgrading our tracking and data mining
tools to provide additional insight into member interests and shopping
preferences.

. Broaden promotional service offerings. In order to provide a complete e-
marketing solution for advertisers, we plan to expand the promotional
services we offer, covering all phases of the customer

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relationship. For example, we recently launched our CoolSavings Rewards
Loyalty program, a loyalty program for single advertisers and affinity
groups, that incorporates popular promotions such as mileage incentives
and rewards points. For offline promotions, we plan to connect coupon
discounts and points to credit cards and frequent shopper cards. In
addition, we plan to offer our promotional services and expertise to
advertisers to target within their own customer databases.

. Provide business-to-business promotions. We believe that advertisers seek
a cost-effective and targeted medium to reach small businesses and
independent professionals. Through minor modifications to our
registration page and database template, we intend to develop a business-
to-business service offering in which small businesses can register with
us to receive incentives appropriate for their needs and interests. We
plan to offer our advertisers the ability to deliver targeted business-
to-business product and service promotions using database information
such as type of business, size, geography and past purchasing behavior.

. Pursue third-party relationships. We intend to pursue relationships to
further build our brand, expand our reach to consumers and advertisers
and enhance our services. Our current relationships include Super Coups,
a subsidiary of ADVO, which uses its franchise sales force to sell
CoolSavings services to neighborhood merchants, First USA Bank, which
issues co-branded CoolSavings credit cards and provides us with
cardholder demographic and purchasing data, The Parenting Group, which
will promote our CoolParenting program targeting special promotional
programs to expectant or new parents, and Netcentives Inc., which will
manage and maintain our CoolSavings Rewards Loyalty program through which
we award points to our members when they participate in certain
promotions on our web site.

. Pursue international expansion. As Internet use becomes more prevalent in
other nations, we see market opportunities to extend our services to
advertisers and consumers in those countries. Our international expansion
efforts will focus initially on Canada, Australia and the United Kingdom.
These international initiatives could take the form of licensing
agreements, joint ventures or other arrangements. As a result of
international expansion, we plan to expand our database to include
consumers in other countries, which we expect will be attractive to
international advertisers and online advertisers seeking to reach an
international audience.

Services

We provide a comprehensive e-marketing solution to our advertisers. We
deliver a broad array of incentives through placement on our web site or by
targeted e-mail, to enable our advertisers to motivate consumers to purchase
products and services. Our advertisers also use our incentive programs to
build the loyalty of their existing customers. Using our tracking, targeting
and data mining capabilities, advertisers can coordinate and enhance their
online and offline promotional campaigns for customer acquisition, retention
and loyalty.

Delivery of Incentives

We deliver a variety of promotional incentives to targeted segments of our
member database on behalf of our advertisers. Our advertisers generally pay
for our services based on a cost-per-thousand offers delivered. The cost of
our promotional services generally rises with the degree of targeting or
customization we provide because, in our experience, these efforts generally
result in higher response rates for the advertisers. In addition, we charge
some of our advertisers based upon the performance of the promotional offers
that we deliver for them. Approximately 80% of our current advertising
contracts have stated terms of less than three months.

The coolsavings.com web site, which is branded as a leading destination
site for consumer savings, offers convenient and personalized incentives for a
broad array of products and services. To use our service, consumers register
with us, provide demographic data about their households and shopping
interests and choose whether to receive our direct e-mails. As members,
consumers can obtain relevant incentives redeemable online or in stores from a
broad range of advertisers, including online retailers, national brick-

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and-mortar chains, consumer packaged goods manufacturers, large consumer
service providers and neighborhood businesses. We track our members' page views
of and responses to promotions in our member database. Upon an advertiser's
request and with the advertiser's cooperation, we can also track the redemption
of incentives.

The promotional services that we provide our advertisers include:

. CoolOffers. Online and offline businesses can deliver incentive offers,
including printed and electronic coupons, rebates, sales notices and gift
certificates, to targeted segments of our membership via our web site and
our targeted e-mail. Targeting is performed by demographic profile and
shopping preferences. CoolSavings members are presented a version of our
web site tailored to their personal interests, where they can "save, then
shop." Specialized sections of our web site are dedicated to specific
categories such as grocery items, regional mall stores and neighborhood
businesses. Our members can also use a search feature to find offers by
product or service category.

. CustomerDirect e-mail. Approximately 77% of our registered households as
of March 31, 2000 had elected to receive periodic e-mails notifying them
of offers that may be of personal interest. This allows us to send
targeted e-mails to these members at the request of our advertisers on
the basis of these members' demographic profiles and shopping
preferences. We can deliver e-mails either with a single promotion by a
specific advertiser or in shared messages, and appear either in full-
graphic HTML format or as plain text with web links, depending on
members' preferences and the capabilities of their computers. The e-mails
are targeted either through pre-selected criteria or using customized
models we develop for particular campaigns.

. FreeStuff. We provide advertisers a method of generating leads by
providing free samples of their products or services to our members.
These offers, such as trial magazine subscriptions, free product samples
and free Internet services, appear in the "FreeStuff" section of our web
site and are targeted by demographic profile and shopping preferences. To
receive free samples, members voluntarily provide the advertiser with
contact information such as name, e-mail and mailing address, as well as
other data about their households. Advertisers may also request secure
credit card information from members as necessary. We can tailor the
submission form to advertisers to ask additional questions of
participating members, to further qualify the leads we generate.

. CoolGames. We provide advertisers with a highly targeted method for
generating brand awareness combined with games that are also engaging for
our members. We help advertisers create trivia contests and branded
sweepstakes specific to their marketing strategies and tailored for their
targeted profiles. We can also deliver targeted e-mails announcing a
contest to generate immediate traffic and consumer response. At the
conclusion of a member's interaction with a contest page, the
advertiser's brand is reinforced by an automatic e-mail.

. CoolBanners. We provide advertisers the opportunity to promote their
brands or offers throughout the web site with banner advertisements,
buttons, text links and prominently sponsored content areas. These can be
targeted based on the demographics and preferences of the viewing
members.

Customer Retention

We offer customer acquisition and reward programs that can be customized for
any product or service. We deliver initial sign-up incentives, such as gift
certificates, tailored to the target consumers, and then administer ongoing
benefits such as loyalty coupons. We also provide co-branded programs that
function together with advertisers' own established promotional vehicles, such
as their web sites, printed circulars, in-package flyers and in-store signs.
These vehicles direct consumers to a special CoolSavings web address. Consumers
entering our web site for the first time through a co-branded address will
experience our entire web site as co-branded each time they return. These
members can also receive customer-only offers targeted specifically to the
customers of the party co-branding with us, either on the co-branded web site
or in promotional e-mails. Our co-branding advertisers can use our
infrastructure to build loyalty with their own customers. We benefit by adding
those advertisers' customers to our database as CoolSavings members.

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Data Mining and Research Services

By analyzing individual, demographic and correlative information in our
database, we provide advertisers several methods to gain insight into customer
preferences and profiles. We can also apply our data mining infrastructure to
analyze the databases of our advertisers upon their request. We use
sophisticated data mining tools to analyze member data to help our advertisers
execute effective promotional campaigns. We use data-mining information to
create predictive models to make future targeting even more effective. Using e-
mail, we can also contact and survey members who have responded to a specific
offer. In addition, we are working with NFO Research, a leading provider of
consumer research to manufacturers of consumer packaged goods, to create member
panels that will provide major brands with quick feedback on new products and
services.

Sales and Marketing

We have built a sales organization dedicated to developing and maintaining
close relationships with advertisers and advertising agencies. Our sales force,
which included 28 full-time employees as of March 31, 2000, is organized
regionally and by specific industry and advertiser segments. We plan to open
sales offices in New York and San Francisco during 2000. To support our sales
efforts, we advertise regularly in trade publications, send regular mailings to
key marketing executives and exhibit at major trade shows. We intend to form
relationships with companies with existing local sales forces in order to
further penetrate local advertising markets. The first of these relationships
is our alliance with Super Coups, in which Super Coups salespersons are selling
our co-branded services to local advertisers.

Our marketing department, which included 13 employees as of March 31, 2000,
is dedicated to promoting the CoolSavings brand, developing our member content
and acquiring members for our service. To attract members, we rely on a variety
of advertising methods, including a national offline branding campaign that
makes use of television, print, outdoor media and radio, as well as online
advertising that includes online banner advertisements on high-traffic web
sites such as portals and search engines. Our advertising features our
identifiable piggy-bank logo character as our "CEO." We also have developed
network affiliate programs, in which other companies send consumers to the
CoolSavings web site and receive a fee per each resulting member registration.
Many of our advertisers provide links from their own web sites that click
through to offers on CoolSavings.

We also have used our advertising relationships to gain additional exposure
for the CoolSavings name and piggy-bank character in retail chains and shopping
malls and on the Internet. In some cases, we have the opportunity to feature
CoolSavings on store signs and materials, such as bags and receipts.

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Representative Advertisers

The following is a list of advertisers from which we derived at least
$40,000 of revenue in 1999, by general industry category:

Specialty and Mass Health and Grocery Entertainment and Media
Retail Allherb.com Barnesandnoble.com
Art.com eNutrition.com Bigstar
Birthday Express Healthshop.com CDNow
Bolt More.com Chuck E. Cheese's
Cooking.com MotherNature.com Doubleday Interactive
Furniture.com NetGrocer EveryCD
Hewlett Packard YourPharmacy.com The Parenting Group
Internet Shopping Reel.com
Network

Manufacturers Uproar.com
JC Penney DaimlerChrysler AG US News & World Report
Kmart

Johnson & Johnson
Marshall's / TJ Maxx Kodak Children's Products
overstock.com

BabyCenter.com
Paper Studio Financial and eToys
PayLess Shoes Communications KBKids.com
PC Flowers & Gifts E-homeCredit Corp. Kids "R" Us
petopia.com First USA SmarterKids.com
petsmart.com H&R Block Toys "R" Us
Petstore.com InsWeb

Radio Shack MCI WorldCom Internet Content and
REI.com Telebank Services
Rhodes

Cybergold
Sara Lee / One Hanes Travel Services eGreetings.com
Place Cruise Lines eNews
Service Merchandise International FamilyWonder
Shop the globe.com Holiday Inn iprint
Silkies.com Northwest Airlines LifeMinders

Netcentives
Local Advertising Vstore
Super Coups

During the first quarter of 2000, overstock.com and First USA accounted for
10.9% and 10.2%, respectively, of our revenues. No other advertiser accounted
for more than 10% of our revenues in the first quarter of 2000.

Third-Party Relationships

We have developed the following relationships with companies that we believe
will assist us in providing more comprehensive services, building our brand and
attracting more advertisers and members:

. First Data. In February 2000, we entered into an agreement with First
Data Merchant Services Corporation to work with First Data and its
affiliated financial institutions to offer electronic coupon redemption
capability. We plan to provide the ability for purchase incentives
offered by online and offline merchants to be posted directly to members'
credit card accounts. Under this agreement, our initial program with
First Data is the CoolDining program. We are obligated to develop and
host a separate web site that displays merchant offers to our members who
enroll in the CoolDining program. In addition, we are required to promote
the CoolDining program by placing on our web site a prominent link to the
program web site and by conducting periodic program member satisfaction
surveys. Under this agreement, we are required to develop the separate
web site for the CoolDining program by May 15, 2000 and we expect to
launch the CoolDining program by July 15, 2000, at which time purchase
incentives offered by merchants will be able to be posted directly to
members' credit card accounts. We currently anticipate that the
CoolDining program will generate revenue primarily from merchant set-up
fees, commissions on merchant sales (known as fulfillment fees) and
annual fees from our members to join the CoolDining program. We receive
50% of all

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merchant set-up fees and we receive 60% of all annual membership fees.
With respect to merchants referred by us to the CoolDining program, First
Data is entitled to an amount equal to 2.5% of the purchase transaction
and we are entitled to the remainder of the fulfillment fee. With respect
to merchants referred to the CoolDining program by First Data, we are paid
an amount equal to 1% of the purchase transaction and First Data is
entitled to the remainder of the fulfillment fee. Under this agreement,
First Data will be our exclusive provider of payment processing services
for Visa and MasterCard transactions for a period of one year. The term of
the agreement with First Data is three years, but under certain
circumstances, including our material breach of the agreement or our
continuing failure to meet specified performance standards, First Data may
terminate the agreement prior to its expiration.

. First USA. In April 1999, we entered into an agreement with First USA
Bank, N.A., a leading national credit card issuer, to create a co-branded
CoolSavings credit card that is promoted extensively on our web site.
Under this agreement, we are required, each calendar quarter, either to
post at least 5,000,000 impressions, such as banners, buttons or text
links, on our web site to promote the co-branded credit card or to
generate at least 25,000 click-through responses. In addition, First USA
has agreed to promote CoolSavings and the co-branded credit card on its
own web site, in account statements and in other promotional pieces. We
will receive fees for marketing the co-branded credit card. The initial
term of the agreement with First USA is five years, but First USA may
terminate the agreement prior to its expiration under some circumstances,
including a substantial reduction in our membership or a failure to meet
promotional goals.

. NBC. In May 1999, we entered into an agreement with National Broadcasting
Company, Inc., under which NBC is broadcasting $3.0 million of 30-second
advertisements for CoolSavings during the 12-month period that began
October 1, 1999. In exchange for this advertising, NBC received 686,766
shares of our common stock.

. Netcentives Inc. In March 2000, we entered into an agreement with
Netcentives Inc., the developer of web-based loyalty incentives programs.
Under this agreement, we co-developed a custom loyalty program for our
members called CoolSavings Rewards using software that we licensed from
Netcentives. Through CoolSavings Rewards, we award points to our members
when they participate in certain promotions offered by select
advertisers, partners and CoolSavings. Netcentives is required to
implement, maintain and manage certain aspects of the loyalty program,
including member signup, tracking, point balances, statement
presentation, and reward redemption requests and fulfillment. CoolSavings
is responsible for all aspects of the billing, collection, sales and
marketing relationship with the participating advertisers. Under the
agreement, CoolSavings is obligated to purchase at least $1.0 million
worth of points during the first year of the contract term and at least
$2.0 million worth of points during the second year of the contract term.
Furthermore, the agreement prohibits us from implementing another loyalty
program during the term of this agreement. The initial term of the
agreement expires two years after the first day of the first month
immediately following the launch date. However, Netcentives may terminate
the agreement prior to its expiration under certain circumstances,
including if we enter into an agreement to sell substantially all of our
assets to or merge into a direct competitor of Netcentives as identified
in the agreement.

. NFO Research. In November 1999, we entered into an agreement with NFO
Research, a leading provider of custom research for the consumer packaged
goods industry. Under this agreement, we will design a co-branded web
site and market it to our members to help NFO recruit panelists for their
market research efforts. Under this agreement we will receive a portion
of NFO's revenue from completed surveys. CoolSavings and NFO will provide
integrated marketing services to their advertisers, offering an
innovative opportunity to link shopper-level consumer attitude and usage
data with CoolSavings' extensive member profiles. The term of the
agreement with NFO Research is one year, but NFO may terminate the
agreement if our web site ceases to operate for a period of five
consecutive days.

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. Super Coups. In January 2000, we formed an alliance with Super Coups, a
subsidiary of ADVO, a leading targeted direct mail company. Super Coups
delivers targeted local merchant coupons, such as automobile service
centers, restaurants and dry cleaners, by direct mail, local cable
television and the Internet. Through this alliance, we have agreed to
design and operate a co-branded version of the CoolSavings web site that
contains a total of more than 3,000 incentive offers submitted by Super
Coups franchisees. In addition, we are required to promote the Super
Coups co-branded web page and to assist Super Coups in the preparation of
sales materials for its franchisees. Super Coups pays us 60% of the
revenue earned by the co-branded web site and we pay Super Coups 15% of
all advertising revenue generated from selected advertisers using any
portion of our web site other than the Super Coups co-branded web page.
Based on member demographics, distinct local offers are targeted to our
members in Super Coups markets across the United States. Super Coups
salespersons are also selling our co-branded services to local
advertisers. The initial term of the agreement with Super Coups expires
September 30, 2002, but under certain circumstances, including our
material breach of the agreement and our failure to be ranked among the
top five Internet coupon sites by Media Metrix, Super Coups may terminate
the agreement prior to its expiration.

. The Parenting Group. In February 2000, we entered into an agreement with
The Parenting Group, a subsidiary of Time Inc. The Parenting Group is a
leading magazine publisher and provider of advertising and marketing
services to expectant and new parents and young families. Under this
agreement, we are establishing a CoolParenting program by developing and
hosting a co-branded web site that allows advertisers to target special
offers to our members who enroll in the program by providing the age or
anticipated birthdate of their children. We pay The Parenting Group $0.70
for each person who is not a member that accesses our web site through
the CoolParenting program or through The Parenting Group and who has
enrolled for services (other than the CoolParenting program) offered on
our web site. Additionally, we and The Parenting Group share the
advertising revenue generated from the CoolParenting program. The
Parenting Group will promote the program in its Healthy Pregnancy, Baby
Talk, Parenting and Family Life print magazines, and inside over one
million "First Moments" sample and discount kits distributed annually to
expectant or new parents. This agreement includes exclusivity provisions
restricting both us and The Parenting Group from entering into agreements
for similar programs with competitors. The initial term of the agreement
with The Parenting Group is fourteen months from the launch of the
program, but under certain circumstances, including our material breach
of the agreement, The Parenting Group may terminate the agreement prior
to its expiration.

Operations and Technology

We have developed a proprietary system to target and personalize promotional
offers from our advertisers to our members. There are five main components of
our system:

. our web server technology, which allows us to display offers of interest
for each member;

. our database, which processes the offers and stores the information about
our members and their activity on our site;

. our data mining and targeting modules, which we use to determine the
members to whom we will deliver offers and the most appropriate offers
for each member;

. CoolSavings Coupon Manager, our free software program that produces high-
quality coupons and rebate certificates on a member's personal computer
printer for in-store or mail-in use; and

. SavingsCenter software, which we and our advertisers use to create,
target and control new offers.

Our system has been designed around industry-standard architecture and is
designed to provide availability 24 hours-a-day, seven days-a-week.
Occasionally in the past, we have disconnected our servers to make upgrades or
maintenance checks on our system, leading to "down time" averaging
approximately two hours per month. Currently, our site architecture, including
multiple servers and co-hosting capabilities,

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usually allows us to introduce upgrades and perform maintenance without taking
our site offline. For our database, we use servers running Microsoft Windows NT
and Microsoft SQL Server database server software. Our web service is balanced
among several servers running Microsoft Internet Information Server on the
Windows NT operating system. These servers provide VeriSign Inc. digital
certificates for secure transactions involving personal data, as well as
VeriSign Authenticode certificates for downloading our Coupon Manager software
to our members' computers. Our electronic certificates, such as printable
coupons, are transmitted in a format that requires our proprietary Coupon
Manager software to print a coupon. Information that members provide during
registration is protected by a password they can create themselves. Members can
also select Secure Socket Layer protection during the registration process.

Our web servers and the database behind our system as well as our data
mining servers are located at the Exodus Communications data center in Oak
Brook, Illinois. Currently, all site traffic is directed to the Exodus system
and we maintain a fully redundant version of our entire system at our Chicago
headquarters. Please see "Risk Factors--Our business could be damaged by
natural disasters and other unexpected problems."

In 1997, 1998 and 1999, we spent $720,000, $1.2 million and $4.5 million,
respectively, on product development, which includes salaries of software
development personnel, expenditures related to third-party technical
consultants and software costs related to enhancing our web site. We expect to
devote significant resources to product development in the future as we add new
features and functionality to our service. Please see "Risk Factors--We may not
be able to keep up with rapid technological development and evolving industry
standards."

Intellectual Property

We currently hold two United States patents, No. 5,761,648, entitled
"Interactive Marketing Network and Process Using Electronic Certificates" and
No. 5,855,007, entitled "Electronic Coupon Communication System."

We are currently pursuing legal action against six companies that we believe
to be infringing our patent. This litigation is expensive, and the outcome of
this litigation may not be favorable to us. In addition, some of these
companies have filed counterclaims or separate lawsuits or other proceedings
against us seeking to prevent us from using our patented system, and others may
do so in the future. We have also settled three prior lawsuits we brought
against companies that we believed were infringing our patent No. 5,761,648.
Competitors are also contesting our patent rights in the United States Patent
and Trademark Office.

Currently, we are a defendant in five pending lawsuits involving an
allegation that our systems or methods infringe on competitors' patents. While
we believe the actions are without merit and intend to defend them vigorously,
our efforts may not be successful. We expect that, like other participants in
our market, we will increasingly be subject to infringement claims as the
number of services and competitors in our industry segment grows. Any
infringement claim, regardless of its merit, could be time-consuming, result in
costly litigation, cause service modifications or delays or require us to enter
into royalty or licensing agreements. These agreements might not be available
on terms that are acceptable to us or at all. As a result, any claim of
infringement could harm our business, results of operations and financial
condition.

In addition to our patents, we have registered service marks and copyrights
in the United States and other countries. Our U.S. registered service marks
include COOLSAVINGS, COOLTRAVEL, COOLMALLS, COOLCATALOGS and COOLSAMPLES. We
also own common law rights in several other marks, and have applied for United
States service mark registration for a number of marks such as our stylized
piggy-bank logo, SAVE. THEN SHOP., SQUEALS OF THE DAY, COOLSAVINGS COUPON
MANAGER and SAVINGSCENTER. We have also obtained a trademark registration in
Australia for COOLSAVINGS and have registration applications pending in the
United Kingdom and Canada.

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We regard the protection of our intellectual property, including our
patents, copyrights, service marks, trademarks, trade dress and trade secrets,
as critical to our future success. We rely on a combination of these
intellectual property rights and contracts to protect the services we have
created and our competitive position in the marketplace. We have generally
entered into confidentiality and invention assignment agreements with our
employees and contractors. Where we have considered it necessary, we have
required nondisclosure agreements with our suppliers and advertisers in order
to protect confidential information about our business plans and technology.
Despite these precautions, these arrangements or the other steps which we have
taken may not protect our trade secrets or prevent another company from copying
important parts of our service. While we have registered our trademarks and
service marks in the U.S. and other countries, protection of these marks may
not be available in every country where we may do business in the future.

We also rely on software programs that we license from other companies for
key database technology, operating system and software, and specific hardware
components for the computers in our system. These licenses may not continue to
be available to us on commercially reasonable terms in the future. As a result,
we may be required to obtain substitute technology of lower quality or at
greater cost, and may incur significant costs in converting to new
technologies, which would materially affect our business, results of operations
and financial condition. Please see "Risk Factors--Intellectual property
litigation against us can be costly and could result in the loss of significant
rights," "Risk Factors--Protecting our patents, trademarks and proprietary
rights may be costly and may distract our management" and "Business--Legal
Proceedings."

Competition

The market for e-marketing services is new, rapidly evolving and intensely
competitive, and we expect competition to intensify. Barriers to entry for
companies in our market are low, and current and potential competitors can
launch new web sites and services at a relatively low cost.

Our ability to compete depends on many factors, both within and beyond our
control. These factors include:

. advertiser identification and retention;

. brand recognition and credibility;

. pricing of our services;

. breadth of our service offerings for advertisers and consumers;

. reliability of service and quality of advertiser support;

. advertiser and member acquisition costs;

. membership size and demographics;

. frequency of use and consumer response rates; and

. technological expertise.

We believe we are well-positioned to compete in our market as a result of
the breadth and sophistication of our services, the size and demographics of
our member audience, our experienced management and staff, our proprietary
technology and our established brand recognition.

Currently, we compete directly with online marketing companies in several
fields:

. direct marketers, such as FreeShop, LifeMinders and YesMail;

. incentive services, such as Cybergold, MyPoints and Netcentives;

. coupon providers, such as the online division of Catalina Marketing, e-
centives and planet U; and

. sweepstakes providers, such as Promotions.com.

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<PAGE>

We also face indirect competition from leading distributors of traditional
coupons by mail or newspaper inserts and from companies offering frequent flyer
points or other affinity rewards tied to responses to advertisements. We expect
that some of the leading distributors of traditional newspaper-insert coupons
will soon begin to compete against us directly by delivering their promotions
over the Internet. For example, Valassis Communications, a leading distributor
of newspaper-insert coupons, recently began to offer some online services. We
also compete with other web sites, portals and advertising networks, as well as
traditional offline media such as television, radio and print, for a share of
advertisers' total advertising budgets and for consumers' attention.

Many of our current and potential competitors have longer operating
histories, greater brand recognition, larger customer or user bases, and
significantly greater financial, marketing, technical and other resources than
we do. In addition, our competitors may be acquired by, receive investments
from or enter into other commercial relationships with larger, well-established
and well-financed companies as use of the Internet and other online services
increases. Therefore, some of our competitors may be able to devote greater
resources to marketing and promotional campaigns, adopt more aggressive pricing
policies and devote substantially more resources to web site and systems
development. They may also try to attract advertisers by offering free
services. Increased competition may cause us to lose brand recognition and
market share and could otherwise harm our business.

Employees

As of March 31, 2000, we had 184 full-time employees, 41 of whom were
engaged in technology and product development, 79 in sales and marketing, 44 in
client and member services and 20 in finance, administration and operations. We
have never had a work stoppage and our employees are not covered by any
collective bargaining agreement. We consider our relations with our employees
to be good.

Facilities

Our executive and operating offices are currently located in Chicago,
Illinois, in a 44,000 square foot facility. This lease expires in 2010 although
we have options to expand the leased space and to extend the term of this
lease. In addition, we maintain administrative offices in Chicago, Illinois in
a 13,700 square foot facility under two separate leases, one expiring on March
16, 2002 and the other expiring on July 31, 2002. In addition, we recently
leased 3,251 square feet of office space located in San Francisco, California
for use as a sales office; however, we do not yet occupy the space. The term of
this lease is approximately 60 months.

Legal Proceedings

On August 10, 1998, we instituted a lawsuit in the Northern District of
Illinois against e-centives, Inc. (f/k/a emaginet, Inc.) for infringement of
our United States Patent No. 5,761,648, entitled "Interactive Marketing Network
and Process Using Electronic Certificates," seeking unspecified damages and a
permanent injunction against e-centives for further infringement. We have also
added Ziff-Davis, Inc. as a defendant in our suit against e-centives, Inc. e-
centives has filed counterclaims alleging invalidity of our patent and
interference with their prospective economic advantage and is seeking
unspecified damages and injunctive relief. As noted below, e-centives also
recently initiated two separate lawsuits against us alleging infringement of
its patents.

On April 27, 1999, e-centives, Inc. filed a lawsuit against us in the United
States District Court for the District of Maryland. The complaint alleges that
our systems or methods infringe on e-centives' United States Patent No.
5,710,886, and seeks unspecified damages and to enjoin us from further
infringing its patent. While the litigation is in the early stage and its
outcome cannot be predicted, we believe that our technology does not infringe
e-centives' patent and that this litigation is therefore without merit. We
intend to defend the action vigorously.

47
<PAGE>

On March 17, 2000, e-centives, Inc. filed a related lawsuit against us in
the United States District Court for the District of Maryland. The complaint
alleges that our systems or methods infringe on e-centives' United States
Patent No. 6,035,280, and seeks unspecified damages and to enjoin us from
further infringing its patent. This patent is a continuation in part of the
patent application which resulted in United States Patent No. 5,710,886, which
is the subject matter of e-centives' April 27, 1999 lawsuit against us. While
this litigation is in the early stage and its outcome cannot be predicted, we
believe that our technology does not infringe e-centives' patent and that this
litigation is therefore without merit. We intend to defend the action
vigorously.

On October 21, 1998, we instituted a lawsuit in the Northern District of
Illinois against Catalina Marketing International, Inc., and its affiliate
Supermarkets Online, Inc. for infringement of our United States Patent No.
5,761,648, seeking unspecified damages and a permanent injunction against
further infringement. The defendants have filed counterclaims alleging
invalidity of our patent and are seeking unspecified damages and injunctive
relief. On March 2, 2000, Catalina filed a motion for summary judgment seeking
a finding that several of the claims of our patent be declared invalid. As
noted below, Catalina Marketing and Supermarkets Online also recently initiated
separate lawsuits against us alleging infringement of patents assigned to them.

On October 21, 1998, we instituted a lawsuit in the United States District
Court for the Northern District of Illinois against planet U, Inc. and Brodbeck
Enterprises, Inc., d/b/a Dick's Supermarkets, for infringement of our United
States Patent No. 5,761,648, seeking unspecified damages and a permanent
injunction against further infringement. The defendants have filed
counterclaims alleging invalidity of our patent and violation of United States
antitrust laws and are seeking unspecified damages and injunctive relief.

On November 15, 1999, Catalina Marketing filed a separate lawsuit against us
in the United States District Court for the Middle District of Florida. The
complaint alleges that our systems and methods infringe Catalina Marketing's
United States Patent No. 4,674,041, and seeks to enjoin us from further
infringing its patent. While the litigation against us is in the early stage
and its outcome cannot be predicted, we believe that our technology does not
infringe Catalina's patent and that the litigation is therefore without merit.
We intend to defend the action vigorously.

On February 12, 2000, Supermarkets Online, an affiliate of Catalina
Marketing, filed a lawsuit against us in the United States District Court for
the Central District of California. The complaint alleges that our systems and
methods infringe its United States Patent No. 6,014,634, and seeks unspecified
damages and injunctive relief. Because this patent was recently issued on
January 11, 2000, we are currently evaluating this patent and claim. In
addition, on February 18, 2000, Catalina Marketing filed a request for
reexamination of our United States Patent No. 5,761,648 with the United States
Patent and Trademark Office, which request was granted on May 2, 2000.
Therefore, our United States Patent No. 5,761,648 will be reexamined, which may
result in the patent being narrowed in scope or found invalid.

On February 16, 2000, planet U filed a lawsuit against us and one of our
customers, Pep Boys Manny Moe & Jack, Inc., d/b/a Pep Boys, in the United
States District Court for the Northern District of California. The complaint
alleges that our systems and methods infringe planet U's recently purchased
United States Patent No. 5,907,830 and seeks unspecified damages and injunctive
relief. We are currently evaluating this patent and claim. As a result of this
lawsuit, Pep Boys terminated its relationship with us.

We have instituted three other patent infringement lawsuits currently
pending in the United States District Court for the Northern District of
Illinois against IQ.commerce Corporation (filed on December 3, 1998), H.O.T.
Coupons, Inc. (filed on November 18, 1998) and Bright Street.com, Inc. (filed
on August 23, 1999). We are seeking unspecified damages and permanent
injunctive relief for each case. All of the defendants are claiming that they
are not infringing on our patent and some of the defendants are claiming that
our patent is invalid and unenforceable.

48
<PAGE>

Bright Street.com recently advised us that it is taking steps in the United
States Patent and Trademark Office to contest our rights in our United States
Patent No. 5,761,648. If Bright Street is successful, we may lose some or all
of our rights in our United States Patent No. 5,761,648.

All of the foregoing lawsuits and allegations are at an early stage and may
not be resolved favorably to us. For example, we may not prevail and prevent
others from using our proprietary rights. We may be required to alter or stop
selling our services, or to pay costs and legal fees or other damages in
connection with these cases and the various counterclaims that have been
asserted against us. Our patents or future patents may be found invalid or
unenforceable. Furthermore, additional counterclaims, separate lawsuits or
other proceedings may be brought against us to invalidate our patents or force
us to change our services or business methods.

In addition, on September 21, 1999, Kathryn L. Meklir, the ex-wife of Steven
M. Golden, our Chairman, Chief Executive Officer and President, filed suit
against both Mr. Golden and CoolSavings in Oakland County, Michigan, alleging
several claims, including fraud, arising out of her March 1998 sale of 2,000
shares of our common stock to Mr. Golden, and seeking damages in excess of $6.5
million. Although the transaction was a private sale between the parties, the
plaintiff has named us as a defendant in the lawsuit. While the outcome of any
litigation is uncertain, we believe that this suit and the claims asserted
against us have no merit, and we intend to defend it vigorously. A negative
outcome in this suit could subject us to substantial damages and negative
publicity. Our defense of this litigation may be costly and time-consuming even
if we are successful.

We may be involved in additional litigation, investigations or other
proceedings in the future. Any litigation, investigation or proceeding, with or
without merit, could be costly and time-consuming and could divert our
management's attention and resources, which in turn could harm our business and
financial results.

49
<PAGE>

MANAGEMENT

Executive Officers and Directors

The executive officers and directors of CoolSavings, and their ages and
positions as of March 31, 2000, are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Chairman of the Board, Chief Executive Officer
Steven M. Golden........... 46 and President
David H. Jacobson.......... 39 Executive Vice President, Finance, Chief
Financial Officer, Treasurer
and Secretary
Executive Vice President, Operations and
John J. Adams.............. 29 Technology
Matthew Moog............... 30 Executive Vice President, Sales and Marketing
Executive Vice President, Strategic Business
Jonathan J. Smith.......... 33 Development
Albert Aiello.............. 57 Director
Robert J. Kamerschen....... 64 Director
Hugh R. Lamle(1)(2)(3)..... 54 Director
Lynette H. Mayne(1)(2)(3).. 48 Director
Richard H. Rogel(1)(2)(3).. 51 Director
David E. Simon............. 38 Director
</TABLE>
- ---------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.

Steven M. Golden founded CoolSavings in December 1994. He has served as a
director, our Chairman of the Board and Chief Executive Officer since June
1996. Mr. Golden also assumed the title of President in January 2000. Prior to
founding CoolSavings, Mr. Golden was a financial consultant with Smith Barney
from May 1993 to May 1996. From January 1989 to April 1993, Mr. Golden served
as President of Land Data Network, which was founded by Mr. Golden and was one
of the nation's first online property information systems, providing tax roll
and assessment information for various counties in the State of Michigan. Mr.
Golden holds a B.B.A. from Michigan State University.

David H. Jacobson has served as our Chief Financial Officer and Treasurer
since October 1998, as our Secretary since May 1999 and as our Executive Vice
President, Finance since October 1999. From January 1996 to October 1998, Mr.
Jacobson was the Chief Financial Officer and Treasurer of SMS Technology, Inc.,
a value added packager and distributor of specialty chemical products. From
August 1990 to January 1996, Mr. Jacobson served as Chief Financial Officer for
Sterling Capital Ltd., a private equity group. Mr. Jacobson also worked for six
years for Coopers & Lybrand in its audit and business assurance practice. Mr.
Jacobson is a Certified Public Accountant and holds a B.S. with high honors in
Business Administration and Accounting from Indiana University.

John J. Adams has served as our Executive Vice President, Operations and
Technology since October 1999. From January 1999 to October 1999, Mr. Adams
served as our Executive Vice President, Engineering and Chief Technology
Officer. Prior to joining CoolSavings, Mr. Adams worked in several capacities
for Arthur Andersen Business Consulting from July 1993 to January 1999,
including Manager--Architecture and Methodology, Manager of Client Server and
Internet Development and Senior Systems Consultant. Mr. Adams holds a B.S. from
Florida State University.

Matthew Moog has served as our Executive Vice President, Sales and Marketing
since August 1998. From October 1996 to July 1998, Mr. Moog served as our Vice
President, Sales. Prior to joining CoolSavings, Mr. Moog worked for Microsoft
Corporation in various capacities from June 1992 to September 1996, including
Strategic Integrator Account Executive, MSN Business Development Executive and
Internet Business Development Manager. Mr. Moog holds a B.A. from The George
Washington University.

50
<PAGE>

Jonathan J. Smith has served as our Executive Vice President, Strategic
Business Development since October 1999 and, from June 1998 to October 1999,
Mr. Smith served as our Vice President, Strategic Business Development. Prior
to joining CoolSavings, Mr. Smith worked in several capacities for Lend Lease
Corporation, which is an Australian-based global financial and property
services company. From July 1989 to June 1997, Mr. Smith was principally
involved in the acquisition, disposition, financing and asset management of
institutional grade commercial properties for ERE Yarmouth, a U.S. based
subsidiary of Lend Lease Corporation. Mr. Smith served as Vice President of ERE
Yarmouth from April 1994 to June 1997 and as Asset Manager for the IT+T
Investments division of Lend Lease Corporation from July 1997 to June 1998. Mr.
Smith holds a B.A. from Northwestern University.

Albert Aiello has served as a director of CoolSavings since June 1998. Since
January 1998, Mr. Aiello has served as Chief Information Officer of Lend Lease
Corporation, an Australian based global financial and property services
company. Mr. Aiello also currently serves as a director of Lend Lease
Corporation. From 1990 to January 1998, Mr. Aiello served as President of
Fidelity Systems Company, the technology division of Fidelity Investments and
also as Chief Information Officer and Managing Director of Fidelity
Investments. Mr. Aiello currently serves as a director of the Software
Productivity Corporation, a consortium of major United States defense
contractors. He is also a member of the U.S. Government Accounting Office
Executive Committee with oversight for information technology expenditures. Mr.
Aiello holds a B.S.E. from Polytechnic Institute of New York, an M.S., M.I.E.
and Ph.D. from New York University. Mr. Aiello, Mr. Kamerschen and Ms. Mayne
were designated by Lend Lease to our board of directors pursuant to the
Investment Agreement described in "Certain Transactions and Relationships--
Transactions with Management and Others."

Robert J. Kamerschen has served as a director of CoolSavings since May 1999.
Since July 1999, Mr. Kamerschen has served as Chairman and Chief Executive
Officer of DIMAC Holdings, Inc., a direct-response marketing services firm.
From November 1988 to July 1999, he served as Chairman of ADVO, Inc., a leading
direct-mail marketing company. From November 1988 to January 1999, he also
served as Chief Executive Officer of ADVO, Inc. From 1987 to 1988, Mr.
Kamerschen served as President and Chief Executive Officer of RKO/Six Flags
Entertainment, Inc. From 1984 to 1987, Mr. Kamerschen served as President and
Chief Executive Officer of Marketing Corporation of America, a leading
marketing services corporation. Mr. Kamerschen also serves as a director of IMS
Health Incorporated, R.H. Donnelley Corporation, Micrografx, Inc, Tandy
Corporation and TravelCLICK, Inc. Mr. Kamerschen holds a B.S. and an M.B.A.
from Miami University.

Hugh R. Lamle has served as a director of CoolSavings since June 1998. Since
April 1974, Mr. Lamle has served as Executive Vice President and a principal of
M.D. Sass Investors Services Inc. a registered investment advisory firm. Since
June 1995, Mr. Lamle has also served as President and Chief Investment Officer
of Chase & M.D. Sass Partners, a joint venture between Chase Manhattan Bank and
M.D. Sass Investors Services which manages portfolios for corporate and
institutional investors. Mr. Lamle also serves as President of Resurgence Asset
Management and on the advisory board of Real Estate Capital Partners, both
affiliates of M.D. Sass, as Executive Vice President and a director of
Corporate Renaissance Group, Inc., a closed-end business development company,
and as a public director of the Finex division of the New York Cotton Exchange.
Mr. Lamle holds a B.A. from Queens College and an M.B.A. from Baruch College at
the City University of New York.

Lynette H. Mayne has served as a director of CoolSavings since June 1998.
Since 1991, Ms. Mayne has served with Lend Lease Corporation, an Australian-
based global financial and property services company, as Chief Executive
Officer of various divisions including IT+T Investments, Corporate Financial
Services and Corporate Services. Prior to joining Lend Lease, Ms. Mayne was a
director of NBC from 1986 to 1988, a director of Pan American World Airways
from 1984 to 1986 and a Vice Persident of Manufacturers Hanover Trust from 1980
to 1984. Ms. Mayne is a full time non-executive director of Lend Lease
Corporation and currently a director of IBM Global Services Australia and
Centius, an Internet intellectual property company. She has also served as
Chair of an Australian state health industry council, as a member of APEC and
is a Trustee of the ACTU--Lend Lease Foundation. Ms. Mayne holds an M.B.A. from
New York University and has authored two books on information technology.

51
<PAGE>

Richard H. Rogel has served as a director of CoolSavings since May 1996. In
1982, Mr. Rogel founded Preferred Provider Organization of Michigan, Inc., a
preferred provider organization, and served as its Chairman from its inception
until it was sold in 1997. Mr. Rogel is the President of the University of
Michigan Alumni Association and chairs the University of Michigan's Business
School Development Advisory Board, as well as serving on other boards of the
University. Mr. Rogel holds a B.B.A. from the University of Michigan.

David E. Simon has served as a director of CoolSavings since November 1999.
Since 1998, Mr. Simon has been the Chief Executive Officer of Simon Property
Group, Inc., a publicly traded real estate company engaged primarily in the
ownership, development, management, leasing, acquisition and expansion of
income-producing retail properties. From 1995 until 1998, Mr. Simon was the
Chief Executive Officer of Simon DeBartolo Group, Inc., a predecessor-in-
interest to Simon Property Group, Inc. In addition to serving as a director of
Simon Property Group, Inc., Mr. Simon also serves as a director of First Health
Group Corporation, a publicly-traded full service national health benefits
company. He currently serves as Second Vice Chairman of the National
Association of Real Estate Investment Trusts, Inc. and is trustee of the
International Council of Shopping Centers. Mr. Simon holds a B.S. from Indiana
University and an M.B.A. from Columbia University Graduate School of Business.

Board of Directors

Our board of directors currently consists of seven members. Each director is
elected for a one-year term at our annual meeting of stockholders and serves
until the next annual meeting of stockholders or until his or her successor is
duly elected and qualified. Richard H. Rogel and Steven M. Golden have agreed
to vote the shares of common stock held by their revocable trusts or over which
they exercise voting control in favor of election of Albert Aiello, an
affiliate of Lend Lease International Pty. Limited (Lend Lease), to our board
of directors at the annual meetings of stockholders to be held in 2000 and
2001. This is conditional upon Lend Lease properly nominating its candidate and
continuing to own at least 10% of our common stock at that time. Lend Lease may
nominate a different person as director instead of Mr. Aiello, only upon the
written consent of Mr. Rogel and Mr. Golden, which they may not unreasonably
withhold.

Board Committees

Our board of directors has a compensation committee, an audit committee and
a nominating committee.

. Compensation Committee. The compensation committee makes recommendations
to the board of directors concerning salaries and incentive compensation
for our officers and employees and administers our 1997 Stock Option
Plan. The current members of our compensation committee are Hugh R.
Lamle, Lynette H. Mayne and Richard H. Rogel.

. Audit Committee. The audit committee, among other things, reviews our
financial statements and accounting practices, makes recommendations to
the board of directors regarding the selection of independent auditors
and reviews the results and scope of the audit and other services
provided by our independent auditors. The current members of our audit
committee are Hugh R. Lamle, Lynette H. Mayne and Richard H. Rogel.
Pursuant to the rules of Nasdaq, our audit committee consists of three
independent directors with financial skills and experience.

. Nominating Committee. The nominating committee screens and nominates
candidates for election to our board of directors. The current members of
our nominating committee are Hugh R. Lamle, Lynette H. Mayne and Richard
H. Rogel.

Director Compensation

Directors who are also employees of CoolSavings receive no compensation for
serving on the board of directors. Directors who are not employees of
CoolSavings do not currently receive any cash compensation from us for their
service as members of the board of directors, although they are reimbursed for
all travel

52
<PAGE>

and other expenses incurred in connection with attending board and committee
meetings. Under our 1999 Non-Employee Director Stock Option Plan, non-employee
directors are also eligible to receive automatic stock option grants upon their
initial appointment to the board of directors and at each of our annual
stockholder meetings.

Under the 1999 Non-Employee Director Stock Option Plan, the following
directors received options in 1999: Albert Aiello, Robert J. Kamerschen, Hugh
R. Lamle, Lynette H. Mayne, Richard H. Rogel and David E. Simon. Each of these
directors other than David E. Simon received an option in July 1999 to purchase
11,500 shares of common stock at an exercise price of $4.37 per share while
David E. Simon received an option in November 1999 to purchase 5,750 shares of
common stock at an exercise price of $7.91 per share. The exercise prices of
these options were fair market value on the date of grant and each of these
options vests in full on the first anniversary of the date of grant and must be
exercised within ten years after the date of grant.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is an officer or employee
of CoolSavings. No executive officer of CoolSavings serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving on our board of directors or compensation committee.
All of the members of the compensation committee have entered into loan
transactions with us. Please see "Certain Transactions and Relationships."
Until the formation of the compensation committee in December 1997, matters
concerning executive compensation were addressed by the entire board of
directors.

Executive Compensation

The following table sets forth compensation earned by or paid for services
rendered to CoolSavings in 1999 by our Chief Executive Officer and each of our
other executive officers whose total annual salary and bonus exceeded $100,000
(collectively, the "Named Executive Officers") during 1999.

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------ ------------
Shares
Underlying
Name and Principal Position Salary($) Bonus($) Options(#)
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
Steven M. Golden,
Chairman of the Board, Chief
Executive Officer and President............... $245,000 $75,000 460,000

David H. Jacobson,
Executive Vice President, Finance
and Chief Financial Officer................... 138,000 20,000 287,500

John J. Adams,
Executive Vice President, Operations
and Technology................................ 125,000 20,000 310,500

Matthew Moog,
Executive Vice President,
Sales and Marketing........................... 137,000 130,000 258,750

</TABLE>

53
<PAGE>

<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------ ------------
Shares
Underlying
Name and Principal Position Salary($) Bonus($) Options(#)
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
Jonathan J. Smith,
Executive Vice President, Strategic
Business Development.......................... 119,000 30,000 287,500

Hillel Levin,
Former President and Chief Operating
Officer (1)................................... 198,000 20,000 143,750
</TABLE>
- ---------------------
(1) Mr. Levin resigned as an officer effective December 31, 1999. However, he
will continue to serve as a consultant to us through December 31, 2000.

Stock Options

The following table sets forth summary information concerning individual
grants of stock options made during 1999 to each of the Named Executive
Officers:

Option Grants in 1999

<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Total Stock Price
Shares Options Exercise Appreciation for
Underlying Granted to Price Option Term(2)
Options Employees Per Expiration ---------------------
Name Granted in 1999(1) Share Date 5% ($) 10% ($)
- ---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven M. Golden........ 230,000 9.7% $2.17 3/3/09 $ 314,447 $ 796,871
230,000 9.7 7.91 11/22/09 1,144,667 2,900,812

David H. Jacobson....... 172,500 7.3 2.17 3/3/09 235,835 597,653
115,000 4.9 7.91 11/22/09 572,334 1,450,406

John J. Adams........... 23,000 1.0 2.17 1/18/09 31,445 79,687
172,500 7.3 2.17 3/3/09 235,835 597,653
115,000 4.9 7.91 11/22/09 572,334 1,450,406

Matthew Moog............ 143,750 6.1 2.17 3/3/09 196,530 498,045
115,000 4.9 7.91 11/22/09 572,334 1,450,406

Jonathan J. Smith....... 172,500 7.3 2.17 3/3/09 235,835 597,653
115,000 4.9 7.91 11/22/09 572,334 1,450,406

Hillel Levin............ 143,750 6.1 2.17 3/3/09 196,530 498,045
</TABLE>
- ---------------------
(1) Based on a total of 2,359,800 option shares granted to our employees under
our 1997 Stock Option Plan during 1999.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise price but
do not include deductions for taxes or other expenses associated with the
exercise of the options or the sale of the underlying shares of common
stock. The 5% and 10% assumed rates of appreciation are mandated by rules
of the Securities and Exchange Commission and do not represent our estimate
or projection of the future price of our common stock. There can be no
assurance that any of the values reflected in this table will be achieved.
The actual gains, if any, will depend on the future performance of the
common stock, the optionee's continued employment through applicable
vesting periods and the date on which the options are exercised.

54
<PAGE>

The following table sets forth the number of shares of common stock acquired
upon the exercise of stock options by each Named Executive Officer during 1999
and the number and value of securities underlying unexercised options held by
each Named Executive Officer as of December 31, 1999:

Aggregated Option Exercises in 1999 and Year-End Option Values

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-The-Money Options at
Acquired December 31, 1999 December 31, 1999(1)
on Value ------------------------- -------------------------
Name Exercise Received Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven M. Golden........ -- -- 322,000 713,000 $1,554,000 $2,120,874

David H. Jacobson....... 9,200 $20,188 -- 301,300 -- 794,037

John J. Adams........... -- -- 4,600 305,900 22,200 816,237

Matthew Moog............ -- -- 338,537 273,700 2,249,759 660,837

Jonathan J. Smith....... -- -- 9,200 301,300 44,400 794,037

Hillel Levin............ -- -- 299,000 362,250 1,443,000 1,748,250
</TABLE>
- ---------------------

(1) The dollar values have been calculated by determining the difference
between the fair market value of the securities underlying the options at
December 31, 1999 and the exercise prices of the options. Solely for
purposes of determining the value of options at December 31, 1999, we have
assumed that the fair market value of shares of common stock issuable upon
exercise of options was $7.00 per share, the assumed initial public
offering price, because the common stock was not traded in an established
market prior to this offering.

Employee Benefit Plans

1997 Stock Option Plan

We adopted our 1997 Stock Option Plan to enable officers, key employees and
consultants of CoolSavings or any subsidiary to participate in our possible
growth and profitability, and to encourage their continuation as officers,
employees or consultants for the benefit of CoolSavings and our stockholders.
Under our 1997 Stock Option Plan, we may award incentive and non-qualified
stock options, stock appreciation rights, restricted stock, performance stock
units and other stock units which are valued by reference to our common stock.
Our officers, employees and consultants are eligible to participate in our 1997
Stock Option Plan. Our 1997 Stock Option Plan is administered by either the
board of directors or the Compensation Committee (the "Administrator") which
determines, subject to the provisions of our 1997 Stock Option Plan, who shall
receive awards, the types of awards to be made, and the terms and conditions of
each award.

The exercise price of non-qualified options may not be less than the fair
market value of the common stock at the time the option is granted, except that
non-qualified options may have an exercise price of no less than 90% of the
fair market value at the time the option is granted if that discount is
expressly granted in lieu of a reasonable amount of salary or bonus. Options
that are intended to qualify as incentive stock options under our 1997 Stock
Option Plan may not be exercisable for more than ten years after the date the
option is granted and may not be granted at an exercise price of less than the
fair market value of the common stock at the time the option is granted. In the
case of incentive stock options granted to holders of more than 10% of our
common stock, the options may not be granted at an exercise price less than
110% of the fair market value of the common stock at the time the options are
granted.

Awards granted under our 1997 Stock Option Plan generally expire three
months after the termination of the recipient's service to CoolSavings or any
subsidiary, except in the case of death, in which case awards generally may be
exercised up to 12 months following the date of death. Awards generally expire
immediately upon termination of employment for cause.

55
<PAGE>

The number of shares of common stock which may be issued under our 1997
Stock Option Plan is limited to 20% of the total number of shares of common
stock issued and outstanding from time to time and the number of shares of
common stock underlying incentive stock options issued under our 1997 Stock
Option Plan is limited to 11,500,000 shares of common stock. As of March 31,
2000, there were 4,282,600 shares subject to options outstanding under our 1997
Stock Option Plan.

The Administrator shall make appropriate adjustments in the number of shares
of common stock subject to each award and the exercise price per share of each
award if there is any change in the common stock as a result of a stock
dividend, stock split, recapitalization or otherwise. The Administrator also
has the authority to accelerate award exercise rights or make other adjustments
if CoolSavings is merged or consolidated, the property or stock of CoolSavings
is acquired by another corporation or CoolSavings is reorganized, liquidated or
impacted by an extraordinary transaction.

Our 1997 Stock Option Plan will terminate when no further shares of common
stock are available for issuance upon the exercise of awards and all
outstanding awards have expired or have been exercised. The board of directors
may at any time terminate our 1997 Stock Option Plan, but termination will not
affect awards previously granted. Any awards which were granted prior to
termination would remain exercisable by the holder in accordance with the terms
of the applicable award agreement. In addition, the board of directors may at
any time amend our 1997 Stock Option Plan without stockholder approval, except
where required by applicable law.

1999 Non-Employee Director Stock Option Plan

We adopted the 1999 Non-Employee Director Stock Option Plan to attract and
retain the services of experienced and knowledgeable independent directors, and
to provide an additional incentive for those directors to work for the best
interests of CoolSavings and its stockholders.

The 1999 Non-Employee Director Stock Option Plan was approved by our
stockholders on November 17, 1999 and, unless terminated earlier, it expires in
May 2009. The 1999 Non-Employee Director Stock Option Plan is designed to work
automatically without administration. To the extent administration is
necessary, however, it will be performed by the board of directors. To the
extent that conflicts of interest arise, we expect interested directors will
abstain from both deliberations and voting regarding matters in which they have
personal interests.

The 1999 Non-Employee Director Stock Option Plan provides that each person
who is a non-employee director on the date that the 1999 Non-Employee Director
Stock Option Plan became effective and each person who becomes a non-employee
director after the date of the plan will be granted, on the later of the date
on which the optionee first becomes a non-employee director or the effective
date of the plan, a non-qualified stock option to purchase a number of shares
of common stock that have a fair market value of $50,000 on the date of
issuance. In addition, on the date of each of our annual stockholder meetings,
each non-employee director will automatically be granted an additional non-
qualified option to purchase a number of shares of common stock with a fair
market value of $50,000 if, on that date, he or she has served on our board of
directors for at least six months. All options granted under the 1999 Non-
Employee Director Stock Option Plan shall have an exercise price equal to 100%
of the fair market value of the common stock on the date of grant and will vest
in full on the first anniversary of the date of grant.

Awards granted under the 1999 Non-Employee Director Stock Option Plan
generally expire three months after the non-employee director ceases to serve
as a director, except in the case of death, in which case awards generally may
be exercised up to 12 months following the date of death. Options granted under
the 1999 Plan generally have a term of ten years.

The number of shares of common stock which may be issued under the 1999 Plan
is limited to 2% of the total number of shares of common stock issued and
outstanding from time to time. As of March 31, 2000, options to purchase 63,250
shares of common stock have been issued under the 1999 Non-Employee Director
Stock Option Plan.

Appropriate adjustments will be made in the number of shares of common stock
subject to each award and the exercise price per share of each award if there
is any change in the common stock as a result of a

56
<PAGE>

stock dividend, stock split, recapitalization or otherwise. If CoolSavings is
merged or consolidated, the property or stock of CoolSavings is acquired by
another corporation or CoolSavings is reorganized, liquidated or impacted by an
extraordinary transaction, the outstanding options will become fully
exercisable.

The 1999 Non-Employee Director Stock Option Plan will terminate when no
further shares of common stock are available for issuance upon the exercise of
awards and all outstanding awards have expired or have been exercised. The
board of directors may at any time terminate the 1999 Non-Employee Director
Stock Option Plan, but termination will not affect awards previously granted.
Any awards which were granted prior to termination would remain exercisable by
the holder under the terms of the applicable award agreement. In addition, the
board of directors may at any time amend the 1999 Non-Employee Director Stock
Option Plan without stockholder approval, except as required by applicable law.

401(k) Plan

We have a tax-qualified employee savings plan which covers all of our full-
time employees who are at least 21 years of age. Eligible employees may defer
up to 25% of their pre-tax earnings, subject to the Internal Revenue Service's
annual contribution limit. Our 401(k) plan permits us to make additional
discretionary matching contributions on behalf of all participants in our
401(k) plan in an amount determined by us. Our 401(k) plan is intended to
qualify under Section 401 of the Internal Revenue Code of 1986 so that
contributions by employees or by us to our 401(k) plan, and income earned on
plan contributions, are not taxable to employees until withdrawn from the plan,
and so that contributions by us, if any, will be deductible by us when made.

Employment Agreements and Severance Arrangements

Each of our executive officers has signed our standard terms of employment
detailing, among other things, his confidentiality obligations and his at-will
employment status. Currently, none of our executive officers has a formal
employment agreement with us. All of our executive officers are employees at-
will and may be terminated at any time at the discretion of our board of
directors.

In January 2000, we entered into a termination agreement with Hillel Levin,
our former President and Chief Operating Officer. Under the terms of this
agreement, (a) Mr. Levin confirmed that he voluntarily resigned from
CoolSavings effective as of December 31, 1999, (b) we agreed to pay Mr. Levin a
$20,000 bonus on or before January 15, 2000, (c) CoolSavings and Mr. Levin
agreed to enter into a one-year consulting agreement, and (d) Mr. Levin agreed
not to compete with us for a period of two years after the termination of the
consulting agreement. Under the terms of the consulting agreement, Mr. Levin
will spend up to 25 hours per week performing consulting services for us for a
period of one year and we will pay Mr. Levin a consulting fee of $120,000.

Limitation of Liability and Indemnification

As permitted by the Michigan Business Corporation Act ("MBCA"), our articles
of incorporation include a provision that limits the liability of our directors
to the maximum extent permitted by the MBCA. The MBCA limits the liability of
directors for monetary damages for breach of fiduciary duty as a director,
except for liability for (a) a breach of the director's duty of loyalty to the
corporation or its stockholders, (b) acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (c) illegal
loans, distributions of dividends or assets, or stock purchases as described in
Section 551(1) of the MBCA, and (d) transactions from which the director
derived an improper personal benefit.

In addition, our bylaws generally provide that we will indemnify our
directors and officers to the fullest extent authorized or permitted under the
MBCA and that we will advance expenses at the request of a director or officer.
Prior to the completion of this offering, we intend to enter into indemnity
agreements with each of our current officers and directors to give them
additional contractual assurances regarding the scope of the indemnification
set forth in our articles of incorporation and bylaws.

We believe that these indemnification and limitation of liability provisions
will assist us in attracting and retaining talented directors and officers in
light of the risk of litigation directed against directors and officers of
publicly held corporations.

57
<PAGE>

CERTAIN TRANSACTIONS AND RELATIONSHIPS

Transactions with Management and Others

Lend Lease

In May 1998, we borrowed $1.0 million from Lend Lease International Pty.
Limited (Lend Lease), an Australian company, under a promissory note providing
for repayment of the indebtedness in six months or upon Lend Lease making a
contemplated $5.0 million investment in CoolSavings, whichever occurred first.
We repaid the promissory note on June 1, 1998, when Lend Lease made its first
equity investment in CoolSavings.

In June 1998, we entered into an Investment Agreement with Lend Lease
pursuant to which Lend Lease committed to invest up to $18.5 million in
CoolSavings upon the occurrence of specified events. Under the Investment
Agreement, Lend Lease purchased: 2,496,443 shares of common stock for $5.0
million on June 1, 1998; 2,269,491 shares of common stock for $5.0 million on
November 4, 1998; 2,723,384 shares of common stock for $5.0 million on March
11, 1999; and 2,139,805 shares of common stock for $3.5 million on April 27,
1999.

In connection with the Investment Agreement, on June 1, 1998, CoolSavings,
Lend Lease and certain of our stockholders entered into a shareholders
agreement under which, among other things, Lend Lease designated three persons
to serve on our board of directors. Albert Aiello, Robert J. Kamerschen and
Lynette H. Mayne are currently the directors designated by Lend Lease. The
provisions in the shareholders agreement addressing the composition of our
board of directors will terminate upon the completion of this offering. Two of
our shareholders have also agreed to vote in favor of the election of a
director nominated by Lend Lease. Please see "Management--Board of Directors."

In April 1999, Lend Lease agreed to loan us up to $3.5 million, which we
could borrow in our discretion by December 31, 1999. In October 1999, we
borrowed nearly $3.5 million under convertible subordinated notes issued to
Lend Lease. These notes bear interest at a rate of 10% per annum. The principal
on these notes automatically converts into shares of our common stock upon
completion of this offering at a conversion price equal to 90% of the initial
public offering price. Assuming an initial public offering price of $7.00 per
share, these notes will automatically convert into 554,982 shares of common
stock upon completion of this offering. The notes mature on June 30, 2000 if
this offering is not completed before that date and, if not repaid within 15
days after their due date, the notes will automatically convert into 800,400
shares of our common stock.

On December 31, 1999, Lend Lease purchased 549.413 shares of our Series A
convertible preferred stock, which will automatically convert into 705,533
shares of our common stock upon completion of this offering. Please see "--
Series A Convertible Preferred Stock." As of March 31, 2000, Lend Lease owned
approximately 30.0% of our capital stock and, assuming conversion of the
convertible subordinated notes into 554,982 shares at an assumed initial public
offering price of $7.00 per share, would have owned 30.8% of our capital stock
on a pro forma basis as of that date.

Loan from Director

Under a credit agreement dated December 18, 1997 between CoolSavings and the
Richard H. Rogel Revocable Living Trust u/a/d March 21, 1990, the grantor,
trustee and beneficiary of which is Richard H. Rogel, a director of CoolSavings
(the Rogel Trust), the Rogel Trust loaned us $1.05 million. In connection with
this credit agreement, we issued the Rogel Trust warrants to purchase 805,000
shares of our common stock at $1.30 per share and warrants to purchase 57,500
shares of our common stock at $2.17 per share. We have repaid the loan to the
Rogel Trust and the Rogel Trust has exercised the warrants. Please see "--Loans
to Directors."

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<PAGE>

Loans to Directors

On February 4, 1999, our board of directors authorized the payment of the
exercise prices of outstanding options and warrants held by our directors and
other warrant holders by delivery of promissory notes to CoolSavings with the
following terms: (a) all principal and accrued and unpaid interest is due on
the fourth anniversary of the issuance of the note; (b) the note bears interest
at the rate of 4.83% per annum (the then applicable federal rate); (c) accrued
interest is payable annually; (d) the note is secured by the shares of common
stock issued upon exercise of such option or warrant; and (e) the maker is
personally liable on the note to the extent of all accrued interest on the note
plus 20% of the total principal amount of the note.

Prior to the date of this prospectus, the following directors of CoolSavings
exercised their outstanding options and warrants in exchange for the delivery
of a promissory note with the terms described above:

<TABLE>
<CAPTION>
Shares Issued
Name Upon Exercise Principal Amount of Note
- ---- ------------- ------------------------
<S> <C> <C>
Richard H. Rogel, Trustee................ 862,500 $1,181,250(a)
Albert Aiello............................ 57,500 120,922
Hugh R. Lamle............................ 57,500 120,922
Lynette Mayne............................ 57,500 120,922
</TABLE>
- ---------------------
(a) Mr. Rogel delivered 13 notes in the aggregate principal amount of
$1,050,000 upon the exercise of warrants to purchase 805,000 shares of
common stock and delivered an additional note in the principal amount of
$131,250 upon the exercise of an option to purchase 57,500 shares of common
stock. All of these notes have identical terms and conditions as described
above.

Prior to the date of this prospectus, the following former directors of
CoolSavings exercised their outstanding options in exchange for the delivery of
a promissory note with the terms as described above:

<TABLE>
<CAPTION>
Shares Issued
Name Upon Exercise Principal Amount of Note
- ---- ------------- ------------------------
<S> <C> <C>
Eve Bosak................................ 57,500 $131,250
Douglas J. Golden........................ 57,500 131,250
Elwyn Jenkins............................ 57,500 120,922
Peter Sugar.............................. 57,500 131,250
Arthur A. Weiss.......................... 57,500 131,250
</TABLE>

On April 3, 2000, Steven M. Golden, our Chairman, Chief Executive Officer
and President, exercised his vested options to purchase 322,000 shares of our
common stock in exchange for the delivery of a promissory note in the principal
amount of $700,000 with the terms as described above, except that the interest
rate is 6.71% per annum (the applicable federal rate).

As of the date of this prospectus all of these promissory notes were still
outstanding.

Options to Director

On July 13, 1999, we granted to Richard H. Rogel, one of our directors, an
option to purchase 115,000 shares of our common stock at a price of $4.37 per
share. This grant is in addition to the options granted to all directors
automatically upon adoption of the 1999 Non-Employee Director Stock Option
Plan. Mr. Rogel exercised this option by delivering to CoolSavings a full
recourse promissory note in the original principal amount of $502,354. This
note bears interest at the rate of 5.86% per annum (the then applicable federal
rate), provides for annual payments of accrued interest and is due in full on
the fourth anniversary of the note.

59
<PAGE>

Convertible Subordinated Notes

One of our directors, Hugh R. Lamle, controls a limited partnership, HLBL
Family Partners, LP, which purchased one of our convertible subordinated notes
in the original principal amount of $65,000. This note will be converted into
10,317 shares of our common stock upon completion of this offering, based upon
an assumed initial public offering price of $7.00 per share.

Series A Convertible Preferred Stock

The following table summarizes the shares of our Series A convertible
preferred stock purchased by our executive officers, directors and significant
stockholders in December 1999:

<TABLE>
<CAPTION>
Number of Shares of
Series A Convertible
Name Preferred Stock Purchase Price
- ---- -------------------- --------------
<S> <C> <C>
Lend Lease International Pty. Limited...... 549.413 $5,000,000
Hugh R. Lamle(a)........................... 109.883 1,000,000
David E. Simon(b).......................... 109.880 999,977
Robert Kamerschen.......................... 30.000 273,019
David H. Jacobson.......................... 8.000 72,805
</TABLE>
- ---------------------
(a)Owned by HLBL Family Partners, LP, an entity controlled by Hugh R. Lamle.
(b)Owned by Cool Savings Investors, LLC, an entity in which David E. Simon is a
member.

Each share of Series A convertible preferred stock will automatically
convert into 1,284 shares of common stock upon completion of this offering.

Relationships with Legal Counsel

Our outside corporate counsel is Golden & Gorman, P.C. Douglas J. Golden, a
shareholder of Golden & Gorman, P.C., is the brother of Steven M. Golden, our
Chairman of the Board and Chief Executive Officer. Douglas J. Golden is also a
former director of CoolSavings and was our Secretary until May 1999. Please see
"--Loans to Directors."

Our outside securities counsel is Jaffe, Raitt, Heuer & Weiss, Professional
Corporation. Peter Sugar and Arthur A. Weiss, shareholders of Jaffe, Raitt,
Heuer & Weiss, Professional Corporation, are former directors of CoolSavings.
Please see "--Loans to Directors" and "Legal Matters."

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our common stock as of March 31, 2000, by:

. each person known by us to beneficially own more than 5% of our common
stock;

. each Named Executive Officer;

. each of our directors; and

. all executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
that are currently exercisable or exercisable within 60 days after March 31,
2000, are deemed to be outstanding and to be beneficially owned by the person
holding the options for the purpose of computing the percentage ownership of
that person, but are not treated as outstanding for the purpose of computing
the percentage ownership of any other person. Unless otherwise noted, each
person or group identified possesses sole voting and investment power with
respect to the shares indicated, subject to applicable community property laws.
Beneficial ownership percentage is based on 35,378,021 shares of common stock
outstanding as of March 31, 2000, on an as converted basis, and 38,678,021
shares of common stock outstanding after completion of this offering.

Unless indicated otherwise, the address of the beneficial owners is: c/o
coolsavings.com inc., 360 N. Michigan Avenue, Suite 1900, Chicago, Illinois
60601.

<TABLE>
<CAPTION>
Percentage of
Shares Beneficially
Owned
Shares ----------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ -------- ---------
<S> <C> <C> <C>
Lend Lease International Pty. Limited..... 10,889,638 30.8% 28.2%
Level 44, Australia Square
Sydney, Australia 2000

Richard H. Rogel(1)....................... 6,873,113 19.7 17.8
56 Rose Crown
Avon, Colorado 81620

Steven M. Golden(2)....................... 4,873,815 13.8 12.5

Hillel Levin(3)........................... 951,207 2.7 2.4

Matthew Moog(4)........................... 576,806 1.6 1.5

David H. Jacobson......................... 19,473 * *

John J. Adams............................. 9,200 * *

Jonathan J. Smith(5)...................... 9,200 * *

Hugh R. Lamle(6).......................... 370,523 1.0 *
c/o M.D. Sass
1185 Avenue of the Americas
New York, New York 10036

Albert Aiello............................. 57,500 * *
81 Carisbrooke Rd.
Wellesley, Massachusetts 02481
</TABLE>

61
<PAGE>

<TABLE>
<CAPTION>
Percentage of
Shares Beneficially
Owned
Shares -----------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ -------- ----------

<S> <C> <C> <C>
Lynette H. Mayne......................... 57,500 * *
Level 44, Australia Square
Sydney, Australia 2000

David E. Simon(7)........................ 141,103 * *
c/o Simon Property Group, Inc.
115 West Washington Street
Indianapolis, Indiana 46204

Robert J. Kamerschen..................... 38,525 * *
200 Day Hill Rd.
Windsor, Connecticut 06095

All directors and executive officers as a
group
(11 persons)(8)......................... 13,026,759 36.1% 33.1%
</TABLE>
- ---------------------
* Less than 1%.
(1) All of these shares of common stock are held by a revocable trust, of which
Mr. Rogel is the trustee.
(2) Includes 4,379,315 shares of common stock held by a revocable trust, of
which Mr. Golden is the trustee, 172,500 shares of common stock held by
Steven M. Golden LLC, which is controlled by Mr. Golden, and 322,000 shares
of common stock subject to options exercisable within 60 days after
March 31, 2000.
(3) Includes 115,000 shares of common stock held by Shore Bridge, L.P., which
is controlled by Mr. Levin, and 299,000 shares of common stock subject to
options exercisable within 60 days after March 31, 2000.
(4) All of these shares are held in the name of Moog Investment Partners, LP,
which is controlled by Mr. Moog. Includes 338,537 shares of common stock
subject to options exercisable within 60 days after March 31, 2000.
(5) Represents 9,200 shares of common stock subject to options exercisable
within 60 days after March 31, 2000.
(6) Includes 289,970 shares of common stock held in the name of HLBL Family
Partners, LP, which is controlled by Mr. Lamle.
(7) All of these shares are held in the name of Cool Savings Investors, LLC.
Mr. Simon, a member of Cool Savings Investors, LLC, disclaims beneficial
ownership of the shares held by that entity except to the extent of his
proportionate pecuniary interest therein.
(8) Includes 669,737 shares of common stock subject to options exercisable
within 60 days after March 31, 2000.

62
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, after giving effect to the filing of our
restated articles of incorporation, our authorized capital stock will consist
of 100,000,000 shares of common stock, without par value, and 10,000,000 shares
of preferred stock, without par value.

The following summary of our capital stock and restated articles of
incorporation and bylaws are qualified by reference to the restated articles of
incorporation and bylaws filed with the Securities and Exchange Commission as
exhibits to the registration statement of which this prospectus forms a part.

Common Stock

As of March 31, 2000, there were 31,762,812 shares of common stock
outstanding, held by approximately 125 stockholders of record. The holders of
outstanding shares of common stock are entitled to receive dividends out of
legally available assets at such times and in such amounts as the board of
directors may from time to time determine. Each holder is entitled to one vote
for each share of common stock held on all matters submitted to a vote of
stockholders. Cumulative voting for the election of directors is not provided
for in our articles of incorporation, which means that the holders of a
majority of the shares of common stock voted can elect all of the directors
nominated for election. Subject to preferences that may be applicable to any
then outstanding preferred stock, holders of common stock are entitled to
receive ratably the dividends, if any, that may be declared by our board of
directors out of legally available funds. Upon a liquidation, dissolution or
winding up of CoolSavings, the holders of common stock will be entitled to
share ratably in the net assets legally available for distribution to
stockholders after the payment of all debts and other liabilities of
CoolSavings, subject to the prior rights of any preferred stock then
outstanding. Holders of common stock have no preemptive or conversion rights or
other subscription rights and there are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and the common stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable.

Preferred Stock

As of March 31, 2000, there were 2,197.650 shares of Series A convertible
preferred stock outstanding, held by 69 stockholders of record. Upon the
completion of this offering, each share of Series A convertible preferred stock
will automatically convert into 1,284 shares of common stock. Our board of
directors has the authority, within the limitations and restrictions contained
in the articles of incorporation, to issue shares of preferred stock, in one or
more classes or series, and to fix the rights, preferences, privileges, and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series or the designation of such series. The board of
directors, without stockholder approval, could issue shares of preferred stock
with voting and conversion rights which could adversely affect the voting power
or other rights of the holders of shares of common stock. The issuance of
shares of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of
CoolSavings and may negatively affect the market price of the common stock and
the voting and other rights of the holders of common stock. We have no current
plans to issue any shares of preferred stock.

Convertible Subordinated Notes

As of March 31, 2000, approximately $5.0 million of coolsavings.com inc.
1999 unsecured, convertible subordinated notes were outstanding. These notes
will automatically convert into shares of our common stock upon the completion
of this offering at a conversion price equal to 90% of the initial public
offering price, and mature on June 30, 2000 if this offering is not completed
before that date. If the notes are not paid within 15 days after their due
date, they will automatically convert into 1,143,783 shares of our common
stock.

63
<PAGE>

Registration Rights

Shareholders Agreement

Under an agreement between us and some of our stockholders, stockholders
holding an aggregate of 29,336,892 shares of common stock, referred to as
registrable securities, have registration rights with respect to the
registrable securities. The holders of substantially all of the registrable
securities have signed lock-up agreements in connection with this offering. See
"Shares Eligible for Future Sale--Lock-up Agreements."

When we become eligible to use a registration statement on Form S-3 to
register an offering of our securities, holders of the registrable securities
may request that we file a registration statement on Form S-3 covering all or a
portion of the registrable securities held by them, provided that the proceeds
from that offering are at least $1.0 million. We are only obligated to effect
two of these demand registrations and we have the right to delay the filing of
a registration statement on Form S-3 for up to 90 days.

In addition, the holders of registrable securities have piggyback
registration rights. If we propose to register any common stock under the
Securities Act, other than under the Form S-3 registration rights noted above
or an employee benefit plan, the holders of the registrable securities may
require us to include all or a portion of their securities in such
registration. However, the underwriters, if any, of that offering have the
right to limit the number of registrable securities proposed to be included in
that registration.

We will bear all of the costs and expenses incurred in connection with these
registrations, except that the holders of registrable securities participating
in any registration would pay their own underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of their
securities.

These registration rights terminate five years after the completion of this
offering.

Agreement with Holders of Unsecured, Convertible Subordinated Notes

Under an agreement with us, the holders of our 1999 unsecured, convertible
subordinated notes have registration rights with respect to the 793,076 shares
of common stock issuable upon conversion of the notes. The holders of
substantially all of the notes have signed lock-up agreements in connection
with this offering. See "Shares Eligible for Future Sale--Lock-Up Agreements."

The holders of the notes have piggyback registration rights. If, after the
completion of this offering, we propose to register any common stock under the
Securities Act, other than on Form S-4 (or any successor form) or under an
employee benefit plan, the holders of the notes may require us to include all
or a portion of their securities in such registration. However, the
underwriters, if any, of that offering have the right to limit the number of
registrable securities proposed to be included in that registration.

We will bear all of the costs and expenses incurred in connection with these
registrations, except that the holders of the notes participating in any
registration would pay their own underwriting discounts, selling commissions
and stock transfer taxes applicable to the sale of their securities.

These registration rights terminate two years after the completion of this
offering.

NBC Agreement

Under our stock purchase and advertising agreement with National
Broadcasting Company, Inc., NBC has registration rights with respect to its
686,766 shares of our common stock. NBC has signed a lock-up agreement in
connection with this offering. See "Shares Eligible for Future Sale--Lock-Up
Agreements."

At any time beginning six months after this offering, NBC may request that
we register at least 50% of its shares of our common stock or any lesser
percentage of its shares if the aggregate public offering price is

64
<PAGE>

greater than $5,000,000. We are only obligated to effect one of these demand
registrations and we have the right to delay the filing of a registration
statement for up to 90 days.

In addition, NBC has piggyback registration rights with respect to its
shares of our common stock. If, after the completion of this offering, we
propose to register any common stock under the Securities Act, other than in a
Rule 145 transaction or under an employee benefit plan, NBC may require us to
include all or a portion of its shares of our common stock in such
registration. However, the underwriters, if any, of that offering have the
right to limit the number of NBC shares proposed to be included in that
registration.

We will bear all of the costs and expenses incurred in connection with these
registrations except that NBC would pay its own underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of its securities.

These registration rights terminate three years after the completion of this
offering.

Agreement with Holders of Series A Convertible Preferred Stock

Under an agreement with us, the holders of our Series A convertible
preferred stock have piggyback registration rights with respect to the shares
of common stock issuable upon conversion of the Series A convertible preferred
stock. If, after the completion of this offering, we propose to register any
common stock under the Securities Act, other than on Form S-4 (or any successor
form) or under an employee benefit plan, the holders of the Series A
convertible preferred stock may require us to include all or a portion of their
securities in such registration. However, the underwriters, if any, of that
offering have the right to limit the number of registrable securities proposed
to be included in that registration. The holders of substantially all of the
Series A convertible preferred stock have signed lock-up agreements in
connection with this offering. See "Shares Eligible for Future Sale--Lock-Up
Agreements."

We will bear all of the costs and expenses incurred in connection with these
registrations, except that the holders of the Series A convertible preferred
stock participating in any registration would pay their own underwriting
discounts, selling commissions and stock transfer taxes applicable to the sale
of their securities.

These registration rights terminate two years after the completion of this
offering.

Anti-Takeover Effects of Certain Provisions of Michigan Law and Our Articles of
Incorporation and Bylaws

Michigan Anti-Takeover Statutes

Chapters 7A and 7B of the MBCA may affect attempts to acquire control of
CoolSavings. In general, unless the corporation's charter specifies otherwise,
under Chapter 7A, "business combinations" between a covered Michigan
corporation or its subsidiaries and an "interested shareholder" can be
consummated only if approved by at least 90% of the votes of each class of
shares entitled to vote and by at least two-thirds of the voting shares held by
disinterested shareholders. The MBCA defines a "business combination" to
include, among other transactions, certain mergers, dispositions of assets or
shares and recapitalizations. An "interested shareholder" is defined as the
direct or indirect beneficial owner of at least 10% of the voting power of a
covered corporation's outstanding shares. The MBCA provides an exemption to
this supermajority voting requirement if five years have elapsed after the
person involved became an "interested shareholder" and if certain price and
other conditions are satisfied. Our articles of incorporation include a
provision expressly "opting out" of Chapter 7A. Our board of directors may "opt
in" to Chapter 7A at any time by action of a majority of the directors then in
office.

In general, under Chapter 7B of the MBCA, an entity that acquires "control
shares" of a covered corporation may vote the control shares in favor of or
against any matter only if a majority of all shares, and

65
<PAGE>

of all non-"interested shares," of each class of shares entitled to vote as a
class approve the voting rights of that acquirer of "control shares." The MBCA
defines "interested shares" as shares owned by officers or employee-directors
of the corporation, or of the entity making the control share acquisition.
"Control shares" are defined as shares that, when added to shares already owned
by an entity, would give the entity voting power in the election of directors
over any of three thresholds: one-fifth, one-third and a majority. The effect
of this statute is to condition the acquisition of voting control of a
corporation on the approval of a majority of the pre-existing disinterested
shareholders. Our board of directors may amend the bylaws before a control
share acquisition occurs to provide that Chapter 7B does not apply to
CoolSavings.

In addition, some provisions of our restated articles of incorporation and
restated bylaws which will take effect upon the consummation of this offering
may have an anti-takeover effect. They may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in its best
interests, including those attempts that might result in a premium over the
market price for the shares held by our stockholders. The following summarizes
these provisions.

Advance Notice Requirements for Stockholder Proposals and Director Nominations

Our restated bylaws will provide that stockholders must provide timely
written notice before bringing business before an annual meeting of
stockholders or nominating candidates for election as directors. Our restated
bylaws also specify requirements as to the form and content of a stockholder's
notice. These provisions may prevent stockholders from bringing matters before
an annual meeting of stockholders or from making nominations for directors at
an annual meeting of stockholders.

Filling Vacancies

Our restated bylaws will authorize the board of directors to fill vacant
directorships or increase the size of the board of directors, which may deter a
stockholder from removing incumbent directors and simultaneously gaining
control of the board of directors.

Supermajority Voting Provisions

Our restated articles of incorporation will require the affirmative vote of
the holders of at least two-thirds of our outstanding voting stock for the
alteration, amendment or repeal of, or the adoption of any provision
inconsistent with, our restated articles of incorporation or bylaws, unless the
alteration, amendment or repeal is recommended by the board of directors. In
that case, the affirmative vote of the holders of a majority of the voting
stock of CoolSavings is required.

Stockholder Action; Special Meeting of Stockholders

Our restated articles of incorporation will provide that stockholders may
not take action by written consent. Our restated bylaws will further provide
that special meetings of stockholders may be called only by the Chairman of the
board of directors, the Chief Executive Officer, a majority of the board of
directors or the holders of at least a majority of the shares entitled to vote
in the election of directors.

Authorized but Unissued Shares

The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. We may use these
shares for a variety of corporate purposes, including future public offerings
to raise additional capital, corporate acquisitions and employee benefit plans.
This could make it more difficult or discourage an attempt to obtain control of
CoolSavings by means of a proxy contest, tender offer, merger or otherwise.

66
<PAGE>

Limitation of Liability and Indemnification Matters

Our restated articles of incorporation and our restated bylaws will provide
that we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their services to
us, which may include services in connection with takeover defense measures.
These provisions may have the effect of preventing changes in our management.

Nasdaq Symbol

Our common stock has been approved for listing on the Nasdaq National Market
under the symbol CSAV.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is EquiServe Trust
Company.

67
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for our common stock and a
significant public market for our common stock may not develop or be sustained
after this offering.

If our stockholders sell substantial amounts of common stock, including
shares issued upon the exercise of outstanding options, in the public market
following this offering, the market price of our common stock could fall. These
sales also might make it more difficult for us to sell equity or equity-related
securities in the future and at a time and price that we deem appropriate.

Upon completion of this offering, we will have outstanding an aggregate of
38,678,021 shares of common stock. All of the shares of common stock sold in
this offering will be freely tradable without restriction or further
registration under the Securities Act, unless these shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Act. This
leaves 35,378,021 shares eligible for sale into the public market as follows:

<TABLE>
<CAPTION>
Number of Shares Date
---------------- ----
<S> <C>
323,035 Immediately after the date of this prospectus

120,120 At various times after the date of this prospectus and prior to
180 days after the effective date of the registration statement
containing this prospectus

32,065,353 180 days after the effective date of the registration statement
containing this prospectus (subject in some cases to volume
limitations)

2,869,513 At various times after 180 days following the effective date
of the registration statement containing this prospectus
</TABLE>

Lock-Up Agreements

All of our executive officers and directors and the holders of approximately
99% of our common stock have agreed, for a period of 180 days from the
effective date of the registration statement containing this prospectus,
without the prior written consent of Chase Securities Inc., not to sell, offer,
contract to sell, transfer the economic risk of ownership in, make any short
sale, pledge or otherwise dispose of any shares of our common stock or any
securities convertible into or exchangeable or exercisable for or any other
rights to purchase or acquire our common stock, with the exception of specific
family and estate planning transfers. The only stockholders that are not
subject to these lock-up restrictions are those stockholders (holding less than
1% of our common stock in the aggregate) that refused to sign the lock-up
agreement. Chase Securities Inc. may remove these lock-up restrictions prior to
the expiration of the lock-up period without prior public notice.

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year, including the holding period of any prior
owner other than an affiliate, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:

. 1% of the number of shares of our common stock then outstanding, which
will equal approximately 386,780 shares immediately after this offering;
or

. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to that sale.

Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
CoolSavings.

68
<PAGE>

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, Rule 144(k) shares may be sold immediately upon
the completion of this offering.

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchase shares of our common
stock in connection with a compensatory stock or option plan or other written
agreement is eligible to resell those shares 90 days after the effective date
of this offering in reliance on Rule 144, but without compliance with some of
the restrictions, including the holding period, contained in Rule 144.

Registration Rights

After this offering, the holders of 33,638,867 shares of our common stock,
or their transferees, will be entitled to registration rights under the
Securities Act. Please see "Description of Capital Stock--Registration Rights."
After registration, these shares will generally be freely tradable without
restriction under the Securities Act. These sales could cause the trading price
of our common stock to decline, perhaps substantially.

Stock Options

As of March 31, 2000, options to purchase 4,670,587 shares of our common
stock were issued and outstanding. Within 12 months after this offering, we
intend to file a registration statement under the Securities Act covering
8,603,529 shares of our common stock subject to outstanding options or reserved
for issuance under our 1997 Stock Option Plan and 1999 Non-Employee Director
Stock Option Plan. Shares of our common stock registered under that
registration statement will, subject to vesting provisions and Rule 144 volume
limitations applicable to our affiliates, be available for sale in the open
market immediately after any applicable 180-day lock-up agreements expire or
are terminated.

69
<PAGE>

UNDERWRITING

We have entered into an underwriting agreement with the underwriters named
below. Chase Securities Inc., Lehman Brothers Inc. and Thomas Weisel Partners
LLC are acting as representatives of the underwriters. Chase H&Q is the
business name Chase Securities Inc. uses to describe its equity underwriting
business. Subject to the terms and conditions of the underwriting agreement,
each underwriter has severally agreed to purchase the number of shares of
common stock set forth opposite its name below.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ -----------
<S> <C>
Chase Securities Inc...........................................
Lehman Brothers Inc. ..........................................
Thomas Weisel Partners LLC.....................................
-----------
Total.......................................................... 3,300,000
===========
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters are subject to specified conditions, including the absence of any
material adverse change in our business and the receipt of certificates,
opinions and letters from us, our counsel and our independent auditors. The
underwriters are committed to purchase all the shares of common stock offered
by us, other than those shares covered by the over-allotment option described
below, if they purchase any of the shares.

The underwriters propose to offer the shares directly to the public at the
initial public offering price shown on the cover page of this prospectus and
to dealers at that price less a concession not in excess of $ per share.
The underwriters may allow, and those dealers may re-allow, a concession not
in excess of $ per share to other dealers. After the initial offering of
shares, the underwriters may change the public offering price and other
selling terms. The representatives have advised us that the underwriters do
not intend to confirm discretionary sales in excess of 5% of the shares of
common stock offered hereby.

We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to 495,000 additional
shares of common stock at the initial public offering price, less the
underwriting discounts shown on the cover page of this prospectus. To the
extent that the underwriters exercise this option, each of the underwriters
will have a firm commitment to purchase approximately the same percentage of
those additional shares which the number of shares of common stock to be
purchased by it shown in the above table bears to the total number of shares
of common stock offered by us. We will be obligated pursuant to this option to
sell shares to the underwriters to the extent the option is exercised. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of shares of common stock offered by us.

The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.

The following table provides information regarding the amount of the
discount to be paid to the underwriters by us in connection with this
offering. The underwriting discount was determined through negotiations with
the underwriters, and equals the public offering price per share of common
stock, less the amount paid by the underwriters to us per share of common
stock. These amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of our common stock.

<TABLE>
<CAPTION>
Paid to the
Underwriters
-----------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per share................................................
Total....................................................
</TABLE>

We will pay the offering expenses, estimated to be $1.1 million, excluding
the underwriting discount.

70
<PAGE>

We have agreed to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the underwriters may be required to make in respect of any of
those liabilities.

We, our executive officers and directors and the holders of substantially
all of our common stock have agreed for a period of 180 days from the effective
date of the registration statement containing this prospectus, without the
prior written consent of Chase Securities Inc., not to sell, offer, contract to
sell, transfer the economic risk of ownership in, make any short sale, pledge
or otherwise dispose of any shares of our common stock or any securities
convertible into or exchangeable or exercisable for or any other rights to
purchase or acquire our common stock, with certain exceptions, including
specific family and estate planning transfers. In addition, during this period,
we have agreed not to file any registration statement with respect to, and each
of our executive officers and directors and the holders of substantially all of
our common stock have agreed not to make any demand for, or exercise any right
with respect to, the registration of any shares of common stock or other
securities issued by us, without the prior written consent of Chase Securities
Inc., other than this offering.

The underwriters, at our request, have reserved for sale at the initial
public offering price up to 210,000 shares of common stock to be sold in this
offering for sale to our employees, directors and parties related to them, and
to service providers and other third parties with whom we have business
relationships. These reserved shares will be sold at the public offering price
that appears on the cover page of this prospectus. The number of shares
available for sale to the general public will be reduced to the extent that any
reserved shares are purchased by these persons. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered by this prospectus.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price for the common stock in this offering
will be determined by negotiation between us and the representatives of the
underwriters. The factors to be considered in determining the initial public
offering price include prevailing market conditions, the history of and the
prospects for the industry in which we compete, an assessment of our
management, our prospects, our capital structure, our results of operations in
recent periods and other factors deemed relevant.

Some of the persons participating in this offering may over-allot or effect
transactions that stabilize, maintain or otherwise affect the market price of
the common stock at levels above those that might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase for the purpose of pegging, fixing or
maintaining the price of the common stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member in connection with the offering when shares
of common stock sold by the syndicate member are purchased in a syndicate
covering transaction. Stabilizing transactions may be effected on the Nasdaq
National Market, in the over-the-counter market, or otherwise. Stabilizing
transactions, if commenced, may be discontinued at any time.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners LLC has been named as a lead or co-
manager on 167 filed public offerings of equity securities, of which 114 have
been completed, and has acted as a syndicate member in an additional 94 public
offerings of equity securities. Thomas Weisel Partners LLC does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us under the underwriting agreement entered into in connection with this
offering.

In December 1999, Hambrecht & Quist California (the predecessor in interest
to Chase Securities Inc.) purchased 15.000 shares of our Series A convertible
preferred stock, which will automatically convert into

71
<PAGE>

19,262 shares of common stock upon completion of this offering, the H&Q
Employee Venture Fund 2000, L.P. purchased 6.000 shares of our Series A
convertible preferred stock, which will automatically convert into 7,704 shares
of common stock upon completion of this offering, and Access Technology
Partners Brokers Fund, L.P., purchased 1.000 share of our Series A convertible
preferred stock, which will automatically convert into 1,284 shares of common
stock upon completion of this offering, for an aggregate purchase price of
$200,213.86, or $9,100.63 per share. The foregoing shares have been deemed to
be underwriting compensation by the NASD. As a result, the holders of these
shares have agreed for a period of one year from the date of this prospectus
not to sell, transfer, assign, pledge or hypothecate these shares.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered hereby
will be passed upon for CoolSavings by Jaffe, Raitt, Heuer & Weiss,
Professional Corporation, Detroit, Michigan. Pillsbury Madison & Sutro LLP, San
Francisco, California, is acting as counsel for the underwriters in connection
with selected legal matters relating to the shares of common stock offered by
this prospectus. Shareholders of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation beneficially own 961,897 shares of our common stock in the
aggregate. Assuming that the fair market value of a share of our common stock
is $7.00, these shares have a fair market value of approximately $6.7 million.

The statements in this prospectus relating to patents, patent licenses,
trademarks and service marks and related litigation under "Table of Contents"
and under the captions "Risk Factors--Intellectual property litigation against
us can be costly and could result in the loss of significant rights," "Risk
Factors--Protecting our patents, trademarks and proprietary rights may be
costly and may distract our management" and "Business--Intellectual Property"
and the statements in this prospectus relating to intellectual property and
related litigation under the caption "Business--Legal Proceedings" have been
reviewed and approved by Niro, Scavone, Haller & Niro, Chicago, Illinois, our
intellectual property counsel, and are included in this prospectus in reliance
upon that review and approval. Shareholders of Niro, Scavone, Haller & Niro
beneficially own 234,600 shares of our common stock in the aggregate. Assuming
that the fair market value of a share of our common stock is $7.00, these
shares have a fair market value of approximately $1.6 million.

EXPERTS

The financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock being sold in this
offering. This prospectus, which constitutes a part of that registration
statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. For further information with respect to CoolSavings and the common
stock offered hereby, please refer to the registration statement and the
exhibits and schedules filed as a part of the registration statement.
Statements contained in this prospectus as to the contents of any contract,
agreement or any other document referred to are not necessarily complete;
reference is made in each case to the copy of the contract or document filed as
an exhibit to the registration statement. Each statement is qualified in all
respects by reference to the exhibit. You may read and copy any document we
file at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please

72
<PAGE>

call the Commission at 1-800-SEC-0330 for further information on the public
reference room. Our Commission filings are also available at the Commission's
web site at http://www.sec.gov.

After this offering, we will become subject to the information and periodic
reporting requirements of the Securities Exchange Act and, accordingly, we will
file periodic reports, proxy statements and other information with the
Commission. Such periodic reports, proxy statements and other information will
be available for inspection and copying at the Commission's public reference
room and the web site of the Commission referred to above.

73
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2

Financial Statements:

Balance Sheets........................................................... F-3

Statements of Operations................................................. F-4

Statements of Stockholders' (Deficit) Equity............................. F-5

Statements of Cash Flows................................................. F-6

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

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of coolsavings.com inc.:

In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' (deficit) equity and of cash flows present
fairly, in all material respects, the financial position of coolsavings.com
inc. at December 31, 1998 and 1999, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
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
auditing standards generally accepted in the United States, 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

Chicago, Illinois
February 18, 2000, except as to Note 10 which is as of April 7, 2000

F-2
<PAGE>

COOLSAVINGS.COM INC.

Balance Sheets

<TABLE>
<CAPTION>
December 31, Pro Forma
------------------------- March 31, March 31,
1998 1999 2000 2000
----------- ------------ ------------ ------------
(unaudited) (unaudited)
(Note 1r)
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents............ $ 4,895,139 $ 17,488,788 $ 9,543,088 $ 9,543,088
Restricted cash......... 67,352 95,352 98,494 98,494
Accounts receivable, net
of allowance of $13,500
and $118,154 and
$158,317 at
December 31, 1998 and
1999 and March 31,
2000................... 281,800 4,381,463 5,593,406 5,593,406
Prepaid advertising..... -- 2,787,327 3,213,062 3,213,062
Prepaid assets.......... 74,311 290,103 327,489 327,489
Other assets............ 10,940 498,137 1,104,278 1,104,278
----------- ------------ ------------ ------------
Total current
assets............. 5,329,542 25,541,170 19,879,817 19,879,817
----------- ------------ ------------ ------------
Property and equipment:
Office furniture and
equipment.............. 298,280 453,725 810,994 810,994
Computer equipment...... 698,684 2,709,057 3,857,099 3,857,099
Leasehold improvements.. 282,805 332,002 348,676 348,676
Capitalized software.... 45,901 1,489,913 1,489,913 1,489,913
----------- ------------ ------------ ------------
1,325,670 4,984,697 6,506,682 6,506,682
Less accumulated
depreciation and
amortization........... (284,568) (935,862) (1,264,950) (1,264,950)
----------- ------------ ------------ ------------
1,041,102 4,048,835 5,241,732 5,241,732
----------- ------------ ------------ ------------
Total assets............ $ 6,370,644 $ 29,590,005 $ 25,121,549 $ 25,121,549
=========== ============ ============ ============

<CAPTION>
LIABILITIES
Current liabilities:
<S> <C> <C> <C> <C>
Accounts payable:
Trade................. $ 729,573 $ 2,319,897 $ 3,050,332 $3,050,332
Related parties....... 4,051 24,944 316,241 316,241
Accrued liabilities..... 522,366 1,832,874 3,842,713 3,842,713
Deferred revenue........ 221,312 417,974 505,897 505,897
Current maturities of
long-term debt......... 64,098 246,601 260,917 260,917
Convertible subordinated
notes payable,
including $3,561,569
due related parties.... -- 4,996,369 4,996,369 --
----------- ------------ ------------ ------------
Total current
liabilities........ 1,541,400 9,838,659 12,972,469 7,976,100
----------- ------------ ------------ ------------
Long-term debt, less
current maturities..... 235,574 631,831 564,171 564,171
----------- ------------ ------------ ------------
Commitments and
contingencies (Note
5).....................

<CAPTION>
STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Series A convertible
preferred stock, no par
value, 5,000 shares
authorized, 2,197.650
shares issued and
outstanding at December
31, 1999 and March 31,
2000 (actual) and zero
shares and outstanding
at March 31, 2000 (pro
forma) (Liquidation
preference of $9,100.63
per share)............. -- -- 4,966,932 --
Common stock, no par
value, 69,000,000
shares authorized,
24,614,899, 31,715,449
and 31,762,812 shares
issued and outstanding
at December 31, 1998,
1999 and March 31, 2000
(actual) and 35,378,021
shares issued and
outstanding at March
31, 2000 (pro forma)... 13,500,865 27,844,658 27,947,658 52,811,750
Additional paid-in
capital................ (4,663,650) 15,204,073 10,237,141 (4,108,498)
Accumulated deficit..... (4,243,545) (21,111,924) (28,749,530) (29,304,682)
Notes receivable from
related parties........ -- (2,817,292) (2,817,292) (2,817,292)
----------- ------------ ------------ ------------
Total stockholders'
equity................. 4,593,670 19,119,515 11,584,909 16,581,278
----------- ------------ ------------ ------------
Total liabilities and
stockholders' equity... $ 6,370,644 $ 29,590,005 $ 25,121,549 $ 25,121,549
=========== ============ ============ ============
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-3
<PAGE>

COOLSAVINGS.COM INC.

Statements of Operations

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
-------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ----------- ------------ ----------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net revenues............ $ 109,510 $ 1,142,819 $ 12,915,732 $ 889,805 $ 8,085,881
Cost of revenues........ 147,144 427,769 1,817,444 255,763 1,068,631
----------- ----------- ------------ ----------- ------------
Gross profit (loss)..... (37,634) 715,050 11,098,288 634,042 7,017,250
Operating expenses:
Sales and marketing... 1,201,564 2,494,395 17,837,722 1,324,561 10,265,240
Product development... 719,547 1,217,101 4,503,223 998,494 1,604,585
General and
administrative....... 766,313 2,349,725 5,890,193 1,005,242 2,859,775
----------- ----------- ------------ ----------- ------------
Total operating
expenses............... 2,687,424 6,061,221 28,231,138 3,328,297 14,729,600
----------- ----------- ------------ ----------- ------------
Loss from operations.... (2,725,058) (5,346,171) (17,132,850) (2,694,255) (7,712,350)
Other income (expense):
Interest and other
income............... 8,911 88,322 492,971 75,970 218,396
Interest expense...... (11,170) (48,517) (228,500) (5,687) (143,652)
Amortization of debt
discount............. (4,204) (434,894) -- - -
----------- ----------- ------------ ----------- ------------
Loss before income
taxes.................. (2,731,521) (5,741,260) (16,868,379) (2,623,972) (7,637,606)
Income taxes............ -- -- -- -- --
----------- ----------- ------------ ----------- ------------
Net loss................ (2,731,521) (5,741,260) (16,868,379) (2,623,972) (7,637,606)
Deemed dividend
representing the
beneficial conversion
feature of preferred
stock.................. -- -- -- -- (4,966,932)
----------- ----------- ------------ ----------- ------------
Loss applicable to
common stockholders.... $(2,731,521) $(5,741,260) $(16,868,379) $(2,623,972) $(12,604,538)
=========== =========== ============ =========== ============
Basic and diluted net
loss per share......... $ (0.15) $ (0.27) $ (0.57) $ (0.10) $ (0.40)
=========== =========== ============ =========== ============
Weighted average shares
used in calculation of
basic and diluted net
loss per share......... 18,266,572 21,547,177 29,804,681 25,249,484 31,729,705
=========== =========== ============ =========== ============
Pro forma basic and
diluted net loss per
share (unaudited)...... $ (1.24) $ (0.79)
============ ============
Weighted average shares
used in calculation of
pro forma basic and
diluted net loss per
share (unaudited)...... 30,058,750 35,340,788
============ ============
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4
<PAGE>

COOLSAVINGS.COM INC.

Statements of Stockholders' (Deficit) Equity

Years Ended December 31, 1997, 1998 and 1999
and the Three Months Ended March 31, 2000 (unaudited)

<TABLE>
<CAPTION>
Notes
Receivable Total
Preferred Stock Common Stock Additional From Stockholders'
-------------------- ----------------------- Paid-In Accumulated Related Equity
Shares Amount Shares Amount Capital Losses Parties (Deficit)
--------- ---------- ---------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1996.................. -- $ -- 16,074,792 $ 885,999 $ -- $ (889,825) $ -- $ (3,826)
Issuance of common
stock................. 3,444,124 1,897,366 1,897,366
Issuance of warrants... 62,730 62,730
Net loss............... (2,731,521) (2,731,521)
--------- ---------- ---------- ----------- ----------- ------------ ----------- ------------
Balances, December 31,
1997.................. -- -- 19,518,916 2,783,365 62,730 (3,621,346) -- (775,251)
Issue of common stock.. 5,095,983 10,717,500 10,717,500
Issuance of warrants... 376,369 376,369
Stock option
compensation.......... 16,312 16,312
Conversion from S-Corp
to C-Corp............. (5,119,061) 5,119,061 --
Net loss............... (5,741,260) (5,741,260)
--------- ---------- ---------- ----------- ----------- ------------ ----------- ------------
Balances, December 31,
1998.................. -- -- 24,614,899 13,500,865 (4,663,650) (4,243,545) -- 4,593,670
Issuance of preferred
stock, net of issuance
costs................. 2,197.650 19,867,723 19,867,723
Issuance of common
stock................. 4,906,594 8,500,000 8,500,000
Exercise of options and
warrants.............. 1,507,190 2,843,793 (2,817,292) 26,501
Issuance of common
stock for
advertising........... 686,766 3,000,000 3,000,000
Net loss............... (16,868,379) (16,868,379)
--------- ---------- ---------- ----------- ----------- ------------ ----------- ------------
Balances, December 31,
1999.................. 2,197.650 -- 31,715,449 27,844,658 15,204,073 (21,111,924) (2,817,292) 19,119,515
For the three month
period ended March 31,
2000 (unaudited):
Exercise of options.... 47,380 103,000 103,000
Redemption of
fractional shares..... (17) --
Deemed dividend
representing the
beneficial conversion
feature of preferred
stock................. 4,966,932 (4,966,932) --
Net loss............... (7,637,606) (7,637,606)
--------- ---------- ---------- ----------- ----------- ------------ ----------- ------------
Balances, March 31,
2000.................. 2,197.650 $4,966,932 31,762,812 $27,947,658 $10,237,141 $(28,749,530) $(2,817,292) $ 11,584,909
========= ========== ========== =========== =========== ============ =========== ============
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-5
<PAGE>

COOLSAVINGS.COM INC.

Statements of Cash Flows

<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
-------------------------------------- ------------------------
1997 1998 1999 1999 2000
----------- ----------- ------------ ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows used in
operating activities:
Net loss................ $(2,731,521) $(5,741,260) $(16,868,379) $(2,623,972) $(7,637,606)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization......... 44,995 236,557 651,294 101,772 329,088
Amortization of debt
discount............. 4,204 434,894 -- -- --
Stock option
compensation......... -- 16,312 -- -- --
Provision for doubtful
accounts............. -- 13,500 104,654 10,982 77,774
Changes in assets and
liabilities:
Increase in restricted
cash................. -- (67,352) (28,000) -- (3,142)
Increase in accounts
receivable........... (71,997) (223,303) (4,204,317) (326,407) (1,289,717)
Increase in prepaid
and other current
assets............... (21,877) (59,656) (135,693) (65,245) (1,069,262)
Increase in accounts
payable.............. 520,693 45,523 1,611,217 762,644 1,021,732
Increase in deferred
revenue.............. -- 221,312 196,662 89,421 87,923
Increase (decrease) in
accrued and other
liabilities.......... (100,972) 323,338 1,310,508 13,266 2,009,839
----------- ----------- ------------ ----------- -----------
Net cash used in
operating activities... (2,356,475) (4,800,135) (17,362,054) (2,037,539) (6,473,371)
----------- ----------- ------------ ----------- -----------
Cash flows used in
investing activities:
Purchases of property
and equipment.......... (224,835) (1,040,575) (2,215,015) (387,567) (1,521,985)
Capitalized software
costs.................. -- (45,901) (1,444,012) (224,999) --
----------- ----------- ------------ ----------- -----------
Net cash used in
investing activities... (224,835) (1,086,476) (3,659,027) (612,566) (1,521,985)
----------- ----------- ------------ ----------- -----------
Cash flows from
financing activities:
Proceeds from short-term
debt................... 150,000 900,000 -- -- --
Repayment of short-term
debt................... -- (1,050,000) -- -- (53,344)
Advances on notes
payable................ 149,812 149,861 578,760 173,608 --
Proceeds from exercise
of stock options....... -- -- 26,500 -- 103,000
Proceeds from
convertible notes
payable ............... -- -- 4,996,369 -- --
Proceeds from issuance
of preferred stock .... -- -- 20,000,000 -- --
Proceeds from issuance
of common stock........ 1,897,366 10,717,500 8,500,000 5,000,000 --
Cash paid for issuance
costs.................. -- -- (486,899) -- --
----------- ----------- ------------ ----------- -----------
Net cash provided by
financing activities... 2,197,178 10,717,361 33,614,730 5,173,608 49,656
----------- ----------- ------------ ----------- -----------
Net increase (decrease)
in cash................ (384,132) 4,830,750 12,593,649 2,523,503 (7,945,700)
Cash and cash
equivalents, beginning
of period.............. 448,521 64,389 4,895,139 4,895,139 17,488,788
----------- ----------- ------------ ----------- -----------
Cash and cash
equivalents, end of
period................. $ 64,389 $ 4,895,139 $ 17,488,788 $ 7,418,642 $ 9,543,088
=========== =========== ============ =========== ===========
Supplemental schedule of
cash flow information,
interest paid.......... $ 11,170 $ 48,517 $ 225,819 $ 4,524 $ 16,748
Non-cash financing
activity:
Accretion of
convertible preferred
stock................ -- -- -- -- $ 4,966,932
Issuance of common
stock in exchange for
stockholder notes
upon exercise of
stock options and
warrants............. -- -- $ 2,817,292 $ 2,062,766 --
Issuance of common
stock for
advertising.......... -- -- $ 3,000,000 -- --
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

1. Summary of Significant Accounting Policies:

a. The Company: coolsavings.com inc. (the "Company") provides a
comprehensive set of e-marketing services used by online and offline
advertisers to build one-to-one customer relationships. Under its
established brand, advertisers can deliver, target and track a wide
array of incentives, including printed and electronic coupons,
personalized e-mails, rebates, samples, sales notices, gift
certificates, contests, and banner advertisements to promote products or
services in any online or offline environment.

In November 1998, the Company changed its corporate name from
Interactive Coupon Marketing Group, Inc. to coolsavings.com inc.

The Company has sustained significant net losses and negative cash
flows from operations since its inception. The Company's ability to
meet its obligations in the ordinary course of business is dependent
upon its ability to establish profitable operations or raise additional
financing through public or private equity financing, bank financing,
or other sources of capital. During 1999, the Company raised
approximately $20.0 million from the sale of preferred stock, $5.0
million from the sale of convertible notes and $8.5 million from the
sale of common stock. In January 2000, the Company obtained a $6.5
million line of credit. Management believes current working capital and
other funding sources are sufficient to continue operations through
2000.

b. Unaudited Interim Results: The accompanying interim financial statements
as of March 31, 2000 and for the three months ended March 31, 1999 and
2000 and the related notes have not been audited. However, they have
been prepared in conformity with the accounting principles stated in the
audited financial statements for the three years in the period ended
December 31, 1999 and include all adjustments, which were of a normal
and recurring nature, which in the opinion of management, are necessary
to present fairly the financial position of the Company and results of
operations and cash flows for the periods presented. The operating
results for the interim periods are not necessarily indicative of
results expected for the full years.

c. Cash and Cash Equivalents: The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. Cash equivalents consist primarily of deposits in money
market funds and certificates of deposit.

d. Concentration of Credit Risk: Financial instruments that potentially
subject the Company to a concentration of credit risk consists of cash
and cash equivalents and accounts receivable. Cash and cash equivalents
are deposited with high credit quality financial institutions. The
Company's accounts receivable are derived from revenue earned from
customers located primarily in the U.S. and are denominated in the U.S.
dollars. During each of the periods presented, no one customer accounted
for more than 10% of net accounts receivable. During 1997, the Company
had three customers that each accounted for approximately 22% of total
net revenues. For the three months ended March 31, 2000, two customers
accounted for approximately 10.9% and 10.2% of total net revenues,
respectively. No other customer accounted for 10% or more of net
revenues for any other period presented.

e. Fair Value of Financial Instruments: The Company's financial
instruments, including cash and cash equivalents, accounts receivable
and accounts payable are carried at cost, which approximates their fair
value because of the short-term maturity of these instruments. The
carrying value for all long-term debt outstanding at the end of all
periods presented approximates fair value.

f. Property and Equipment: Property and equipment are recorded at cost.
Depreciation and amortization are computed using primarily the straight-
line method over the estimated useful lives of the assets. Useful lives
are 3 to 5 years for computer equipment and 5 to 7 years for furniture
and fixtures. Leasehold improvements are amortized over the term or the
estimated useful life, whichever is shorter. Upon sale or retirement of
property and equipment, the cost and

F-7
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

related accumulated depreciation or amortization are eliminated from the
respective accounts, and the resulting gain or loss is included in the
determination of net income. Maintenance and repair costs are expensed
as incurred.

g. Long-Lived Assets: The Company assesses the recoverability of long-lived
assets at the entity level, whenever adverse events or changes in
circumstances or business climate indicate that an impairment may have
occurred. If the future cash flows (undiscounted and without interest)
expected to result from the use of the related assets are less than the
carrying value of such assets, an impairment has been incurred and a
loss is recognized to reduce the carrying value of the long-lived assets
to fair value, which is determined by discounting estimated future cash
flows. The Company has not recognized an impairment loss in any of the
periods presented.

h. Revenue Recognition: Revenue subject to time-based contracts is
recognized ratably over the duration of the contract. Deferred revenue
represents the portion of revenue that has not been recognized related
to time based contracts. For contracts based on certain performance or
delivery criteria, revenue is recognized in the month performance is
delivered to the customer.

i. Advertising: Advertising costs are expensed as incurred. Advertising
expense was $815,950, $1,426,452 and $14,136,270 during the years ended
December 31, 1997, 1998 and 1999, respectively, and $773,393 and
$8,369,946 during the three months ended March 31, 1999 and 2000,
respectively.

j. Income Taxes: Until June 1, 1998, the Company had elected, under Section
1362(a) of the Internal Revenue Code, to be treated as an S-corporation
for income tax purposes. As such, the Company was not liable for federal
income taxes and any taxable income of the Company was included in the
tax returns of the Company's stockholders. Income taxes are accounted
for using an asset and liability approach, which requires the
recognition of taxes payable or refundable for the current year and
deferred tax liabilities and assets for the future tax consequences of
events that have been recognized in the Company's financial statements
or tax returns. The measurement of current and deferred tax liabilities
and assets are based on provisions of the enacted tax law; the effects
of future changes in tax laws or rates are not anticipated. The
measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that, based on available evidence, are not
expected to be realized.

k. Use of Estimates: The preparation of the 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.

l. Capitalized Software Costs: The Company accounts for software
development costs in accordance with the American Institute of Certified
Public Accountants Statement of Position 98-1 ("SOP 98-1"), "Accounting
for the Cost of Computer Software Developed or Obtained for Internal
Use" which requires capitalization of certain costs including the cost
of outside consultants. These costs are amortized using the straight-
line method over three years, beginning when individual modules are
placed into service. The Company recognized $111,659 in amortization
expense for the year ended December 31, 1999 and $124,159 for the three
months ended March 31, 2000. The Company typically does not capitalize
internal costs as it is not reasonably cost-effective for the Company to
separate these internal costs between maintenance and relatively minor
upgrades and enhancements.

F-8
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

m. Stock-Based Compensation: Financial Accounting Standards Board ("FASB")
Statement of Accounting Standards (SFAS) No. 123, "Accounting for Stock-
Based Compensation" encourages, but does not require, companies to
record compensation cost for stock-based compensation at fair value. The
Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and its
related Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the fair market value of a
share of the Company's stock at the date of the grant over the amount
that must be paid to acquire the stock. Total compensation expense
recognized in connection with nonemployee stock option grants was
$16,312 during the year ended December 31, 1998. Due to the vesting
terms of non-employee options, no future compensation expense will be
recognized in connection with these grants. No compensation expense has
been recognized in connection with stock option grants during any other
period presented. See Note 7d for the required pro forma net income and
earnings per share disclosures required by SFAS Statement No. 123.

n. Basic and Diluted Net Loss Per Share: The Company computes net loss per
share in accordance with the provisions of SFAS 128 "Earnings per Share"
("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under
the provisions of SFAS 128 and SAB 98, basic and diluted net loss per
share applicable to common stockholders is computed by dividing the net
loss applicable to common stockholders for the period by the weighted
average number of common shares outstanding for the period. The
calculation of diluted net loss per share excludes shares of common
stock issuable upon the conversion of unsecured convertible subordinated
notes (see Note 4b), exercise of employee stock options and warrants
(see Note 7d), and the conversion of preferred stock (see Note 7a) as
the effect of such exercises would be antidilutive. Refer to Note 8--
Earnings Per Share for the reconciliation of the numerator and
denominator of the basic and diluted EPS calculation. Basic and diluted
net loss per share have been restated to reflect the stock split (see
Note 10).

o. Comprehensive Earnings: The Company reports comprehensive earnings in
accordance with SFAS Statement No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive earnings and its components in general-purpose financial
statements. There were no components of other comprehensive income
during any of the periods presented.

p. Segment Information: SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," requires that management identify
operating segments based on the way that management desegregates the
entity for making internal operating decisions. The Company currently
operates under the definition of one segment. Therefore, SFAS No. 131
is not applicable to the Company.

q. Recent Pronouncements: In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and hedging activities and requires recognition of all
derivatives as assets or liabilities in the statement of financial
position and measurement of those instruments at fair value. The
statement as amended is effective for fiscal years beginning after June
15, 2000. As the Company does not have any derivative instruments or
hedging activities, SFAS No. 133 is not expected to have a material
effect on its financial results.

In May 2000, the Emerging Issues Task Force ("EITF") released Issue No.
00-2, "Accounting for Web Site Development Costs". EITF Issue No. 00-2
establishes standards for determining the

F-9
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

capitalization or expensing of incurred costs relating to the
development of Internet web sites based upon the respective stage of
development. The Issue is effective for fiscal quarters beginning after
June 30, 2000 (including costs incurred for projects in process at the
beginning of the quarter of adoption). The Company is currently
evaluating the effect of EITF No. 00-2 on its financial results.

In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements", which provides
additional guidance in applying generally accepted accounting
principles for revenue recognition. The Company believes its revenue
recognition policy is in compliance with SAB No. 101.

r. Pro Forma Information: The pro forma balance sheet as of March 31, 2000
presents the estimated effects of certain transactions that will occur
simultaneously with the closing of the initial public offering,
including (i) the conversion of Series A convertible preferred stock
into common stock giving effect to the accretion of the full value of
the beneficial conversion feature as described in Note 7a, and (ii) the
conversion of all convertible subordinated notes payable and accrued
interest into common stock. The pro forma loss per common share for the
year ended December 31, 1999 and the three months ended March 31, 2000
reflects the effects of a deemed dividend of $19,868,000 representing
the beneficial conversion feature of the Series A convertible preferred
stock and a beneficial conversion feature of $550,000 relating to the
conversion of the convertible subordinated notes. The shares used to
compute pro forma loss per common share at December 31, 1999 and March
31, 2000 were calculated by adding to the historical weighted average
common shares outstanding the number of shares which will be issued upon
the conversion of the convertible subordinated notes and the Series A
convertible preferred stock using the if converted method from the
respective dates of issuance.

s. Web Site Development Costs: The Company currently accounts for web site
development costs under the guidance of SOP 98-1. Effective July 1,
2000, the Company will apply the standards of EITF No. 00-2 (see Note
1q), which requires capitalization of certain web site development
costs. The Company is currently evaluating the effects of EITF No. 00-2
on its financial results.

2.Related Party Transactions:

a. Legal Services: The Company engages the services of certain attorneys
who were members of the Company's Board of Directors during 1997 and
1998, and are holders of the Company's stock. Total fees for services
were $71,572, $388,243 and $954,839 during the years ended December 31,
1997, 1998 and 1999, respectively, and $134,847 and $139,179 during the
three months ended March 31, 1999 and 2000, respectively. These fees are
included in general and administrative expenses in the Company's
statements of operations. Total fees payable were $4,051 and $116,236
and $316,241 at December 31, 1998, 1999 and March 31, 2000,
respectively.

b. Notes Receivable: In March, April, and July 1999, shareholders provided
a total of $2,817,292 notes receivable upon exercise of stock options
and warrants. These notes are due in 2003, with interest at the rates
ranging from 4.83% to 5.86% due annually. These notes are collateralized
by the shares of common stock issued upon exercise of the related
options and warrants and the makers of each note are personally liable
for up to 20% of the face value of the note, plus accrued interest.

c. Short-Term Borrowings: In December 1997, the Company entered into an
unsecured Line of Credit Loan (the "Loan") with a major shareholder.
Under the Loan, the Company could borrow funds as needed at a rate of
prime plus 2.0% (10.5% at December 31, 1997). The Loan became due and
was repaid during 1998. The total amount outstanding at December 31,
1997 was $150,000. Total amounts borrowed and repaid during 1998 were
$900,000.

F-10
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

In connection with the Loan, the lender received 115,000 and 747,500
common stock warrants during 1997 and 1998, respectively. The warrants
were immediately exercisable and had a term of five years. Of the
warrants, 805,000 were exercisable at $1.30 and 57,500 were exercisable
at $2.17 as of December 31, 1998. During the year ended December 31,
1999, all of warrants were exercised in exchange for notes receivable
(see Notes Receivable above). The proportional fair value of warrants
issued during 1997 and 1998 was $62,730 and $376,368, respectively.
Such value represents a discount from the fair value of the Loan and
the relative fair value of the warrants has been recorded in the
financial statements as stipulated by APB 14 and was amortized over the
period that the Loan was outstanding.

d. Unsecured Convertible Subordinated Notes: On May 28, 1999, the Company
issued $1.5 million of unsecured convertible subordinated notes (see
Note 4b). One note worth $65,000 is held by a member of the Board of
Directors. There was no unpaid interest as of December 31, 1999. In
October 1999, the Company borrowed approximately $3.5 million from a
major stockholder under an unsecured convertible subordinated note (see
Note 4b). There was no unpaid interest as of December 31, 1999. At March
31, 2000, interest totaling $126,398 was accrued on these notes.

3.Accrued Liabilities:

Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------- March 31,
1998 1999 2000
-------- ---------- ----------
<S> <C> <C> <C>
Accrued payroll............................ $139,952 $ -- $ 231,741
Accrued marketing expense.................. 68,476 1,057,149 2,199,296
Other...................................... 313,938 775,725 1,411,676
-------- ---------- ----------
$522,366 $1,832,874 $3,842,713
======== ========== ==========
</TABLE>

4.Long and Short Term Debt:

a. Bank Line of Credit: The Company has a revolving line of credit
arrangement with a bank in the amount of $500,000 for the purchase of
new equipment. On May 21, 1999, the maximum amount of borrowings allowed
under this line was increased to $1.0 million. Borrowings under this
line are collateralized by the specific equipment purchased and are
repayable in 36 or 48 equal installments with interest at a rate of
prime plus 1% per annum. Amounts outstanding under this line were
$299,672, $878,432 and $825,089 at December 31, 1998, 1999 and March 31,
2000, respectively. The weighted average interest rate of these
borrowings was 9.3%, 9.0% and 9.0% at December 31, 1998, 1999 and March
31, 2000, respectively.

Under this line of credit the Company is required to comply with
certain financial covenants, including maintenance of a minimum
tangible net worth. Additionally, the Company may not purchase or
retire any outstanding shares or alter or amend its capital structure
without the prior consent of the bank. The Company was not in
compliance with certain nonfinancial covenants during 1999 and 2000.
Waivers of the respective covenants have been received from the lender.

The aggregate principal payments over the next five years are:

F-11
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

On January 31, 2000, the Company obtained an additional $6.5 million
line of credit with a bank. Borrowings under this line of credit are
collateralized by trade accounts receivable and fixed assets.
$3.5 million of the line is payable in installments at an interest rate
of prime plus 1.25%. The final installment payment is due on June 30,
2003. $3.0 million of the line is a promissory note due on April 30,
2001 at an interest rate of prime plus 1%. The line of credit requires
certain minimum tangible capital funds and other financial ratios to be
maintained. As of March 31, 2000, the Company had no borrowings under
this line of credit.

b. Convertible Subordinated Notes Payable: On May 28, 1999, the Company
entered into $1.5 million of unsecured convertible subordinated notes.
These notes are repayable by the Company on June 30, 2000 with interest
at a rate of 10.0% per annum. Upon the closing of an initial public
offering of equity securities prior to the due date, the notes and
accrued interest will automatically convert to common stock shares based
on the principal (plus any accrued but unpaid interest) divided by 90%
of the public offering price. In the event that an initial public
offering does not occur and the notes are not repaid by the Company
within 15 days of the due date, the notes will automatically convert
into 343,383 shares of the Company's common stock.

On April 9, 1999, the Company received a commitment from a major
stockholder to advance the Company up to $3.5 million by December 31,
1999 at the Company's discretion. On October 18, 1999 the Company
borrowed $3,496,384 under the commitment through an unsecured
convertible subordinated note. Borrowings under this agreement bear
interest at an annual rate of 10.0% and the principal amount of the
convertible subordinated note will be due on June 30, 2000. Upon the
closing of an initial public offering of equity securities prior to the
due date, the notes and accrued interest will automatically convert
into shares of common stock based on the principal (plus any accrued
but unpaid interest) divided by 90% of the public offering price. In
the event that an initial public offering does not occur and the notes
are not repaid by the Company within 15 days of the due date, the notes
and accrued interest will automatically convert into 800,400 shares of
the Company's common stock.

Based on the conversion ratio of the convertible subordinated notes
payable in the event on an initial public offering, management has
determined that the discount received by the note holders constitutes a
beneficial conversion feature under the Emerging Issues Task Force
("EITF") Issue 98-5. The value of the beneficial conversion feature has
been computed at $555,000 and will be recorded by the Company as
additional paid in capital and interest expense upon the completion of
the proposed initial public offering. In the event that an initial
public offering does not occur, management has determined that a
beneficial conversion feature does not exist based upon the conversion
terms of the note.

5.Commitments and Contingencies:

a. Letters of Credit: At December 31, 1998 and 1999 and March 31, 2000, the
Company maintained a $70,494 letter of credit to collateralize a lease
deposit on its office facility. The letter of credit expires after the
termination of the lease. A certificate of deposit for this amount has
been established by the Company in the event that the letter of credit
is executed. At December 31, 1999 and March 31, 2000 the Company
maintained a $28,000 certificate of deposit to secure a line of credit.

b. Leases: The Company leases equipment and its office premises under
operating lease agreements. Rental expense under these agreements was
$78,395, $196,894 and $439,196 during 1997, 1998 and 1999, respectively.

F-12
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

At December 31, 1999, future minimum payments under noncancelable
operating leases were as follows:

For the years ended December 31:

<TABLE>
<S> <C>
2000........................................................... $ 410,406
2001........................................................... 378,416
2002........................................................... 167,722
2003........................................................... --
2004 and thereafter............................................ --
---------
$ 956,544
=========
</TABLE>
On January 3, 2000, the Company signed a lease agreement for an office
premise beginning May 1, 2000. The lease agreement has escalating rents
over the ten-year term of the lease.

c. Litigation: The Company is a defendant in business-related litigation.
Management does not believe the outcome of such litigation will have a
material adverse effect on the Company's financial position, results of
operations or cash flows.

6.Income Taxes:

Under Statement of Financial Accounting Standards ("SFAS") No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences of differences between the carrying amounts of assets and
liabilities and their respective tax bases and for tax carryforward items
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Deferred tax assets consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward............... $ 1,345,000 $ 7,989,000
Amounts to adjust from accrual method to the
cash method of accounting used for tax
purposes..................................... 385,000 (499,000)
Property and equipment........................ 41,000 76,000
Other......................................... 6,000 6,000
Valuation allowances.......................... (1,777,000) (7,572,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>

The difference between the amount of income tax benefit recorded and the
amount of income tax benefit calculated using the U.S. federal statutory
rate of 34% is due to net operating losses not being benefited. For
financial reporting purposes, the entire amount of deferred tax assets
related principally to the net operating loss carryforwards has been offset
by a valuation allowance due to uncertainty regarding realization of the
asset. Accordingly, there is no provision for income taxes for the years
ended December 31, 1998 and 1999.

The Company has net operating loss carryforwards of approximately
$3,956,000 and $23,496,000 at December 31, 1998 and 1999, that expire
beginning in 2018 for federal purposes.

7.Stockholders' Equity:

a. Preferred Stock: In December 1999, the Company issued 2,197.650 shares
of no par value Series A convertible preferred stock ("Convertible
Preferred") at a price of $9,100.63 per share

F-13
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

and received proceeds of $20,000,000. The Company incurred $132,000 of
issuance costs. The holders of Convertible Preferred have various rights
and preferences as follows:

Voting: Each share of Convertible Preferred has the same voting rights
as a share of common stock and votes together as one class with the
common stock.

Conversion: Each share of Convertible Preferred converts at the earlier
of December 31, 2000 or the occurrence of any of the following
Liquidity Events: an initial public offering, a change in control of
the Company as a result of a merger; consolidation or reorganization;
or a sale of substantially all of the assets of the Company. Each share
of preferred converts into 1,150 shares of common stock, subject to
adjustment.

If the conversion is the result of a Liquidity Event, then each share
will be converted into shares of common stock using a conversion ratio
based upon projected market capitalization thresholds and structured so
that the amount of the aggregate shares of common stock issued upon
conversion would constitute between 7.407% and 10.0% of the currently
issued and outstanding shares of common stock as measured on a pro
forma, as converted basis.

Such shares are not required to be registered as part of the proposed
initial public offering.

In the absence of a Liquidity Event on or before December 31, 2000,
then as of January 1, 2001, each share will be converted into a number
of shares of common stock using the respective conversion ratio that
yields the fewest shares of common stock based on either: (a) the
number of registered households on the coolsavings.com web site or (b)
the total revenue of coolsavings.com for the year 2000 with the
potential aggregate number of shares of common stock issued upon
conversion ranging between 7.407% and 10.0% of the currently issued and
outstanding shares of common stock as measured on a pro forma, as
converted basis.

The EITF Issue 98-5 requires that beneficial conversion features
present in the terms of the convertible securities should be recognized
and measured by allocating a portion of the proceeds equal to the value
of that feature to additional paid-in capital. The value of the
beneficial conversion feature related to the preferred stock offering
is in excess of the $19.9 million net proceeds. Accordingly, the
Company has allocated the full amount of net proceeds to the beneficial
conversion feature and recorded $19.9 million as additional paid-in
capital as of December 31, 1999. The beneficial conversion feature will
be recognized through accretion using the interest method as a deemed
dividend during 2000 unless there is a conversion resulting from a
liquidity event such as the planned initial public offering. The
Company has accreted a deemed dividend of $4,966,932 representing the
beneficial conversion feature of the preferred stock during the three
months ended March 31, 2000. The preferred stock requires mandatory
conversion to common stock on December 31, 2000. Upon the occurrence of
a Liquidity Event, the unamortized value of the beneficial conversion
feature will be automatically accreted in full from additional paid-in
capital to preferred stock as a deemed dividend. The entire value of
the preferred stock will be credited to common stock upon conversion.

b. Advertising Agreement: On May 28, 1999, the Company entered into an
agreement with a major television network under which the Company
purchased television advertising valued at $3.0 million in exchange for
686,766 shares of its common stock. The advertisements stipulated in the
agreement are required to be aired during the twelve-month period
beginning on October 1, 1999.

In accordance with Emerging Issue Task Force Abstract No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or
Services," the Company has recorded the value of spots to be received
based on the fair value of the spots, as it was more reliably measured
than the fair value of the stock issued at the time that the
performance commitment by the network was reached. Amounts recorded

F-14
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

prior to the running of the advertising spots are classified on the
balance sheet as deferred advertising. As the advertising spots are
run, the Company recognizes advertising expense.

c. Share Warrants: During 1998 and 1997, the Company issued 747,500 and
115,000 warrants, respectively, to a stockholder in connection with
providing short-term loans to the Company. See Note 2-Related Parties,
for a description of the loans and warrants.

d. Common Stock Options: The Company has two stock-based compensation
plans, the 1997 Stock Option Plan (the "Employee Plan") and the 1999
Non-Employee Director Stock Option Plan (the "Non-Employee Plan"). The
Employee Plan and the Company's former 1997 Non-Employee Director Stock
Option Plan were established by action of the Company's Board of
Directors on December 4, 1997. In April 1999, the Company's 1997 Non-
Employee Director Stock Option Plan was terminated by the Board of
Directors. In July 1999, the Board of Directors approved the
establishment of the Non-Employee Plan. Vesting under the Employee Plan
is determined by the Board of Directors on an individual grant basis and
is typically incremental vesting over a period of approximately four
years. Options granted under the Non-Employee Plan become fully vested
one year from the date of the grant. The term of the grants made under
each plan is established by the Board of Directors and may not exceed
ten years. The Company is authorized to issue options under the Employee
and Non-Employee Plans for up to 20% for the Employee Plan and 2% for
the Non-Employee Plan of the total number of common shares outstanding,
including those reserved for issuance upon exercise of stock options and
warrants.

In addition to the above plans, the Company has granted options to a
certain employee in conjunction with the execution of a Board-approved
employment contract. These options are included in the disclosures that
follow.

The following information relates to stock options whose exercise price
equals the fair value of the underlying stock on the date of grant:

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1997 1998 1999
------------------ ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 324,737 $0.28 1,526,487 $1.77 1,852,627 $1.84
Granted................. 1,201,750 2.17 343,850 2.17 2,538,050 4.76
Exercised............... -- -- -- -- (127,190) 4.16
Forfeited/expired....... -- -- (17,710) 2.17 (11,270) 2.85
--------- --------- ---------
Outstanding at end of
period................. 1,526,487 $1.77 1,852,627 $1.84 4,252,217 $3.51
========= ========= =========
Exercisable at end of
period................. 402,719 $1.41 784,283 $1.58 1,175,047 $1.65
========= ========= =========
Weighted average fair
value of options
granted during the
period................. $0.68 $0.68 $1.45
</TABLE>

F-15
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

The following information relates to stock options whose exercise price
exceeds the fair value of the underlying stock on the date of grant:

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1998 1999
--------------- ---------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- -- $ -- 287,500 $2.29
Granted................. -- -- 287,500 2.29 -- --
Exercised............... -- -- -- -- (287,500) 2.29
Forfeited/expired....... -- -- -- -- -- --
---- ------- --------
Outstanding at end of
period................. -- $ -- 287,500 $2.29 -- $ --
==== ======= ========
Weighted average fair
value of options
granted during the
period................. $ -- $0.12 $ --
</TABLE>

The following information relates to stock options whose exercise price is
less than the fair value of the underlying stock on the date of grant:

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1998 1999
--------------- ---------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- -- $ -- 230,000 $2.10
Granted................. -- -- 230,000 2.10 -- --
Exercised............... -- -- -- -- (230,000) 2.10
Forfeited/expired....... -- -- -- -- -- --
---- ------- --------
Outstanding at end of
period................. -- $ -- 230,000 $2.10 -- --
==== ======= ========
Weighted average fair
value of options
granted during the
period................. $ -- $0.29 $ --
</TABLE>

The following table summarizes information about fixed stock options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
December 31, 1999
------------------------------------
Weighted
Average
Remaining
Exercise Options Options Contractual
Price Outstanding Exercisable Life (Years)
-------- ----------- ----------- ------------
<S> <C> <C> <C>
$0.28............ 324,737 324,737 6.80
$2.17............ 2,711,930 850,310 8.60
$4.37............ 189,750 -- 9.53
$7.91............ 1,025,800 -- 9.90
--------- ---------
Totals........... 4,252,217 1,175,047 8.81
========= =========
</TABLE>

F-16
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock Based
Compensation," upon establishing the Employee Plan and the Non-Employee
Plan. As permitted by SFAS 123, the Company continues to apply the
accounting provisions of APB Opinion Number 25, "Accounting for Stock
Issued to Employees" with regard to the measurement of compensation cost
for options granted. The Company recognized $16,312 of compensation expense
during 1998 in conjunction with grants made under its fixed stock option
plans. Had expense been recognized using the fair value method described in
SFAS 123, the Company would have reported the following results of
operations using the Black-Scholes option pricing model:

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Pro forma net
loss........... $(2,913,300) $(6,005,992) $(17,608,725)
Pro forma net
loss per
diluted share.. $ (0.16) $ (0.28) $ (0.59)
</TABLE>

These costs may not be representative of the total effects on pro forma
reported income for future years. Factors that may also impact disclosures
in future years include the attribution of the awards to the service
period, the vesting period of stock options, timing of additional grants of
stock option awards and number of shares granted for future awards.

The assumptions used for valuations of option grants calculated in
accordance with SFAS 123 are as follows:

<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Annualized dividend yield.............. 0.0% 0.0% 0.0%
Risk free rate of return............... 5.5% 5.5% 5.6%
Expected option term (in years)........ 7.00 3.95 6.66
Expected volatility.................... 0.0% 0.0% 0.0%
</TABLE>

8. Earnings Per Share:

SFAS 128 requires companies to provide a reconciliation of the numerator and
denominator of the basic and diluted EPS computations. The calculation below
provides net loss, weighted average common shares outstanding and the
resultant net loss per share for both basic and diluted EPS for the years
ended December 31, 1997, 1998, and 1999 and the three month periods ended
March 31, 1999 and 2000.

<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31,
-------------------------------------- -----------------------------
1997 1998 1999 1999 2000
----------- ----------- ------------ -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Numerator:
Net loss............... $(2,731,521) $(5,741,260) $(16,868,379) $ (2,623,972) $ (7,637,606)
Deemed dividend repre-
senting the beneficial
conversion feature of
preferred stock........ -- -- -- -- (4,966,932)
----------- ----------- ------------ ------------- --------------
Loss available to common
stockholders........... $(2,731,521) $(5,741,260) $(16,868,379) $ (2,623,972) $ (12,604,538)
=========== =========== ============ ============= ==============
Denominator:
Weighted average common
shares................ 18,266,572 21,547,177 29,804,681 25,249,484 31,729,705
=========== =========== ============ ============= ==============
Earnings per share:
Basic and diluted...... $ (0.15) $ (0.27) $ (0.57) $ (0.10) $ (0.40)
=========== =========== ============ ============= ==============
</TABLE>

F-17
<PAGE>

COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information presented for the three months ended March 31, 1999 and 2000 is
unaudited)

9. 401(k) Plan: On February 11, 1997, the Company adopted a 401(k) plan for
employees. All employees who meet certain age requirements are eligible to
participate. Matching contributions are made at the discretion of the
Company. The Company made no matching contributions during 1997, 1998 and
1999.

10.Subsequent Events:

a. Stock Split: On April 7, 2000 the Board of Directors approved a 1,150
for 1 common stock split. All share and per share amounts have been
retroactively restated to reflect the split.

b. Increase in Authorized Capital Stock: On April 7, 2000, the Company's
articles of incorporation were restated to increase the authorized
capital stock to 100,000,000 shares of common stock and 10,000,000
shares of preferred stock.

c. Stock Option Exercise: On April 3, 2000, the Company's Chairman, Chief
Executive Officer and President exercised his vested options to purchase
322,000 shares of the Company's common stock in exchange for the
delivery of a $700,000 promissory note. The note provides for interest
at the rate of 6.71% per annum, payable annually. The principal amount
of the note and all unpaid interest is due on April 3, 2004.

d. Bank Line of Credit: On May 8, 2000, the Company borrowed $1,482,000 on
its $6.5 million bank line of credit (see note 4b). The funds were used
to purchase new equipment.

F-18
<PAGE>

Inside Back Cover

Co-branded Programs

screenshot of screenshot of reward page
co-branded home page

[logo]

Program Benefits to:
Co-Branding Associates CoolSavings
. customer acquisition and . new members
retention tools

. purchase and membership . enhanced data
incentives

<PAGE>

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

3,300,000 Shares

[LOGO OF COOLSAVINGS.COM APPEARS HERE]

Common Stock

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

PROSPECTUS

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

CHASE H&Q

LEHMAN BROTHERS

THOMAS WEISEL PARTNERS LLC

------------
, 2000

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

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.

No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in that jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are required to inform
themselves about and to observe any restrictions as to this offering and the
distribution of this prospectus applicable to that jurisdiction.

Until , 2000, all dealers that buy, sell or trade in our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the common stock being registered hereby. All the amounts
shown are estimated, except the SEC registration fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC registration fee.......... $ 15,302
NASD filing fee............... 6,300
Nasdaq National Market listing
fee.......................... 100,000
Printing and engraving
expenses..................... 150,000
Legal fees and expenses....... 450,000
Accounting fees and expenses.. 250,000
Blue Sky fees and expenses.... 7,500
Transfer Agent and Registrar
Fees......................... 10,000
Miscellaneous Expenses........ 110,898
----------
Total....................... $1,100,000
==========
</TABLE>

Item 14. Indemnification of Directors and Officers

Section 561 of the Michigan Business Corporation Act (the "MBCA") provides
that a Michigan corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no cause to believe his conduct was unlawful.

Section 562 of the MBCA provides that a Michigan corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that despite adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.

Article V of CoolSavings' bylaws provides for the indemnification of its
officers and directors in the manner, and to the fullest extent, authorized by
the MBCA. Reference is made to Exhibit 3.3 of this Registration Statement for
the complete text of the amended and restated bylaws.

As permitted by the MBCA, CoolSavings' articles of incorporation include a
provision that limits the personal liability of its directors to the maximum
extent permitted by the MBCA. Reference is made to Exhibit 3.2 of this
Registration Statement for the complete text of the restated articles of
incorporation to be filed prior to the closing of this offering.

II-1
<PAGE>

CoolSavings intends to enter into indemnification agreements with its
current directors and executive officers. CoolSavings intends to insure its
directors and officers against losses arising from any claim against them as
such for wrongful acts or omissions, subject to certain limitations.

Under Section 7 of the Underwriting Agreement, the underwriters are
obligated, under certain circumstances, to indemnify officers, directors and
controlling persons of CoolSavings against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the form of
Underwriting Agreement filed as Exhibit 1.1 hereto.

Item 15. Recent Sales of Unregistered Securities

Within the past three years, the registrant has issued and sold unregistered
securities in the amounts, at the times and for the aggregate amounts of
consideration listed as follows:

1. On February 11, 1997, we issued 735.7 shares of common stock to
Robert Ball and Stanley G. Feldman for an aggregate purchase price of
$300,000.00.

2. On April 1, 1997, we issued 1,029 shares of common stock to Antonio
F. Schmizzi, Bruce R. Feldman, Deneal Feldman, Leonard P. Ballas, Norman G.
Hubert, James B. Hochman, Elaine F. Wolf and Nancy and Ted Schwartzenfeld
for an aggregate purchase price of $420,000.00.

3. On August 5, 1997, we issued 688 shares of common stock to 16
investors for an aggregate purchase price of $530,865.63.

4. On October 10, 1997, we issued 401 shares of common stock to 21
investors for an aggregate purchase price of $601,500.00.

5. From December 18, 1997 through April 24, 1998, we issued warrants to
purchase an aggregate of 750 shares of common stock to the Richard H. Rogel
Revocable Living Trust in connection with a financing arrangement.

6. On May 5, 1998, we issued 287 shares of common stock to HLBL Family
Partners, L.P., Martin D. Sass, Walter Schram, Steven R. Trinborn, Steve
Schwartz, Hal Schwartz, Roger Winkelman, Kenton Hopkins, Robert D. Gorman
and Jeffrey Levitt for an aggregate purchase price of $717,500.00.

7. On June 1, 1998, we issued 2,170.82 shares of common stock to Lend
Lease International Pty. Limited for a purchase price of $5 million.

8. On November 4, 1998, we issued 1,973.47 shares of common stock to
Lend Lease International Pty. Limited for a purchase price of $5 million.

9. On March 11, 1999, we issued 2,368.16 shares of common stock to Lend
Lease International Pty. Limited for a purchase price of $5 million.

10. On April 27, 1999, we issued 1,860.70 shares of common stock to Lend
Lease International Pty. Limited for a purchase price of $3.5 million.

11. On April 27, 1999, we issued an additional 37.74 shares of common
stock to the ten investors who purchased shares on May 5, 1998, pursuant to
an agreement to render the per-share price of their investment equal to
that of Lend Lease International Pty. Limited.

12. On May 28, 1999, we issued promissory notes in the aggregate
principal amount of $1.5 million to one director and 17 other investors.
Upon completion of this offering, these promissory notes will automatically
convert into shares of common stock.

13. On May 28, 1999, we issued 597.188 shares of common stock to
National Broadcasting Company, Inc. in exchange for $3,000,000 of broadcast
advertising.

14. On October 18, 1999, we issued a promissory note in the principal
amount of approximately $3.5 million to Lend Lease International Pty.
Limited. Upon completion of this offering, this promissory note will
automatically convert into shares of common stock.

15. On December 31, 1999, we issued 2,197.650 shares of Series A
convertible preferred stock for an aggregate purchase price of $20.0
million to three directors, one officer, Lend Lease International Pty.
Limited and 64 other investors. Upon completion of this offering, the
Series A convertible preferred stock will automatically convert into shares
of common stock.

II-2
<PAGE>

16. On April 6, 2000, we granted Coupco, Inc. an option to purchase up
to $500,000 of our common stock at the per share public offering price
established in this offering. This option was granted in consideration for
Coupco providing us consulting services related to our license of certain
of its intellectual property.

17. Since inception, we have issued options to purchase an aggregate of
5,185,350 shares of common stock to our employees and directors.

No underwriters were engaged in connection with the foregoing sales of
securities. The sales of common stock, preferred stock, warrants and promissory
notes referenced in items 1, 2 and 5-15 above were made in reliance upon the
exemption from registration set forth in Section 4(2) of the Securities Act of
1933 and also in Rule 506 of Regulation D promulgated thereunder for
transactions not involving a public offering. The sales of common stock
referenced in items 3, 4 and 16 above were made in reliance upon the exemption
from registration set forth in Section 4(2) of the Securities Act of 1933 for
transactions not involving a public offering. Issuances of options to the
Registrant's employees and directors were made under Rule 701 promulgated under
the Securities Act of 1933. The recipients of the above securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
access, through their relationship with the Registrant, to information about
the Registrant.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibit Index

See exhibits listed on the Exhibit Index following the signature pages
of the Form S-1, which is incorporated herein by reference.

(b) Financial Statement Schedules:

Report of Independent Accountants

Schedule II--Valuation and Qualifying Accounts

Item 17. Undertakings

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

The undersigned Registrant hereby undertakes that:

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

II-3
<PAGE>

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

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

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on May 19, 2000.

coolsavings.com inc.

/s/ Steven M. Golden
By: _________________________________
Steven M. Golden
Chairman of the Board, Chief
Executive Officer and President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Steven M. Golden Chairman of the Board, Chief May 19, 2000
____________________________________ Executive Officer and
Steven M. Golden President (Principal
Executive Officer)

* Chief Financial Officer, May 19, 2000
____________________________________ Treasurer Secretary
David H. Jacobson (Principal Financial and
Accounting Officer)

* Director May 19, 2000
____________________________________
Richard H. Rogel

* Director May 19, 2000
____________________________________
Hugh R. Lamle

* Director May 19, 2000
____________________________________
Albert Aiello

* Director May 19, 2000
____________________________________
Lynette H. Mayne

* Director May 19, 2000
____________________________________
David E. Simon

* Director May 19, 2000
____________________________________
Robert J. Kamerschen
</TABLE>

/s/ Steven M. Golden
*By: ________________________________
(Steven M. Golden,
Attorney-in-Fact)

II-5
<PAGE>

Report of Independent Accountants on Financial Statement Schedule

To the Board of Directors
of coolsavings.com

Our audits of the financial statements referred to in our report dated
February 18, 2000 appearing in this Registration Statement on Form S-1 also
included an audit of the financial statement schedule. In our opinion, such
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.

PricewaterhouseCoopers LLP

Chicago, Illinois
February 18, 2000
<PAGE>

coolsavings.com inc.
Schedule II--Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
Additions (Reductions)
---------------------------
Balance Charged Balance
at to Costs Charged at End
Beginning and to Other Deductions of
Classification of Period Expenses Accounts (1) Period
- -------------- --------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful
receivables.................. $13,500 $122,566 $0 $17,912 $118,154
Year ended December 31, 1998:
Allowance for doubtful
receivables.................. $ 0 $13,500 $0 $ 0 $13,500
Year ended December 31, 1997:
Allowance for doubtful
receivables.................. $ 0 $ 0 $0 $ 0 $ 0
</TABLE>
- ---------------------
(1) Uncollectible accounts written off.
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement+

3.1 Articles of Incorporation+

3.2 Form of Restated Articles of Incorporation to be filed prior to the
closing of this offering+

3.3 Amended and Restated Bylaws+

4.1 Form of Common Stock Certificate+

4.2 Shareholders Agreement, dated as of June 1, 1998, among CoolSavings
and certain of its Stockholders+

4.3 Form of 1999 Unsecured, Convertible Subordinated Promissory Note of
CoolSavings+

4.4 Registration Rights Agreement among CoolSavings and the holders of
the 1999 Unsecured, Convertible Subordinated Promissory Notes+

4.5 Registration Rights Agreement among CoolSavings and the holders of
the Series A Convertible Preferred Stock+

5.1 Opinion letter of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation, regarding the validity of securities being registered+

10.1 Investment Agreement, dated June 1, 1998, by and between CoolSavings
and Lend Lease International Pty. Limited+

10.2 Form of Indemnification Agreement+

10.3 1997 Stock Option Plan+

10.4 1999 Director Option Plan+

10.5 Credit Agreement, dated December 18, 1997, between CoolSavings and
the Richard H. Rogel Revocable Living Trust u/a/d March 21, 1990+

10.6 Form of Promissory Note from current and former directors of
CoolSavings payable to CoolSavings in consideration for exercise of
stock options and/or warrants+

10.7 Termination Agreement, dated December 30, 1999, between CoolSavings
and Hillel Levin+

10.8 Consulting Agreement, dated as of January 1, 2000, between
CoolSavings and Hillel Levin+

10.9 Lease Agreement, dated February 24, 1997, between Prentiss
Properties Acquisition Partners, L.P. and CoolSavings+

10.10 Agreement of Sublease, dated June 30, 1998, between Insurance
Company of North America and CoolSavings+

10.11 Lease Agreement, dated January 3, 2000, between 360 North Michigan
Trust and CoolSavings+

10.12 Market Survey Panelist Agreement, dated as of October 25, 1999,
between CoolSavings and NFO Research, Inc.+

10.13 Bankcard Marketing Agreement, dated April 2, 1999, between
CoolSavings and First USA Bank+

10.14 Stock Purchase and Advertising Agreement, dated May 28, 1999,
between CoolSavings and National Broadcasting Company, Inc.**+

10.15 Agreement, dated February 8, 2000, between CoolSavings and The
Parenting Group, Inc.+

10.16 Agreement, dated January 18, 2000, between CoolSavings and Mail
Coups Inc.+

10.17 Program Agreement, dated February 17, 2000, between CoolSavings and
First Data Merchant Services Corporation+

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.18 Loan and Security Agreement, dated January 19, 2000, between
CoolSavings and American National Bank and Trust Company of Chicago+

10.19 Incentives Management Program Agreement, dated March 31, 2000,
between CoolSavings and Netcentives Inc.+

23.1 Consent of Jaffe, Raitt, Heuer & Weiss, Professional Corporation
(included as part of Exhibit 5.1)

23.2 Consent of PricewaterhouseCoopers LLP

23.3 Consent of Niro, Scavone, Haller & Niro+

24.1 Power of Attorney (included on signature page)

27.1 Financial Data Schedule
</TABLE>
- ---------------------
+ Previously filed.
** Certain information in Exhibit 10.14 has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portion.

<PAGE>

Exhibit 23.2

Consent of Independent Accountants

We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated February 18, 2000 relating to the financial statements and
financial statement schedule of coolsavings.com inc., which appears in such
Registration Statement. We also consent to the reference to us under the
headings "Experts" and "Selected Financial Data" in such Registration Statement.

PricewaterhouseCoopers LLP

Chicago, IL
May 19, 2000

<PAGE>

<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 DEC-31-1999
<CASH> 9,543,088 17,488,788
<SECURITIES> 0 0
<RECEIVABLES> 5,751,723 4,499,617
<ALLOWANCES> 158,317 118,154
<INVENTORY> 0 0
<CURRENT-ASSETS> 19,879,817 25,541,170
<PP&E> 6,506,682 4,984,697
<DEPRECIATION> (1,264,950) (935,862)
<TOTAL-ASSETS> 25,121,549 29,590,005
<CURRENT-LIABILITIES> 12,972,469 9,838,659
<BONDS> 0 0
0 0
4,966,932 0
<COMMON> 27,947,658 27,844,658
<OTHER-SE> (21,329,681) (8,725,143)
<TOTAL-LIABILITY-AND-EQUITY> 25,121,549 29,590,005
<SALES> 0 0
<TOTAL-REVENUES> 8,085,881 12,915,732
<CGS> 0 0
<TOTAL-COSTS> 1,068,631 1,817,444
<OTHER-EXPENSES> 14,433,430 27,615,601
<LOSS-PROVISION> 77,774 122,566
<INTEREST-EXPENSE> 143,652 228,500
<INCOME-PRETAX> (7,637,606) (16,868,379)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (7,637,606) (16,868,379)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,637,606) (16,868,379)
<EPS-BASIC> (0.40) (0.57)
<EPS-DILUTED> (0.40) (0.57)

</TABLE>