EXACTIS COM INC, S-1/A, 1999-10-04

EXACTIS COM INC
S-1/A, 1999-10-04
TELEGRAPH & OTHER MESSAGE COMMUNICATIONS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1999

REGISTRATION NO. 333-85315
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3

TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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EXACTIS.COM, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 8900 84-1359618
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

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707 - 17TH STREET, SUITE 2850
DENVER, CO 80202
(303) 675-2300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
E. THOMAS DETMER, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXACTIS.COM, INC.
707 - 17TH STREET, SUITE 2850
DENVER, CO 80202
(303) 675-2300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:

<TABLE>
<S> <C>
JAMES C.T. LINFIELD, ESQ. NORA L. GIBSON, ESQ.
LAURA M. MEDINA, ESQ. LAURA M. DE PETRA, ESQ.
JOHN W. BENDER, ESQ. ANGELA C. HILT, ESQ.
COOLEY GODWARD LLP BROBECK, PHLEGER & HARRISON LLP
2595 CANYON BOULEVARD, SUITE 250 SPEAR STREET TOWER, ONE MARKET
BOULDER, CO 80302-6737 SAN FRANCISCO, CA 94105
(303) 546-4000 (415) 442-0900
</TABLE>

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Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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PROPOSED MAXIMUM
TITLE OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value................................ $65,550,000.00 $18,223.00
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</TABLE>

(1) Includes shares that the underwriters have the option to purchase solely to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).

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> 2

The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities, and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 4, 1999

PROSPECTUS

[EXACTIS.COM LOGO]

3,800,000 Shares

Common Stock
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This is an initial public offering of shares of common stock of Exactis.com,
Inc. We are offering 3,530,000 shares in this offering. The selling stockholders
that we identify in this prospectus are offering an additional 270,000 shares.
We will not receive any proceeds from the sale of the shares by the selling
stockholders. We anticipate that the initial public offering price will be
between $13.00 and $15.00 per share.

We have applied to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "XACT."
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.

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<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds to us $ $
Proceeds to the selling stockholders $ $
</TABLE>

The underwriters have an option to purchase 570,000 additional shares of common
stock from us and the selling stockholders at the initial public offering price
to cover any over-allotments of shares.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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THOMAS WEISEL PARTNERS LLC
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
WIT CAPITAL CORPORATION

The date of this prospectus is , 1999

<PAGE> 3

INSIDER FRONT COVER

The upper four-fifths of the page contains a large table or chart. The chart's
title is Exactis.com Email Marketing Solutions(SM). The x-axis of the chart is
labeled Markets. The y-axis is labeled Solutions. The markets from left to right
are Media, Financial Services and Ecommerce. The Solutions from top to bottom
are Communicate news and information, Deliver event-triggered communications and
Create and manage targeted email marketing campaigns*. The bottom of the y-axis
contains the following language:
* In initial client-testing stage.

In the chart at the intersections of Media and Communicate news and information,
Financial Services and Deliver event-triggered communications, and Ecommerce and
Create and manage targeted email marketing campaigns are cascading PC screen
shots of email samples. Respectively, these are titled:
- - Email newsletter,
- - Email trade confirmation and
- - Email promotional offer.

At all other intersections, the word yes appears.

At the bottom of the page, there is a horizontal one and one-half inch blue
border.

INSIDE BACK COVER

Company logo

<PAGE> 4

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO
WHICH WE HAVE REFERRED YOU. NEITHER WE NOR ANY UNDERWRITER HAS AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN
OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, EVEN IF
THIS PROSPECTUS IS DELIVERED TO YOU AFTER THE PROSPECTUS DATE, OR YOU BUY OUR
COMMON STOCK AFTER THE PROSPECTUS DATE.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 5
Forward-Looking Statements; Market Data..................... 15
Conventions which Apply to this Prospectus.................. 15
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Dilution.................................................... 17
Capitalization.............................................. 18
Selected Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 30
Management.................................................. 44
Certain Relationships and Related Transactions.............. 53
Principal and Selling Stockholders.......................... 56
Description of Securities................................... 59
Shares Eligible for Future Sale............................. 63
Underwriting................................................ 64
Legal Matters............................................... 66
Experts..................................................... 66
Where You Can Find Additional Information................... 66
Index to Financial Statements............................... F-1
</TABLE>

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UNTIL , ALL DEALERS SELLING SHARES OF OUR COMMON STOCK, WHETHER
OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights some of the information found in greater detail
elsewhere in this prospectus. In addition to this summary, we urge you to read
the entire prospectus carefully, especially the risks of investing in our common
stock discussed under "Risk Factors" and the financial statements before you
decide to buy our common stock.

OUR COMPANY

We are a leading provider of permission-based outsourced email marketing
and communications solutions. We provide a comprehensive and scalable, or
expandable, suite of email services which enable our clients to deliver large
numbers of custom email messages in an efficient, timely and cost-effective
manner. Our primary services consist of the distribution of email newsletters
and information bulletins, as well as the delivery of personalized order and
trade confirmation messages, which are triggered by specific transactions or
events. We also serve targeted banner advertisements within the email
communications that we deliver to over two million subscribers of Sony Music's
daily email newsletters. In addition, we are continuing to develop a wide
variety of targeted messaging capabilities to allow our clients to conduct
personalized one-to-one email marketing campaigns.

We help our clients create, maintain and analyze their customer
relationships. Our email solutions help establish new revenue opportunities for
our clients while reducing their costs of communicating with large numbers of
customers. Our advanced, proprietary technology allows us to deliver a large
volume of email messages for our clients. In the second quarter of 1999, we
delivered over 400 million email messages for 48 companies, primarily in the
media, ecommerce and financial services industries. Our clients include American
Express, Charles Schwab & Co., CMPnet, Consumer Net, The Economist,
Egreetings.com, First Union, The Financial Times, Forbes, MSNBC Interactive
News, News America Digital Publishing, Sony Music and Slate Magazine. As email
continues to gain widespread acceptance as a marketing and communications
channel, we anticipate that businesses will grow increasingly reliant on
outsourced email marketing and communications services.

OUR STRATEGY

Our objective is to be a world leader in the delivery of permission-based
email marketing and communications services. To achieve this objective, our
strategy includes the following key elements:

- extending our industry leading technology infrastructure to increase our
email capacity, system reliability and security;

- broadening our suite of email services to continue to offer our clients a
full line of feature-rich email services to meet their email needs across
a variety of applications;

- continuing to develop and leverage strategic relationships, particularly
in the areas of joint product development and marketing;

- increasing our marketing and sales efforts to become experts within
specific vertical markets and expand internationally; and

- acquiring businesses, products, services and technologies that are
complementary to our existing business.

CORPORATE INFORMATION

We were incorporated in Colorado in January 1996 under the name Mercury
Mail, Inc. We reincorporated in Delaware in July 1996. In August 1997, we
changed our name to InfoBeat Inc., and in January 1999, we changed our name to
Exactis.com, Inc. Our principal executive office is located at 707 -- 17th
Street, Suite 2850, Denver, Colorado 80202 and our telephone number is (303)
675-2300. The information contained on our Web site, www.exactis.com, does not
constitute part of this prospectus.

1
<PAGE> 6

THE OFFERING

Common stock offered by
us......................... 3,530,000 shares

Common stock offered by the
selling stockholders..... 270,000 shares

Common stock outstanding
after this offering........ 11,836,204 shares

Use of proceeds............ For working capital and other general corporate
purposes. Please see "Use of Proceeds" for more
information regarding our planned use of the
proceeds from this offering.

Proposed Nasdaq National
Market Symbol............ XACT

The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of June 30, 1999. It also
reflects our sale of 1,357,284 shares of Series E preferred stock in July and
August 1999 and the automatic conversion of all outstanding series of preferred
stock into common stock upon completion of this offering. In addition to the
shares of common stock to be outstanding after this offering, there are:

- 1,424,423 shares that could be issued upon the exercise of options
outstanding as of June 30, 1999 at a weighted average exercise price of
$2.57 per share;

- 1,357,583 shares that could be issued upon the exercise of warrants
outstanding and contingently issuable as of June 30, 1999 at a weighted
average exercise price of $5.48 per share;

- 203,586 shares that could be issued upon the exercise of warrants issued
after June 30, 1999 at a weighted average exercise price of $8.00 per
share;

- 1,557,540 shares that could be issued under our option plans; and

- 500,000 shares that could be issued to our employees who elect to buy
stock in the future under our employee stock purchase plan.

2
<PAGE> 7

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

In 1998, we sold our publishing line of business to Sony Music, a Group of
Sony Music Entertainment Inc. At the same time, we entered into a service
agreement with Sony Music. The historical activity of the publishing business
sold to Sony Music has been separately stated as discontinued operations in the
financial statements and other financial information contained in this
prospectus. The revenue from Sony Music constituted $2.2 million of our total
revenue for the six months ended June 30, 1999 and is not reflected in our
results of continuing operations in any prior historical period. As a result, we
believe period-to-period comparisons of our revenue and operating results are
not meaningful. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and related
notes appearing elsewhere in this prospectus for a description of the accounting
treatment of the discontinued operations.

We have not paid any dividends on our common stock since inception.

Net loss attributable to common holders includes the effect of the
accretion on the redeemable convertible preferred stock which increases net loss
attributable to common holders for the related periods. This accretion will not
be recognized after the conversion of all outstanding series of preferred stock
into common stock upon completion of this offering.

Pro forma basic and diluted net loss per share is computed using the
weighted average number of common shares outstanding, including the pro forma
effects of the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering as if the conversion occurred
on January 1, 1998, or at the date the preferred stock was actually issued, if
later. Pro forma basic and diluted net loss per share does not give effect to
the issuance of Series E preferred stock issued in July and August 1999.

3
<PAGE> 8

<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 557 $ 9,381 $54,692
Working capital (deficit)................................. (453) 8,371 53,682
Total assets.............................................. 6,793 15,617 60,928
Long-term debt and capital lease obligations, net of
current portions and discount.......................... 300 300 300
Redeemable convertible preferred stock and warrants....... 18,725 27,549 --
Total stockholders' equity (deficit)...................... (17,791) (17,791) 55,068
</TABLE>

The pro forma column gives effect to the receipt of net proceeds of $8.8
million from our sale of 1,357,284 shares of Series E preferred stock at a price
of $6.50 per share and warrants to purchase 203,586 shares of Series E preferred
stock at an exercise price of $8.00 per share in July and August 1999.

The pro forma as adjusted column gives effect to:

- the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering; and

- our receipt of the estimated net proceeds from the sale of the 3,530,000
shares of common stock we are selling in this offering at an assumed
initial public offering price of $14.00 per share, after deducting
estimated underwriting discounts and commissions and offering expenses.

4
<PAGE> 9

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the following information about these risks, together
with the other information contained in this prospectus, before you decide
whether to buy our common stock. If any of the events described in the following
risks actually occurs, the market price of our common stock could decline, and
you may lose all or part of the money you paid to buy our common stock.

RISKS ASSOCIATED WITH OUR BUSINESS

WE HAVE A HISTORY OF LOSSES, WE EXPECT CONTINUING LOSSES AND WE MAY NEVER
ACHIEVE PROFITABILITY.

We have not generated enough revenue to cover the substantial amounts we
have spent to create, launch and enhance our services. If our revenue does not
increase substantially, we may never become profitable. Even if we do achieve
profitability, we may not sustain or increase profitability on a quarterly or
annual basis in the future. This may, in turn, cause our stock price to decline.
In addition, if we do not achieve or sustain profitability in the future, we may
be unable to continue our operations. Our operating costs have exceeded our
revenue in all quarters since our inception. We incurred net losses of
approximately $3.4 million from January 30, 1996, the date of our inception,
through December 31, 1996, $7.7 million in 1997, $4.5 million in 1998 and $3.9
million for the six months ended June 30, 1999. We had an accumulated deficit of
$19.6 million at June 30, 1999. We expect to incur net losses and negative cash
flow for the foreseeable future.

We have invested heavily in technology and infrastructure development. We
expect to continue to invest substantial financial and other resources to
develop and introduce new services and expand our sales and marketing
organizations, strategic relationships and operating infrastructure. We expect
that our cost of revenue, sales and marketing expenses, general and
administrative expenses, research development and engineering expenses,
operations and customer support expenses and depreciation and amortization
expenses will continue to increase in absolute dollars and may increase as a
percent of revenue. If our revenue does not correspondingly increase, we may
never become profitable.

OUR BUSINESS WILL SUFFER IF THE MARKET FOR OUTSOURCED EMAIL MARKETING AND
COMMUNICATIONS SOLUTIONS FAILS TO GROW.

The market for outsourced email marketing and communications solutions is
new and rapidly evolving. If sufficient demand for our services does not
develop, we may not generate sufficient revenue to offset our costs and we may
never become profitable. Market acceptance of our existing and planned services
will depend on the acceptance and use of outsourced email marketing and
communications solutions. Our current and planned services are very different
from the traditional advertising and direct mail methods that our clients have
historically used to attract new customers and maintain customer relationships.
Businesses that have already invested substantial resources in traditional or
other methods of marketing and communications may be reluctant to adopt new
marketing strategies and methods. Consumers may also be reluctant to alter
established patterns of purchasing goods and services. Moreover, the sales cycle
for the new targeted messaging services that we are developing may be longer
than for existing services.

ONE OF OUR CLIENTS ACCOUNTED FOR A MAJORITY OF OUR REVENUE IN A RECENT PERIOD
AND A SMALL NUMBER OF CLIENTS ACCOUNT FOR A HIGH PERCENTAGE OF OUR REVENUE;
THEREFORE, THE LOSS OF A MAJOR CLIENT COULD HARM OUR BUSINESS.

A small number of clients account for most of our revenue. If we lose
existing clients and do not replace them with new clients, our revenue will
decrease and may not be sufficient to cover our costs. In the first six months
of 1999, Sony Music accounted for approximately 62% of our revenue. In 1998,
five clients accounted for approximately 48% of our revenue, of which MSNBC
Interactive News, L.L.C. accounted for approximately 18% and Egreetings.com
accounted for approximately 11%. We expect that a small number of clients will
continue to account for a high percentage of our revenue for at least the

5
<PAGE> 10

foreseeable future. This could cause our revenue and earnings to fluctuate from
quarter to quarter based on the timing of contracts. The loss of a major client
could harm our business. Other than as specified in our agreement with Sony
Music, none of our clients has any obligation to purchase additional services
from us.

INTENSE COMPETITION EXISTS IN THE EMAIL SERVICES MARKET AND WE EXPECT
COMPETITION TO CONTINUE TO INTENSIFY.

Competition in the email services market is intense. If we do not respond
successfully to competitive pressures, we could lose market share. We may not be
able to compete successfully against our current or future competitors which
include the in-house email capabilities of many businesses. An increasing number
of companies are entering our market. Many of our competitors have greater brand
recognition, longer operating histories, larger customer bases and greater
financial, marketing and other resources than we have. These factors may place
us at a disadvantage when we respond to our competitors' pricing strategies,
technological advances and other initiatives. Additionally, our competitors may
develop or provide services that are superior to ours or that achieve greater
market acceptance. We expect competition to persist and intensify. Barriers to
entry may be insubstantial and we may face substantial and growing competitive
pressures from companies both in the United States and abroad. See "Business --
Competition" for a list of our current and potential competitors.

DELAYS IN THE INTRODUCTION OF NEW SERVICES MAY HARM OUR BUSINESS.

We may experience delays in the development and launch of new services,
which could harm our business, financial condition and operating results. We are
currently developing new services which are designed to provide our clients with
a wide variety of targeted marketing capabilities, which we expect to release in
the fourth quarter of 1999. Several factors may delay the development and launch
of this new service, including delays or difficulties in integrating third-party
software with our email engine. Because this targeted marketing capability is
designed to appeal to on-line retailers who experience their peak season in the
fourth quarter of each year, any delay would likely result in a significant
reduction in the number of initial clients for our new service. We may
experience development delays with respect to this new service or other new
services that we may develop in the future. Additionally, actual service
offerings and benefits could differ materially from those currently planned for
many reasons, some or all of which may be out of our control, which could result
in a loss of clients.

WE DEPEND ON KEY STRATEGIC RELATIONSHIPS, INCLUDING RELATIONSHIPS WITH SONY
MUSIC AND E.PIPHANY, INC., TO GENERATE REVENUE AND OUR BUSINESS COULD SUFFER IF
ANY OF THESE RELATIONSHIPS ARE TERMINATED.

We are highly dependent on our strategic relationships with Sony Music and
E.piphany, Inc. If these relationships are terminated early, our revenue will
decrease. Our relationship with Sony Music accounted for approximately 62% of
our revenue in the first six months of 1999. Our relationship with E.piphany is
critical to our ability to complete our targeted messaging capabilities. Our
agreement with Sony Music terminates in December 2001 and certain terms of our
agreement with E.piphany related to pricing terminate in March 2001. These
agreements, as well as others covering future strategic relationships, may not
be renewed at the end of their respective terms or may be terminated early in
certain circumstances. We may also be unable to effectively reallocate
personnel, equipment and other resources that were allocated to those
relationships.

OUR FAILURE TO MANAGE OUR PLANNED RAPID GROWTH COULD CAUSE OUR BUSINESS TO
SUFFER.

Our failure to manage our growth effectively could result in service
disruptions, loss of competitive position and lack of adequate financial
controls. We plan to expand our operations rapidly and to significantly augment
our infrastructure. We must effectively manage our operational, customer service
and financial systems, procedures and controls to manage this future growth.
This expansion is expected to place a significant strain on our managerial,
operational and financial resources.

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<PAGE> 11

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE AND MAY FALL BELOW MARKET
EXPECTATIONS AS A RESULT OF NON-CASH COMPENSATION CHARGES RELATED TO STOCK
OPTIONS AND WARRANTS AND VARIATIONS IN EQUIPMENT EXPENDITURES.

Our operating results will be affected by non-cash charges associated with
stock-based arrangements with employees and strategic partners. As a result of
our grant in May 1999 of stock options with an exercise price below fair market
value, we recorded a total non-cash compensation expense of $1.9 million which
we are recognizing over the three-year vesting period of the options.

In addition, we have issued warrants to Sony Music and American Express
Travel Related Services Company, Inc. that include vesting provisions tied to
their achievement of performance milestones. Should American Express achieve one
or both remaining milestones, then we expect to record additional non-cash
charges of up to approximately $250,000 in the period in which one or both of
these milestones is achieved. If Sony Music achieves any of the performance
goals set forth in its warrant, we will recognize non-cash charges which we
cannot currently estimate and which will be substantial. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

Due to lead times required to purchase, install and test equipment, we
typically need to purchase equipment well in advance of the recognition of any
expected revenues. Delays in obtaining this equipment could result in unexpected
revenue shortfalls. Small variations in the timing of the recognition of
specific revenues could cause significant variations in operating results from
quarter to quarter.

Period-to-period comparisons of our operating results are not a good
indication of our future performance. Our operating results in some quarters may
be below market expectations. In this event, the price of our common stock is
likely to decline.

IF WE DO NOT SUCCESSFULLY EXPAND OUR EMAIL SERVICES AND OPERATIONS INTO
INTERNATIONAL MARKETS, OUR BUSINESS COULD SUFFER.

We intend to expand into international markets and to spend significant
financial and managerial resources to do so. If our revenue from international
operations does not exceed the expense of establishing and maintaining these
operations, we may never achieve profitability or may attain significantly
reduced profitability. We do not have expertise in conducting business
internationally and may not be able to compete effectively in international
markets. Therefore, we face several risks, including:

- compliance with regulatory requirements which could change in unexpected
ways;

- difficulties and costs of staffing and managing international operations;

- varying technology standards from country to country;

- uncertainties regarding protection of intellectual property rights in
certain countries;

- difficulties in collecting accounts receivable;

- fluctuations in currency exchange rates;

- imposition of currency exchange controls; and

- potentially adverse tax consequences.

WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT HARM OUR OPERATING RESULTS.

We expect to review acquisition or investment prospects that would
complement our current services, enhance our technical capabilities or offer
growth opportunities. These actions by us could harm our operating results and
the price of our common stock. Acquisitions could also entail many other risks,
such as:

- difficulties in integrating acquired operations, technologies or
services;

- unanticipated costs associated with the acquisitions that harm our
operating results;
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<PAGE> 12

- negative effects on our reported results of operations from
acquisition-related charges and of amortization of acquired technology
and other intangibles; and

- risks of entering markets in which we have no or limited prior
experience.

Any of these risks could harm our business, operating results and financial
condition.

WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL CAPITAL TO FUND OUR OPERATIONS WHEN
NEEDED.

If our capital requirements or revenue vary materially from our current
plans or if unforeseen circumstances occur, we may require additional financing
sooner than we anticipate. This financing may not be available on a timely
basis, in sufficient amounts or on terms acceptable to us. The financing may
also dilute existing stockholders.

If we cannot obtain adequate funds on acceptable terms, we may be unable
to:

- fund our capital requirements;

- take advantage of strategic opportunities;

- respond to competitive pressures; and

- develop or enhance our services.

Any of these failures could adversely affect our profitability. If we do
not achieve or sustain profitability in the future, we may be unable to continue
our operations.

WE MAY NOT BE ABLE TO ENTER INTO NEW STRATEGIC RELATIONSHIPS BECAUSE WE MAY
COMPETE WITH EXISTING OR FUTURE RELATIONSHIPS.

Our existing and future strategic relationships may limit our ability to
enter into other strategic relationships or sell our services to similar
businesses. This could limit our ability to compete effectively. For example,
our agreements with Sony Music prevent us from entering into a relationship that
is competitive with the editorial publishing services that we provide to Sony
Music. We may also enter into similar non-competition arrangements in connection
with future strategic relationships.

WE MAY NOT BE ABLE TO SUCCESSFULLY OPERATE OUR BUSINESS IF WE LOSE KEY
PERSONNEL.

The loss of any member of our senior management team could negatively
affect our future operating results. We believe that our success will depend on
the continued services of our key senior management personnel, especially E.
Thomas Detmer, Jr., our president and chief executive officer. None of the
persons currently in senior management are bound by an employment agreement.

WE MAY NOT BE ABLE TO SUCCESSFULLY OPERATE OUR BUSINESS IF OUR NEWLY FORMED
MANAGEMENT TEAM DOES NOT WORK EFFECTIVELY TOGETHER.

If our management team is unable to work together effectively, our business
could be harmed. The majority of our executive officers, including E. Thomas
Detmer, Jr., our president and chief executive officer, Kenneth W. Edwards, Jr.,
our chief financial officer, and Cynthia L. Brown, our vice president of
engineering, have joined us within the past several months. Accordingly, our
management team has had a limited time to work together and may not be able to
work together effectively.

OUR BUSINESS WILL SUFFER IF WE DO NOT ATTRACT AND RETAIN ADDITIONAL HIGHLY
SKILLED PERSONNEL.

In order for us to succeed, we must identify, attract, retain and motivate
highly skilled technical, managerial, sales and marketing personnel. Failure to
retain and attract necessary personnel will limit our ability to compete
effectively and provide our services. We plan to significantly expand our
operations and we will need to hire additional personnel as our business grows.
Competition for qualified personnel is

8
<PAGE> 13

intense. In particular, we have experienced difficulties in hiring highly
skilled technical personnel and in retaining employees due to significant
competition for experienced personnel in our market.

RISKS ASSOCIATED WITH OUR TECHNOLOGY

IF WE FAIL TO UPGRADE OUR SYSTEMS AND INFRASTRUCTURE TO CONTINUE TO EXPAND OUR
BUSINESS AND TO ACCOMMODATE INCREASES IN EMAIL TRAFFIC, WE MAY EXPERIENCE SLOWER
RESPONSE TIMES OR SYSTEM FAILURES.

We must continue to expand our network infrastructure as the number of our
clients increases. Additionally, we must adapt our network infrastructure to the
increasing volume and complexity of information our clients wish to transmit and
as their requirements change. If we do not add sufficient capacity to handle
growing volume and complexity of messages, we could suffer slower response times
or system failures which could result in a loss of clients. We have made and
intend to continue to make substantial investments to increase our capacity by
adding new hardware and upgrading our software. Our services may be unable to
handle growing message volume and complexity. The expansion of our network
infrastructure will also require substantial financial, operational and
managerial resources.

In addition, we may not be able to accurately project the rate or timing of
email traffic increases or upgrade our systems and infrastructure to accommodate
future traffic levels. As we upgrade our network infrastructure to increase
capacity available to our clients, we may encounter equipment or software
incompatibility which may cause delays in implementation. We may not be able to
expand or adapt our network infrastructure to meet additional demand or our
clients' changing requirements in a timely manner or at all.

OUR INFORMATION TECHNOLOGY SYSTEMS ARE NOT CURRENTLY PREPARED TO ADDRESS YEAR
2000 ISSUES; IF WE DO NOT ADEQUATELY ADDRESS YEAR 2000 ISSUES, WE MAY INCUR
SIGNIFICANT COSTS AND OUR BUSINESS COULD SUFFER.

Our information technology systems are not currently Year 2000 compliant.
If our present efforts to address the Year 2000 compliance issues are not
successful, or if third party vendors, licensors and providers of hardware,
software and services with which we conduct business do not successfully address
these issues, we may experience service interruptions and a loss of clients. We
must complete upgrades and Year 2000 certification testing of our proprietary
and third party software. We also need to develop contingency plans for each of
our third-party data sources.

Failure of our internal computer systems, third-party hardware or software,
systems maintained by third parties or electronic data that we receive to
operate properly with regard to Year 2000 and thereafter could cause systems
interruptions or loss of data or could require us to incur significant
unanticipated expenses to remedy any problems. Presently, we are unable to
reasonably estimate the duration and extent of any interruption caused by Year
2000 issues, or to quantify the effect it may have on our future revenue. We
have not yet developed a comprehensive contingency plan to address these issues.
Please refer to our discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000."

WE MAY NOT COMPETE SUCCESSFULLY AND THE VALUE OF YOUR INVESTMENT MAY DECLINE IF
WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGY AND MARKET CONDITIONS.

If we do not successfully respond to new technological developments in our
industry or are unable to respond in a cost-effective manner, we may experience
a loss of competitive position and lose market share. We operate in an industry
that is characterized by rapid technological change, frequent new service
introductions, changing client demands and the emergence of new industry
standards and practices that could render our existing services, proprietary
technology and systems obsolete. We must continually improve the performance,
features and reliability of our services, particularly in response to
competitive offerings. Our success depends, in part, on our ability to enhance
our existing services and to develop new services, functionality and technology
that address the increasingly sophisticated and varied needs of our prospective
clients. The development of our technology and necessary service enhancements
entail significant technical and business risks and require substantial
expenditures and lead-time. We may not be

9
<PAGE> 14

able to keep pace with the latest technological developments or adapt our
services to client requirements or emerging industry standards.

IF WE ENCOUNTER SYSTEM FAILURE, WE MAY NOT BE ABLE TO PROVIDE ADEQUATE SERVICE
AND OUR BUSINESS AND REPUTATION COULD BE DAMAGED.

Our ability to successfully receive and send email messages and provide
acceptable levels of customer service largely depends on the efficient and
uninterrupted operation of our computer and communications hardware and network
systems. All of our communications systems are located in Denver, Colorado. As a
result, if there were to be a natural disaster affecting the Denver area, our
communications systems could be disrupted and our business would be harmed. We
may not be able to relocate quickly under those circumstances.

Our clients have experienced some interruptions in our email service in the
past due to network outages and internal system failures. Similar interruptions
may occur from time to time in the future. Our revenues depend on the number of
end users who use our email services. Our business will suffer if we experience
frequent or long system interruptions that result in the unavailability or
reduced performance of our systems or networks or reduce our abilities to
provide email services. Our systems and operations are also vulnerable to damage
or interruption from fire, flood, earthquake, power loss, telecommunications
failure, physical break-ins and similar events. If any of these events occur, we
could fail to meet our minimum performance standards and incur monetary
penalties under our contracts.

IF WE FAIL TO MEET MINIMUM PERFORMANCE STANDARDS, WE MAY BE UNABLE TO ATTRACT
AND RETAIN CLIENTS.

We have entered into service agreements with some of our clients that
require certain minimum performance standards. If we fail to meet these
standards, our clients could terminate their relationships with us and we could
be subject to contractual monetary penalties. Any unplanned interruption of
services may adversely affect our ability to attract and retain clients and
could damage our reputation.

IF WE DO NOT SUCCESSFULLY RELOCATE OUR DATA CENTER TO A FACILITY WITH
APPROPRIATE BACK-UP POWER AND COOLING CAPABILITIES, WE MAY EXPERIENCE AN OUTAGE
AND OUR CURRENT SYSTEMS MAY TEMPORARILY CEASE OPERATING.

Due to insufficient access to back-up power and cooling capabilities in our
current data center, we may experience a system interruption. We plan to
relocate our offices and data center in late 1999 to a facility with more
extensive back-up power and cooling capabilities. We have identified a site for
the relocation but have not yet executed a lease. If we are unable to promptly
enter into an acceptable lease for the site we have identified, and if we are
unable to rapidly identify an alternative site, we will continue to be subject
to the risk of a power outage that interrupts our operations. Any failure of our
systems would materially harm our business. Moreover, our relocation to a new
site requires that we rebuild and enhance our system. Although we plan to
continue operating in our current site until our new site is fully operational,
any defects or delays in building our system at the new site could harm our
business.

SERVICE INTERRUPTIONS FROM OUR THIRD PARTY INTERNET AND TELECOMMUNICATIONS
PROVIDERS COULD HARM OUR BUSINESS.

We depend heavily on our third party providers of Internet and related
telecommunications services. Any interruption by our Internet and
telecommunications providers would likely disrupt the operation of our messaging
platform, causing a loss of revenue and a potential loss of clients. In the
past, we have experienced disruptions and delays in our email service due to
service disruption from those providers. These companies may be unable to
provide services to us without disruptions, at the current cost or at all. The
costs associated with a transition to a new service provider would be
substantial. We would have to reroute our computer systems and
telecommunications infrastructure to accommodate a new service provider. This
process would be both expensive and time consuming.

10
<PAGE> 15

UNKNOWN SOFTWARE DEFECTS COULD DISRUPT OUR SERVICES, WHICH COULD HARM OUR
BUSINESS AND REPUTATION.

Our service offerings depend on complex software, both internally developed
and licensed from third parties. Complex software often contains defects,
particularly when first introduced or when new versions are released. These
defects could cause service interruptions, which could damage our reputation,
increase our service costs, cause us to lose revenue, delay market acceptance
and divert our development resources. Although we test our software, we may not
discover software defects that affect current or planned services or
enhancements until after they are deployed.

IF OUR SECURITY SYSTEM IS BREACHED, OUR BUSINESS AND REPUTATION COULD SUFFER.

We must securely receive and transmit confidential information over public
networks and maintain that information on internal systems. Our failure to
prevent security breaches could damage our reputation, expose us to risk of loss
or liability, result in a loss of our clients and adversely affect our ability
to obtain new clients. Although we have implemented network security measures,
our servers are vulnerable to computer viruses, which could lead to
interruptions, delays or loss of data. We may be required to expend significant
capital and other resources to license encryption technology and additional
technologies to protect against security breaches or to alleviate problems
caused by any breach.

OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY ADVERSELY AFFECT
OUR COMPETITIVE POSITION.

The unauthorized misappropriation of our proprietary rights could harm our
competitive position and adversely affect our profitability. If we resort to
legal proceedings to enforce our proprietary rights, the proceedings could be
burdensome and expensive and the outcome could be uncertain.

Trademarks, service marks, trade secrets, copyrights, patents and other
proprietary rights are important to our success and competitive position. Our
efforts to protect our proprietary rights may be inadequate and may not prevent
others from claiming violations by us of their proprietary rights. Existing
trade secret, copyright and trademark laws offer only limited protection.
Further, effective trademark, copyright and trade secret protection may not be
available in every country in which our services are made available and policing
unauthorized use of our proprietary information is difficult.

In addition, the status of United States patent protection in the software
industry is not well defined and will evolve as the U.S. Patent and Trademark
Office grants additional patents. We have obtained two patents and we have two
patents pending in the United States. We may seek additional patents in the
future. We do not know if our pending patent applications or any future patent
applications will be issued with the scope of the claims we seek, if at all, or
whether the patent we own or any patents we receive will be challenged or
invalidated. Furthermore, we may not be successful in obtaining registration of
several pending trademark applications in the United States and in other
countries.

WE MAY BE SUBJECT TO CLAIMS ALLEGING INTELLECTUAL PROPERTY INFRINGEMENT.

We may be subject to claims alleging that we have infringed third party
proprietary rights. If we were to discover that we have infringed third party
rights, we may not be able to obtain permission to use those rights on
commercially reasonable terms. If we resort to legal proceedings to enforce our
proprietary rights or defend against alleged infringements, the proceedings
could be burdensome and expensive and could involve a high degree of risk.

WE ARE DEPENDENT ON LICENSED THIRD PARTY TECHNOLOGIES AND WE MAY NEED TO LICENSE
ADDITIONAL TECHNOLOGIES TO SUCCEED IN OUR BUSINESS.

We intend to continue to license technology from third parties. We are
highly dependent on the technology we license from SendMail, which enables us to
send email through the Internet, and E.piphany, Inc., which will allow us to
offer a variety of targeted marketing capabilities. The market is evolving and
we may need to license additional technologies to remain competitive. We may not
be able to license these technologies on commercially reasonable terms or at
all. Our inability to obtain any of these

11
<PAGE> 16

licenses could delay the development of our services until equivalent technology
can be identified, licensed and integrated. Any delays could cause our operating
results to suffer. In addition, we may not be able to integrate any licensed
technology into our services. These third party licenses may expose us to
increased risks, including risks related to the integration of new technology,
the diversion of resources from the development of our own proprietary
technology and our inability to generate revenue from new technology sufficient
to offset associated acquisition and maintenance costs.

RISKS ASSOCIATED WITH THE INTERNET

OUR BUSINESS WILL SUFFER AND THE VALUE OF YOUR INVESTMENT WILL DECLINE IF THE
INTERNET DOES NOT ACHIEVE CONTINUING, WIDESPREAD ACCEPTANCE AS A MARKETING AND
COMMUNICATIONS MEDIUM.

Our revenue and profitability will be adversely affected if the Internet
does not achieve continuing, widespread acceptance as a marketing and
communications medium. Our future success will depend substantially upon our
assumption that the Internet will continue to evolve as an attractive platform
for marketing and communications applications and the use of outsourcing to
solve businesses' email marketing and communications needs. Most businesses and
consumers have only limited experience with the Internet as a marketing and
communications medium.

WE WILL NOT BE ABLE TO GROW OUR BUSINESS UNLESS CONSUMERS AND BUSINESSES
INCREASE THEIR USE OF THE INTERNET AND THE INTERNET IS ABLE TO SUPPORT THE
DEMANDS OF THIS GROWTH.

Our success depends on increasing use of the Internet by consumers and
businesses. If use of the Internet as a medium for consumer and business
communications does not continue to increase, demand for our services will be
limited. Consumers and businesses might not increase their use of the Internet
for a number of reasons, such as:

- high Internet access costs;

- perceived security risks;

- legal and regulatory issues;

- inconsistent service quality; and

- unavailability of cost-effective, high-speed service.

Even if consumers and businesses increase their use of the Internet, the
Internet infrastructure may not be able to support demands of this growth. The
Internet infrastructure must be continually improved and expanded in order to
alleviate overloading and congestion. Failure to do so will degrade the
Internet's performance and reliability. Internet users may experience service
interruptions as a result of outages and other delays occurring throughout the
Internet. Frequent outages or delays may cause consumers and businesses to slow
or stop their use of the Internet as a communications medium.

WE MAY HAVE LIABILITY FOR INTERNET CONTENT AND WE MAY NOT HAVE ADEQUATE
LIABILITY INSURANCE.

As a provider of email services, we face potential liability for
defamation, negligence, copyright, patent or trademark infringement and other
claims based on the nature and content of the materials transmitted via email.
We do not and cannot screen all of the content generated by our users, and we
could be exposed to liability with respect to this content. Furthermore, some
foreign governments have enforced laws and regulations related to content
distributed over the Internet that are stricter than those currently in place in
the United States.

Any imposition of liability, particularly liability that is not covered by
insurance or is in excess of insurance coverage, could harm our reputation and
our operating results or could result in the imposition of criminal penalties.
Although we carry general liability and umbrella liability insurance, our
insurance may not cover claims of these types or may not be adequate to
indemnify us for all liability that may be imposed. A single claim or multiple
claims, if successfully asserted against us, could exceed the total of our
coverage limits or may not qualify for coverage under our insurance policies as
a result of coverage

12
<PAGE> 17

exclusions that are contained within these policies. In this case, we may need
to use capital contributed by our stockholders to settle claims.

WE MAY LOSE CLIENTS AND OUR REPUTATION MAY SUFFER BECAUSE OF SPAM.

If we fail in our attempts to prevent the distribution of unsolicited bulk
email, or spam, our business and reputation may be harmed. Spam-blocking efforts
by others may also result in the blocking of our clients' legitimate messages.
Additionally, spam may contain false email addresses or be generated by the use
of false email addresses. Our reputation may be harmed if email addresses with
our domain names are used in this manner. Any of these events may cause clients
to become dissatisfied with our service and terminate their use of our services.

INCREASED GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES MAY IMPAIR THE GROWTH
OF THE INTERNET AND DECREASE DEMAND FOR OUR SERVICES OR INCREASE OUR COST OF
DOING BUSINESS.

Although there are currently few laws and regulations directly applicable
to the Internet and commercial email services, the adoption of additional laws
or regulations may impair the growth of our business and the Internet which
could decrease the demand for our services and increase our cost of doing
business. A number of laws have been proposed involving the Internet, including
laws addressing:

- user privacy;

- pricing;

- content;

- copyrights;

- characteristics and quality of services; and

- consumer protection.

In particular, a number of states have already passed statutes prohibiting
unsolicited commercial email. A number of statutes have been introduced in
Congress and state legislatures to impose penalties for sending unsolicited
emails which, if passed, could impose additional restrictions on our business.
In addition, a California court recently held that unsolicited email
distribution is actionable as an illegal trespass for which the sender could be
subject for monetary damages.

Further, the growth and development of the market for online email may
prompt calls for more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online, including us.
If we were alleged to have violated federal, state or foreign, civil or criminal
law, even if we could successfully defend these claims, it could harm our
business and reputation.

CHANGES IN TELECOMMUNICATIONS REGULATIONS COULD CAUSE REDUCED DEMAND FOR OUR
SERVICES.

Several telecommunications carriers are advocating that the Federal
Communications Commission regulate the Internet in the same manner as other
telecommunications services by imposing access fees on Internet service
providers. These regulations could substantially increase the costs of
communicating on the Internet. This, in turn, could slow the growth in Internet
use and thereby decrease the demand for our services.

RISKS ASSOCIATED WITH THIS OFFERING

BECAUSE OUR EXISTING STOCKHOLDERS WILL CONTINUE TO HOLD A MAJORITY OF OUR COMMON
STOCK AFTER THIS OFFERING, YOUR ABILITY TO INFLUENCE THE OUTCOME OF DIRECTOR
ELECTIONS AND OTHER MATTERS REQUIRING STOCKHOLDER APPROVAL MAY BE LIMITED.

Following the offering, our executive officers, directors and our
stockholders who currently own over five percent of our common stock will, in
the aggregate, beneficially own approximately 66.8% of our outstanding common
stock. These stockholders, if they vote together, will be able to significantly
influence matters that we require our stockholders to approve, including
electing directors and approving significant

13
<PAGE> 18

corporate transactions. This concentration of ownership may also have the effect
of delaying or preventing a change in control of us, which could result in a
lower stock price.

CERTAIN PROVISIONS IN OUR CORPORATE DOCUMENTS MAY DISCOURAGE OUR ACQUISITION BY
OTHERS AND THUS DEPRESS OUR STOCK PRICE.

Our corporate documents and Delaware law could make it more difficult for a
third party to acquire us, even if a change in control would be beneficial to
our stockholders. These and other provisions might discourage, delay or prevent
a change in control of us or a change in our management. These provisions could
also limit the price that investors might be willing to pay in the future for
shares of common stock.

FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD CAUSE OUR STOCK
PRICE TO FALL AND DECREASE THE VALUE OF YOUR INVESTMENT.

The market price of our common stock could fall if our stockholders sell
substantial amounts of common stock, including shares issued upon the exercise
of outstanding options and warrants, in the public market following this
offering. These sales might also make it more difficult for us to sell equity
securities in the future at a time and price that we deem appropriate.
Additionally, Thomas Weisel Partners LLC may, in its sole discretion, release
all or some portion of the securities subject to lock-up agreements. Some stock
and warrant holders are entitled to certain registration rights. The exercise of
these rights could adversely affect the market price of our common stock.

14
<PAGE> 19

FORWARD-LOOKING STATEMENTS; MARKET DATA

This prospectus may contain forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of factors more fully described in the
"Risk Factors" section and elsewhere in this prospectus. We are not obligated to
update or revise these forward-looking statements to reflect new events or
circumstances.

This prospectus contains market data related to us and our industry. This
data has been included in the studies published by the Internet market research
firms, Jupiter Communications and Forrester Research. These market research
firms assume that certain events, trends and activities will occur and they
project information on those assumptions. Some of these assumptions are that:

- no catastrophic failure of the Internet will occur;

- the number of people online and the total number of hours spent online
will increase significantly over the next few years; and

- Internet security and privacy concerns will be adequately addressed.

If the market research firms are wrong about any of their assumptions, then
their projections may also be wrong. For example, the Internet-related markets
may not grow over the next few years at the rates Jupiter Communications and
Forrester Research project, or at all. If these markets do not grow at these
projected rates, it may adversely affect our profitability.

CONVENTIONS WHICH APPLY TO THIS PROSPECTUS

Of the 3,800,000 shares of common stock being offered, we are offering
3,530,000 shares and the selling stockholders are offering 270,000 shares;
however, the underwriters have a 30-day option to purchase up to 570,000
additional shares from us and the selling stockholders to cover over-allotments.
Of the 570,000 shares of common stock available to cover over-allotments,
490,000 shares would be offered by us and 80,000 shares would be offered by the
selling stockholders. Some of the disclosures in this prospectus would be
different if the underwriters exercise the option. Unless we tell you otherwise,
the information in this prospectus assumes that the underwriters will not
exercise the option.

Unless we tell you otherwise:

- all pro forma capitalization information in this prospectus gives effect
to the receipt of net proceeds of $8.8 million from our sale of 1,357,284
shares of Series E preferred stock at a price of $6.50 per share and
warrants to purchase 203,586 shares of Series E preferred stock at an
exercise price of $8.00 per share in July and August 1999; and

- all pro forma as adjusted capitalization information in this prospectus
gives effect to:

- the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering;

- our receipt of the estimated net proceeds from the sale of the
3,530,000 shares of common stock we are selling in this offering at an
assumed initial public offering price of $14.00 per share, after
deducting estimated underwriting discounts and commissions and
offering expenses; and

- an increase in our authorized common stock to 35,000,000 shares and an
increase in our undesignated preferred stock to 3,500,000 shares
effective immediately prior to the closing of this offering.

Our trademarks include "Exactis" and "Email Marketing Solutions." We have
applied for federal registration of our "Exactis" trademark. Each other
trademark, trade name or service mark appearing in this prospectus belongs to
its holder.

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<PAGE> 20

USE OF PROCEEDS

We estimate that the net proceeds from the sale of 3,530,000 shares offered
by us will be approximately $45.3 million, assuming an initial public offering
price of $14.00 per share, after deducting estimated underwriting discounts and
commissions and offering expenses. If the underwriters' over-allotment option is
exercised in full, we estimate that we will receive approximately $51.7 million
in net proceeds from this offering. We will not receive any proceeds from the
sale of common stock by the selling stockholders.

The principal reasons for this offering are to raise funds for working
capital and other general corporate purposes. We have not identified specific
uses for the net proceeds from this offering. The amounts we actually expend in
these areas may vary significantly and will depend on a number of factors,
including our future revenues. Accordingly, management will retain broad
discretion in the allocation of the net proceeds of this offering. You will not
have the opportunity to evaluate the economic, financial or other information on
which we base our decisions on how to use the proceeds. A portion of the net
proceeds may also be used to acquire or invest in complementary businesses,
technologies, services or products. We have no current plans, agreements or
commitments with respect to any acquisition or investment, and we are not
currently engaged in any negotiations with respect to any such transaction.

Pending these uses, the estimated net proceeds of this offering will be
invested in short term, interest bearing, investment grade securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain future earnings, if any, to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of our board of directors and will be
dependent on our financial condition, operating results, capital requirements
and such other factors as the board of directors deems relevant.

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<PAGE> 21

DILUTION

Our pro forma net tangible book value as of June 30, 1999 was $9.5 million,
or approximately $1.15 per share of common stock. This includes the sale of
1,357,284 shares of Series E preferred stock at a price of $6.50 per share and
warrants to purchase 203,586 shares of Series E preferred stock at an exercise
price of $8.00 per share in July and August 1999.

Pro forma net tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the number of shares of
common stock outstanding, including the sale of 1,357,284 shares of Series E
preferred stock and conversion of all outstanding series of preferred stock into
common stock. Without taking into account any other changes in the net tangible
book value after June 30, 1999, other than to give effect to our receipt of the
net proceeds from the sale of the 3,530,000 shares of common stock in this
offering at an assumed initial public offering price of $14.00 per share, our
pro forma as adjusted net tangible book value as of June 30, 1999 would have
been approximately $54.8 million, or $4.63 per share of common stock. This
represents an immediate increase in net tangible book value of $3.48 per share
to existing stockholders and an immediate dilution of $9.37 per share to new
investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Pro forma net tangible book value per share before this
offering............................................... $ 1.15
Increase per share attributable to new investors.......... 3.48
--------
Pro forma as adjusted net tangible book value per share
after this offering....................................... 4.63
------
Pro forma as adjusted dilution per share to new investors... $ 9.37
======
</TABLE>

The following table summarizes, on a pro forma as adjusted basis as of June
30, 1999, 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 existing
stockholders and by new investors purchasing shares of common stock in this
offering. The information presented is based upon an assumed initial public
offering price of $14.00 per share, before deducting estimated underwriting
discounts and commissions and offering expenses.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 8,306,204 70.2% $27,257,138 35.5% $ 3.28
New investors.......................... 3,530,000 29.8 49,420,000 64.5 14.00
---------- ----- ----------- -----
Total........................ 11,836,204 100.0% $76,677,138 100.0%
========== ===== =========== =====
</TABLE>

The foregoing table assumes no exercise of the underwriters' over-allotment
option or of any outstanding stock options or warrants after June 30, 1999. As
of June 30, 1999, there were outstanding options to purchase 1,424,423 shares of
common stock at a weighted average exercise price of $2.57 per share and
warrants to purchase 1,357,583 shares at a weighted average exercise price of
$5.48 per share. There will be further dilution to the extent any of our options
or warrants are exercised. Please see "Management -- Stock Plans" for a
discussion of our employee benefit plans and "Description of Securities" for a
discussion of our outstanding warrants.

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<PAGE> 22

CAPITALIZATION

The following table sets forth our cash and cash equivalents and
capitalization as of June 30, 1999. This table should be read together with the
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition" and the financial statements and notes to those statements appearing
elsewhere in this prospectus. This information is presented:

- on an actual basis;

- on a pro forma basis to give effect to the receipt of net proceeds of
$8.8 million from our sale of 1,357,284 shares of Series E preferred
stock at a price of $6.50 per share and warrants to purchase 203,586
shares of Series E preferred stock at an exercise price of $8.00 per
share in July and August 1999; and

- on a pro forma as adjusted basis to give effect to:

- the automatic conversion of all outstanding series of preferred stock
into common stock upon completion of this offering;

- an increase in our authorized common stock to 35,000,000 shares and an
increase in our undesignated preferred stock to 3,500,000 shares
effective immediately prior to the closing of this offering.

<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 557 $ 9,381 $ 54,692
======== ======== ========
Long-term debt and capital lease obligations, net of current
portions and discount..................................... 300 300 300
-------- -------- --------
Redeemable preferred stock:
Preferred Stock (Series B, C and D), par value $.01 per
share; 7,420,000 shares authorized actual and pro forma;
none authorized pro forma as adjusted; 5,059,867 shares
outstanding actual and pro forma; none outstanding pro
forma as adjusted....................................... 18,077 18,077 --
Series E Preferred Stock, par value $.01 per share; none
authorized actual and pro forma as adjusted; 2,500,000
shares authorized pro forma; none outstanding actual and
pro forma as adjusted; 1,357,284 outstanding pro
forma................................................... -- 8,012 --
Warrants for the purchase of shares of redeemable
preferred stock; 1,357,583 outstanding and contingently
issuable actual; 1,561,169 outstanding and contingently
issuable pro forma...................................... 648 1,460 --
-------- -------- --------
18,725 27,549 --
-------- -------- --------
Stockholders' equity (deficit):
Undesignated preferred stock, par value $.01 per share;
none authorized actual; 200,000 shares authorized pro
forma; 3,500,000 shares authorized pro forma as
adjusted................................................ -- -- --
Series A preferred stock, par value $.01 per share;
880,000 shares authorized and outstanding actual and pro
forma; none authorized and outstanding pro forma as
adjusted................................................ 1,094 1,094 --
Common stock, par value $.01 per share; 13,500,000 shares
authorized actual and pro forma; 35,000,000 shares
authorized pro forma as adjusted; 1,009,053 shares
outstanding actual and pro forma; 11,836,204 shares
outstanding pro forma as adjusted....................... 10 10 118
Additional paid-in capital, net of unearned
compensation............................................ 751 751 74,596
Accumulated deficit....................................... (19,646) (19,646) (19,646)
-------- -------- --------
Total stockholders' equity (deficit)............... (17,791) (17,791) 55,068
-------- -------- --------
Total capitalization............................... $ 1,234 $ 10,058 $ 55,368
======== ======== ========
</TABLE>

18
<PAGE> 23

The number of shares of common stock is based on the number of shares
outstanding as of June 30, 1999 and does not include the following:

- 1,424,423 shares that could be issued upon the exercise of options
outstanding as of June 30, 1999 at a weighted average exercise price of
$2.57 per share;

- 1,357,583 shares that could be issued upon the exercise of warrants
outstanding and contingently issuable as of June 30, 1999 at a weighted
average exercise price of $5.48 per share;

- 203,586 shares that could be issued upon the exercise of warrants issued
after June 30, 1999 at a weighted average exercise price of $8.00 per
share;

- 1,557,540 shares that could be issued under our option plans; and

- 500,000 shares that could be issued to our employees who elect to buy
stock in the future under our employee stock purchase plan.

19
<PAGE> 24

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
the financial statements and the notes to such statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The statement of operations data for the
period from inception to December 31, 1996 and for the years ended December 31,
1997 and 1998, and the balance sheet data at December 31, 1997 and 1998 are
derived from our financial statements which have been audited by KPMG LLP,
independent auditors, and are included elsewhere in this prospectus. The
statement of operations data for the six months ended June 30, 1998 and 1999 and
the balance sheet data at June 30, 1999 have been derived from the unaudited
financial statements included elsewhere in this prospectus that have been
prepared on the same basis as the audited financial statements and, in our
opinion, contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for these periods. Historical results are not necessarily
indicative of the results to be expected in the future and results for interim
periods are not necessarily indicative of results for the entire year.

In 1998, we sold our publishing line of business to Sony Music. At the same
time, we entered into a service agreement with Sony Music. The historical
activity of the publishing business sold to Sony Music has been separately
stated as discontinued operations in the financial statements and other
financial information contained in this prospectus. The revenue from Sony Music
constituted $2.2 million of our total revenue for the six months ended June 30,
1999 and is not reflected in our results of continuing operations in any prior
historical period. As a result, we believe period-to-period comparisons of our
revenue and operating results are not meaningful. Earnings from discontinued
operations per share for the year ended December 31, 1998 include a gain on the
sale of discontinued operations of $3.3 million. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes appearing elsewhere in this
prospectus for a description of the accounting treatment of the discontinued
operations.

We have not paid any dividends on our common stock since inception.

Net loss attributable to common stockholders includes the effect of the
accretion on the redeemable convertible preferred stock which increases net loss
attributable to common stockholders for the related periods. This accretion will
not be recognized after the conversion of all outstanding series of preferred
stock into common stock upon completion of this offering.

20
<PAGE> 25

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 30,
1996
(INCEPTION) TO YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
-------------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................... $ -- $ 359 $ 821 $ 154 $ 3,574
Cost of revenue....................... -- 132 256 93 398
---------- ---------- ---------- ---------- ----------
Gross profit........................ -- 227 565 61 3,176
---------- ---------- ---------- ---------- ----------
Operating expenses:
Marketing and sales................. -- 1,034 1,621 595 1,275
Research, development and
engineering....................... -- 701 1,807 733 3,134
General and administrative.......... -- 1,821 1,846 823 1,928
Depreciation and amortization....... -- 581 730 337 690
---------- ---------- ---------- ---------- ----------
Total operating expenses..... -- 4,137 6,004 2,488 7,027
---------- ---------- ---------- ---------- ----------
Loss from operations.... -- (3,910) (5,439) (2,427) (3,851)
Interest expense, net................. -- (73) (101) (30) (18)
---------- ---------- ---------- ---------- ----------
Loss from continuing operations..... -- (3,983) (5,540) (2,457) (3,869)
---------- ---------- ---------- ---------- ----------
Discontinued operations:
Loss from discontinued operations... (3,392) (3,716) (2,282) (926) --
Gain on sale of discontinued
operations........................ -- -- 3,348 -- --
---------- ---------- ---------- ---------- ----------
Gain on sale and loss from
discontinued operations.... (3,392) (3,716) 1,066 (926) --
---------- ---------- ---------- ---------- ----------
Net loss................ (3,392) (7,699) (4,474) (3,383) (3,869)
Accretion of preferred stock to
liquidation value................... (3) (53) (103) (50) (52)
---------- ---------- ---------- ---------- ----------
Net loss attributable to common
stockholders................... $ (3,395) $ (7,752) $ (4,577) $ (3,433) $ (3,921)
========== ========== ========== ========== ==========
Basic and diluted net loss per share:
Loss from continuing operations..... $ -- $ (4.04) $ (5.62) $ (2.50) $ (3.89)
Earnings (loss) from discontinued
operations........................ (3.40) (3.71) 1.06 (0.92) --
---------- ---------- ---------- ---------- ----------
Net loss..................... $ (3.40) $ (7.75) $ (4.56) $ (3.42) $ (3.89)
========== ========== ========== ========== ==========
Shares used in computing net loss per
share -- basic and diluted.......... 1,000,000 1,000,255 1,004,461 1,002,468 1,009,053
Pro forma basic and diluted net loss
per share (unaudited):
Loss from continuing operations..... $ (0.84) $ (0.56)
Earnings from discontinued
operations........................ 0.16 --
---------- ----------
Net loss..................... $ (0.68) $ (0.56)
========== ==========
Shares used in computing pro forma
net loss per share -- basic and
diluted........................... 6,748,964 6,948,920
</TABLE>

The following table is a summary of our balance sheet data. The pro forma
column gives effect to the receipt of net proceeds of $8.8 million from our sale
of 1,357,284 shares of Series E preferred stock at a price of $6.50 per share
and warrants to purchase 203,586 shares of Series E preferred stock at an
exercise price of $8.00 per share in July and August 1999.

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1999
---------------------------- --------------------
1996 1997 1998 ACTUAL PRO FORMA
------ -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $3,798 $ 3,747 $ 6,383 $ 557 $ 9,381
Working capital (deficit).................... 3,420 3,863 4,352 (453) 8,371
Total assets................................. 5,791 7,065 10,806 6,793 15,617
Long-term debt and capital lease obligations,
net of current portions and discount....... 30 824 610 300 300
Redeemable convertible preferred stock and
warrants................................... 7,540 15,349 18,673 18,725 27,549
Total stockholders' deficit.................. (2,288) (10,039) (14,577) (17,791) (17,791)
</TABLE>

21
<PAGE> 26

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

You should read the following discussion and analysis in conjunction with
"Selected Financial Data" and the financial statements and notes attached to
those statements included elsewhere in this prospectus. This discussion contains
certain forward-looking statements. Please see "Risk Factors" and "Forward-
Looking Statements; Market Data" elsewhere in this prospectus.

OVERVIEW

We are a leading provider of permission-based outsourced email marketing
and communications solutions primarily to companies in the media, ecommerce and
financial services industries. Permission-based email is email that the
recipient has consented to receive. We were founded in January 1996 under the
name Mercury Mail, Inc. In August 1997, we changed our name to InfoBeat Inc. and
in January 1999 we changed our name to Exactis.com, Inc. Our initial business
was the publication of a suite of advertising supported newsletters delivered
daily to subscribers via email, which we refer to as the InfoBeat publishing
business. In 1997, we began using the email technologies we developed for the
InfoBeat publishing business to deliver email newsletters for another client. In
early 1998, we launched our outsourced email marketing and communications
services, which we refer to as our email services business.

In December 1998, we sold the InfoBeat publishing business to Sony Music
and simultaneously entered into a service agreement to manage the production and
delivery of the InfoBeat products for Sony Music. Sony Music agreed to pay us an
aggregate of at least $14.8 million, of which $6.5 million was payable under a
purchase agreement and a minimum of $8.3 million was payable under a service
agreement. Under the purchase agreement, Sony Music paid us $5.0 million in 1998
and $1.5 million in July 1999. Under the service agreement, Sony Music agreed to
make minimum payments totaling $8.3 million over three years, of which $2.5
million, $2.8 million and $3.0 million has been paid, or will be paid, for
services rendered or to be rendered in 1999, 2000 and 2001, respectively.
Generally, a significant portion of the cash payable to us under the service
agreement is received prior to the time services are rendered, resulting in
deferred revenue. This revenue is recognized in the period in which services are
performed. For financial reporting purposes, we have treated the results of our
InfoBeat publishing business as discontinued operations for periods prior to
January 1, 1999.

Based on management's projections of pricing and costs for delivery of
similar services, we estimated the fair value of the services to be provided to
Sony Music under the service agreement to be $11.5 million. The excess of the
aggregate of $14.8 million payable by Sony Music over the estimated $11.5
million fair value of the services to be provided was recorded as a $3.3 million
gain on the sale of discontinued operations in 1998. The difference between the
estimated $11.5 million fair value of the services to be provided and the $8.3
million payable by Sony Music under the service agreement, or $3.2 million, has
been recorded as deferred revenue that will be amortized over the term of the
service agreement. The revenue from the service agreement with Sony Music
constituted $2.2 million, or 62%, of our total revenue for the six months ended
June 30, 1999. Approximately $800,000 of the $2.2 million consists of
amortization of the $3.2 million of deferred revenue. For more information about
the InfoBeat publishing business, please refer to note 2 in the financial
statements.

Since January 1999, we have focused exclusively on providing outsourced
email marketing and communications solutions to a wide range of clients
primarily in the media, ecommerce and financial services industries. We generate
revenue based on a fee per email message sent, charges for related services and
custom engineering development work. The actual per message fees are related to
each client's monthly email message volume and decline as a client's volume
increases. The majority of our clients execute a 12-month contract with
guaranteed monthly minimum charges based upon their expected volume of messages.
Revenue is recognized in the period in which services are provided. We record
deferred revenue for payments received in advance of services provided.

Cost of revenue consists primarily of sales commissions and network
connectivity charges to our Internet service providers. Internet service
providers charge us for network connectivity based on monthly
22
<PAGE> 27

minimum charges up to a certain level of usage and incrementally for usage above
that level. Sales commissions are paid monthly based on a percentage of revenue
recognized during the month.

Our average cost to deliver an email message is significantly influenced by
the volume of email messages processed by our systems. As we continue to add new
clients, and as our existing clients increase both the size of their email lists
as well as their overall usage of our services, we expect our average cost to
deliver an email message to decline over the long term. In addition, a portion
of our research, development and engineering efforts are devoted to improving
the performance and efficiency of our systems.

In May 1999, we granted options to an executive to purchase 658,000 shares
of common stock at an exercise price of $1.50 per share. This grant resulted in
a total non-cash compensation expense of $1.9 million that we are recognizing in
general and administrative expense over the three-year vesting period of the
options. For the six months ended June 30, 1999, we recognized non-cash
compensation expense of $707,000 with respect to these options.

In December 1998, we issued to Sony Music a warrant to purchase 600,000
shares of Series D preferred stock at a purchase price of $6.00 per share. The
warrant expires on December 30, 2003. The vesting of this warrant is contingent
upon the achievement by Sony Music of certain performance milestones. See
"Description of Securities -- Warrants." We will recognize the fair value of the
vested portion of the warrant, as calculated using the Black-Scholes option
pricing model, as marketing and sales expense at the time, if ever, each
performance milestone is achieved. The fair value and volatility of our common
stock are critical components of the Black-Scholes option pricing model and we
cannot predict what those components might be on the date each performance
milestone is achieved. If Sony Music achieves any of the performance milestones,
we will incur non-cash charges, which may be substantial. As of June 30, 1999,
none of the performance milestones had been achieved.

In July 1997, we issued to American Express a warrant to purchase 425,000
shares of Series C preferred stock at a purchase price of $6.00 per share. The
warrant expires in July 2000. The vesting of this warrant is contingent upon the
achievement by American Express of certain performance milestones. In accordance
with accounting standards in effect at the time of the issuance of this warrant,
the estimated fair value of the warrant, using the Black-Scholes option pricing
model, was calculated at the time awarded and is being amortized over the life
of the warrant. We estimate the number of warrant shares that will ultimately
vest under the warrant at the end of each reporting period and, based upon these
estimates, may recognize additional non-cash charges both currently and over the
remaining life of the warrant. We recognized non-cash charges of $46,000 in
1997, $118,000 in 1998 and $24,000 for the six months ended June 30, 1999
related to the American Express warrant and, based on estimates as of June 30,
1999 as to the ultimate vesting of the warrant, we plan to recognize an
additional $6,000 of non-cash charges over the next 12 months. Should American
Express achieve one or both remaining milestones, then we expect to record
additional non-cash charges of up to approximately $250,000 in the period in
which one or both of these milestones is achieved.

We incurred losses from continuing operations of $4.0 million in 1997, $5.5
million in 1998 and $3.9 million for the six months ended June 30, 1999. All
activity related to the period from inception through December 1996 has been
reported as discontinued operations in the financial statements. Net losses
including discontinued operations were $3.4 million in 1996, $7.7 million in
1997 and $4.5 million in 1998. We expect to increase spending on marketing and
sales as we expand our sales force and increase promotional and advertising
expenditures. We also expect substantially higher general and administrative and
research, development and engineering expenses as we expand our infrastructure
to support expected growth and as we broaden our suite of email services. As a
result of these increases, we expect to continue to incur significant net losses
on a quarterly basis through at least 2000.

In view of the rapidly evolving nature of our business, our limited
operating history and our recent focus on providing outsourced email marketing
and communications solutions, we believe that period-to-period comparisons of
our revenue and operating results, including our operating expenses as a
percentage

23
<PAGE> 28

of total revenue, are not meaningful and should not be relied upon as an
indication of future performance. In addition, we do not believe that our
historical growth rates are indicative of future results.

RESULTS OF CONTINUING OPERATIONS

The expenses and number of employees discussed below are shown net of costs
allocated to the InfoBeat publishing business, which has been accounted for as
discontinued operations. In addition, all activity for the period from inception
through December 31, 1996 was related to the discontinued operations. As a
result, comparison of the period ended December 31, 1996 to the year ended
December 31, 1997 has been omitted. For more information about the InfoBeat
publishing business, please refer to note 2 in the financial statements.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998

Revenue. Revenue consists of charges for providing email messaging services
and includes fees based on the volume of email messages sent, charges for
related services and custom engineering development work. Revenue increased to
$3.6 million in the first six months of 1999 from $154,000 in the first six
months of 1998. Revenue from Sony Music for providing the InfoBeat products
under our contract which began on January 1, 1999 constituted $2.2 million, or
62% of the 1999 revenue amount. Approximately $800,000 of this amount reflects
the recognition of deferred revenue related to Sony's purchase of the InfoBeat
publishing segment of our business. The balance of the growth is attributable to
increases in both our client base and the volume of email messages sent. We sent
approximately 175 million email messages for 52 clients in the six months ended
June 30, 1999 as compared to approximately 19 million email messages for seven
clients in the six months ended June 30, 1998. We also sent approximately 625
million email messages for Sony Music in the 1999 period.

Cost of Revenue. Cost of revenue consists primarily of sales commissions
and network connectivity charges from our Internet service providers. Cost of
revenue increased to $398,000 in the first six months of 1999 from $93,000 in
the first six months of 1998. Sales commissions increased $131,000 in the 1999
period as a result of our growing sales force and corresponding revenue growth.
Network connectivity charges increased $183,000 in the 1999 period due to higher
email message volume and the addition of a connection to a second Internet
service provider in order to achieve increased reliability.

Marketing and Sales. Marketing and sales costs consist primarily of
salaries and other personnel costs related to our sales, account management,
customer care and marketing employees, as well as travel, advertising and other
promotional costs. Marketing and sales costs increased to $1.3 million in the
first six months of 1999 from $595,000 in the first six months of 1998. Salaries
and other personnel costs accounted for $445,000 of the increase in the 1999
period as the number of marketing and sales employees increased to 32 as of June
30, 1999 from 11 at the beginning of 1998. We expect to significantly increase
the number of employees, as well as advertising and promotional spending in this
area in the future.

Research, Development and Engineering. Research, development and
engineering costs consist primarily of salaries and other personnel costs
related to our operations and research and development groups, consultants and
outside contractor costs, and software and hardware maintenance expenses.
Research, development and engineering costs increased to $3.1 million in the
first six months of 1999 from $733,000 in the first six months of 1998. The cost
of outside contractors and consultants, who are utilized to speed development
efforts, increased by $1.5 million in the 1999 period. In addition, salaries and
other personnel costs accounted for an additional $783,000 of the increase in
the 1999 period, as the number of research, development and engineering
employees increased to 41 as of June 30, 1999 from 14 at the beginning of 1998.
We are continuing to invest substantially in this area to develop the new
features and services required to meet the needs of current and potential
clients, and plan to maintain or increase the dollar amount we spend on
research, development and engineering activities in the future.

General and Administrative. General and administrative costs consist
primarily of salaries and other personnel costs related to executive and
administrative personnel, occupancy and general office costs and professional
fees. General and administrative costs increased to $1.9 million in the first
six months of 1999
24
<PAGE> 29

from $823,000 in the first six months of 1998. Non-cash stock option
compensation expense increased by $707,000 in the 1999 period as a result of
options granted in May 1999. Professional fees increased $201,000 in the 1999
period, primarily due to costs related to the patent infringement lawsuits
described in "Business-Legal Proceedings." Occupancy and general office costs
represented $134,000 of the increase in the 1999 period due to an increase in
the total number of our employees. Increased salaries and other personnel costs
accounted for $54,000 of the increase in the 1999 period, as the number of
general and administrative employees increased to 10 as of June 30, 1999 from
six at the beginning of 1998.

Depreciation and Amortization. Depreciation and amortization expense
consists primarily of depreciation of equipment, software and furniture and
amortization of leasehold improvements. Fixed assets are recorded at cost and
depreciated over the estimated useful lives of the assets which range from three
to five years. Depreciation and amortization expense increased to $690,000 in
the first six months of 1999 from $337,000 in the first six months of 1998.
Purchases of equipment and software necessary to deliver higher email message
volume, as well as for general corporate use, were responsible for this increase
in the 1999 period.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

Revenue. Revenue increased to $821,000 in 1998 from $359,000 in 1997 as a
result of increases in our client base, email message volume and average price
per message sent. We sent approximately 115 million email messages for 25
clients in 1998 as compared to approximately 104 million email messages for one
client in 1997. We did not begin to make our outsourced email services generally
available until early 1998.

Cost of Revenue. Cost of revenue increased to $256,000 in 1998 from
$132,000 in 1997. Sales commissions increased $76,000 in 1998 due to the
establishment of a sales force and the associated payment of sales commissions.
Network connectivity charges increased $48,000 in 1998 due to higher email
message volume.

Marketing and Sales. Marketing and sales costs increased to $1.6 million in
1998 from $1.0 million in 1997. Salaries and other personnel costs increased
$772,000 in 1998 due to the increase in the number of marketing and sales
employees to 28 as of December 31, 1998 from six at the beginning of 1997. This
increase in salaries and other personnel costs was partially offset by a decline
of $244,000 in advertising and other promotional costs in 1998.

Research, Development and Engineering. Research, development and
engineering costs increased to $1.8 million in 1998 from $701,000 in 1997.
Salaries and other personnel costs increased $1.1 million in 1998, as the number
of research, development and engineering employees increased to 22 as of
December 31, 1998 from seven at the beginning of 1997.

General and Administrative. General and administrative costs remained
relatively unchanged at $1.8 million in both 1998 and 1997. Occupancy and
general office costs increased $168,000 in 1998 due to the total increase in the
number of our employees. This increase was partially offset by a $127,000
decline in salaries and other personnel costs in 1998.

Depreciation and Amortization. Depreciation and amortization expense
increased to $731,000 in 1998 from $581,000 in 1997. Purchases of equipment and
software necessary to deliver higher email message volume, as well as for
general corporate use, were responsible for this increase in 1998.

INCOME TAXES

As of December 31, 1998, a net operating loss carryforward for federal
income tax purposes of approximately $11.8 million was available to offset
future federal taxable income, if any, through 2018. No tax benefit for these
losses has been recorded by us in 1996, 1997, 1998 or to date in 1999 due to
uncertainties regarding the utilization of the loss carryforward. The
utilization of a portion of the net operating loss carryforwards will be limited
under Section 382 of the Internal Revenue Code due to changes in ownership
interests.
25
<PAGE> 30

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth our historical unaudited quarterly
information for our most recent six quarters. This quarterly information has
been prepared on a basis consistent with our audited financial statements and,
we believe, includes all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the information shown. Our
quarterly operating results have fluctuated and may continue to fluctuate
significantly as a result of a variety of factors and operating results for any
quarter are not necessarily indicative of results for a full fiscal year.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue........................... $ 52 $ 102 $ 295 $ 372 $ 1,542 $ 2,032
Cost of revenue................... 46 47 88 75 121 277
------- ------- ------- ------- ------- -------
Gross profit.................... 6 55 207 297 1,421 1,755
------- ------- ------- ------- ------- -------
Operating expenses:
Marketing and sales............. 220 375 543 483 612 663
Research, development and
engineering.................. 341 392 544 530 963 2,171
General and administrative...... 319 504 432 591 1,118 810
Depreciation and amortization... 169 168 194 199 310 380
------- ------- ------- ------- ------- -------
Total operating
expenses.............. 1,049 1,439 1,713 1,803 3,003 4,024
------- ------- ------- ------- ------- -------
Loss from
operations....... (1,043) (1,384) (1,506) (1,506) (1,582) (2,269)
Interest income (expense), net.... (9) (21) (15) (56) 3 (21)
------- ------- ------- ------- ------- -------
Loss from continuing
operations................... (1,052) (1,405) (1,521) (1,562) (1,579) (2,290)
------- ------- ------- ------- ------- -------
Discontinued operations:
Loss from discontinued
operations................... (487) (439) (597) (759) -- --
Gain on sale of discontinued
operations................... -- -- -- 3,348 -- --
------- ------- ------- ------- ------- -------
Gain on sale and loss
from discontinued
operations............ (487) (439) (597) 2,589 -- --
------- ------- ------- ------- ------- -------
Net income (loss)................. $(1,539) $(1,844) $(2,118) $ 1,027 $(1,579) $(2,290)
======= ======= ======= ======= ======= =======
</TABLE>

Our limited operating history and the emerging nature of the Internet-based
email services market make it very difficult for us to accurately forecast our
revenue. Our revenue could fall short of our expectations if we experience
delays or cancellations of even a small number of contracts. A number of factors
are likely to cause fluctuations in our operating results, including but not
limited to:

- continued growth of the Internet, in general, and of email usage, in
particular;

- demand for our services;

- our ability to attract and retain clients and maintain client
satisfaction;

- our ability to upgrade, develop and maintain our systems and
infrastructure;

- the amount and timing of operating costs and capital expenditures
relating to expansion of our business and infrastructure;

- technical difficulties or system outages;

- the announcement or introduction of new or enhanced services by our
competitors;

- pricing policies of our competitors;

26
<PAGE> 31

- our ability to attract and retain qualified personnel with Internet and
direct marketing industry expertise, particularly technology, sales and
marketing personnel; and

- governmental regulation regarding the Internet, email and direct
marketing.

In addition, our operating results may be affected by non-cash charges
associated with the warrants issued to Sony Music that may vest upon the
achievement of certain performance milestones. We cannot currently estimate
these non-cash charges, which may be substantial.

Please see "Risk Factors -- Due to the emerging nature of the email
services market, our future revenues are unpredictable and our quarterly
operating results may fluctuate" for more detailed information on factors that
could affect our operating results.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily from sales of
our preferred stock and, to a lesser extent, proceeds from bank loans. Net cash
used by operating activities, excluding discontinued operations, was $3.4
million in 1997, $1.7 million in 1998 and $3.9 million for the six months ended
June 30, 1999.

Net cash used by investing activities was $1.8 million in 1996, $1.0
million in 1997, $893,000 in 1998 and $1.6 million for the six months ended June
30, 1999. The amount in 1998 excludes a $3.3 million gain on the sale of
discontinued operations. In each period, net cash used by investing activities
was primarily the result of capital expenditures for equipment and software used
in our data center from which we operate our email message platform.

Net cash provided by financing activities was $8.6 million in 1996, $7.9
million in 1997 and $3.8 million in 1998 and net cash used by financing
activities was $342,000 for the six months ended June 30, 1999. Proceeds from
the sale of preferred stock, net of payments for debt and capital lease
obligations, were the primary source of the net cash provided by financing
activities. In the year ended 1997, proceeds from notes payable of $3.5 million
were also a significant source of financing. Approximately $2.0 million of this
amount was converted into preferred stock in July 1997. The balance consists of
proceeds from bank loans.

At December 31, 1998 and June 30, 1999, we had $6.4 million and $557,000,
respectively, in cash and cash equivalents. In July 1999, we received a $1.5
million payment from Sony Music related to the sale of the InfoBeat publishing
business. In July and August 1999, we received net proceeds of $8.8 million from
the sale of Series E preferred stock and warrants. We plan to increase our
general level of spending in the future and plan to expend significant resources
on capital expenditures in 1999 and 2000 for equipment and software, furniture,
and leasehold improvements. We plan to relocate our existing data center and
corporate offices in late 1999, and we plan to open a second data center for
disaster recovery in the fourth quarter of 1999. In particular, we expect to
spend approximately $3.5 million on capital expenditures in the remainder of
1999 and approximately $3.0 million in 2000. We expect to incur operating losses
through at least the end of 2000.

We expect that existing cash resources and the net proceeds of this
offering will be sufficient to fund currently anticipated working capital and
capital expenditure needs at least through the end of 2000. Additionally, in the
fourth quarter of 1999, we plan to enter into a line of credit with a bank or
other financial institution. Thereafter, we may require additional funds to
support our working capital requirements or for other purposes. If we are not
successful in raising capital when we need it and on terms acceptable to us, it
could harm our business, financial condition and operating results.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At June 30, 1999, we had debt in the aggregate amount of $1.0 million and
we may incur additional debt in the future. A change in interest rates would not
affect our obligations related to debt existing as of

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<PAGE> 32

June 30, 1999, as the interest payments related to that debt are fixed over the
term of the debt. Increases in interest rates could, however, increase the
interest expense associated with future borrowings.

We may invest a portion of the net proceeds from this offering and the
proceeds from our sale of Series E preferred stock in short-term investments.
The value of these investments may decline as the result of changes in equity
markets and interest rates.

YEAR 2000

Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. This could result in
system failures or miscalculations causing disruption of operations for any
company using these computer programs or hardware. Among other things, this
could include a temporary inability to process transactions, send or receive
email messages, send invoices or engage in normal business activities. As a
result, many companies' computer systems, including ours, may need to be
upgraded or replaced in order to avoid Year 2000 issues.

We have evaluated the Year 2000 readiness of all of the information
technology systems that we use. Our information technology systems are not yet
Year 2000 compliant. We have also received certifications from our providers of
our non-information technology systems, such as our phone systems, power
supplies and other systems. These certifications indicate that our
non-information technology systems are Year 2000 compliant. As part of our Year
2000 readiness, we are certifying whether all of our internal systems are Year
2000 compliant. Year 2000 compliance provides that we have confirmed that, under
the conditions of our internal testing, our information technology systems will
perform as follows:

- date calculations will neither cause any abnormal termination of
performance nor generate inconsistent results; and

- when sorting by date, all records will be sorted in accurate sequence.

We are a comparatively new enterprise. Accordingly, the majority of
software and hardware we use to operate and manage our business has all been
purchased or developed by us within the last three years. While this does not
uniformly protect us against Year 2000 exposure, we believe our exposure is
limited because the information technology we use to operate and manage our
business is not based upon legacy hardware and software systems. Generally,
hardware and software designed within the current decade and the past several
years in particular has given greater consideration to Year 2000 issues.

As part of our Year 2000 compliance program, we have a separate dedicated
Year 2000 team, consisting of five external Year 2000 technology experts, as
well as our own staff. We have installed a complete Year 2000 test system to
facilitate achieving Year 2000 compliance of our internal systems. In
implementing our Year 2000 compliance program, we have identified and
inventoried Year 2000 sensitive components in our internal systems and we are
working to achieve Year 2000 compliance of our components. We have also made
reasonable efforts to contact vendors and suppliers that provide us with Year
2000 sensitive components in order to determine the compliance of these
components. The majority of our vendors have certified to us that they are Year
2000 compliant. For vendors that have not provided this certification, we intend
to test their products for Year 2000 compliance and develop contingency plans to
address any problems associated with noncompliance of their products. It is the
intent of our Year 2000 compliance program to either repair or replace any
components for our internal systems that are determined not to be Year 2000
compliant. We have completed our evaluation of substantially all of our hardware
components and have received vendor certification that they are Year 2000
compliant. We have also upgraded substantially all our operating systems to Year
2000 compliant system versions. We plan to complete our software Year 2000
compliance program in November 1999.

Because we are unable to control other companies' products and software, we
are not able to certify that these products and software will not suffer any
errors or malfunctions related to Year 2000. In addition, although some Year
2000 sensitive components in our internal systems may have passed internal
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<PAGE> 33

Year 2000 compliance testing by our suppliers or vendors, we do not certify that
these materials or components will perform as tested when used in circumstances
not reflected in the testing.

In addition, we rely on third party network infrastructure providers to
gain access to the Internet. If these providers experience business
interruptions as a result of their failure to achieve Year 2000 compliance, our
ability to provide email services could be impaired, which could harm our
business. In particular, one of our Internet service providers has informed us
that it will be unable to certify that it has attained Year 2000 compliance
prior to December 1999.

Through August 31, 1999, we have incurred approximately $100,000 in costs
toward achieving Year 2000 compliance. We anticipate that future costs
associated with our Year 2000 remediation will not exceed $500,000. If we, our
clients, our providers of hardware or software or our third party network
providers fail to remedy any Year 2000 issues, our service could be interrupted
and we could experience a material loss of revenue that could harm our business.
Presently, we are unable to estimate the duration and extent of any interruption
or quantify the effect it may have on our future revenue. We are developing a
comprehensive contingency plan to address the effects of a failure. We plan to
complete development of this contingency plan in November 1999.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective, as amended, for all fiscal quarters
of fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments, including some
derivative instruments embedded in other contracts, and for hedging securities.
To the extent we begin to enter into these transactions in the future, we will
adopt the statement's disclosure requirements in our financial statements for
the year ending December 31, 2000.

During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise" and the American Institute of Certified Public
Accountants issued Statement of Position No. 98-5, Reporting on the Costs of
Start-up Activities. The adoption of these pronouncements is not expected to
impact us.

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<PAGE> 34

BUSINESS

OVERVIEW

We are a leading provider of permission-based outsourced email marketing
and communications solutions. We provide a comprehensive and scalable suite of
email services which enable our clients to deliver large numbers of custom email
messages in an efficient, timely and cost-effective manner. Our primary services
consist of the distribution of email newsletters and information bulletins, as
well as the delivery of personalized order and trade confirmation messages,
which are triggered by specific transactions or events. We also serve targeted
banner advertisements within the email communications that we deliver to over
two million subscribers of Sony Music's daily email newsletters. In addition, we
are continuing to develop a wide variety of targeted messaging capabilities to
allow our clients to conduct personalized one-to-one email marketing campaigns.
Our advanced, proprietary technology allows us to deliver a large volume of
email messages for our clients. In the second quarter of 1999, we delivered over
400 million email messages for 48 companies, primarily in the media, ecommerce
and financial services industries.

INDUSTRY BACKGROUND

GROWTH OF THE INTERNET AND EMAIL

The Internet has emerged as a significant tool for global communications,
commerce and media. According to a December 1998 Jupiter Communications study,
there were over 77 million Web users in the United States at the end of 1998,
representing 28% of the United States population. This number is expected to
grow to over 131 million users by the end of 2002, representing 47% of the
United States population. The growth of the Internet is the result of a number
of factors, including the extensive and growing installed base of advanced
personal computers in the home and workplace, increasingly faster and cheaper
access to the Internet, improvements in network infrastructure and bandwidth,
development of Internet-based applications and increasingly useful content
available online. The proliferation of alternative access devices providing
Internet connectivity, including pagers and Internet capable wireline and
wireless phones, is also contributing to the increasing use of the Internet.

Email is one of the most popular applications associated with the Internet.
Increased use of the Internet has resulted in the widespread adoption of email
as a regular and dependable communications medium. Initially developed for
people working on single mainframe computers or on small networks, email has
expanded rapidly to become a widely used medium for business and personal
communications worldwide. The ability to inexpensively communicate at any time
and from any location with Internet access has resulted in the rapid increase in
email use in recent years. Continued growth in the use of email is being driven
by its convenience, speed, low cost and the ability to send increasingly large
and complex files and attachments, including documents, spreadsheets and
multimedia.

Today, email is becoming increasingly critical to business-to-consumer and
business-to-business communications. Forrester Research estimates that three
billion solicited commercial emails were sent during 1997 and predicts that 250
billion commercial emails will be sent in 2002 for both consumer and business
email users. Because email provides an immediate, targeted and inexpensive
method to reach an expanding number of online consumers, businesses are facing
increasing competitive pressure to develop comprehensive Internet and email
communications strategies. These email strategies are driving a wide range of
customer communications, including promotional messages, announcements,
confirmations, order acknowledgments, customer requested information and
one-to-one marketing initiatives.

GROWTH OF PERMISSION-BASED EMAIL MARKETING AND COMMUNICATIONS

Consumer marketing has traditionally been conducted through a variety of
media, including direct mail and telephone. The widespread adoption of the
Internet and email has enabled companies to create new direct marketing and
communications strategies to target and acquire new customers, as well as
enhance existing customer relationships. The Direct Marketing Association has
estimated that approxi-

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<PAGE> 35

mately $603 million was spent on direct marketing through the Internet in 1998
and predicts that this number will grow to $5.3 billion by 2003.

Permission-based email marketing and communications strategies are gaining
acceptance among a wide variety of businesses. In a 1999, Forrester Research
study, 70% of online retail, manufacturing and media companies surveyed
indicated that email marketing is "important" or "very important" to their sales
and marketing strategy and that 66% of such companies are using email for
promotional activities. Permission-based email marketing and communications
strategies have several advantages over traditional direct marketing methods,
including the following:

- Cost-Effectiveness -- In a 1998 study, Jupiter Communications estimated
that each email costs $0.01 to $0.25, as compared to $1.00 to $2.00 per
piece for a marketing mailing done via postal mail.

- Instantaneous Communication -- As compared to many other traditional
marketing channels, email enables significantly faster communication with
a large audience. Jupiter Communications reports that 80% of all
responses to an email campaign occur within two days, as compared to six
to eight weeks for a marketing campaign done via mail.

- Higher Response Rates -- Jupiter Communications reports that response
rates for permission-based email campaigns are generally five percent to
15%, as compared to response rates of 0.5% to five percent for
traditional direct mail marketing methods.

CHALLENGES IN IMPLEMENTING EMAIL MARKETING AND COMMUNICATIONS SOLUTIONS

Companies seeking to successfully utilize email as a channel for marketing
and communications face several challenges. Many companies attempting to develop
and manage an in-house solution to expanding and increasingly sophisticated
email systems lack the resources and expertise required to cost-effectively
launch email marketing initiatives. Businesses often find it difficult and
costly to integrate state-of-the-art technology into their infrastructure,
resulting in email marketing efforts which are defined by a company's
technological capabilities, rather than the company's strategic marketing and
communications goals. Sophisticated email marketing initiatives require
technology solutions with the following capabilities:

- sufficient bandwidth to handle peak volumes of emails;

- email content integration with selected email lists;

- inbound message management, including bounces from undeliverable
addresses and responses from recipients;

- subscriber and recipient database management, including email addresses
and demographic, transactional and behavioral data;

- applications which enable campaign management, Web-based reporting and
targeting and predictive modeling; and

- safeguards to avoid distribution of unsolicited bulk mail, or spam, and
to operate in accordance with existing governmental regulations.

The demonstrated success of the Internet and permission-based email as a
marketing and communications channel, combined with the challenges of developing
and managing in-house solutions, has led many companies to seek email
outsourcing services that can rapidly deploy large-scale marketing and
communications programs.

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OUR SOLUTION

We offer a comprehensive suite of end-to-end outsourced email marketing and
communications solutions. Our email services provide our clients with the
following benefits:

LEADING EDGE TECHNOLOGIES

Our advanced, proprietary technologies enable us to quickly distribute
large quantities of email messages for our clients. In addition, our
technologies allow us to deliver customized messages according to user-defined
preferences or client-defined message templates which are personalized through
our mail merge technology. Our Internet-based email solutions are designed to
afford our clients choice and flexibility. Our clients are able to:

- send email messages in both text and graphically-rich HyperText Markup
Language, commonly known as HTML, formats;

- define bounce rules for handling undeliverable emails;

- select the schedule for delivery of their email communications one month
in advance;

- generate report information based on a variety of menu options and dates;
and

- create the content in subscribe and unsubscribe confirmation messages and
provide users multiple ways to subscribe and unsubscribe.

We also serve targeted advertising banners in HTML email newsletters that
we deliver to over two million subscribers of Sony Music's InfoBeat newsletters,
enabling Sony Music to generate advertising revenue.

HIGHLY SCALABLE AND RELIABLE SOLUTION

Our email engine delivered an average of over 6.9 million email messages
per weekday in August 1999. We have the capacity to deliver up to 25 million
email messages per day without additional hardware or infrastructure
improvements. Our system can accommodate rapid growth in the volume and
complexity of the messaging needs of our clients and is designed to be highly
reliable. We have identified single points of failure and designed redundancy
where appropriate. We maintain two separate Internet connections and have
separate routers connected to one another in the event a router fails. We do not
need to interrupt our service during maintenance periods. Automated performance
monitoring allows us to intervene promptly if required.

BROAD SUITE OF INTEGRATED EMAIL APPLICATIONS

Our comprehensive suite of email marketing and communications solutions is
designed to address all aspects of our clients' email program needs. Currently,
we send and manage email news and information bulletins as well as deliver
personalized order and trade confirmation messages triggered by specific
transactions and events. Our end-to-end solution includes email list
administration, subscription management, bounce and reply processing, logging
and reporting, customer service, content submission and a high level of account
management with availability 24 hours per day, seven days per week. In addition,
we are developing a wide variety of targeted marketing capabilities to allow our
clients to conduct one-to-one email marketing campaigns.

COST-EFFECTIVE OUTSOURCED SOLUTIONS

Compared to internally-developed solutions, our outsourcing services allow
our clients to conduct cost-effective email marketing and communications
initiatives. We offer our clients a complete turnkey solution, from professional
implementation of all required systems to 24 hours per day, seven days per week
account service. By outsourcing their email programs to us, our clients can
focus on their core business competencies rather than managing a complex email
delivery system. This reduces our clients' need to invest in complex
infrastructure, bandwidth and technical professionals.
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SECURE DATA CAPABILITIES

To ensure protection of client data, we have established strict security
measures including multiple firewalls to prevent unauthorized sending of email,
tampering or unauthorized access to files. Our clients' data and lists are kept
confidential and we do not sell their lists or data. All data and client
interfaces are password protected and our clients oversee the permission process
for sending and scheduling capabilities to appropriate parties. We have
procedures for regular on-site and off-site back-up of client information,
including subscriber databases, reports and logging and account information.

COMPREHENSIVE SPAM POLICY

We understand that if email is used improperly, it can cause significant
harm to our own and our clients' reputations and customer relationships. It is
our policy not to send unsolicited commercial email. We assist our clients in
conducting email programs that are anti-spam compliant. Our clients are required
to represent to us that their email addresses have been obtained using
permission-based methods.

We are members of the Direct Marketing Association and the Association for
Interactive Media and serve on its Council for Responsible Email. These
associations provide us with updates of legislative activity around the country
that could affect our clients' email marketing initiatives and result in changes
to our spam policy.

STRATEGY

Our objective is to be a world leader in the delivery of permission-based
email marketing and communications services. We plan to achieve this objective
by pursuing the following strategies:

EXTEND INDUSTRY LEADING TECHNOLOGIES

We intend to further develop our technology infrastructure to increase our
email capacity, system reliability and security. Our goal is to increase our
capacity to 50 million email messages per day by the end of 1999. In addition to
expanding our capacity, we plan to continue to offer a high level of system
reliability and security by improving our redundancy and failsafe features in
our primary data center, as well as opening a second data center in another
location for disaster recovery and additional failsafe capabilities.

We are developing a unified software-based platform that will support our
entire range of services and offer our clients a consistent user interface and
single database. This will allow us to share new features and capabilities that
we develop among different products and clients. This new platform is being
designed to reduce product development and implementation time, allowing us
quicker time-to-market while spreading infrastructure costs across our various
service offerings.

BROADEN OUR SUITE OF EMAIL SERVICES

We intend to continue to offer our clients a full line of feature-rich
email marketing and communications services to meet their email needs across a
variety of applications. We are developing an advanced, targeted email marketing
solution which will allow clients to implement one-to-one email marketing
programs directed at their most profitable customers. New features that we plan
to introduce over the next 12 months include:

- Targeting and Predictive Modeling -- to give clients the ability to
perform sophisticated analyses to target potential customers based on
their profiles and on a comparison model to current buyers.

- Enhanced Personalization -- to expand capabilities across our entire
product suite to enable clients to personalize various fields within the
body of an email.

- Web-Based Reporting and Analysis -- to allow clients to more effectively
analyze results of an email campaign to determine its success.

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- Web-Based Campaign Management -- to allow clients to easily manage their
email campaigns, including complex scheduling, database querying and
testing.

- Targeted Ad-Serving Capabilities -- to enable all of our clients to
insert targeted banner advertisements within the body of an email.

We also plan to provide professional services that complement our email
service offerings. These professional services are intended to extend our
relationships with current clients, attract new clients and allow us to
differentiate ourselves in the outsourced email services market. These services
may consist of the procurement of email lists, email program consulting and
campaign results analysis.

CONTINUE TO DEVELOP AND LEVERAGE STRATEGIC RELATIONSHIPS

In order to strengthen our market position and offer our clients additional
services, we plan to develop strategic relationships with companies that possess
complementary technical and marketing services. Through these strategic
relationships, we will undertake joint product development and marketing
efforts, such as integrating email with ecommerce applications and developing
relationships with permission-based email list partners. Potential strategic
partners include database design, ad-serving, ecommerce, secure email and
language translation companies, as well as technology service providers.

INCREASE MARKETING AND SALES EFFORTS

We intend to increase the size of our direct sales force substantially over
the next 12 to 18 months. As our sales force grows, we intend to move from our
current geographic focus to a vertical market focus, allowing our sales staff to
become experts within specific vertical markets and to offer more consultative
email marketing and communications solutions specifically tailored to each
client's individual needs. We also plan to increase our sales efforts by
developing relationships with a network of partners that are in a position to
influence their clients' marketing strategies and tactics, including advertising
agencies, marketers and systems integrators. Additionally, we plan to expand
into international markets both through the addition of a direct sales force and
by developing alliances with international partners. We intend to launch our
international expansion in the United Kingdom.

ACQUIRE NEW BUSINESSES AND TECHNOLOGIES

We intend to pursue acquisitions of businesses, products, services and
technologies that are complementary to our existing business. These may include
acquisitions of secure email solutions, permission-based lists of email
addresses, statistical analysis and consulting services, inbound email
processing capabilities and Internet ad-serving solutions. We currently have no
agreements or current negotiations regarding acquisitions.

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SERVICES AND FEATURES

We provide a comprehensive suite of email services which enable our clients
to develop and send large numbers of custom email messages. Our services are
designed to offer clients a reliable, timely and cost-effective means of
communicating with their customers and prospects. Our clients can select from a
broad array of features and functions to develop email messaging solutions for a
wide range of business communication needs. We offer clients a complete turnkey
solution, from professional implementation of all required systems to 24 hours
per day, seven days per week account service. We generally charge clients on a
per message basis.

CURRENT SERVICES

We offer our comprehensive offering of email services to a variety of
clients, primarily in the media, ecommerce and financial services industries.
Our solutions include:

News and Information Distribution. Our services enable our clients to send
the same message to a large number of recipients or subscribers. A Web-based
interface allows our clients to input content, preview the message and approve
the message for sending. Typically, news and information distributions are sent
in response to consumer requests for information. Our clients utilize these
services to retain customers and drive traffic to their Web sites. Sample
messages under this service offering include newsletters, announcements and
welcome notices.

We currently offer a highly customized version of our news and information
distribution service to two clients, Sony Music for their InfoBeat products and
Tribune Media Services for their MovieQuest service. Our service allows Sony
Music's email subscribers to select preferences from a menu or list of options
and receive only the information they have requested, thereby customizing the
news, weather and financial, entertainment and other information that they
receive via email. The MovieQuest service allows Tribune Media's subscribers to
receive weekly updates of movie listings for theatres they have selected. We are
further developing our capabilities to offer a standard customized messaging
solution that can be used by all of our clients across a range of industries and
applications.

Event-Driven Customer Communications. This service allows our clients to
send large numbers of personalized email messages that are triggered by a
specific event or transaction, such as executing an online trade or making an
online purchase. These emails have a similar format but include content that is
unique and personalized to each recipient. We create, maintain and store a
customized template for each client and use mail merge technology to insert data
from the clients into the template to create a personalized message for each
customer. These messages may be archived in a manner that meets regulatory
requirements that apply to the financial services industry. This service is
faster and less expensive than traditional mailings.

Ad-Serving Capabilities. We currently serve targeted advertising banners in
HTML email newsletters to subscribers of Sony Music's InfoBeat newsletters. Our
ad-serving capabilities generate additional revenue opportunities for Sony
Music, which receives advertising revenue based upon clickthrough rates and
images served as a result of the banner ads embedded within the email messages.
We are currently serving banner advertisements to over two million subscribers
of Sony Music's daily email newsletters. This service is included in our per
message price to Sony Music and does not generate additional revenue for us.
However, we intend to further develop and offer our ad-serving services to other
clients.

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CURRENT FEATURES AND FUNCTIONS

Our current email services include a variety of standard and optional
features and functionality that can be flexibly implemented based upon the
client's preferences, including the following:

<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
FEATURE/FUNCTION DESCRIPTION BENEFITS
- -----------------------------------------------------------------------------------------------------------
List Management - Manages and corrects invalid - Keeps subscriber lists
email addresses accurate
- Lowers costs
- -----------------------------------------------------------------------------------------------------------
Web Interface - Using a Web interface, client - Client controls approval
can submit content, approve - Client controls scheduling
email and schedule sending - User-friendly interface
time
- -----------------------------------------------------------------------------------------------------------
Online Reporting - Using a Web interface, client - Client generates timely
can request information about reports
email sends, such as messages - Client selects time periods
delivered, bounces, click to evaluate results
throughs and mail opened
- -----------------------------------------------------------------------------------------------------------
Bounce Management - Tracks undeliverable email - Keeps subscriber lists
addresses accurate
- Lowers costs
- -----------------------------------------------------------------------------------------------------------
Inbound Reply Processing - Handles reply emails on - Timely response to customer
client's behalf emails
- Less staff required by client
- -----------------------------------------------------------------------------------------------------------
Content Archiving - All content is stored at - Ability to recreate email
Exactis.com distributions
- Less storage space required
at client site
- -----------------------------------------------------------------------------------------------------------
Personalization - Ability to personalize email - Personalized to each customer
content using customer data - Higher response rates
and template
- -----------------------------------------------------------------------------------------------------------
Clickthrough Reporting - Ability to determine which - Tracking of customer response
customers clicked on specific
URLs in the email
- -----------------------------------------------------------------------------------------------------------
Open Mail Reporting - Ability, for HTML emails, to - Tracking of customer response
determine which customers
opened the email
- -----------------------------------------------------------------------------------------------------------
Attachments - Ability to send an attachment - Client can send more custom-
with the email ized information
- -----------------------------------------------------------------------------------------------------------
</TABLE>

PLANNED TARGETED MARKETING SERVICES

We are developing a system to enable targeted marketing initiatives across
a wide range of industries. Our system is designed to enable our clients to
communicate with their customers through targeted and personalized
communications based on selected demographics, purchase behavior or other
characteristics. Under this planned service, we would host the client's customer
database, perform database queries and evaluate the effectiveness of each email
marketing campaign. We also plan to offer clients access to a Web-based
interface to perform these querying and analysis activities on their own.
Targeted email uses templates and the client's database to merge customer
specific information with messages or content similar to a segmented direct mail
program, allowing us to send personalized messages based on the name, purchase
behavior, demographic profile or any other attribute of an individual customer.
We believe that our database querying and targeting capabilities will result in:

- more cost-effective direct marketing efforts due to improved customer
response rates;

- immediate feedback;

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<PAGE> 41

- reporting and measurability features; and

- one-to-one customer communication capabilities.

PLANNED FEATURES AND FUNCTIONS

In addition to our planned targeted marketing capabilities, we are
developing a number of other standard and optional features, including the
following:

<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
FEATURE/FUNCTION DESCRIPTION BENEFITS
- -----------------------------------------------------------------------------------------------------------
Format Identification - Ability to determine in which - HTML emails receive higher
format (HTML or text) an response rates, but not all
email should be sent browsers can read them
- -----------------------------------------------------------------------------------------------------------
Flexible Scheduling - Ability to send unscheduled - Clients can react to market
email notices demands
- Database can be maintained by
client
- -----------------------------------------------------------------------------------------------------------
Alternate Content Submission - Client can send content via - Flexible for client
email, Web or user interface
- -----------------------------------------------------------------------------------------------------------
Enhanced Personalization - Ability to personalize email - More personalized messages
content based on demographics - Higher response rates
and response history
- -----------------------------------------------------------------------------------------------------------
Expanded Database - Ability to store demographic - Segmentation of customers for
and response information varying offers
about each customer
- -----------------------------------------------------------------------------------------------------------
Triggered Scheduling - Ability to schedule emails - Automates sending
based on factors such as capabilities
birthday or last purchase
date
- -----------------------------------------------------------------------------------------------------------
Database Synchronization - Ability to transport and syn- - Flexibility in database
chronize databases between management and hosting
Exactis.com and client
- -----------------------------------------------------------------------------------------------------------
Advanced Response Analysis and - Ability to analyze campaign - Tracking and analysis of cus-
Reporting results tomer response
- -----------------------------------------------------------------------------------------------------------
Customized Content - Customer can select from a - Content is more relevant to
menu of content/information customer who is then more
they wish to receive in one likely to read the message
email
- -----------------------------------------------------------------------------------------------------------
Secure Email - Ability to send encrypted - Clients can send confidential
email messages that can only be or sensitive information to
read by the intended their customers
recipient - Lowers cost by replacing
paper mail
- -----------------------------------------------------------------------------------------------------------
Ad Serving - Ability to insert banner ads - Generates revenue for client
within email messages
- -----------------------------------------------------------------------------------------------------------
</TABLE>

We are actively engaged in the design and development of all these planned
features and functions and plan to introduce them over the next 12 months.

The statements in this prospectus regarding planned service offerings and
anticipated features and functions of such planned service offerings are
forward-looking statements. Actual service offerings and benefits could differ
materially from those projected as a result of a variety of factors, some or all
of which may be out of our control. For a discussion of these factors, see "Risk
Factors."

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CUSTOMERS

To date, we have provided our services to clients primarily in the media,
ecommerce and financial services industries. We have focused on these market
segments as a result of their email volume potential, range of email needs and
acceptance of email marketing and communications solutions. The following is a
list of substantially all of our current clients:

4anything.com
Activision
Advance Internet Services
American Express Company
BBDO Worldwide
ChannelSeven.com
Charles Schwab & Co.
Client Logic
CMPnet
Consumer Net Marketplace
Covad Communications
Creative Planet
Digital Work
DoubleDay
The Economist Newspaper
Egreetings.com
The Financial Times
First Source Bancorp.
First Union Corporation
Forbes, Inc.
KBKids.com
Last Minute Network Limited
Law News Network
Microsoft Web events
MSNBC Interactive News

News America Digital Publishing

Network Publishing
Princessnet
Sage Online
Silicon Alley Reporter
Slate Magazine
Sony Music
Spinner.com
Sterling-Rice Group
Strong Funds
TheStreet.com
theWhiz.com
Tribune Media Services
USAToday.com
Wired
Worldly Investor
World Wrestling Federation

In August 1999, the clients listed above accounted for over 99% of our
revenue. Of this amount, Sony Music accounted for approximately 56% of our
revenue, Charles Schwab accounted for approximately 11% of our revenue and
American Express accounted for approximately four percent of our revenue. The
remaining clients each accounted for less than three percent of our revenue in
August 1999. We expect that a small number of clients will continue to account
for a high percentage of our revenue for the foreseeable future.

MARKETING AND SALES

MARKETING STRATEGY

The key components of our marketing strategy are to:

- continue to develop our reputation as an industry leader;

- build brand awareness; and

- aggressively generate sales leads.

We employ a number of marketing methods to promote our brand and
reputation, as well as to generate leads for our sales organization. Our
marketing methods include media relations, press releases, magazine and
newspaper advertisements, speaking engagements and attendance at trade shows and
seminars. We also use our Web site to build our image and to provide information
about our services, technology and organization to potential clients. We are
scheduled to have a presence at more than ten national conferences and trade
shows during 1999, including Jupiter Consumer Online, @Travel and Online Retail,
as well as Internet World in London. We are implementing an aggressive lead
generation program using direct marketing campaigns to key decision makers
within specific targeted markets, including ecommerce, media and financial
services companies.

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<PAGE> 43

SALES STRATEGY

Through our direct sales force, we have historically targeted the media,
ecommerce and financial services segments. Currently, our sales force is
geographically focused, with sales representatives covering a particular region.
As our sales force grows, we intend to move to a vertical market focus, allowing
our sales staff to become experts within specific vertical markets and to offer
more consultative email marketing and communications solutions specifically
tailored to each client's individual needs.

As of August 31, 1999, we had six sales professionals in our direct sales
force located in California, Colorado, Boston and New York. We plan to
significantly expand this group in the next 12 months and add an international
sales office in London, England. In addition to the sales professionals, as of
June 30, 1999, we had three sales engineers and one lead generation associate
who support potential clients and the sales process.

CUSTOMER SERVICE AND ACCOUNT MANAGEMENT

We offer a high level of customer service and account management to our
clients and to their customers. As of August 31, 1999, we employed seven
customer service representatives who handle all incoming responses via email.
Typical responses include subscribing, unsubscribing, format changes and report
requests. In many cases, we utilize an automated response tool to respond
without human intervention. Our customer service representatives attempt to
handle all responses within 24 hours of receipt.

In addition to our customer service representatives, as of August 31, 1999,
we employed seven account managers who oversee the day-to-day relationships with
our clients. Account managers are available 24 hours per day, seven days per
week. As the clients' primary point of contact, our account managers are
responsible for providing day-to-day operational support through regular client
interactions. Automated monitoring tools inform the account manager and
operations staff of the status of client mailings.

STRATEGIC RELATIONSHIPS

We seek to enter into strategic relationships to expand our services and
product offerings and to undertake joint product development and marketing
efforts. Our existing strategic relationships include Sony Music and E.piphany.

SONY MUSIC

In connection with the sale of our InfoBeat publishing business to Sony
Music Entertainment in December 1998, we entered into a long-term strategic
relationship under which we provide the editorial services, content and
technical operations for the InfoBeat product and deliver more than 4.5 million
InfoBeat newsletters per weekday. Subscribers can choose from a menu of
preferences to customize the news, weather, financial, entertainment and other
information that they receive via email. Additionally, we provide Sony Music
with customer support and database management services and host and maintain Web
sites on our servers related to the delivery of the services.

In early 1999, we worked with Sony Music to develop InfoBeat Entertainment,
which is comprised of the following services:

- InfoBeat Music -- a comprehensive source for music news, including
concert and album information and artist updates.

- InfoBeat Movies -- movie news and new video and movie releases.

- TV News -- a behind-the-scenes look at television features, soap opera
updates and special television events.

- Entertainment Express -- entertainment news, Hollywood gossip, horoscopes
and lotteries.

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<PAGE> 44

Our service agreement with Sony Music has a three-year term and Sony Music
may, at its sole option, renew the agreement for up to two additional years. We
are entitled to receive a base fee of $2.5 million, $2.8 million and $3.0
million, subject to certain price reductions, during each of the first, second
and third year of the agreement, respectively. We are also entitled to receive
an additional monthly editorial fee and a variable per message fee for each
consumer news email we send in excess of a base amount.

E.PIPHANY

In March 1999, we entered into an agreement with E.piphany, a leader in
software solutions for analysis of customer data and marketing campaign
management. Under the agreement, we will offer E.piphany E.4 analytic
applications as part of the highly targeted email marketing solution we are
currently developing. Our agreement with E.piphany includes a perpetual software
license and specified pricing terms and conditions. Once integrated with our
email system, E.piphany's E.4 solutions will enable our clients to develop and
implement highly-targeted business-to-consumer relationships via email.
E.piphany's E.4 solutions assist clients to quickly profile customers and design
and execute customer-specific marketing campaigns, measure results and refine
future campaigns based on those results. We believe that the combination of
E.piphany's solutions with our technologies and expertise will enable our
clients to precisely target their marketing efforts to appropriate audiences and
deliver relevant, personalized information in each email message in a timely and
cost-effective manner.

TECHNOLOGY

ARCHITECTURE

Our technology infrastructure has been designed to achieve reliable,
scalable and secure operations. We currently process between six and ten million
messages per day and plan to expand our data center to support 50 million
messages per day by the end of 1999. Our technology is based on a distributed
architecture utilizing Sun Microsystems processor systems and servers, Intel
processor based servers, Cisco Systems routers and Oracle databases. Our system
is designed to enable parallel processing while providing redundancy at any
point of failure. Our current software environment is primarily UNIX and Linux
based.

Our distributed architecture manages outbound and inbound message flow
which enables us to scale rapidly by adding additional servers to assemble and
deliver email. All of the system functions may be replicated, enabling the
network to expand for additional functionality and volume growth.

DATA CENTER AND NETWORK ACCESS

Our principal data facility is located in Denver, Colorado. Our data center
has a high-speed connection to two Internet service providers to allow
high-bandwidth access to the Internet. We operate separate production, test and
development networks. The test and development networks have the same hardware
and software environment as our production network, which enables us to develop
and fully test our services prior to putting any upgrades, enhancements or fixes
into our production system.

We plan to relocate our data center operations to a new data center located
in Denver, Colorado in late 1999. The new data center will have two separate
high-speed connections to our Internet service providers to prevent a loss of
connectivity and will provide the environment necessary to support our planned
increase in messaging capacity. In addition, the new center will feature
redundant systems for power, cooling, fire protection and security surveillance
24 hours per day, seven days per week by both personnel and video monitors.

NETWORK SECURITY

We seek to assure network security through multiple firewalls. External
firewalls operate at the network link layer and a second layer of firewalls
separates every public network from its companion private network.

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<PAGE> 45

OFFSITE DISASTER RECOVERY

We are in the process of establishing an offsite disaster recovery facility
which will be located in an existing data center in Sunnyvale, California. We
expect that this facility will be operational in November 1999. Initially, this
data center will act solely as a recovery site which can be operational within
twenty four hours of a service interruption at our principal facility. By March
2000, this center will receive continuous data feeds from our principal facility
and be able to convert to sending mode within 30 minutes of any service
interruption at our principal facility. Ultimately, we plan to expand this
facility into a full production center.

NEW SERVICE DEVELOPMENT

Our ability to design, develop, test and support new services, features and
functions on a timely basis is critical to our success. Our product managers
define new service and feature requirements by analyzing market trends, client
needs and competitive offerings. Under the supervision of the product manager, a
team creates a design and specifications document, development schedule and
ultimately a new service or feature.

We cannot assure you that we will be successful in developing and marketing
new services and enhancements that meet changing customer needs or which respond
to technology changes or evolving industry standards. Our current services are
compatible with widely-used and accepted standards. Current and future use of
our services will depend, in part, on industry acceptance of these standards and
practices as they apply to the Internet and ecommerce.

COMPETITION

The email marketing industry is intensely competitive. There are few
barriers to entry, as evidenced by the many new entrants to the market over the
last year, and we expect that established and new entities will continue to
enter the market. We cannot assure you that we will compete effectively with
current or future competitors or that competitive pressures will not harm our
business, operating results and financial condition.

We offer clients a combination of both scalability and functionality. Our
email engine allows us to send large volumes of complex email messages within
client-defined time frames. Our ability to compete depends upon our ability to
offer:

- technical expertise;

- scalability;

- consistent and reliable service;

- features and functionality;

- full service solutions; and

- direct marketing expertise.

The majority of businesses today use their internal email systems to
provide solutions to manage and deliver outbound email campaigns. For companies
seeking outsourced solutions, we compete with email outsourcing companies that
offer services similar to ours, including email distribution, list management,
reporting and bounce processing. In addition, several of these competitors offer
email consulting and campaign analysis. Key competitors in this category include
Bigfoot International, Digital Impact, InterStep, L-Soft international, Lyris
Technologies, MarketHome, Media Synergy, MessageMedia, Post Communications and
Responsys.com. Many of these competitors, such as L-Soft, Lyris and
MessageMedia, also offer customers the choice of purchasing or licensing
software to internally handle their own email marketing programs. Other email
outsourcing companies that specialize in corporate email management, including
Critical Path, Mail.com and USA.Net, have the technical capabilities and
infrastructure to enter our market.

Several competitors maintain and rent permission-based email lists that
identify customers by certain interest categories or demographic areas. Clients
pay the list brokers a one-time use fee that includes sending the email to the
customer and tracking results. Competitors in this category include MatchLogic,

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<PAGE> 46

MyPoints.com, NetCreations and yesmail.com. Clients must currently use the email
sending service provided by the list broker to reach the end-customer.

There are several other potential competitors that could enter the email
marketing and communications industry, including direct marketing companies,
Internet service providers, Internet ad networks, advertising agencies and
others with large established Internet businesses. Potential competitors include
American Online, Acxiom, DoubleClick, Experian Information Solutions,
Harte-Hanks Communications, IBM, Microsoft and Netscape Communications. Large
Internet portals, such as Yahoo!, also have the financial resources and
technical capabilities to enter this market. Email communication offers Internet
portals a powerful tool to build customer loyalty while driving traffic to their
Web site. These potential competitors could enter the market by acquiring one of
our existing competitors or by forming strategic alliances with our competitors.
Either of these occurrences could harm our ability to compete effectively.

INTELLECTUAL PROPERTY

We regard our copyrights, service marks, trademarks, trade secrets and
similar intellectual property as critical to our success and rely on trademark
and copyright law, trade secret protection and confidentiality and/or license
agreements with our employees, customers, partners and others to protect our
proprietary rights. We have no service marks and only one registered trademark
to date; however, we have several applications currently pending. It may be
possible for unauthorized third parties to copy certain portions of our products
or reverse engineer to obtain and use information that we regard as proprietary.
Certain end-user license provisions protecting against unauthorized use may be
unenforceable under the laws of certain jurisdictions and foreign countries. We
have two patents that have been issued and two patents pending in the United
States. We do not know whether these pending patents will be issued or, if
issued, that the patents will not be challenged or invalidated. In addition, the
laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States. We cannot assure you that our means
of protecting our proprietary rights in the United States or abroad will be
adequate or that competing companies will not independently develop similar
technology.

We also strategically license certain technology from third parties,
including E.piphany and the Accipter Ad-Manger product from Engage Technologies,
Inc. In the future, if we add certificate technology to our systems, we may
license additional technology from third-party vendors. We cannot be certain
that these third-party content licenses will be available to us on commercially
reasonable terms or at all or that we will be able to successfully integrate the
technology into our products and services. These third-party content licenses
may expose us to increased risks, including risks associated with the
assimilation of new technology, the diversion of resources from the development
of our own proprietary technology and our inability to generate revenues from
new technology sufficient to offset associated acquisition and maintenance
costs. The inability to obtain any of these licenses could result in delays in
product and service development until equivalent technology can be identified,
licensed and integrated. Any delays in services could cause our business,
financial condition and operating results to suffer.

We have also been subject, and may be subject in the future, to claims
alleging that we have infringed third party proprietary rights. If we were to
discover that any of our services infringed third party rights, we may not be
able to obtain permission to use those rights on commercially reasonable terms.
This may require us to expend significant resources to make our services
non-infringing or to discontinue the use of our services. We might incur
substantial costs defending against an infringement claim, even if the claim is
invalid. If we have to defend against an infringement claim, it could distract
our management from our business. Further, a party making a claim could secure a
judgment that requires us to pay substantial damages or that prevents us from
using or selling our products and services. Any of these events could harm our
business, financial condition and operating results. Our success depends
significantly on our proprietary technology. Please see "Legal Proceedings" for
a more detailed description of our current litigation.

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<PAGE> 47

GOVERNMENT REGULATION

As the Internet continues to evolve, we expect that federal, state or
foreign agencies will adopt regulations covering such issues as user privacy,
pricing, content and quality of products and services. A number of legislative
and regulatory proposals are currently under consideration by federal and state
lawmakers and regulatory bodies and may be adopted with respect to the Internet.
In particular, a number of states have already passed statutes prohibiting
unsolicited commercial email, or spam. A number of statutes have also been
introduced in Congress and state legislatures to impose penalties for sending
unsolicited emails which, if passed, could impose additional restrictions on our
business. In addition, a California court recently held that unsolicited email
distribution is actionable as an illegal trespass for which the sender could be
subject for monetary damages.

The adoption of any such laws or regulations may decrease the growth of the
Internet, which could in turn decrease the projected demand for email services
or increase our cost of doing business. The applicability to the Internet of
existing United States and international laws governing issues such as property
ownership, copyright, trade secret, libel, taxation and personal privacy is
uncertain and developing and may take years to resolve.

Any new legislation or regulation, or application or interpretation of
existing laws, could harm our business, operating results and financial
condition. Additionally, because we expect to expand our operations outside the
United States, the international regulatory environment relating to the Internet
could harm our business, operating results and financial condition.

EMPLOYEES

As of August 31, 1999, we employed 109 people, all of whom were full-time.
The 109 employees included ten in general and administrative functions, 18 in
operations, 32 in development and testing, 18 in sales and marketing, 14 in
customer service/account management, 15 editors and two Sony/InfoBeat sales
persons. Employees are not represented by a labor union or covered by any
collective bargaining agreements. We consider our employee relations to be good.

FACILITIES

Our principal executive offices are located in 20,281 square feet of space
in Denver, Colorado under a lease expiring on December 31, 2001. We also lease
14,653 square feet of additional space in Denver, Colorado on a month-to-month
basis. We plan to relocate our data center and principal executive offices in
late 1999. We have identified a site for our relocation but have not yet
executed a lease agreement for this space. Assuming that we are able to secure a
lease for the site we have identified, we believe that our facilities will be
adequate for our needs for at least the next 12 months. However, we may be
unable to lease the additional space that we require on commercially reasonable
terms or at all.

LEGAL PROCEEDINGS

From time to time, we are subject to legal proceedings arising out of our
operations. We are not currently a party to any material legal proceedings.

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<PAGE> 48

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH US
- ---- --- ----------------
<S> <C> <C>
E. Thomas Detmer, Jr. .................... 45 Chief Executive Officer, President and
Director
Kenneth W. Edwards, Jr. .................. 39 Chief Financial Officer, Secretary and
Treasurer
Cynthia L. Brown.......................... 40 Vice President of Engineering
Michael J. Rosol.......................... 39 Vice President of Sales
Gregory B. Schneider...................... 38 Vice President of Marketing and Business
Development
Adam Goldman(1)........................... 38 Chairman of the Board of Directors
Pierric D. Beckert(2)..................... 32 Director
Linda Fayne Levinson(1)................... 57 Director
David D. Williams(2)...................... 51 Director
</TABLE>

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

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

E. Thomas Detmer, Jr. has served as our president and chief executive
officer since January 1999 and as a director since July 1996. From March 1998 to
January 1999, Mr. Detmer served as the president of BehaviorBank/Atlantes, a
division of Experian, Inc., a provider of consumer information solutions to
businesses. In September 1991, Mr. Detmer founded Atlantes Corporation, a
consumer database marketing company, which was acquired by Metromail Company in
July 1997. Metromail was acquired by Experian in March 1998. Prior to Atlantes,
Mr. Detmer founded and served as president of the publishing division of
Telelink Systems, Inc., a telemarketing company. Additionally, Mr. Detmer spent
ten years with National Demographics and Lifestyles, a consumer information
management and resale company. He holds a B.A. from Williams College and an
M.B.A. from the University of Denver.

Kenneth W. Edwards, Jr. has served as our chief financial officer,
secretary and treasurer since March 1999. From March 1998 to March 1999, Mr.
Edwards served as corporate controller and director of business operations for
Atlantes, a division of Experian, a provider of consumer information solutions
to businesses. In January 1994, Mr. Edwards joined Atlantes Corporation, a
consumer database marketing company, as corporate controller. Atlantes was
acquired by Metromail Company in July 1997, which was acquired by Experian in
1998. From March 1988 to September 1993, Mr. Edwards served as controller for CT
Publications Corp., a privately-held magazine publishing company. He also
co-founded and served as a partner with Cordovano and Company, Certified Public
Accountants. Mr. Edwards holds a B.S. from Metropolitan State College of Denver.

Cynthia L. Brown has served as our vice president of engineering since June
1999. From September 1997 to May 1999, Ms. Brown served as a founding partner of
Anova Partners, a management consulting firm specializing in technology and
Internet-based companies. From June 1993 to August 1997, Ms. Brown was the
president and chief operating officer of System One Technical Incorporated, a
software vendor company, prior to its merger with MC Health Care Holdings. From
June 1983 to May 1993, Ms. Brown held various positions with Tandem
Telecommunications, a subsidiary of Tandem Computers Inc. and Applied
Communications, Inc. From June 1981 to May 1983, Ms. Brown was employed by Data
General Corporation, a computer storage company, as a systems engineer. Ms.
Brown holds a B.A. from Park College in Kansas City, Missouri.

Michael J. Rosol has served as our vice president of sales since May 1998.
From August 1996 to May 1998, he served as senior account executive for SCC
Communications Corp., a provider of 911 emergency services and
telecommunications technology systems. From September 1995 to July 1996, Mr.
Rosol served as the vice president of sales for Datasonix Corporation, a
portable storage device

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<PAGE> 49

company. From March 1991 to September 1995, he was the director of North
American Sales for XVT Software Inc, a manufacturer of cross-platform
development tools. Mr. Rosol holds a B.A. and an M.S. from the University of
Colorado, Boulder.

Gregory B. Schneider has served as our vice president of marketing and
business development since February 1997. From August 1989 to February 1997, he
held various marketing positions in product management, market development and
business planning with Hewlett-Packard Company. Mr. Schneider holds a B.A. from
Santa Clara University and an M.B.A. from the J.L. Kellogg Graduate School of
Management at Northwestern University.

Adam Goldman has served as a director since March 1996 and as chairman of
the board since January 1999. Mr. Goldman is a general partner of Centennial
Fund IV, LP and Centennial Fund V, LP, and is a managing principal of Centennial
Fund VI, LLC. The Centennial Funds manage over $700 million in private equity
and specialize in communication, media and technology investments. Mr. Goldman
also serves as a senior vice president of Centennial Holdings, Inc., a venture
capital investment company, which he joined in 1992. Mr. Goldman received a B.A.
from Northwestern University and an M.M. from the J.L. Kellogg School of
Management at Northwestern University.

Pierric D. Beckert has served as a director since August 1999. Since
January 1998, Mr. Beckert has served as vice president of Interactive Enterprise
Development, a division of American Express Relationship Services and part of
American Express Travel Related Services Company, Inc., where he is responsible
for developing the global American Express Interactive strategy, as well as all
strategic equity investments in interactive companies. From August 1996 to
December 1998, Mr. Beckert served as the director of Interactive New Business
Development within American Express Relationship Services. From 1994 to 1996,
Mr. Beckert was a director of the Customer Information Management group within
American Express Travel Related Services. Mr. Beckert received an M.A. from the
Ecole Nationale de la Statistique et de l'Administration Economique.

Linda Fayne Levinson has served as a director since July 1998. Since April
1997, Ms. Levinson has served as a principal of Global Retail Partners, L.P., a
private equity investment fund. From 1994 to 1997, she served as the president
of Fayne Levinson Associates, a senior management consulting firm. During 1993,
Ms. Levinson served as an executive at Creative Arts Agency, Inc., a talent
agency. Prior to that, Ms. Levinson was a partner at Alfred Checchi Associates,
Inc., a merchant banking firm; a senior vice president of American Express
Travel related Services Company, Inc.; and a partner at McKinsey & Co., a global
consulting firm. She is a director of NCR Corporation, Administaff, Inc., Jacobs
Engineering Group Inc., GoTo.com, Inc. and CyberSource, Inc. Ms. Levinson
received an A.B. from Barnard College, an M.A from Harvard University and an
M.B.A. from New York University.

David D. Williams has served as a director since December 1996. Since
December 1991, Mr. Williams has served as president and chief executive officer
of Tribune Media Services, Inc., a creator and marketer of editorial and
advertising content for multiple media distribution. From July 1990 to November
1991, Mr. Williams served as the executive vice president and chief operating
officer of Tribune Media Services. Prior to joining Tribune Media Services, Mr.
Williams held various advertising and marketing positions at the Chicago
Tribune. Mr. Williams is a director of Knight-Ridder, Inc. and the Newspaper
Features Council. He received a B.A. from Michigan State University.

CLASSIFIED BOARD OF DIRECTORS

We currently have five directors. In August 1999, our board of directors
approved, subject to stockholder approval, our restated certificate of
incorporation. Among other things, our restated certificate of incorporation
provides for a classified board of directors. The restated certificate of
incorporation states that the terms of office of the board of directors will be
divided into three classes:

- class I, whose term will expire at the annual meeting of stockholders to
be held in 2000;

- class II, whose term will expire at the annual meeting of stockholders to
be held in 2001; and

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<PAGE> 50

- class III, whose term will expire at the annual meeting of stockholders
to be held in 2002. At each annual meeting of stockholders beginning with
the 2000 annual meeting, the successors to directors whose terms expire
will be elected to serve from the time of election and qualification
until the third annual meeting following election and until their
successors have been elected.

BOARD COMMITTEES

AUDIT COMMITTEE. Our audit committee consists of Mr. Goldman and Ms.
Levinson. The audit committee makes recommendations to the board of directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by our independent auditors and
evaluates our internal accounting procedures.

COMPENSATION COMMITTEE. Our compensation committee consists of Mr. Beckert
and Mr. Williams. The compensation committee reviews and approves compensation
and benefits for our executive officers. The compensation committee also
administers our compensation and stock plans and makes recommendations to the
board of directors regarding such matters.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. No member of
the compensation committee has been an officer or employee of Exactis.com at any
time. None of our executive officers serves as a member of the board of
directors or compensation committee of any other company that has one or more
executive officers serving as a member of our board of directors or compensation
committee.

DIRECTOR COMPENSATION

Other than reimbursing directors for customary and reasonable expenses
incurred in attending board of directors and committee meetings, we do not
currently compensate our directors.

EXECUTIVE COMPENSATION

The following table sets forth all compensation received during 1998 by our
former chief executive officer and our other former executive officers whose
annual salary and bonus exceeded $100,000 for services rendered in all
capacities to us during 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------- ---------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- --------------------------- -------- ----- --------------------- ------------
<S> <C> <C> <C> <C>
John T. Funk,
Former Chairman of the Board of Directors........ $159,712 -- -- --
Raymond H. Van Wagener, Jr.
Former President and Chief Executive Officer..... 125,000 -- 40,000 --
Eric R. Belcher
Former Vice President of Retail Sales............ 213,360 -- 40,000 $7,200
Craig M. Deans
Former Vice President of Engineering............. 119,034 -- 16,666 --
</TABLE>

Mr. Funk served as our chairman of the board from January 1997 to January
1999. Mr. Van Wagener served as our president and chief executive officer from
February 1997 to January 1999. Mr. Belcher currently serves as a retail sales
consultant for the InfoBeat product and served as our vice president of retail
sales from June 1997 to December 1998. Mr. Deans served as our vice president of
engineering from April 1997 to September 1998.

The amount reflected in the "All Other Compensation" column of the
foregoing table represents the amount allocated for an automobile allowance.

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<PAGE> 51

OPTION GRANTS IN 1998

The following table sets forth information regarding options granted to the
executive officers listed in the Summary Compensation table during 1998.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
PERCENT OF OF STOCK PRICE
TOTAL OPTIONS APPRECIATION
NUMBER OF GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE ---------------------
NAME GRANTED 1998 ($/SHARE) EXPIRATION DATE 5% 10%
- ---- --------- ------------- --------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John T. Funk.......... -- -- -- -- -- --
Raymond H.
Van Wagener, Jr. ... 40,000 7.8% $3.40 April 1, 2008 $ 85,530 $216,749
Eric R. Belcher....... -- -- -- -- -- --
Craig M. Deans........ 16,666 3.2 4.32 August 21, 2001 11,349 23,831
</TABLE>

The percent of total options granted to employees in the above table is
based on 513,065 total options granted in 1998. Our board of directors may
reprice options under the terms of our stock option plans.

Options were granted at an exercise price equal to the fair market value of
our common stock, as determined by our board of directors on the date of grant.
In making this determination, the board of directors considered a number of
factors, including:

- our historical and prospective future revenue and profitability;

- our cash balance and rate of cash consumption;

- the development and size of the market for our services;

- the status of our financing activities;

- the stability of our management team; and

- the breadth of our service offerings.

The amounts reflected in the "Potential Realizable Value" column of the
foregoing table are calculated assuming that the fair market value of the common
stock on the date of the grant as determined by the board of directors
appreciates at the indicated annual rate compounded annually for the entire term
of the option, and that the option is exercised and the common stock received
therefor is sold on the last day of the term of the option for the appreciated
price. The five percent and ten percent rates of appreciation are mandated by
the rules of the Securities and Exchange Commission and do not represent our
estimate or projection of future increases in the price of the common stock.

1998 OPTION EXERCISES AND YEAR-END OPTION VALUES

The following table sets forth information concerning the number and value
of unexercised options held by each of the executive officers listed in the
Summary Compensation table at December 31, 1998. None of these executive
officers exercised options to purchase common stock in 1998.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John T. Funk.............. -- -- -- -- -- --
Raymond H. Van Wagener,
Jr. .................... -- -- 149,568 115,432 $186,767 $147,033
Eric R. Belcher........... -- -- 13,333 26,667 17,600 35,201
Craig M. Deans............ -- -- 16,666 -- -- --
</TABLE>

In the table above, the value of the unexercised in-the-money options is
based on the fair market value of our common stock as of December 31, 1998
(determined by the board of directors in the manner

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<PAGE> 52

discussed above to be $4.32 per share), minus the per share exercise price,
multiplied by the number of shares underlying the option. The options granted to
Mr. Van Wagener expired prior to being exercised.

401(K) PLAN

Our employees are eligible to participate in our 401(k) plan. Under our
401(k) plan, employees may elect to reduce their current compensation by up to
the lesser of 15% of eligible compensation or the statutorily prescribed annual
limit, which was $10,000 in 1998. Employees may contribute this amount to the
401(k) plan. Employees direct the investment of the assets of the 401(k) plan in
up to 13 different investment funds. The 401(k) plan is intended to qualify
under Section 401 of the Internal Revenue Code so that contributions by
employees to the 401(k) plan, and income earned on plan contributions, are not
taxable to employees until withdrawn, and so that the contributions by employees
will be deductible when made. An employee becomes eligible for the matching
contribution only if he or she makes a pretax contribution. We may make
discretionary matching contributions to the 401(k) plan. Additionally, we may
make annual discretionary profit sharing contributions in amounts to be
determined annually by the board of directors. Since the 401(k) plan's
inception, we have made no matching or profit sharing contributions.

STOCK PLANS

1996 STOCK OPTION PLAN

Our 1996 stock option plan was adopted by the board of directors and
approved by the stockholders on February 1, 1996. No further options will be
granted under the 1996 plan. Options currently outstanding under the 1996 plan
will continue in full force and effect under the terms of the 1996 plan until
such outstanding options are exercised or terminated in accordance with their
terms.

As of June 30, 1999, we had granted options under the 1996 plan to purchase
an aggregate of approximately 703,143 shares of common stock, of which options
to purchase approximately 9,053 shares had been exercised, options to purchase
approximately 568,560 shares had been cancelled (due to expiration or otherwise)
and options to purchase approximately 125,530 shares at a weighted average
exercise price of approximately $1.20 per share remained outstanding.

The 1996 plan provides for the grant of incentive stock options under the
Internal Revenue Code to employees and nonstatutory stock options to employees
and consultants (including non-employee directors).

An incentive stock option is a stock option that has met the requirements
of Section 422 of the Internal Revenue Code. It is free from regular tax at both
the date of grant and the date of exercise. If two holding period tests are met
(two years between grant date and sale date and one year between exercise date
and sale date), the profit on the option is long-term capital gain income. If
the holding periods are not met, there has been a disqualifying disposition, and
the difference between the exercise price and the fair market value of the
shares on the exercise date will be taxed at ordinary income rates. The
difference between the fair market value on the date of exercise and the
exercise price is an item of alternative minimum tax unless there is a
disqualifying disposition in the year of exercise.

A nonstatutory stock option is a stock option that does not meet the
Internal Revenue Code criteria for qualifying incentive stock options and,
therefore, triggers a tax upon exercise. This type of option requires payment of
state and federal income tax on the difference between the exercise price and
the fair market value on the exercise date.

The 1996 plan is administered by the board or a committee appointed by the
board which determines recipients and types of awards to be granted, including
the exercise price, number of shares subject to the award and the exercisability
thereof.

The terms of stock options granted under the 1996 plan generally may not
exceed ten years. The exercise price of options granted under the 1996 plan is
determined by the board, provided that the exercise price of an incentive stock
option cannot be less than 100% of the fair market value of the

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<PAGE> 53

common stock on the date of the option grant. Options granted under the 1996
plan vest over four years or at a rate set by the board. No incentive stock
option may be transferred by the optionee other than by will or the laws of
descent or distribution. A nonstatutory stock option will only be transferable
by will or by the laws of descent and distribution or as otherwise specified by
the board.

An optionee whose relationship with us ceases due to termination by us
other than by death or permanent and total disability or for cause may exercise
vested options in the three-month period following cessation unless the options
terminate or expire sooner by their terms. If we terminate an optionee's
relationship for cause, all options held by the optionee immediately terminate.
If an optionee terminates his or her relationship with us in order to accept
employment with any entity engaged in the business of providing information
services via electronic means, all options held by optionee will immediately
terminate. Vested options may be exercised for up to 12 months after termination
due to death or disability unless the options terminate or expire sooner by
their terms.

All options outstanding under the 1996 plan will immediately vest and
become exercisable upon consummation of this offering or upon the acquisition of
all or substantially all of our assets or in which 40% or more of our
outstanding shares are acquired by a single person or entity or an affiliated
group of persons or entities.

Upon acquisition, we have the option, but not the obligation, to cancel
options outstanding as of the effective date of acquisition, whether or not such
options are then exercisable, in return for payment to the optionees of an
amount equal to the difference between the net amount per share payable as a
result of the acquisition, less the exercise price of the option. For this
purpose, an acquisition means any transaction in which substantially all of our
assets are acquired or in which more than 50% of our outstanding shares are
acquired in each case by a single person or entity or an affiliated group of
persons and/or entities.

Our dissolution or a liquidation or a merger or consolidation in which we
are not the surviving corporation will cause every option outstanding under the
1996 plan to terminate as of the effective date of the dissolution, liquidation,
merger or consolidation. However, the optionee either must be offered a
substitute option by the resulting or surviving corporation in a merger or
consolidation or will have the right to exercise any unexercised options whether
or not then exercisable.

1997 STOCK OPTION PLAN

Our 1997 stock option plan was adopted by the board of directors on March
17, 1997 and approved by the stockholders on March 26, 1997. No further options
will be granted under the 1997 plan. Options currently outstanding under the
1997 plan will continue to be outstanding under the terms of the 1997 plan until
exercised or terminated.

As of June 30, 1999, we had granted options under the 1997 plan to purchase
an aggregate of approximately 2,042,726 shares of common stock, of which no
options had been exercised, options to purchase approximately 743,833 shares had
been cancelled (due to expiration or otherwise) and options to purchase
approximately 1,298,893 shares at a weighted average exercise price of
approximately $2.70 per share remained outstanding. Options granted under the
1996 plan which expire or terminate without having been exercised in full become
available for issuance under the 1997 plan.

The 1997 plan provides for the grant of incentive stock options under the
Code to employees and nonstatutory stock options to employees, directors and
consultants. The 1997 plan is administered by the board or a committee appointed
by the board which determines recipients and types of awards to be granted,
including the exercise price, number of shares subject to the award and the
exercisability thereof.

The terms of stock options granted under the 1997 plan generally may not
exceed ten years. The exercise price of options granted under the 1997 plan is
determined by our board, provided that the exercise price of an incentive stock
option cannot be less than 100% of the fair market value of the common stock on
the date of the option grant. Options granted under the 1997 plan vest at the
rate specified in the applicable option agreement. No incentive stock option may
be transferred by the optionee other than by will or the laws of descent or
distribution. A nonstatutory stock option will only be
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<PAGE> 54

transferable by will or by the laws of descent and distribution under a
qualified domestic relations order, and will be exercisable during the lifetime
of the optionee only by the optionee or by a permitted transferee. An optionee
whose relationship with us ceases for any reason other than death or permanent
and total disability may exercise vested options in the three-month period
following such cessation unless the options terminate or expire sooner by their
terms. Vested options may be exercised for up to 12 months after an optionee's
relationship with us or related corporations ceases due to death or disability
unless such options terminate or expire sooner by their terms. Vested options
may be exercised for up to 18 months after an optionee's death unless such
options terminate or expire sooner by their terms.

Upon certain changes in control, each outstanding option will become fully
vested and exercisable prior to such change in control or thereafter terminate.
If the benefit received by an optionee as a result of accelerated option vesting
resulting from a change of control would constitute a parachute payment within
the meaning of Section 280G of the Internal Revenue Code, the accelerated
vesting will be reduced to the extent necessary so that no portion of such
benefit is subject to the excise tax imposed by Section 4999 of the Code.

1999 EQUITY INCENTIVE PLAN

Our 1999 equity incentive plan was adopted by the board of directors and
approved by the stockholders on August 11, 1999. There is currently an aggregate
of 1,400,000 shares of common stock authorized for issuance under the incentive
plan. Additionally, options granted under the 1997 plan which expire or
terminate without having been exercised in full become available for issuance
under the 1999 incentive plan. The incentive plan will terminate on August 10,
2009 unless sooner terminated by the board or appointed committee.

The incentive plan provides for the grant of incentive stock options to
employees, including officers and employee-directors, and nonstatutory stock
options, restricted stock purchase awards, stock bonuses and stock appreciation
rights to employees, including officers and employee-directors, directors and
consultants. The incentive plan is administered by the board or a committee
appointed by the board which determines recipients and types of awards to be
granted, including the exercise price, number of shares subject to the award and
the exercisability thereof.

The terms of options granted under the incentive plan may not exceed ten
years. The board or committee determines the exercise price of options granted
under the incentive plan. However, the exercise price for an incentive stock
option cannot be less than 100% of the fair market value of the common stock on
the date of the option grant, and the exercise price for a nonstatutory stock
option cannot be less than 85% of the fair market value of the common stock on
the date of the option grant. Options granted under the incentive plan vest at
the rate specified in the option agreement. Generally, the optionee may not
transfer a stock option other than by will or the laws of descent or
distribution unless the optionee holds a nonstatutory stock option that provides
for transfer in the stock option agreement. However, an optionee may designate a
beneficiary who may exercise the option following the optionee's death. An
optionee whose service relationship ceases for any reason may exercise vested
options for the term provided in the option agreement.

No incentive stock option may be granted to any person who, at the time of
the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of our stock or, unless the option exercise price is
at least 110% of the fair market value of the stock subject to the option on the
date of grant and the term of the option does not exceed five years from the
date of grant. In addition, the aggregate fair market value, determined at the
time of grant, of the shares of common stock with respect to which incentive
stock options are exercisable for the first time by an optionee during any
calendar year, under the incentive plan and, all of our other stock plans, may
not exceed $100,000.

Section 162(m) of the Code denies a deduction to publicly held corporations
for certain compensation paid to specified employees in a taxable year to the
extent that the compensation exceeds $1,000,000. Under Section 162(m), no person
may be granted options under the incentive plan covering more than 700,000
shares of common stock in any calendar year.
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<PAGE> 55

Shares subject to stock awards that have expired or otherwise terminated
without having been exercised in full again become available for the grant of
awards under the incentive plan. Under its general authority to grant and to
amend options, the board or appointed committee has the implicit authority to
reprice outstanding options or to offer optionees the opportunity to replace
outstanding options with new options for the same or a different number of
shares. Both the original and new options will count toward the Code Section
162(m) limitation set forth above.

Restricted stock purchase awards granted under the incentive plan may be
granted pursuant to a repurchase option in favor of us in accordance with a
vesting schedule determined by the board or appointed committee. The price of a
restricted stock purchase award under the incentive plan can not be less than
85% of the fair market value of the stock subject to the award on the date of
grant. Stock bonuses may be awarded in consideration of past services without a
purchase payment. Unless otherwise specified, rights under a stock bonus or
restricted stock bonus agreement generally may not be transferred other than by
will or the laws of descent and distribution during this period as the stock
awarded under such an agreement remains subject to the agreement. Stock
appreciation rights granted under the incentive plan allows a recipient to elect
to receive cash or stock of a value equal to the appreciation of optioned
rights. The incentive plan authorizes three types of stock appreciation rights:
a tandem stock appreciation right is granted along with a stock option and is
subject to the same terms and conditions applicable to the option. It requires
the holder to elect between exercising the option (and receiving our shares) or
surrendering, in whole or in part, the option and receiving instead cash or
stock equal to the appreciation of the shares that are surrendered. A concurrent
stock appreciation right also is granted with a stock option and is subject to
the same terms and conditions applicable to the option. However, it is exercised
automatically at the same that the recipient exercises the option. Without
surrendering any of the shares subject to the option, the recipient receives
cash or stock equal to the appreciation of the shares exercised. On the other
hand, an independent stock appreciation right is not granted with a stock
option, although it generally is subject to the same terms and conditions
applicable to nonstatutory stock options. On exercising the independent stock
appreciation right, the recipient receives cash or stock equal to the
appreciation of the share equivalents that the recipient is exercising.

If there is any sale of substantially all of our assets, any merger,
reverse merger or any consolidation in which we are not the surviving
corporation, or any acquisition by certain persons, entities or groups of 50% or
more of our stock, all outstanding awards under the incentive plan either will
be assumed or substituted for by any surviving entity. If the surviving entity
determines not to assume or substitute for such awards, the vesting provisions
of such stock awards will be accelerated and the awards terminated if not
exercised prior to such transaction.

1999 EMPLOYEE STOCK PURCHASE PLAN

Our employee stock purchase plan was adopted by the board of directors and
approved by the stockholders on August 11, 1999. There is currently an aggregate
of 500,000 shares of common stock authorized for issuance under the purchase
plan. The purchase plan will become effective on the effective date of this
offering. The purchase plan is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Code. Under the purchase plan, the
board may authorize participation by eligible employees, including officers, in
periodic offerings following the adoption of the purchase plan. The offering
period for any offering will be no longer than 27 months.

The purchase plan provides a means by which employees may purchase common
stock of Exactis through payroll deductions. The purchase plan is implemented by
offerings of rights to eligible employees. Under the purchase plan, Exactis may
specify offerings with a duration of not more than 27 months, and may specify
shorter purchase periods within each offering. The first offering will begin on
the effective date of the initial public offering of our common stock and will
end on January 31, 2001. Purchases will occur on July 31, 2000 and January 31,
2001. Unless otherwise determined by the board, common stock is

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<PAGE> 56

purchased for accounts of employees participating in the purchase plan at a
price per share equal to the lower of:

- 85% of the fair market value of a share of common stock on the date of
commencement of participation in the offering; or

- 85% of the fair market value of a share of common stock on the date of
purchase.

Generally, all regular employees, including executive officers, who work at
least 20 hours per week, who are customarily employed for at least five months
per calendar year and who are employed as of the start of an offering, or as of
the start of a purchase period within an offering, may participate in the
purchase plan and may authorize payroll deductions of up to 15% of their base
compensation for the purchase of stock under the purchase plan.

Eligible employees may be granted rights only if the rights together with
any other rights granted under employee stock purchase plans do not permit such
employee's rights to purchase stock of Exactis to accrue at a rate which exceeds
$25,000 of fair market value of such stock for each calendar year in which such
rights are outstanding. No employee will be eligible for the grant of any rights
under the purchase plan if immediately after such rights are granted, such
employee has voting power over 5% or more of Exactis' outstanding capital stock.

Upon certain changes of control, the board has discretion to provide that
each right to purchase common stock will be assumed or an equivalent right
substituted by the successor corporation, or the board may shorten the offering
period and provide for all sums collected by payroll deductions to be applied to
purchase stock immediately prior to the change in control. The purchase plan
will terminate at the board's direction or when all of the shares reserved for
issuance have been purchased.

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<PAGE> 57

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SERIES E FINANCING

On July 15, 1999 and August 13, 1999, we issued an aggregate of 1,357,284
shares of Series E preferred stock to certain principal stockholders and certain
other investors at a purchase price of $6.50 per share. We also issued warrants
to purchase an aggregate of 203,586 shares of Series E preferred stock at an
exercise price of $8.00 per share, exercisable on or prior to July 15, 2004. Of
the 1,357,284 shares of Series E preferred stock sold by us, an aggregate of
1,307,657 shares were sold to the following principal stockholders for an
aggregate purchase price of approximately $8.5 million:

<TABLE>
<CAPTION>
NUMBER NUMBER AGGREGATE
PURCHASER OF SHARES OF WARRANTS PURCHASE PRICE
- --------- --------- ----------- --------------
<S> <C> <C> <C>
Boulder Ventures II, L.P. ........................ 461,539 70,310 $3,000,707
Centennial Fund IV, L.P. ......................... 384,615 57,961 2,500,574
Global Retail Partners, L.P. ..................... 197,272 29,590 1,282,564
DLJ Diversified Partners, L.P. ................... 58,785 8,817 382,191
DLJ Diversified Partners - A, L.P. ............... 21,830 3,274 141,928
GRP Partners, L.P. ............................... 12,825 1,923 83,382
Global Retail Partners Funding, Inc. ............. 13,584 2,037 88,316
DLJ ESC II, L.P. ................................. 3,396 509 22,079
The Tribune Company............................... 153,811 23,071 1,000,002
</TABLE>

Boulder Ventures, Centennial Fund and The Tribune Company are each greater
than five percent stockholders of Exactis.com. The remaining entities are all
affiliated with Global Retail Partners, a greater than five percent stockholder
of Exactis.com. Mr. Goldman, one of our directors, is a general partner of
Centennial Fund. Ms. Levinson, one of our directors, is a principal of Global
Retail Partners. Mr. Williams, one of our directors, is president and chief
executive officer of Tribune Media Services, a wholly owned subsidiary of The
Tribune Company.

SERIES D FINANCING

On June 8, 1998, we issued an aggregate of 625,001 shares of Series D
preferred stock to certain principal stockholders and certain other investors at
a purchase price of $5.08 per share. Of the 625,001 shares of Series D preferred
stock sold by us, an aggregate of 605,315 shares were sold to the following
principal stockholders for an aggregate purchase price of approximately $3.1
million:

<TABLE>
<CAPTION>
NUMBER AGGREGATE
PURCHASER OF SHARES PURCHASE PRICE
- --------- --------- --------------
<S> <C> <C>
Boulder Ventures, L.P....................................... 14,764 $ 75,001
Global Retail Partners, L.P................................. 378,630 1,923,440
DLJ Diversified Partners, L.P............................... 112,824 573,146
DLJ Diversified Partners-A, L.P............................. 41,899 212,847
GRP Partners, L.P........................................... 24,614 125,039
Global Retail Partners Funding, Inc. ....................... 26,068 132,425
DLJ ESC II, L.P............................................. 6,516 33,101
</TABLE>

SERIES C FINANCING

On July 25, 1997, we issued an aggregate of 1,911,533 shares of Series C
preferred stock to certain principal stockholders and certain other investors at
a purchase price of $4.00 per share. We also issued warrants to purchase an
aggregate of 210,917 shares of Series C preferred stock at an exercise price of
$4.00 per share, exercisable on or prior to July 24, 2001, and a warrant to
purchase an aggregate of 425,000 shares of Series C preferred stock at an
exercise price of $6.00 per share exercisable, subject to certain conditions, on
or prior to July 24, 2000. Of the 1,911,533 shares of Series C preferred stock
sold by

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<PAGE> 58

us, an aggregate of 1,845,413 shares were sold to the following principal
stockholders for an aggregate purchase price of approximately $7.4 million:

<TABLE>
<CAPTION>
NUMBER NUMBER AGGREGATE
PURCHASER OF SHARES OF WARRANTS PURCHASE PRICE
- --------- --------- ----------- --------------
<S> <C> <C> <C>
American Express Travel Related Services
Company......................................... 875,000 556,250 $3,500,556
Boulder Ventures Ltd.............................. 40,898 3,355 163,598
Centennial Fund IV, L.P........................... 402,150 30,268 1,608,632
Telecom Partners, L.P............................. 201,290 12,160 805,173
The Tribune Company............................... 326,075 33,884 1,304,335
</TABLE>

American Express and Telecom Partners are each greater than five percent
stockholders of Exactis.com. Mr. Beckert, one of our directors, is vice
president of a division affiliated with American Express.

BRIDGE FINANCING

On June 20, 1997, we issued promissory notes in the aggregate principal
amount of $2.0 million bearing simple interest at a rate of 12.0% per annum to
certain principal stockholders and certain other investors. We also issued
warrants to purchase an aggregate of 75,000 shares of Series C preferred stock
at an exercise price of $4.00 per share exercisable on or prior to June 17,
2001. Immediately upon the closing of the Series C preferred stock financing,
the principal amount outstanding under the notes and accrued interest thereon
automatically converted into shares of Series C preferred stock at $4.00 per
share.

Of the principal amount of $2.0 million issued by us, an aggregate
principal amount of $1.7 million and warrants to purchase an aggregate of 65,188
shares of Series C preferred stock were issued to the following principal
stockholders:

<TABLE>
<CAPTION>
AGGREGATE NUMBER
PURCHASER PRINCIPAL AMOUNT OF WARRANTS
- --------- ---------------- -----------
<S> <C> <C>
Centennial Fund IV, L.P. ................................. $792,864 29,732
Telecom Partners, L.P. ................................... 475,719 17,840
Boulder Ventures, L.P. ................................... 73,340 2,750
The Tribune Company....................................... 396,432 14,866
</TABLE>

SERIES B FINANCING

On July 22, 1996, September 19, 1996 and November 27, 1996, we issued an
aggregate of 1,416,666, 440,000 and 666,667 shares of Series B preferred stock,
respectively, to certain principal stockholders and certain other investors at a
purchase price of $3.00 per share. Of the 2,523,333 shares of Series B preferred
stock sold by us, an aggregate of 1,683,333 shares were sold to the following
principal stockholders for an aggregate purchase price of approximately $7.6
million:

<TABLE>
<CAPTION>
NUMBER AGGREGATE
PURCHASER OF SHARES PURCHASE PRICE
- --------- --------- --------------
<S> <C> <C>
Boulder Ventures Ltd........................................ 83,333 $ 249,999
Centennial Fund IV, L.P..................................... 933,333 2,799,999
Softven No. 2 Investment Enterprise Partnership............. 440,000 1,320,000
Telecom Partners, L.P....................................... 400,000 1,200,000
The Tribune Company......................................... 666,667 2,000,001
</TABLE>

Softven No. 2 Investment Enterprise Partnership is a greater than five
percent stockholder of Exactis.com.

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<PAGE> 59

SERIES A FINANCING

On February 14, 1996 and March 15, 1996, we issued an aggregate of 600,000
and 280,000 shares, respectively, of Series A preferred stock to certain
principal stockholders and certain other investors at a purchase price of $1.25
per share. Of the 880,000 shares of Series A preferred stock sold by us, an
aggregate of 840,000 shares were sold to the following principal stockholders
for an aggregate purchase price of approximately $1.1 million:

<TABLE>
<CAPTION>
NUMBER AGGREGATE
PURCHASER OF SHARES PURCHASE PRICE
- --------- --------- --------------
<S> <C> <C>
Centennial Fund IV, L.P. ................................... 400,000 $500,000
Telecom Partners, L.P. ..................................... 400,000 500,000
Boulder Ventures Ltd. ...................................... 40,000 50,000
</TABLE>

We are not currently indebted to any of our directors, officers or greater
than five percent stockholders.

We believe that each of the transactions described above was carried out on
terms that were no less favorable to us than those that would have been obtained
from unaffiliated third parties. Any future transactions between us and any of
our directors, officers or principal stockholders will be on terms no less
favorable to us than could be obtained from unaffiliated third parties and will
be approved by a majority of the independent and disinterested members of the
board of directors.

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<PAGE> 60

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to beneficial
ownership of our common stock as of September 30, 1999 for:

- each person or group of affiliated persons known to us to own
beneficially more than five percent of our common stock;

- each of our directors;

- our executive officers listed in the Summary Compensation Table;

- each of our current stockholders who is expected to sell shares in this
offering; and

- all of our directors and executive officers as a group.

In accordance with the rules of the Securities and Exchange Commission, the
following table gives effect to the shares of common stock that could be issued
upon the exercise of outstanding options within 60 days of September 30, 1999.
Unless otherwise noted in the footnotes to the table and subject to community
property laws where applicable, the following individuals have sole voting and
investment control with respect to the shares beneficially owned by them.

We have calculated the percent of shares beneficially owned based on
8,540,746 shares of common stock outstanding as of September 30, 1999 and
12,091,186 shares of common stock outstanding after this offering. An asterisk
indicates ownership of less than one percent.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
---------------------- SHARES ----------------------
NAME NUMBER PERCENTAGE TO BE SOLD NUMBER PERCENTAGE
- ---- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Centennial Fund IV, L.P.(1)............ 2,237,789 25.9% -- 2,237,789 18.3%
American Express Travel Related
Services Company, Inc.(2)............ 1,176,250 13.3% -- 1,176,250 9.5%
The Tribune Company(3)................. 1,218,374 14.2% -- 1,218,374 10.0%
Telecom Partners, L.P.(4).............. 1,031,290 12.0% -- 1,031,290 8.5%
Global Retail Partners, L.P.(5)........ 944,393 11.0% -- 944,393 7.8%
Boulder Ventures, L.P. and Boulder
Ventures II, L.P.(6)................. 716,949 8.3% -- 716,949 5.9%
Softven No. 2 Investment Enterprise
Partnership(7)....................... 444,906 5.2% -- 444,906 3.7%
Eric R. Belcher........................ 22,055 * -- 22,055 *
Pierric D. Beckert(8).................. -- -- -- -- --
Craig M. Deans......................... 16,666 * -- 16,666 *
E. Thomas Detmer, Jr.(9)............... 230,797 2.7% -- 230,797 1.9%
John T. Funk(10)....................... 676,552 7.9% 178,184 498,368 4.1%
Adam Goldman(11)....................... -- -- -- -- --
Linda Fayne Levinson(12)............... 944,393 11.0% -- 944,393 7.8%
Raymond H. Van Wagener, Jr.(13)........ 31,260 * 8,440 22,820 *
David D. Williams(14).................. -- -- -- -- --
Officers and directors as a group (9
persons)(15)......................... 1,215,904 14.1% -- 1,215,904 10.0%
ADDITIONAL SELLING STOCKHOLDERS
- ---------------------------
Gus Bigos(16).......................... 126,500 1.5% 34,155 92,345 *
Kenneth Cook(17)....................... 54,000 * 14,580 39,420 *
Jeffrey M. Horn(18).................... 53,750 * 13,500 40,250 *
Sally H. Horn(19)...................... 21,167 * 5,400 15,767 *
Michael K. Stake(20)................... 28,000 * 7,560 20,440 *
Homer John Livingston, III(21)......... 10,000 * 2,700 7,300 *
Frank Parkinson(22).................... 10,000 * 2,700 7,300 *
Thomas S. Finke(23).................... 5,000 * 1,350 3,650 *
Jack Walter Funk Educational
Trust(24)............................ 5,300 * 1,431 3,869 *
</TABLE>

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

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<PAGE> 61

(1) Includes 117,691 shares of common stock issuable upon exercise of warrants.
The address of Centennial Fund IV, L.P. is 1428 Fifteenth Street, Denver,
Colorado 80202.

(2) Includes 301,250 shares of common stock issuable upon exercise of vested
warrants. Excludes 255,000 shares of common stock issuable upon exercise of
unvested warrants. The address of American Express Travel Related Services
Company, Inc. is 3 World Financial Center, 40th Floor, New York, New York
10285.

(3) Includes 71,821 shares of common stock issuable upon exercise of warrants.
The address of The Tribune Company is 435 North Michigan Avenue, Suite
1500, Chicago, Illinois 60611.

(4) Includes 30,000 shares of common stock issuable upon exercise of warrants.
The address of Telecom Partners, L.P. is 6400 S. Fiddlers Green Circle,
Englewood, Colorado 80111.

(5) Consists of (i) the following shares of common stock (A) 575,902 shares
held by Global Retail Partners, L.P., (B) 171,609 shares held by DLJ
Diversified Partners, L.P., (C) 63,729 shares held by DLJ Diversified
Partners -- A, L.P. , (D) 37,439 shares held by GRP Partners, L.P., (E)
39,652 shares held by Global Retail Partners Funding, Inc. and (F) 9,912
shares held by DLJ ESC II, L.P., and (ii) the following shares of common
stock issuable upon exercise of warrants (A) 29,590 shares held by Global
Retail, (B) 8,817 shares held by DLJ, (C) 3,274 shares held by DLJ-A, (D)
1,923 shares held by GRP, (E) 2,037 shares held by Global Funding and (F)
509 shares held by DLJ ESC. The address of Global Retail Partners and its
affiliates is 2121 Avenue of the Stars, Suite 1630, Los Angeles, California
90067.

(6) Consists of (i) the following shares of common stock: (A) 178,995 shares
held by Boulder Ventures, L.P. and (B) 461,539 shares held by Boulder
Ventures II, L.P., and (ii) the following shares of common stock issuable
upon exercise of warrants (A) 6,105 shares held by Boulder Ventures I and
(B) 70,310 shares held by Boulder Ventures II. Boulder Ventures I and
Boulder Ventures II are affiliated entities. The address of Boulder
Ventures I and Boulder Ventures II is 1634 Walnut Street, Suite 301,
Boulder, Colorado 80302.

(7) The address of Softven No. 2 Investment Enterprise Partnership is 3-12-3
Kanda-Nishikicho, Chiyoda, Tokyo 101-0054, Japan.

(8) Mr. Beckert is the vice president of Interactive Enterprise Development, a
division of American Express Relationship Services and part of American
Express Travel Related Services.

(9) Includes 509 shares of common stock issuable upon exercise of warrants and
26,446 shares of common stock issuable upon exercise of stock options, of
which 2,201 of such shares shall vest upon the completion of this offering.

(10) The address of Mr. Funk is 22583 Anasazi Way, Golden, Colorado 80401. If
the underwriters' over-allotment option is exercised, Mr. Funk will sell up
to 52,795 shares of common stock at such time. If Mr. Funk sells 52,795
shares, he will beneficially own 445,573 shares of common stock after this
offering, or 3.5%.

(11) The sole general partner of Centennial Fund IV is Centennial Holdings IV,
L.P. Centennial Holdings IV may be deemed to beneficially own the shares
owned by Centennial Fund IV. Mr. Goldman is a general partner of Centennial
Holdings IV and may be deemed to be the indirect beneficial owner of the
shares owned by Centennial Fund IV. Mr. Goldman disclaims beneficial
ownership of all shares held by Centennial Fund IV, except to the extent of
his pecuniary interest.

(12) Ms. Levinson is a principal of Global Retail Partners. The shares listed
represent shares held by Global Retail Partners and it affiliated entities.
Ms. Levinson disclaims beneficial ownership of all shares held by Global
Retail and it affiliated entities, except to the extent of her pecuniary
interest. The address of Ms. Levinson is Global Retail Partners, 2121
Avenue of the Stars, Suite 1630, Los Angeles, California 90067.

(13) The address of Mr. Van Wagener is 9230 East Crestline Avenue Greenwood
Village, Colorado 80111. If the underwriters' over-allotment option is
exercised, Mr. Van Wagener will sell up to 2,501 shares of common stock at
such time. If Mr. Van Wagener sells 2,501 shares, he will beneficially own
20,319 shares of common stock after this offering, or less than one
percent.

(14) Mr. Williams is president and chief executive officer of Tribune Media
Services, Inc., a wholly-owned subsidiary of The Tribune Company.

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<PAGE> 62

(15) Includes shares included pursuant to note (12).

(16) If the underwriters' over-allotment option is exercised, Mr. Bigos will
sell up to 10,120 shares of common stock at such time. If Mr. Bigos sells
10,120 shares, he will beneficially own 82,225 shares of common stock after
this offering, or less than one percent.

(17) If the underwriters' over-allotment option is exercised, Mr. Cook will sell
up to 4,320 shares of common stock at such time. If Mr. Cook sells 4,320
shares, he will beneficially own 35,100 shares of common stock after this
offering, or less than one percent.

(18) Includes 3,750 shares of common stock issuable upon exercise of stock
options. If the underwriters' over-allotment option is exercised, Mr. Horn
will sell up to 4,000 shares of common stock at such time. If Mr. Horn
sells 4,000 shares, he will beneficially own 36,250 shares of common stock
after this offering, or less than one percent.

(19) If the underwriters' over-allotment option is exercised, Ms. Horn will sell
up to 1,600 shares of common stock at such time. If Ms. Horn sells 1,600
shares, she will beneficially own 14,167 shares of common stock after this
offering, or less than one percent.

(20) If the underwriters' over-allotment option is exercised, Mr. Stake will
sell up to 2,240 shares of common stock at such time. If Mr. Stake sells
2,240 shares, he will beneficially own 18,200 shares of common stock after
this offering, or less than one percent.

(21) If the underwriters' over-allotment option is exercised, Mr. Livingston
will sell up to 800 shares of common stock at such time. If Mr. Livingston
sells 800 shares, he will beneficially own 6,500 shares of common stock
after this offering, or less than one percent.

(22) If the underwriters' over-allotment option is exercised, Mr. Parkinson will
sell up to 800 shares of common stock at such time. If Mr. Parkinson sells
800 shares, he will beneficially own 6,500 shares of common stock after
this offering, or less than one percent.

(23) If the underwriters' over-allotment option is exercised, Mr. Finke will
sell up to 400 shares of common stock at such time. If Mr. Finke sells 400
shares, he will beneficially own 3,250 shares of common stock after this
offering, or less than one percent.

(24) If the underwriters' over-allotment option is exercised, the Jack Walter
Educational Trust will sell up to 424 shares of common stock at such time.
If the Jack Walter Educational Trust sells 424 shares, it will beneficially
own 3,445 shares of common stock after this offering, or less than one
percent.

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<PAGE> 63

DESCRIPTION OF SECURITIES

Following completion of this offering, our authorized capital stock will
consist of 35,000,000 shares of common stock, par value $.01 per share, and
3,500,000 shares of preferred stock, par value $.01 per share.

The following description of our securities reflects changes that will be
made to our certificate of incorporation and bylaws upon the closing of this
offering. We have filed our restated certificate of incorporation and amended
and restated bylaws as exhibits to the registration statement of which this
prospectus is a part.

COMMON STOCK

As of the date of this prospectus, there are 8,540,746 shares of common
stock outstanding and held of record by 65 stockholders. Upon the closing of
this offering, there will be 12,091,186 shares of common stock outstanding,
assuming no exercise of the underwriters' over-allotment option.

Holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. Holders of common stock are not
entitled to cumulative voting rights in the election of directors. Accordingly,
minority stockholders will not be able to elect directors on the basis of their
votes alone. Subject to preferences that may be applicable to any
then-outstanding shares of preferred stock, holders of common stock are entitled
to receive ratably such dividends as may be declared by our board of directors.
In the event we liquidate, dissolve or wind up our affairs, holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any then-outstanding shares of
preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights. There are no sinking fund provisions applicable
to the common stock.

PREFERRED STOCK

Our board of directors is authorized, without further stockholder approval,
to issue up to an aggregate of 3,500,000 shares of preferred stock in one or
more series. The board of directors may fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such series, and the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption price or prices and
liquidation preferences. The issuance of preferred stock could:

- adversely affect the voting power of holders of common stock;

- adversely affect the likelihood that the holders of common stock will
receive dividend payments and payments upon liquidation; and

- delay, defer or prevent a change in control.

We have no present plans to issue any shares of preferred stock.

WARRANTS

As of the date of this prospectus, we have outstanding warrants to purchase
an aggregate of 94,608 and 108,978 shares of common stock at an exercise price
of $8.00 per share issued to certain principal stockholders and certain other
investors, which expire on July 15, 2004 and August 13, 2004, respectively. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares of common stock underlying the warrants
upon the occurrence of any recapitalization, reclassification, stock dividend,
stock split, stock combination or similar transaction. The shares of common
stock issuable upon exercise of the warrants carry registration rights, as
discussed below.

As of the date of this prospectus, Sony Music holds a warrant to purchase
an aggregate of 600,000 shares of common stock at an exercise price of $6.00 per
share. The warrant expires on December 30, 2003. The warrant contains
anti-dilution provisions providing for adjustments of the exercise price and the
number of shares of common stock underlying the warrant upon the occurrence of
any recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. The
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<PAGE> 64

shares of common stock issuable upon exercise of the warrant carry registration
rights, as discussed below. The warrant vests in four increments based upon the
achievement by Sony Music of performance milestones based upon monthly gross
revenue.

The warrant ceases to vest at such time as we are not providing services to
Sony Music under the service bureau agreement. As of June 30, 1999, none of the
performance milestones had been achieved by Sony Music.

As of the date of this prospectus, we have outstanding warrants to purchase
an aggregate of 70,094 and 210,917 shares of common stock at an exercise price
of $4.00 per share issued to certain principal stockholders and certain other
investors, which expire on June 17, 2001 and July 24, 2001, respectively. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares of common stock underlying the warrants
upon the occurrence of any recapitalization, reclassification, stock dividend,
stock split, stock combination or similar transaction. The shares of common
stock issuable upon exercise of the warrants carry registration rights, as
discussed below.

As of the date of this prospectus, we have outstanding a warrant to
purchase an aggregate of 425,000 shares of common stock at an exercise price of
$6.00 per share issued to American Express. The warrant expires on July 24,
2000. The warrant contains anti-dilution provisions providing for adjustments of
the exercise price and the number of shares of common stock underlying the
warrant upon the occurrence of any recapitalization, reclassification, stock
dividend, stock split, stock combination or similar transaction. The shares of
common stock issuable upon exercise of the warrant carry registration rights, as
discussed below. The warrant vests in increments based upon the achievement by
American Express of certain performance milestones. 63,750 shares vested in
1998; and the remaining 361,250 shares vest upon achievement of monthly gross
revenue targets.

As of the date of this prospectus, we have outstanding warrants to purchase
an aggregate of 46,666 shares of common stock at an exercise price of $3.00 per
share issued to MMC/GATX Partnership No. 1 and Silicon Valley Bank. The warrants
expire on the date that is five years from the date of closing of this offering.
The warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares of common stock underlying the warrants
upon the occurrence of any recapitalization, reclassification, stock dividend,
stock split, stock combination or similar transaction. The shares of common
stock issuable upon exercise of the warrants carry registration rights, as
discussed below.

REGISTRATION RIGHTS

Under our stockholders' agreement, holders of 7,302,057 shares of common
stock and up to 1,556,263 shares of common stock issuable upon the exercise of
warrants, have certain rights to require us to register their shares for resale
under the Securities Act of 1933 during the ten-year period following this
offering.

Subject to certain limitations:

- (i) the holders of more than a majority of registrable securities may
require that the we register such shares under the Securities Act of 1933
on Form S-1 or any similar form, with respect to at least 25% of such
shares; and

- (ii) any holder of such shares may demand that we register on Form S-3 or
any similar form, if available, shares having an aggregate offering price
to the public of more than $1,000,000. We are not required to effect more
than four demand registrations on Form S-1 or more than ten demand
registrations on Form S-3. In addition, these stockholders are entitled
to piggyback registration rights with respect to any public offering
registration statement we file under the Securities Act following this
offering, with certain limitations. Further, at any time after we become
eligible to file a registration statement on Form S-3 or any similar
short-form registration statement, such stockholders may require us to
file such registration statements from time to time, again with certain
limitations. We are generally required to bear all of the expenses of
these registrations, except underwriting discounts and commissions.
Registration of any of the shares of common stock entitled to these
registration rights would result in such shares becoming freely tradable
without restriction under the Securities Act.

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<PAGE> 65

Upon completion of this offering, the registration rights with respect to
the shares held by a stockholder will terminate if the stockholder holds less
than 5% of the then-outstanding shares of common stock and the stockholder's
shares are entitled to be resold without restriction under Rule 144 promulgated
under the Securities Act.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS

Following the closing of this offering, we will be subject to the
provisions of Section 203 of the Delaware General Corporation Law, which
generally prohibits a publicly-held Delaware corporation from engaging in a
business combination with an interested stockholder for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained that status with the
approval of the corporation's board of directors or unless the business
combination is approved in a prescribed manner. Business combinations include
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. With certain exceptions, an interested stockholder
is a person who, together with affiliates and associates, owns, or within three
years did own, 15% or more of a corporation's voting stock. This statute could
prohibit or delay the accomplishment of mergers or other takeover or
change-in-control attempts and, accordingly, may discourage attempts to acquire
us.

The following provisions of our restated certificate of incorporation and
amended and restated bylaws that will become effective upon the closing of this
offering may have an anti-takeover effect and may delay or prevent a tender
offer or takeover attempt that a stockholder might consider to be in its best
interest, including attempts that might result in a premium over the market
price for the common stock:

CLASSIFIED BOARD OF DIRECTORS. Our board of directors will be divided into
three classes. The directors in class I will hold office until the first annual
meeting of stockholders following this offering, the directors in class II will
hold office until the second annual meeting of stockholders following this
offering and the directors in class III will hold office until the third annual
meeting of stockholders following this offering. After each such election, the
directors in that class will serve for terms of three years. The classification
system of electing directors may tend to discourage a third party from making a
tender offer or otherwise attempting to obtain control of us and may maintain
the incumbency of the board of directors, since such classification generally
increases the difficulty of replacing a majority of the directors.

BOARD OF DIRECTOR VACANCIES. The board of directors will be authorized to
fill vacant directorships and to increase the size of the board of directors.
This may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
resulting vacancies with its own nominees.

STOCKHOLDER ACTION; SPECIAL MEETINGS OF STOCKHOLDERS. Our stockholders will
not be permitted to take action by written consent, but only at duly called
annual or special meetings of stockholders. In addition, special meetings of
stockholders may be called only by the chairman of the board, the chief
executive officer or a majority of the board of directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an annual
meeting of stockholders, must deliver a written notice to our principal
executive offices within a prescribed time period. Our amended and restated
bylaws also set forth specific requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
the election of directors at an annual meeting of stockholders.

AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to limitations imposed by the Nasdaq National
Market. We may use these additional shares for a variety of corporate purposes,
including future public offerings to raise additional capital, acquisitions and
employee benefit plans. The

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<PAGE> 66

existence of authorized but unissued and unreserved common stock and preferred
stock could render more difficult or discourage an attempt to obtain control of
us by means of a proxy contest, tender offer, merger or otherwise.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Our bylaws provide that we will indemnify its directors, officers,
employees and agents to the fullest extent permitted by Delaware law. In
addition, our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty to us and our stockholders. This
provision of the certificate of incorporation does not eliminate the duty of
care. In appropriate circumstances equitable remedies such as an injunction or
other forms of non-monetary relief are available under Delaware law. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws.

Each director will continue to be subject to liability for:

- breach of the director's duty of loyalty to Exactis.com;

- acts or omissions not in good faith or involving intentional misconduct;

- knowing violations of law;

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

- improper transactions between the director and Exactis.com; and

- improper distributions to stockholders and improper loans to directors
and officers.

We intend to enter into indemnity agreements with each of our directors and
executive officers under which each director and executive officer will be
indemnified against expenses and losses incurred for claims brought against them
by reason of their being a director or executive officer of Exactis.com. Our
board of directors has authorized the officers of Exactis.com to investigate and
obtain directors' and officers' liability insurance.

There is no pending litigation or proceeding involving a director or
officer of Exactis.com as to which indemnification is being sought. We are not
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and control persons
of Exactis.com pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable.

LISTING

We have applied for listing of the common stock on the Nasdaq National
Market under the trading symbol "XACT."

TRANSFER AGENT AND REGISTRAR

We have appointed American Securities Transfer & Trust, Inc. to serve as
the transfer agent and registrar for the common stock.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, we will have a total of 12,091,186
shares of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of options or warrants. Of the outstanding
shares, the 3,800,000 shares being sold in this offering will be freely
tradable, except that any shares held by our affiliates may only be sold in
compliance with the limitations described below. The remaining 8,540,746 shares
of common stock will be restricted securities that may be sold in the public
market only if they are registered under the Securities Act or if they qualify
for an exemption from registration under Rule 144, 144(k) or 701 promulgated
under the Securities Act.

Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will become available for sale in
the public market as follows:

<TABLE>
<CAPTION>
NUMBER
OF SHARES DATE
- --------- ----
<S> <C>
13,300.............. Upon the date of this prospectus (shares eligible for resale
under Rule 144(k) and not subject to lock-up agreements)
3,349.............. 90 days following the date of this prospectus (shares
eligible for resale under Rules 144 and 701 and not subject
to lock-up agreements)
8,254,097.............. 180 days following the date of this prospectus (lock-up
agreements released)
</TABLE>

In general, under Rule 144, a person or persons whose shares are required
to be aggregated, including an affiliate, who has beneficially owned shares for
at least one year is entitled to sell, within any three-month period commencing
90 days after the date of this prospectus, a number of shares that does not
exceed the greater of:

- (i) 1% of the then-outstanding shares of common stock, or approximately
120,912 shares immediately after this offering; or

- (ii) the average weekly trading volume of the common stock during the
four calendar weeks preceding the date on which notice of that sale is
filed. In addition, a person who is not considered an affiliate of ours
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 is entitled
to sell such shares under Rule 144(k) without regard to the volume
limitations described above.

In addition, following the closing of this offering, we intend to file a
registration statement to register for resale up to 3,500,000 shares of common
stock available for issuance under our stock plans. Accordingly, shares issued
under those plans will become eligible for resale in the public market from time
to time, subject to the lock-up agreements described below and, in the case of
our affiliates, the volume limitations of Rule 144 described above. As of the
date of this prospectus, options and purchase rights to acquire a total of
1,667,517 shares of common stock are outstanding under our stock plans, of which
222,524 are currently exercisable.

Directors, officers and stockholders of Exactis.com holding an aggregate of
8,254,097 shares of common stock have agreed that they will not sell any shares
of common stock without the prior written consent of Thomas Weisel Partners LLC
for a period of 180 days from the date of this prospectus. Please refer to our
discussion in "Underwriting" for further discussion of these agreements.

We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, other
than the grant of options and purchase rights under our stock plans and the
issuance of common stock under these options and purchase rights.

Following this offering, certain of our stockholders will have rights to
have their shares of common stock registered for resale under the Securities
Act. Please refer to our discussion in "Description of
Securities -- Registration Rights" for further discussion of these registration
rights.

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UNDERWRITING

GENERAL

Subject to the terms and conditions set forth in an agreement among the
underwriters and us, each of the underwriters named below, through their
representatives, Thomas Weisel Partners LLC, Dain Rauscher Wessels, a division
of Dain Rauscher Incorporated, and Wit Capital Corporation, has severally agreed
to purchase from us and the selling stockholders the aggregate number of shares
of common stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Thomas Weisel Partners LLC..................................
Dain Rauscher Wessels.......................................
Wit Capital Corporation.....................................
---------
Total............................................. 3,800,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters are subject to various conditions. The nature of the underwriters'
obligations is such that they are committed to purchase and pay for all of the
shares of common stock listed above if any are purchased.

The underwriting agreement provides that we will indemnify the underwriters
against liabilities specified in the underwriting agreement under the Securities
Act or will contribute to payments that the underwriters may be required to make
relating to these liabilities.

OVER-ALLOTMENT OPTION

We have granted a 30-day over-allotment option to the underwriters to
purchase up to an aggregate of 570,000 additional shares of our common stock
from us and the selling stockholders exercisable at the public offering price
less the underwriting discounts and commissions, each as set forth on the cover
page of this prospectus. If the underwriters exercise such option in whole or in
part, then each of the underwriters will be severally committed, subject to
conditions described in the underwriting agreement, to purchase the additional
shares of our common stock in proportion to their respective commitments set
forth in the table above.

COMMISSIONS AND DISCOUNTS

The underwriters propose to offer the shares of common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus, and at such price less a concession not in excess of $ per share
of common stock to other dealers specified in a master agreement among
underwriters who are members of the National Association of Securities Dealers,
Inc. The underwriters may allow, and such dealers may reallow, concessions, not
in excess of $ per share of common stock to these other dealers. After this
offering, the offering price, concessions and other selling terms may be changed
by the underwriters. Our common stock is offered subject to receipt and accept
by the underwriters and to other conditions, including the right to reject
orders in whole or in part.

The following table summarizes the compensation to be paid to the
underwriters by us and the selling stockholders and the expenses payable by us
and the selling stockholders:

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

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RESERVED SHARES

The underwriters, at our request, have reserved for sale at the initial
public offering price up to 175,000 shares of common stock to be sold in this
offering for sale to our employees and other persons designated by us. The
number of shares available for sale to the general public will be reduced to the
extent that any reserved shares are purchased. Any reserved shares not purchased
in this manner will be offered by the underwriters on the same basis as the
other shares offered in this offering.

NO SALES OF SIMILAR SECURITIES

We have agreed that for a period of 180 days after the dates of this
prospectus we will not, without the prior written consent of Thomas Weisel
Partners LLC, offer, sell, or otherwise dispose of any shares of common stock
except for the shares of common stock offered in the offering and the shares of
common stock issuable upon exercise of outstanding options and warrants.

INFORMATION REGARDING THOMAS WEISEL PARTNERS LLC AND WIT CAPITAL CORPORATION

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 70
filed public offerings of equity securities, of which 39 have been completed,
and has acted as a syndicate member in an additional 34 public offerings of
equity securities. Thomas Weisel Partners LLC does not have any material
relationship with us or any of our officers, directors or controlling persons,
except with respect to its contractual relationship with us under the
underwriting agreement entered into in connection with this offering.

Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in this offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
co-manager or selected dealer in over 130 public offerings. Except for its
participation as a manager in this offering, Wit Capital has no relationship
with Exactis.com or any of its founders or significant stockholders.

NASDAQ NATIONAL MARKET LISTING

Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock was
determined through negotiations between us and representatives of the
underwriters. Some of the factors considered in these negotiations will be our
results of operations in recent periods, estimates of our prospects and the
industry in which we compete, an assessment of our management, the general state
of the securities markets at the time of this offering and the prices of similar
securities of generally comparable companies. We have applied to have our common
stock quoted on the Nasdaq National Market under the symbol "XACT." We cannot
assure you that an active or orderly trading market will develop for our common
stock or that our common stock will trade in the public markets subsequent to
this offering at or above the initial offering price.

The underwriters do not expect to confirm sales of common stock to any
accounts over which they exercise discretionary authority to exceed five percent
of shares being offered under this prospectus.

MARKET STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

In order to facilitate this offering, persons participating in this
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of our common stock during and after this offering. Specifically, the
underwriters may over-allot or otherwise create a short position in our common
stock for their own account by selling more shares of common stock than we have
sold to them. The underwriters may elect to cover any short position by
purchasing shares of common stock in the open market or by exercising the
over-allotment option granted to the underwriters. In addition, the underwriters
may stabilize or maintain the price of the common stock by bidding for or
purchasing shares of common stock

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<PAGE> 70

in the open market and may impose penalty bids. Under these penalty bids,
selling concessions that are allowed to syndicate members or other
broker-dealers participating in this offering are reclaimed if shares of common
stock previously distributed in this offering are repurchased, usually in order
to stabilize the market. The effect of these transactions may be to stabilize or
maintain the market price at a level above that which might otherwise prevail in
the open market. No representation is made as to the magnitude or effect of any
such stabilization or other transactions. These transactions may be effected on
the Nasdaq National Market or otherwise and may be discontinued at any time
after they are commenced.

A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit Capital. In addition, all dealers purchasing shares
from Wit Capital in the offering similarly have agreed to make a prospectus in
electronic format available on Web sites maintained by these dealers.

LEGAL MATTERS

Cooley Godward LLP, Boulder, Colorado will pass upon the validity of the
shares of common stock offered hereby. Attorneys at Cooley Godward LLP are the
beneficial owners, through investment partnerships, of approximately 8,700
shares of our common stock.

Brobeck, Phleger & Harrison LLP, San Francisco, California, will pass upon
certain legal matters in connection with the offering for the underwriters.

EXPERTS

The financial statements of Exactis.com, Inc. (formerly InfoBeat Inc.) as
of December 31, 1997 and 1998 and for the period from inception (January 30,
1996) to December 31, 1996 and for the years ended December 31, 1997 and 1998,
have been included herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said 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 (including exhibits, schedules and amendments) under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information in the registration
statement. For further information about us and our common stock, please refer
to the registration statement. In each instance, please refer to the copy of
that contract, agreement or document filed as an exhibit to the registration
statement.

You may read and copy all or any portion of the registration statement or
any other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
to you on the SEC's web site (http://www.sec.gov).

As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended. In
accordance with those requirements, we will file periodic reports, proxy
statements and other information with the SEC.

We intend to furnish our stockholders with annual reports containing
audited financial statements and with quarterly reports for the first three
quarters of each year containing unaudited interim financial information.

66
<PAGE> 71

EXACTIS.COM, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1997 and 1998 and June 30,
1999 (unaudited).......................................... F-3
Statements of Operations for the period from inception
(January 30, 1996) to December 31, 1996, years ended
December 31, 1997 and 1998 and six months ended June 30,
1998 and 1999 (unaudited)................................. F-4
Statements of Stockholders' Deficit for the period from
inception (January 30, 1996) to December 31, 1996, years
ended December 31, 1997 and 1998 and six months ended June
30, 1999 (unaudited)...................................... F-5
Statements of Cash Flows for the period from inception
(January 30, 1996) to December 31, 1996, years ended
December 31, 1997 and 1998 and six months ended June 30,
1998 and 1999 (unaudited)................................. F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 72

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Exactis.com, Inc.:

We have audited the accompanying balance sheets of Exactis.com, Inc.
(formerly Infobeat Inc.) as of December 31, 1997 and 1998 and the related
statements of operations, stockholders' deficit and cash flows for the period
from inception (January 30, 1996) to December 31, 1996 and the years ended
December 31, 1997 and 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Exactis.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from inception (January 30, 1996) to December 31, 1996 and the
years ended December 31, 1997 and 1998 in conformity with generally accepted
accounting principles.

KPMG LLP

Denver, Colorado
April 2, 1999, except
as to Note 8, which
is as of August 13, 1999

F-2
<PAGE> 73

EXACTIS.COM, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1997 1998 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,746,703 $ 6,383,255 $ 556,628
Restricted cash........................................... 750,320 -- --
Accounts receivable, net of allowance of approximately
$75,000 in 1997, 1998 and 1999.......................... 193,687 727,295 1,472,969
Receivable from sale of discontinued operations (note
2)...................................................... -- 1,500,000 1,500,000
Prepaid expenses and other................................ 104,207 96,961 299,619
------------ ------------ ------------
Total current assets................................ 4,794,917 8,707,511 3,829,216
------------ ------------ ------------
Equipment and purchased computer software, at cost (note 5):
Computers and equipment -- production..................... 1,736,167 2,304,982 3,329,149
Computers and equipment -- administrative................. 370,312 465,920 559,314
Furniture and fixtures.................................... 327,941 438,630 482,842
Purchased computer software............................... 234,442 322,973 650,134
Leasehold improvements.................................... 289,763 314,879 400,597
------------ ------------ ------------
2,958,625 3,847,384 5,422,036
Less accumulated depreciation and amortization............ (982,324) (2,010,118) (2,686,594)
------------ ------------ ------------
1,976,301 1,837,266 2,735,442
Deferred marketing and financing costs, net................. 151,289 59,275 19,822
Other assets................................................ 142,880 202,219 208,606
------------ ------------ ------------
Total assets........................................ $ 7,065,387 $ 10,806,271 $ 6,793,086
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 116,808 $ 194,540 $ 789,225
Accrued liabilities....................................... 297,252 699,014 1,189,557
Deferred revenue (note 2)................................. 12,591 2,775,858 1,624,326
Current portion of notes payable (note 5)................. 482,506 677,777 679,060
Current portion of obligations under capital leases (note
6)...................................................... 22,307 8,056 --
------------ ------------ ------------
Total current liabilities........................... 931,464 4,355,245 4,282,168
Deferred revenue, net of current portion (note 2)........... -- 1,745,493 1,276,477
Notes payable, less current portion (note 5)................ 816,429 609,700 300,100
Obligations under capital leases, excluding current portion
(note 6).................................................. 8,056 -- --
------------ ------------ ------------
Total liabilities................................... 1,755,949 6,710,438 5,858,745
------------ ------------ ------------
Mandatorily redeemable preferred stock (note 3):
Series B, par value $.01, authorized 2,570,000 shares;
issued and outstanding 2,523,333 shares (aggregate
liquidation preference of $7,569,999)................... 7,546,884 7,553,489 7,556,791
Series C, par value $.01, authorized 3,550,000 shares;
issued and outstanding 1,911,533 shares (aggregate
liquidation preference of $7,646,136)................... 7,224,325 7,318,061 7,364,934
Series D, par value $.01, authorized 1,300,000 shares;
issued and outstanding 625,001 shares in 1998 and 1999
(aggregate liquidation preference of
$3,175,005)............................................. -- 3,153,037 3,155,478
Warrants for the purchase of mandatorily redeemable
preferred stock......................................... 577,713 647,936 647,936
------------ ------------ ------------
15,348,922 18,672,523 18,725,139
------------ ------------ ------------
Stockholders' deficit (note 3):
Series A preferred stock, par value $.01, authorized,
issued and outstanding 880,000 shares (aggregate
liquidation preference of $1,100,000)................... 1,094,413 1,094,413 1,094,413
Common stock, par value $.01. Authorized 13,500,000
shares; issued and outstanding 1,001,000, 1,009,053 and
1,009,053 shares, respectively.......................... 10,010 10,091 10,091
Additional paid-in capital................................ 3,523 43,138 1,898,698
Unearned compensation..................................... -- -- (1,148,445)
Accumulated deficit....................................... (11,147,430) (15,724,332) (19,645,555)
------------ ------------ ------------
Total stockholders' deficit......................... (10,039,484) (14,576,690) (17,790,798)
Commitments and contingencies (note 6)......................
------------ ------------ ------------
Total liabilities and stockholders' deficit......... $ 7,065,387 $ 10,806,271 $ 6,793,086
============ ============ ============
</TABLE>

See accompanying notes to financial statements.
F-3
<PAGE> 74

EXACTIS.COM, INC.

STATEMENTS OF OPERATIONS

See accompanying notes to financial statements.

F-4
<PAGE> 75

EXACTIS.COM, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT

PERIOD FROM INCEPTION (JANUARY 30, 1996) TO DECEMBER 31, 1996,
YEARS ENDED DECEMBER 31, 1997 AND 1998 AND THE SIX MONTHS
ENDED JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
SERIES A
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ------------------- PAID-IN UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT TOTAL
------- ---------- --------- ------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at inception..... -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock
for assets.............. -- -- 1,000,000 10,000 2,282 -- -- 12,282
Issuance of Series A
preferred stock, net of
issuance costs.......... 880,000 1,094,413 -- -- -- -- -- 1,094,413
Accretion of redeemable
preferred stock to
liquidation value....... -- -- -- -- -- -- (3,303) (3,303)
Net loss.................. -- -- -- -- -- -- (3,391,741) (3,391,741)
------- ---------- --------- ------- ---------- ----------- ------------ ------------
Balances at December 31,
1996.................... 880,000 1,094,413 1,000,000 10,000 2,282 -- (3,395,044) (2,288,349)
Issuance of common stock
for cash................ -- -- 1,000 10 1,241 -- -- 1,251
Accretion of redeemable
preferred stock to
liquidation value....... -- -- -- -- -- -- (53,473) (53,473)
Net loss.................. -- -- -- -- -- -- (7,698,913) (7,698,913)
------- ---------- --------- ------- ---------- ----------- ------------ ------------
Balances at December 31,
1997.................... 880,000 1,094,413 1,001,000 10,010 3,523 -- (11,147,430) (10,039,484)
Exercise of common stock
options................. -- -- 8,053 81 9,911 -- -- 9,992
Issuance of common stock
options for services.... -- -- -- -- 29,704 -- -- 29,704
Accretion of redeemable
preferred stock to
liquidation value....... -- -- -- -- -- -- (102,782) (102,782)
Net loss.................. -- -- -- -- -- -- (4,474,120) (4,474,120)
------- ---------- --------- ------- ---------- ----------- ------------ ------------
Balances at December 31,
1998.................... 880,000 1,094,413 1,009,053 10,091 43,138 -- (15,724,332) (14,576,690)
Issuance of common stock
options at less than
fair value.............. -- -- -- -- 1,855,560 (1,855,560) -- --
Amortization of unearned
compensation............ -- -- -- -- -- 707,115 -- 707,115
Accretion of redeemable
preferred stock to
liquidation value....... -- -- -- -- -- -- (52,611) (52,611)
Net loss.................. -- -- -- -- -- -- (3,868,612) (3,868,612)
------- ---------- --------- ------- ---------- ----------- ------------ ------------
Balances at June 30, 1999
(unaudited)............. 880,000 $1,094,413 1,009,053 $10,091 $1,898,698 $(1,148,445) $(19,645,555) $(17,790,798)
======= ========== ========= ======= ========== =========== ============ ============
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 76

EXACTIS.COM, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 30, SIX MONTHS ENDED
1996) TO YEARS ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(3,391,741) $(7,698,913) $(4,474,120) $(3,383,191) $(3,868,612)
Adjustments to reconcile net loss to net cash
used by operating activities:
Loss from discontinued operations............ 3,391,741 3,715,724 2,282,055 925,949 --
Gain on sale of discontinued operations...... -- -- (3,347,861) -- --
Depreciation and amortization................ -- 580,898 730,541 337,103 689,593
Amortization of deferred marketing and
financing costs............................ -- 77,606 162,237 65,894 39,458
Preferred stock and preferred stock warrants
issued for financing costs, marketing cost
and interest expense....................... -- 113,197 -- -- --
Common stock options issued for services and
compensation............................... -- -- 29,704 -- 707,115
Accretion of premium on notes payable........ -- 29,748 53,286 25,251 25,520
Changes in operating assets and liabilities:
Accounts receivable.......................... -- (193,687) (2,033,608) (272,101) (745,674)
Prepaid expenses and other................... -- 26,601 7,246 (120,470) (202,658)
Other assets................................. -- (12,692) (66,693) (50,625) (6,387)
Accounts payable and accrued liabilities..... -- (75,170) 479,494 175,012 1,085,228
Deferred revenue............................. -- 12,591 4,508,760 237,394 (1,620,548)
----------- ----------- ----------- ----------- -----------
Net cash used by continuing operations... -- (3,424,097) (1,668,959) (2,059,784) (3,896,965)
Net cash used by discontinued operations....... (3,003,956) (3,491,102) (1,980,989) (794,850) --
----------- ----------- ----------- ----------- -----------
Net cash used by operating activities.... (3,003,956) (6,915,199) (3,649,948) (2,854,634) (3,896,965)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of discontinued
operations................................... -- -- 3,355,215 -- --
Purchase of equipment and software............. (1,848,753) (1,056,942) (894,493) (261,633) (1,587,769)
Proceeds from sale of equipment................ 31,289 7,358 1,921 -- --
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by investing
activities............................. (1,817,464) (1,049,584) 2,462,643 (261,633) (1,587,769)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common and preferred
stock........................................ 8,631,389 5,414,330 3,160,588 3,163,486 --
Principal payments on capital lease
obligations.................................. (11,912) (19,768) (22,307) (10,955) (8,056)
Proceeds from notes payable.................... -- 3,522,658 477,343 111,452 --
Payments on notes payable...................... -- (253,471) (542,087) (240,130) (333,837)
Change in restricted cash...................... -- (750,320) 750,320 619,376 --
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by financing
activities............................. 8,619,477 7,913,429 3,823,857 3,643,229 (341,893)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ 3,798,057 (51,354) 2,636,552 526,962 (5,826,627)
Cash and cash equivalents at beginning of
period......................................... -- 3,798,057 3,746,703 3,746,703 6,383,255
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period....... $ 3,798,057 $ 3,746,703 $ 6,383,255 $ 4,273,665 $ 556,628
=========== =========== =========== =========== ===========
Supplemental cash flow information --
Cash paid for interest......................... $ 4,807 $ 86,865 $ 107,558 $ 54,860 $ 46,099
=========== =========== =========== =========== ===========
Supplemental noncash investing and financing
activities:
Common stock and common stock options issued
for assets................................... $ 12,282 -- -- -- --
=========== =========== =========== =========== ===========
Redeemable preferred stock warrants issued for
financing and marketing costs................ $ -- $ 320,394 $ 70,223 -- --
=========== =========== =========== =========== ===========
Notes payable and accrued interest payable
converted to preferred stock................. $ -- $ 2,021,697 -- -- --
=========== =========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 77

EXACTIS.COM, INC.

Notes to Financial Statements

December 31, 1997 and 1998 and June 30, 1999 (Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION

Exactis.com, Inc. (formerly Infobeat Inc.) (the "Company"), a Delaware
corporation, was formed on January 30, 1996. In January 1999, the
Company changed its name from Infobeat Inc. to Exactis.com, Inc. The
Company provides permission-based outsourced email marketing and
communications solutions. Through December 1998, the Company also sold
advertising, which was distributed with free email consumer newsletters
to subscribers (see note 2).

The accompanying unaudited financial information as of June 30, 1999 and
for the six-month periods ended June 30, 1998 and 1999 has been prepared
in accordance with generally accepted accounting principles for interim
financial information. All significant adjustments, consisting of only
normal and recurring adjustments, which, in the opinion of management,
are necessary for a fair presentation of the results of operations and
cash flows for the six months ended June 30, 1998 and 1999 have been
included. Operating results for the six month period ending June 30,
1999 are not necessarily indicative of the results that may be expected
for the full year.

The Company has incurred significant losses since inception and expects
to incur a loss in 1999. Should the Company be unable to generate
significant revenue and realize cash flows from operations in the near
term, the Company will require additional equity or debt financing to
meet working capital needs and to fund operating losses. Although the
Company completed financing transactions in July and August 1999, as
described in note 8, management believes the Company will require
additional financing and there can be no assurances that such financing
will be available in the future.

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 revenue and expenses
during the reporting period. Actual results could differ from those
estimates.

(b) CASH EQUIVALENTS AND RESTRICTED CASH

The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase to be cash equivalents.

Restricted cash in 1997 consisted of proceeds from the sale of preferred
stock to a strategic partner which was committed, and used in 1998, for
the development of the email services business.

Equipment and purchased computer software are recorded at cost.
Depreciation and amortization is calculated using the straight-line
method over the estimated useful lives of the assets which range from 3
to 5 years.

(d) INCOME TAXES

The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
(Statement 109). Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for the

F-7
<PAGE> 78
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in operations in the
period that includes the enactment date. A valuation allowance is
required to the extent any deferred tax assets may not be realizable.

(e) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of certain of the Company's financial instruments,
including accounts receivable and accrued liabilities, approximate fair
value because of their short maturities. Because the interest rates on
the Company's notes payable and capital lease obligations reflect market
rates and terms, the fair values of these instruments approximate
carrying amounts.

(f) REVENUE RECOGNITION

Revenue generally is derived from the delivery of email messages for
clients on a pre-determined price per message basis and is recognized
upon delivery. The Company records deferred revenue for payments
received in advance of services performed.

(g) IMPAIRMENT OF LONG-LIVED ASSETS AND ASSETS TO BE DISPOSED OF

In accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the
Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is generally measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is equal to the amount by which the
carrying amounts of the assets exceed the fair values of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell.

(h) STOCK-BASED COMPENSATION

The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense is recorded on the date of grant only if
the current market price of the underlying stock exceeds the exercise
price of the option. Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation, permits entities to recognize
as expense, over the vesting period, the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income or loss disclosures as if the
fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosures required by SFAS No. 123.

(i) CONTINGENT STOCK PURCHASE WARRANTS

The Company recorded contingent stock purchase warrants issued prior to
November 21, 1997 in accordance with Emerging Issues Task Force Bulletin
96-3: Accounting for Equity Instruments
F-8
<PAGE> 79
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

That Are Issued for Consideration Other Than Employee Services under
FASB Statement No. 123. Under EITF 96-3, the number of warrants
estimated to eventually be issued are recorded at the fair value at the
grant date. The Company expenses subsequent revisions to the estimated
number of warrants to be issued based on the fair value of the warrants,
as determined at the grant date.

The Company has recorded contingent stock purchase warrants issued
subsequent to November 20, 1997 in accordance with Emerging Issues Task
Force Bulletin 96-18: Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services. At the grant date, the minimum number of warrants
which may eventually be issued are recorded at their fair value, which
is adjusted in subsequent periods for revisions of the minimum number of
warrants to be issued and the then current fair value of the warrants.

(j) LOSS PER SHARE

Loss per share is presented in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128). Under SFAS 128, basic earnings (loss) per share (EPS)
excludes dilution for potential common stock and is computed by dividing
income or loss available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock.
Basic and diluted EPS are the same in 1996, 1997, 1998 and 1999, as all
potential common stock instruments are antidilutive.

(2) DISCONTINUED OPERATIONS

Prior to December 1998, the Company operated in two lines of business. The
Company's initial business, the InfoBeat publishing business, was the
publication of advertising supported newsletters delivered daily to
subscribers via email. In early 1998, the Company launched its outsourced
email marketing and communications services business (the email services
business).

In December 1998 the Company sold the InfoBeat publishing business,
including rights to the InfoBeat brand, the consumer newsletters and the
subscriber lists to Sony Music, a Group of Sony Music Entertainment Inc.
The sales agreement and related service agreement provide for the payment
of $5.0 million in 1998, $1.5 million in 1999 and minimum payments over a
three year period totaling $8.3 million for email distribution services to
be provided to Sony Music, including distribution of modified versions of
the InfoBeat newsletters. In connection with the agreements, Sony Music was
granted preferred stock purchase warrants with contingent vesting
provisions based on future performance criteria (see note 3).

The Company accounted for the sales transaction, and allocated the related
revenue, based on the estimated fair values of the separate elements of the
arrangement. Accordingly, the excess of the total minimum proceeds under
the agreement of $14.8 million over the estimated fair value of the service
arrangement, as determined by the Company's Board of Directors, was
recorded as a gain on the sale of the discontinued operations of
approximately $3.3 million. Proceeds received as of December 31, 1998 in
excess of the gain, and the related $1.5 million receivable for a payment
due in 1999, were recorded as deferred revenue totaling approximately $4.3
million, which will be amortized to revenue over the term of the service
agreement.

The results of the InfoBeat publishing business have been reported
separately as discontinued operations in the statements of operations. As
the Company has not recorded income tax benefits for

F-9
<PAGE> 80
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

net operating loss carryforwards, no income taxes were allocated to
discontinued operations. Revenue of the InfoBeat publishing business for
the period from inception to December 31, 1996 and the years ended December
31, 1997 and 1998 was $0, $496,099 and $1,957,700, respectively, which
amounts are included in loss from discontinued operations in the
accompanying statements of operations. The net assets specifically used in
the InfoBeat publishing business were not significant at December 31, 1998.

(3) PREFERRED STOCK AND STOCKHOLDERS' EQUITY

(a) PREFERRED STOCK

The Company has four classes of preferred stock outstanding (Series A,
Series B, Series C and Series D) in addition to common stock. All
preferred shares are convertible at any time, at the option of the
holder, or in the case of an initial public offering meeting certain
offering price requirements, into an equal number of shares of common
stock, subject to adjustment for dilution that may occur from future
equity transactions. All preferred shares have voting rights on an as-
converted basis and have liquidation preferences equal to the face
amount of preferred shares sold.

The Series B, Series C and Series D Preferred Stock are subject to
mandatory redemption by the Company at $3.00, $4.00 and $5.08 per share,
respectively, as specified below:

<TABLE>
<CAPTION>
PERCENTAGE OF REMAINING
REDEMPTION DATE SHARES TO BE REDEEMED
- --------------- -----------------------
<S> <C>
July 31, 2003........................................... 33 1/3%
July 31, 2004........................................... 50%
July 31, 2005........................................... 100%
</TABLE>

The Series A preferred shares are not redeemable.

(b) WARRANTS

In April 1997, the Company issued warrants to purchase 46,666 shares of
Series B preferred stock at $3.00 per share in connection with the
issuance of notes payable to a bank. The warrants expire in 2007 and at
December 31, 1998, all of the warrants were exercisable. The fair value
of the warrants at the date of issuance was recorded as deferred
financing costs and is being amortized to interest expense over the term
of the notes using the interest method.

In June 1997, the Company issued warrants to purchase 75,000 shares of
Series C preferred stock at $4.00 per share in connection with a bridge
financing. The warrants expire in 2001 and at December 31, 1998, all of
the warrants were exercisable. The fair value of the warrants at the
date of issuance was recognized as interest expense in 1997.

In July 1997, the Company issued warrants to purchase 210,917 shares of
Series C preferred stock at $4.00 per share in connection with the
issuance of Series C preferred stock. The warrants expire in 2001 and at
December 31, 1998, all of the warrants were exercisable. The fair value
of the warrants at the date of issuance was separately recorded as
warrants for the purchase of mandatorily redeemable preferred stock and
as a reduction in the Series C preferred stock balance.

In July 1997, the Company issued warrants to purchase 425,000 shares of
Series C preferred stock at $6.00 per share in connection with a
marketing agreement. Vesting of the warrants is contingent upon the
recipient meeting certain performance requirements under the agreement.

F-10
<PAGE> 81
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

The warrants expire in 2000 and at December 31, 1998, 63,750 of the
warrants were exercisable. The fair value of the warrants is being
recognized as marketing and sales expense over the term of the
agreement, based on management's periodic estimate of the number of
warrants which will ultimately vest under the agreement. Such estimate
was adjusted in 1998 and the Company recorded an additional $70,223 of
deferred marketing expense. At June 30, 1999, 170,000 warrants were
vested and exercisable.

In December 1998, the Company issued warrants to purchase 600,000 shares
of Series D preferred stock in connection with the service arrangement
described in note 2. The exercise price per share is the greater of
$6.00 per share or the price per share that is received in a qualified
financing prior to performance requirements being met. Vesting of the
warrants is contingent upon the recipient meeting certain performance
requirements under the agreement. The warrants expire in 2003 and at
June 30, 1999 and December 31, 1998, none of the warrants were
exercisable. The fair value of the warrants is being recognized as
marketing and sales expense at the time performance requirements are
met.

In 1996 and 1997, the Company adopted stock option plans (the 1996 Plan
and the 1997 Plan) pursuant to which the Company's Board of Directors
may grant incentive stock options and non-qualified stock options to
employees, directors and consultants. The 1996 Plan and the 1997 Plan
authorize grants of options to purchase up to an aggregate of 1,600,000
shares of authorized but unissued common stock. Options forfeited under
the 1996 Plan are available for grant under the 1997 Plan. Stock options
are granted with an exercise price equal to the stock's fair market
value at the date of grant as determined by the Company's Board of
Directors. Incentive stock options have ten-year terms and generally
vest 25% one year from the grant date with the remainder vesting on a
pro-rata basis over 36 months. Non-qualified stock options have ten-year
terms and generally vest over periods up to four years from the grant
date, although 658,000 non-qualified stock options with three-year
vesting were granted in May 1999.

At December 31, 1998, 587,081 shares were available for grant under the
Plans. The per share weighted-average fair value of stock options
granted during 1996, 1997 and 1998 was $0.10, $0.33 and $0.41,
respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions: no
volatility or dividends, risk-free interest rate of 6%, and an expected
life of 2 years.

The Company utilizes APB Opinion No. 25 in accounting for its Plans and,
accordingly, since the Company generally grants options at fair value,
no compensation cost was recognized for stock options in the
accompanying financial statements in 1996, 1997 and 1998. In May 1999,
658,000 stock options were granted with exercise prices less than fair
market value, resulting in total compensation expense to be recognized
over the vesting period of $1,855,560, $707,115 of which was recognized
in the six months ended June 30, 1999. If the Company determined
compensation cost based on the fair value of the options at the grant
date under SFAS No. 123, the Company's net loss would have been
approximately $3,413,000, $7,714,000 and $4,540,000 in 1996, 1997 and
1998, respectively.

F-11
<PAGE> 82
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

The following table summarizes stock option activity from inception
(January 30, 1996) to June 30, 1999:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balances at inception.............................. -- $ --
Granted.......................................... 619,643 .93
Forfeited........................................ (3,500) .89
---------
Balance at December 31, 1996....................... 616,143 .93
Exercised........................................ (1,000) 1.25
Granted.......................................... 657,160 2.88
Forfeited........................................ (378,667) 1.14
---------
Balance at December 31, 1997....................... 893,636 1.71
Exercised........................................ (8,053) 1.25
Granted.......................................... 513,065 3.74
Forfeited........................................ (385,729) 2.04
---------
Balance at December 31, 1998....................... 1,012,919 3.05
Granted.......................................... 956,000 2.38
Forfeited........................................ (544,496) 3.13
---------
Balances at June 30, 1999 (unaudited).............. 1,424,423 2.57
=========
</TABLE>

At December 31, 1998, the range of exercise prices of outstanding
options was $0.75 to $4.32 and the remaining contractual life of
outstanding options was 8.71 years. At December 31, 1998, 291,284
incentive options and 75,043 non-qualified options were exercisable.

The following table summarizes information about stock options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------- -----------------------
WEIGHTED NUMBER
RANGE AVERAGE WEIGHTED EXERCISABLE WEIGHTED
OF REMAINING AVERAGE AS OF AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES OUTSTANDING LIFE PRICE 1998 PRICE
- ------------ ----------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$.75 -- 1.25 165,693 7.74 $1.20 100,395 $1.20
3.00 -- 3.40 689,810 8.72 3.21 247,016 3.13
4.32 157,416 9.69 4.32 18,916 4.32
--------- -------
1,012,919 8.71 3.05 366,327 2.66
========= =======
</TABLE>

F-12
<PAGE> 83
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

(4) INCOME TAXES

Income tax benefit relating to losses from continuing operations for the
period and years ended December 31 differs from the amounts that would
result from applying the federal statutory rate of 34% as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Expected tax benefit....................................... $(1,354,284) $(1,883,575)
State income taxes, net of federal benefit................. (78,867) (109,691)
Change in valuation allowance for deferred tax assets...... 1,505,151 2,028,266
Other, net................................................. (72,000) (35,000)
----------- -----------
Actual income tax benefit.................................. $ -- $ --
=========== ===========
</TABLE>

No tax benefit was recorded by the Company for the six months ended June
30, 1999 due to net operating losses and an increase in the valuation
allowance for deferred tax assets.

Temporary differences that give rise to the components of deferred tax
assets as of December 31 are as follows:

<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Net operating loss carryforwards........................... $ 3,665,164 $ 4,372,641
Receivables due to allowance for doubtful accounts for tax
purposes only............................................ 27,771 27,771
Deferred revenue........................................... -- 1,138,453
Equipment and leasehold improvements due to differences in
depreciation............................................. (4,938) 71,082
Accrued expenses........................................... 22,203 78,692
Other, net................................................. -- 49,827
----------- -----------
Gross deferred tax asset......................... 3,710,200 5,738,466
Valuation allowance........................................ (3,710,200) (5,738,466)
----------- -----------
Net deferred tax asset........................... $ -- $ --
=========== ===========
</TABLE>

At December 31, 1998, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $11.8 million, which is
available to offset future federal taxable income, if any, through 2018.
Management believes the utilization of the carryforwards will be limited by
Internal Revenue Code Section 382 relating to changes in ownership, as
defined.

Due to the uncertainty regarding the realization of the deferred tax assets
relating to the net operating loss carryforwards and other temporary
differences, a valuation allowance has been recorded for the entire amount
of the Company's deferred tax asset at December 31, 1997 and 1998 and June
30, 1999.

F-13
<PAGE> 84
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

(5) LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1997 1998 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
14.0% note, payable in monthly installments of
$31,669, including interest, with final payment
of $75,000 due March 1, 2000; secured by
computer equipment............................. $ 796,513 $ 502,994 $ 340,709
12.5% note, payable in monthly installments of
$12,815, including interest, with final payment
of $30,622 due October 1, 2000; secured by
computer equipment and furniture............... 388,056 276,148 214,735
12.5% note, payable in monthly installments of
$3,585, including interest, with final payment
of $8,577 due December 1, 2000; secured by
computer equipment............................. 114,366 82,830 65,976
12.3% note, payable in monthly installments of
$3,487, including interest with final payment
of $8,359 due May 1, 2001...................... -- 93,631 78,013
12.3% note, payable in monthly installments of
$11,454, including interest, with final payment
of $27,442 due August 1, 2001.................. -- 331,874 279,727
---------- ---------- ---------
1,298,935 1,287,477 979,160
Less current portion................... (482,506) (677,777) (679,060)
---------- ---------- ---------
Long-term debt, excluding current
portion.............................. $ 816,429 $ 609,700 $ 300,100
========== ========== =========
</TABLE>

The above notes payable are included in a bank financing agreement. The
aggregate maturities for long-term debt for each of the years subsequent to
December 31, 1998 are as follows: 1999 -- $677,777; 2000 -- $496,938 and
2001 -- $112,762.

In June 1997, the Company borrowed $2.0 million in the form of convertible
subordinated promissory notes with an interest rate of 12%, which amount
was converted to Series C preferred stock in July 1997.

F-14
<PAGE> 85
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

(6) COMMITMENTS AND CONTINGENCIES

(a) LEASES

The Company leases office facilities under an operating lease agreement
which expires in 2001. Additionally, the Company has leased $62,043 of
computer equipment under capital leases. Future minimum lease payments
as of December 31, 1998, are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASE
------- ---------
<S> <C> <C>
1999...................................................... $8,260 $175,176
2000...................................................... -- 175,176
2001...................................................... -- 175,176
------ --------
Total future minimum lease payments............. 8,260 $525,528
========
Less amount representing interest......................... (204)
------
Present value of future minimum lease payments--
current....................................... $8,056
======
</TABLE>

Rent expense for the period from inception (January 30, 1996) to
December 31, 1996, the years ended December 31, 1997 and 1998 and the
six months ended June 30, 1999 was $57,300, $152,461, $167,862 and
$88,107, respectively.

(b) EMPLOYEE BENEFIT PLAN

During 1996, the Company established a 401(k) plan that allows eligible
employees to contribute up to 15% of their compensation up to a maximum
amount provided by the Internal Revenue Code. The Company may make
discretionary contributions to the 401(k) plan. The Company has made no
contributions to the Plan since inception.

The Company is subject to litigation and claims incidental to its
business. While it is not feasible to predict or determine the financial
outcome of these matters, management does not believe that the ultimate
resolution of these matters will result in a significant adverse effect
on the Company's financial position, results of operations or liquidity.

(7) SIGNIFICANT CUSTOMERS

Revenue from continuing operations attributable to significant customers
(as a percentage of total revenue from continuing operations) in 1997, 1998
and 1999 was as follows:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, SIX MONTHS
------------- ENDED JUNE 30,
1997 1998 1999
----- ----- --------------
(UNAUDITED)
<S> <C> <C> <C>
Customer A................................................. -- -- 62%
Customer B................................................. 100% 6% --
Customer C................................................. -- 18% 5%
Customer D................................................. -- 11% 3%
</TABLE>

F-15
<PAGE> 86
EXACTIS.COM, INC.

Notes to Financial Statements -- (Continued)

(8) SUBSEQUENT EVENTS

On July 15, 1999, the Company issued 630,738 shares of Series E redeemable
preferred stock, and warrants to purchase 94,608 shares of Series E
redeemable preferred stock, for proceeds of approximately $4.1 million. On
August 13, 1999, the Company issued 726,546 additional shares of Series E
redeemable preferred stock, and additional warrants to purchase 108,978
shares of Series E redeemable preferred stock, for proceeds of
approximately $4.7 million. The Series E preferred shares have similar
rights and obligations as the Series B, C and D redeemable preferred stock
(see note 3). The warrants have an exercise price of $8.00 per share and
expire in July 2004.

F-16
<PAGE> 87

PROSPECTUS

[EXACTIS.COM LOGO]

3,800,000 Shares

Common Stock

THOMAS WEISEL PARTNERS LLC

DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED

WIT CAPITAL CORPORATION
<PAGE> 88

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 the
underwriting discount and commissions, payable by us in connection with the sale
of the common stock being registered hereby. All amounts shown are estimates,
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 18,823.00
NASD filing fee............................................. 7,055.00
Nasdaq National Market listing application fee.............. 17,500.00
Blue Sky fees and expenses.................................. 10,000.00
Printing and engraving expenses............................. 175,000.00
Legal fees and expenses..................................... 300,000.00
Accounting fees and expenses................................ 100,000.00
Transfer agent and registrar fees........................... 10,000.00
Miscellaneous expenses...................................... 12,222.00
-----------
Total.................................................. 650,000.00
===========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Our bylaws provide that we will indemnify our directors, officers,
employees and agents to the fullest extent permitted by Delaware law. In
addition, our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty to us and our stockholders. This
provision of the certificate of incorporation does not eliminate the duty of
care. In appropriate circumstances equitable remedies such as an injunction or
other forms of non-monetary relief are available under Delaware law. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws.

Each director will continue to be subject to liability for:

- breach of the director's duty of loyalty to Exactis.com;

- acts or omissions not in good faith or involving intentional misconduct;

- knowing violations of law;

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

- improper transactions between the director and Exactis.com; and

- improper distributions to stockholders and improper loans to directors
and officers.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and control persons of
Exactis.com under the foregoing provisions, or otherwise,
II-1
<PAGE> 89

Exactis.com has been advised that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act of
1933, and is, therefore, unenforceable.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Described below is information regarding all securities that have been
issued by us during the past three years.

On various dates between August 1996 and August 1999, we issued an
aggregate of 12,058 shares of its common stock to 11 employees pursuant to the
exercise of options granted under its stock options. The exercise prices per
share range from $0.75 to $1.25, for aggregate consideration of $14,988. We
relied on the exemption provided by Rule 701 of the Securities Act.

On July 15, 1999, we issued an aggregate of 630,738 shares of our Series E
preferred stock at a purchase price of $6.50 per share and warrants to purchase
up to 94,608 shares of Series E preferred stock at an exercise price of $8.00
per share to nine accredited investors for cash proceeds in the aggregate amount
of $4.1 million. In a second closing held on August 13, 1999, we issued an
additional 726,546 shares of our Series E preferred stock at a purchase price of
$6.50 per share and warrants to purchase up to 108,978 shares of Series E
preferred stock at an exercise price of $8.00 per share to twenty-nine
accredited investors for cash proceeds in the aggregate amount of $4.7 million.
We relied on the exemption provided by Rule 506 of Regulation D under the
Securities Act.

On December 30, 1998, we issued a warrant to purchase an aggregate of
600,000 shares of our Series D preferred stock at an exercise price of $6.00 per
share to one accredited investor in connection with our sale of certain assets.
We relied on the exemption provided by Rule 506 of Regulation D under the
Securities Act.

On June 8, 1998, we issued an aggregate of 625,001 shares of our Series D
preferred stock to eight accredited investors at a purchase price of $5.08 per
share for cash proceeds in the aggregate amount of $3.2 million. We relied on
the exemption provided by Rule 506 of Regulation D under the Securities Act.

On July 24, 1997, we issued an aggregate of 1,911,533 shares of our Series
C preferred stock at a purchase price of $4.00 per share and warrants to
purchase up to 210,917 shares of Series C preferred stock at an exercise price
of $4.00 per share to six accredited investors for cash proceeds in the
aggregate amount of $7.6 million. We relied on the exemption provided by Rule
506 of Regulation D under the Securities Act.

On July 24, 1997, we issued a warrant to purchase an aggregate of 425,000
shares of our Series C preferred stock at an exercise price of $6.00 per share
to one accredited investor in connection with a marketing agreement. We relied
on the exemption provided by Rule 506 of Regulation D under the Securities Act.

On June 20, 1997, we issued convertible promissory notes in the aggregate
principal amount of $2.0 million bearing simple interest at a rate of 12.0% per
annum and warrants to purchase up to 75,000 shares of Series C preferred stock
at an exercise price of $4.00 per share to five accredited investors for cash
proceeds in the aggregate amount of $2.0 million. We relied on the exemption
provided by Rule 506 of Regulation D under the Securities Act.

In connection with a Loan and Security Agreement dated March 27, 1997, we
issued warrants to two lenders to purchase up to an aggregate of 46,666 shares
of Series B preferred stock at an exercise price of $3.00 per share. We relied
on the exemption provided by Rule 506 of Regulation D under the Securities Act.

On July 22, 1996, we issued an aggregate of 1,416,666 shares of our Series
B preferred stock to three accredited investors at a purchase price of $3.00 per
share. On September 19, 1996, we issued 440,000 shares of Series B preferred
stock to an additional accredited investor at a purchase price of $3.00 per
share. On November 27, 1996, we issued 666,667 shares of Series B preferred
stock to an additional accredited investor at a purchase price of $3.00 per
share. We received cash proceeds from the
II-2
<PAGE> 90

issuance of Series B preferred stock in the aggregate amount of $7.6 million. We
relied on the exemption provided by Rule 506 of Regulation D under the
Securities Act.

The recipients of the above-described securities represented their
intention to acquire the securities for investment only and not with a view for
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. All recipients had adequate access, through
employment or other relationships, to information about Exactis.com.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement.
3.1** -- Restated Certificate of Incorporation of Exactis.com.
3.2 -- Certificate of Amendment to Restated Certificate of
Incorporation of Exactis.com.
3.3** -- Form of Restated Certificate of Incorporation of
Exactis.com to become effective upon the closing of this
offering.
3.4** -- Bylaws of Exactis.com.
3.5** -- Amended and Restated Bylaws of Exactis.com to become
effective upon the closing of this offering.
4.1** -- Reference is made to Exhibits 3.1 through 3.4.
4.2** -- Specimen stock certificate representing shares of common
stock of Exactis.com.
5.1** -- Opinion of Cooley Godward LLP regarding the legality of
the securities being registered.
10.1** -- 1996 Stock Option Plan of Exactis.com.
10.2** -- 1997 Stock Option Plan of Exactis.com.
10.3** -- 1999 Equity Incentive Plan of Exactis.com.
10.4** -- 1999 Employee Stock Purchase Plan of Exactis.com.
10.5** -- Third Amended and Restated Stockholders' Agreement, among
Exactis.com and certain of its stockholders, dated July
15, 1999.
10.6** -- Form of Indemnity Agreement to be entered into between
Exactis.com and each of its directors and executive
officers.
10.7** -- Sublease Agreement, between Exactis.com and Atlantic
Richfield Company, as amended, dated August 7, 1996.
10.8** -- Series A Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated February 14, 1996 and March 15, 1996.
10.9** -- Series B Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 22, 1996 September 19, 1996 and November 27,
1996.
10.10** -- Series C Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 24, 1997.
10.11** -- Series D Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated June 8, 1998.
10.12** -- Series E Preferred Stock Purchase Agreement, among
Exactis.com and the parties named therein, as amended,
dated July 15, 1999.
10.13**+ -- Asset Purchase Agreement, between Exactis.com and Sony
Music, a Group of Sony Music Entertainment Inc., dated
December 15, 1998.
</TABLE>

II-3
<PAGE> 91

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.14**+ -- Service Bureau Agreement, between Exactis.com and Sony
Music, a Group of Sony Music Entertainment Inc., dated
January 1, 1999.
10.15** -- Form of Series B Preferred Stock Warrant.
10.16** -- Form of Series C Preferred Stock Warrant.
10.17** -- Form of Series C Preferred Stock Warrant issued to
American Express on July 24, 1997.
10.18** -- Form of Series D Preferred Stock Warrant.
10.19** -- Form of Series E Preferred Stock Warrant.
23.1** -- Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 -- Consent of KPMG LLP.
24.1** -- Powers of attorney (included on Page II-5).
27** -- Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

** Previously filed.

+ The Company has applied for confidential treatment with respect to portions
of these exhibits.

(b) FINANCIAL STATEMENT SCHEDULES.

Not applicable.

ITEM 17. UNDERTAKINGS.

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

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 provisions described in Item 14 or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes:

(1) That, for purposes of determining any liability under the
Securities Act of 1933, 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 Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, 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.

II-4
<PAGE> 92

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Denver, County of Denver, State of Colorado, on October 4, 1999.

By: /s/ E. THOMAS DETMER, JR.
---------------------------------
E. Thomas Detmer, Jr.
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

* Chairman of the Board of October 4, 1999
- ----------------------------------------------------- Directors
Adam Goldman

/s/ E. THOMAS DETMER, JR. President, Chief Executive October 4, 1999
- ----------------------------------------------------- Officer and Director
E. Thomas Detmer, Jr. (Principal Executive Officer)

/s/ KENNETH W. EDWARDS, JR. Chief Financial Officer, October 4, 1999
- ----------------------------------------------------- Secretary and Treasurer
Kenneth W. Edwards, Jr. (Principal Financial and
Accounting Officer)

* Director October 4, 1999
- -----------------------------------------------------
Pierric D. Beckert

* Director October 4, 1999
- -----------------------------------------------------
Linda Fayne Levinson

* Director October 4, 1999
- -----------------------------------------------------
David D. Williams

*By: /s/ E. THOMAS DETMER, JR.
-------------------------------------------------
E. Thomas Detmer, Jr.
Attorney-in-fact
</TABLE>

II-5
<PAGE> 93

EXHIBIT INDEX

<PAGE> 94

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.19** -- Form of Series E Preferred Stock Warrant.
23.1** -- Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 -- Consent of KPMG LLP.
24.1** -- Powers of attorney (included on Page II-5).
27** -- Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

** Previously filed.

+ The Company has applied for confidential treatment with respect to portions
of these exhibits.

<PAGE> 1
EXHIBIT 1.1

3,800,000 SHARES

EXACTIS.COM, INC.

COMMON STOCK

UNDERWRITING AGREEMENT

DATED , 1999
------

<PAGE> 2

TABLE OF CONTENTS

PAGE
----

<S> <C> <C>
1. Representations and Warranties of the Company............................................................2

1.1. Effective Registration Statement................................................................2
1.2. Contents of Registration Statement..............................................................2
1.3. Due Incorporation...............................................................................3
1.4. No Subsidiaries.................................................................................3
1.5. Underwriting Agreement..........................................................................3
1.6. Description of Capital Stock....................................................................3
1.7. Authorized Stock................................................................................3
1.8. Validly Issued Shares...........................................................................4
1.9. No Conflict.....................................................................................4
1.10. No Material Adverse Change......................................................................4
1.11. Legal Proceedings; Exhibits.....................................................................4
1.12. Compliance with Securities Act..................................................................4
1.13. Not an Investment Company.......................................................................5
1.14. Compliance with Laws............................................................................5
1.15. No Environmental Costs..........................................................................5
1.16. No Registration Rights..........................................................................5
1.17. Cuban Business Statute..........................................................................5
1.18. Absence of Material Charges.....................................................................5
1.19. Good Title to Properties........................................................................6
1.20. Intellectual Property Rights....................................................................6
1.21. No Labor Disputes...............................................................................6
1.22. Insurance.......................................................................................6
1.23. Governmental Permits............................................................................7
1.24. Accounting Controls.............................................................................7
1.25. Year 2000 Compliance............................................................................7
1.26. Directed Share Program..........................................................................7
1.27. Compliance with Laws............................................................................8

2. Representations and Warranties of the Selling Stockholders...............................................8

2.1. Due Authorization...............................................................................8
2.2. Selling Stockholder Documents...................................................................8
2.3. No Conflict.....................................................................................8
2.4. Good Title to Shares............................................................................9
2.5. Delivery of Common Shares.......................................................................9
2.6. No Registration Rights..........................................................................9
2.7. No Price Stabilization or Manipulation..........................................................9
2.8. Disclosure by Selling Stockholder in Registration Statement....................................10

3. Purchase and Sale Agreements............................................................................10

3.1. Firm Shares....................................................................................10
</TABLE>

<PAGE> 3

TABLE OF CONTENTS
(CONTINUED)

<TABLE>
<S> <C> <C>
3.2. Additional Shares..............................................................................10
3.3. Market Standoff Provision......................................................................11
3.4. Terms of Public Offering.......................................................................11

4. Payment and Delivery....................................................................................12

4.1. Firm Shares....................................................................................12
4.2. Additional Shares..............................................................................12
4.3. Delivery of Certificates.......................................................................12

5. Covenants of the Company................................................................................12

5.1. Furnish Copies of Registration Statement and Prospectus........................................13
5.2. Notification of Amendments or Supplements......................................................13
5.3. Filings of Amendments or Supplements...........................................................13
5.4. Blue Sky Laws..................................................................................13
5.5. Earnings Statement.............................................................................13
5.6. Use of Proceeds................................................................................14
5.7. Transfer Agent.................................................................................14
5.8. Periodic Reporting Obligations.................................................................14
5.9. Directed Share Program.........................................................................14
5.10. Exchange Act Compliance........................................................................14

6. Conditions to the Underwriters' Obligations.............................................................14

6.1. Effective Registration Statement...............................................................15
6.2. Rule 462 Registration Statement................................................................15
6.3. Prospectus Filed with Commission...............................................................15
6.4. No Stop Order..................................................................................15
6.5. No NASD Objection..............................................................................15
6.6. No Material Adverse Change.....................................................................15
6.7. Officer's Certificate..........................................................................16
6.8. Opinion of Company Counsel.....................................................................16
6.9. Opinion of Selling Stockholders Counsel........................................................16
6.10. Opinion of Patent Counsel......................................................................16
6.11. Opinion of Underwriters Counsel................................................................16
6.12. Accountant's Comfort Letter....................................................................16
6.13. Lock-Up Agreements.............................................................................17
6.16. Additional Documents...........................................................................17

7. Expenses................................................................................................18

8. Indemnity and Contribution..............................................................................19

8.1. Indemnification of the Underwriters............................................................19
8.2. Indemnification of Company by the Selling Stockholders.........................................19
8.3. Indemnification of Underwriters by Selling Stockholders........................................19
</TABLE>

<PAGE> 4

TABLE OF CONTENTS
(CONTINUED)

<TABLE>
<S> <C> <C> <C>
8.4. Indemnification by the Underwriters............................................................20
8.5. Indemnification Procedures.....................................................................20
8.6. Limitation of Selling Stockholder Liability....................................................22
8.7. Indemnification for Directed Share Program.....................................................22
8.8. Contribution Agreement.........................................................................22
8.9. Contribution Amounts...........................................................................23
8.10. Survival of Provisions.........................................................................23

9. Effectiveness...........................................................................................24

10. Termination.............................................................................................24

11. Defaulting Underwriters.................................................................................24

12. Counterparts............................................................................................25

13. Headings; Table of Contents.............................................................................25

14. Notices.................................................................................................26

15. Successors..............................................................................................26

16. Partial Unenforceability................................................................................27

17. Governing Law...........................................................................................27

18. Failure of the Selling Stockholders to Sell and Deliver Shares..........................................27

19. Entire Agreement........................................................................................27

20. Amendments..............................................................................................28

21. Sophisticated Parties...................................................................................28
</TABLE>

SCHEDULES

A List of Underwriters
B List of Selling Stockholders

EXHIBITS

A Matters to be Covered in the Opinion of Company Counsel
B Matters to be Covered in the Opinion of Patent Counsel to the Company
C Form of Lock-Up Agreement

<PAGE> 5

, 1999
--------

Thomas Weisel Partners LLC
Dain Rauscher Wessels
Wit Capital Corporation
As Representatives of the several Underwriters
c/o Thomas Weisel Partners LLC
One Montgomery Street, Suite 3700
San Francisco, California 94104

Ladies and Gentlemen:

Introduction. Exactis.com, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to the several underwriters named in
Schedule A hereto (the "UNDERWRITERS"), and certain stockholders of the Company
(the "SELLING STOCKHOLDERS") named in Schedule B hereto severally propose to
sell to the several Underwriters, an aggregate of 3,800,000 shares of the common
stock, par value $0.01 per share, of the Company (the "FIRM SHARES"), of which
3,530,000 shares are to be issued and sold by the Company and 270,000 shares are
to be sold by the Selling Stockholders, with each Selling Stockholder selling
the number of shares set forth opposite such Selling Stockholder's name in
Schedule B hereto.

The Company also proposes to issue and sell to the several
Underwriters and the Selling Stockholders severally propose to sell to the
several Underwriters not more than an additional 570,000 shares of its common
stock, par value $0.01 per share (the "ADDITIONAL SHARES"), if and to the extent
that you shall have determined to exercise, on behalf of the Underwriters, the
right to purchase such shares of common stock granted to the Underwriters in
Section 3 hereof. If you determine to exercise this right to purchase the
Additional Shares, the Selling Stockholders shall sell the first 80,000 shares
and then the Company shall sell up to the remaining 490,000 shares. The Firm
Shares and the Additional Shares are hereinafter collectively referred to as the
"SHARES". The shares of common stock, par value $0.01 per share, of the Company
to be outstanding after giving effect to the sales contemplated hereby are
hereinafter referred to as the "COMMON STOCK". The Company and the Selling
Stockholders are hereinafter sometimes collectively referred to as the
"SELLERS". Thomas Weisel Partners LLC, Wit Capital Corporation and Dain Rauscher
Wessels have agreed to act as representatives of the several Underwriters (in
such capacity, the "REPRESENTATIVES") in connection with the offering and sale
of the Shares.

The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement on Form S-1 (file no.
333-85315), including a

<PAGE> 6

prospectus, relating to the Shares. The registration statement as amended at the
time it becomes effective, including the information (if any) deemed to be part
of the registration statement at the time of effectiveness pursuant to Rule 430A
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), is
hereinafter referred to as the "REGISTRATION STATEMENT"; the prospectus in the
form first used to confirm sales of Shares is hereinafter referred to as the
"PROSPECTUS". If the Company has filed a registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement. All references in this Agreement to the Registration
Statement, the Rule 462 Registration Statement, a preliminary prospectus, the
Prospectus, or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR").

As part of the offering contemplated by this Agreement, Thomas
Weisel Partners LLC has agreed to reserve out of the Shares set forth opposite
its name on Schedule A to this Agreement, up to 175,000 shares, for sale to the
Company's employees, officers, and directors and other parties associated with
the Company (collectively, "PARTICIPANTS"), as set forth in the Prospectus
under the heading "Underwriting" (the "DIRECTED SHARE PROGRAM"). The Shares to
be sold by Thomas Weisel Partners LLC pursuant to the Directed Share Program
(the "DIRECTED SHARES") will be sold by Thomas Weisel Partners LLC pursuant to
this Agreement at the public offering price. Any Directed Shares not orally
confirmed for purchase by any Participants by the end of the first business day
after the date on which this Agreement is executed will be offered to the
public by Thomas Weisel Partners LLC as set forth in the Prospectus.

1. Representations and Warranties of the Company.

The Company represents and warrants to and agrees with each of
the Underwriters that:

1.1. Effective Registration Statement.

The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.

1.2. Contents of Registration Statement.

2.
<PAGE> 7

amended or supplemented, if applicable, will comply in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iii) the Prospectus does not contain and, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in the Registration Statement
or the Prospectus based upon information relating to any Underwriter furnished
to the Company in writing by such Underwriter through you expressly for use
therein.

1.3. Due Incorporation.

The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company.

1.4. No Subsidiaries.

The Company has no subsidiaries.

1.5. Underwriting Agreement.

This Agreement has been duly authorized, executed and
delivered by the Company, and is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.

1.6. Description of Capital Stock.

The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.

1.7. Authorized Stock.

The shares of Common Stock (including the Shares to be sold by
the Selling Stockholders) outstanding prior to the issuance of the Shares to be
sold by the Company have been duly authorized and are validly issued, fully paid
and non-assessable.

3.
<PAGE> 8

1.8. Validly Issued Shares.

The Shares to be sold by the Company have been duly authorized
and, when issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.

1.9. No Conflict.

The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law or the certificate of incorporation
or by-laws of the Company or any agreement or other instrument binding upon the
Company that is material to the Company, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company, and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company of
its obligations under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Shares.

1.10. No Material Adverse Change.

There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company, from that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).

1.11. Legal Proceedings; Exhibits.

There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened to which the Company is a party or to
which any of the properties of the Company is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described or any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not described or
filed as required.

1.12. Compliance with Securities Act.

Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.

4.
<PAGE> 9

1.13. Not an Investment Company.

The Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.

1.14. Compliance with Laws.

The Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii)
has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to its business and (iii) is in compliance with
all terms and conditions of any such permit, license or approval, except where
such noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, individually or in the
aggregate, have a material adverse effect on the Company.

1.15. No Environmental Costs.

There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties) which
would, individually or in the aggregate, have a material adverse effect on the
Company.

1.16. No Registration Rights.

There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the Company
to file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement other than as
described in the Registration Statement and as have been waived in writing in
connection with the offering contemplated hereby.

1.17. Cuban Business Statute.

The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the Government of Cuba
or with any person or affiliate located in Cuba.

1.18. Absence of Material Charges.

Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (1) the Company has not
incurred any material

5.
<PAGE> 10
liability or obligation, direct or contingent, nor entered into any material
transaction not in the ordinary course of business; (2) the Company has not
purchased any of its outstanding capital stock, nor declared, paid or otherwise
made any dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any material
change in the capital stock, short-term debt or long-term debt of the Company,
except as described in the Prospectus.

1.19. Good Title to Properties.

The Company has good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned by it
which is material to the business of the Company, free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company; and any
real property and buildings held under lease by the Company are held by it under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company.

1.20. Intellectual Property Rights.

The Company owns or possesses, or can acquire on reasonable
terms, all material patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names that it currently employs in connection with the
business it now operates, and the Company has not received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse affect on
the Company.

1.21. No Labor Disputes.

No material labor dispute with the employees of the Company
exists, or, to the knowledge of the Company, is imminent; and the Company is not
aware of any existing, threatened or imminent labor disturbance by the employees
of any of its principal suppliers, manufacturers or contractors that could have
a material adverse effect on the Company.

1.22. Insurance.

The Company is insured by the insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged; and the Company has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect on the Company.

6.
<PAGE> 11

1.23. Governmental Permits.

The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, and the Company has not received
any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a material
adverse effect on the Company.

1.24. Accounting Controls.

The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are executed in
accordance with management's general or specific authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (3) access to assets is permitted only in
accordance with management's general or specific authorization; and (4) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

1.25. Year 2000 Compliance.

The Company has reviewed its operations and those of any third
parties with which the Company has a material relationship to evaluate the
extent to which the business or operations of the Company will be affected by
the Year 2000 Problem. As a result of such review, the Company has no reason to
believe, and does not believe, that the Year 2000 Problem will have a material
adverse effect on the Company, or result in any material loss or interference
with the Company's business or operations. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of mechanical or
electrical systems of any kind will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000.

1.26. Directed Share Program.

The Company represents and warrants to Thomas Weisel Partners
LLC that (i) the Registration Statement, the Prospectus and any preliminary
prospectus comply, and any further amendments or supplements thereto will
comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share Program,
and that (ii) no authorization, approval, consent, license, order, registration
or qualification of or with any government, governmental instrumentality or
court, other than such as have been obtained, is

7.
<PAGE> 12

necessary under the securities laws and regulations of foreign jurisdictions in
which the Directed Shares are offered outside the United States.

1.27. Compliance with Laws.

To the Company's knowledge, the Company is conducting its
business in compliance with the Fair Labor Standards Act, and all applicable
federal, state and local laws, rules and regulations of the jurisdictions in
which it is conducting business, including, without limitation, all applicable
local, state and federal laws and regulations governing environmental matters,
zoning and land use, except where the failure to be so in compliance would not
have a material adverse effect on the Company.

2. Representations and Warranties of the Selling Stockholders.

Each of the Selling Stockholders, severally and not jointly,
represents and warrants to and agrees with each of the Underwriters that:

2.1. Due Authorization.

This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder (including through the Power of Attorney,
as defined below), enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.

2.2. Selling Stockholder Documents.

The Custody Agreement and the Power of Attorney have been duly
authorized, executed and delivered by such Selling Stockholder and are valid and
binding agreements of such Selling Stockholder enforceable in accordance with
their respective terms, except as rights to indemnification thereunder may be
limited by applicable law and except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.

2.3. No Conflict.

The execution and delivery by such Selling Stockholder of, and
the performance by such Selling Stockholder of its obligations under, this
Agreement, the Custody Agreement signed by such Selling Stockholder and
____________, as Custodian, relating to the deposit of the Shares to be sold by
such Selling Stockholder (the "CUSTODY AGREEMENT") and the Power of Attorney
appointing certain individuals as such Selling Stockholder's attorneys-in-fact
to the

8.
<PAGE> 13
extent set forth therein, relating to the transactions contemplated hereby and
by the Registration Statement (the "POWER OF ATTORNEY") will not contravene any
provision of the certificate of incorporation or by-laws of such Selling
Stockholder (if such Selling Stockholder is a corporation), or any agreement or
other instrument binding upon such Selling Stockholder or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over such
Selling Stockholder, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by such Selling Stockholder of its obligations under this Agreement
or the Custody Agreement or Power of Attorney of such Selling Stockholder,
except such as may be required by the Securities Act and the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Shares, and to such Selling Stockholder's knowledge it will not contravene any
provisions of applicable law.

2.4. Good Title to Shares.

Such Selling Stockholder has, and on each Closing Date will
have, valid title to the Shares to be sold by such Selling Stockholder and the
legal right and power, and all authorization and approval required by law, to
enter into this Agreement, the Custody Agreement and the Power of Attorney and
to sell, transfer and deliver the Shares to be sold by such Selling Stockholder,
except such as may be required by the Securities Act and the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Shares.

2.5. Delivery of Common Shares.

Delivery of the Shares to be sold by such Selling Stockholder
pursuant to this Agreement will pass title to such Shares free and clear of any
security interests, claims, liens, equities and other encumbrances.

2.6. No Registration Rights.

Such Selling Stockholder does not have any registration or
other similar rights to have any equity or debt securities registered for sale
by the Company under the Registration Statement or included in the offering
contemplated by this Agreement, other than as described in the Registration
Statement or as contemplated under this Agreement and as have been waived in
writing in connection with the offering contemplated hereby.

2.7. No Price Stabilization or Manipulation.

Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might be reasonably
expected to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.

<PAGE> 14

2.8. Disclosure by Selling Stockholder in Registration Statement.

(i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading
with respect to, and only with respect to, information under the caption
"Principal and Selling Stockholders" which specifically relate to such Selling
Stockholder, (ii) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder with respect to, and only with respect to, information
under the caption "Principal and Selling Stockholders" which specifically relate
to such Selling Stockholder and (iii) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading with respect to, and only with respect to, information
under the caption "Principal and Selling Stockholders" which specifically relate
to such Selling Stockholder, except that the representations and warranties set
forth in this paragraph 2.9 do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein.

3. Purchase and Sale Agreements.

3.1. Firm Shares.

Each Seller, severally and not jointly, hereby agrees to sell
to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from such
Seller at $______ a share (the "PURCHASE PRICE") the number of Firm Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) that bears the same proportion to the number of Firm Shares to be
sold by such Seller as the number of Firm Shares set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Firm Shares.

3.2. Additional Shares.

On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to sell to the Underwriters the Additional Shares, and the Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 570,000
Additional Shares at the Purchase Price. A total of the first 80,000 Additional
Shares shall first be sold by the Selling Stockholders, on a pro rata basis,
based upon the number of Firm Shares to be sold by such Selling Stockholders set
forth on Schedule A hereto (subject to adjustments to eliminate fractional
shares); if the Underwriters purchase more

10.
<PAGE> 15

than 80,000 Additional Shares, the Company shall sell the remaining Additional
Shares to the Underwriters. If you, on behalf of the Underwriters, elect to
exercise such option, you shall so notify the Company and in writing not later
than thirty (30) days after the date of this Agreement, which notice shall
specify the number of Additional Shares to be purchased by the Underwriters and
the date on which such shares are to be purchased. Such date may be the same as
the Closing Date (as defined below) but not earlier than the Closing Date nor
later than ten (10) business days after the date of such notice. Additional
Shares may be purchased as provided in Section 4 hereof solely for the purpose
of covering over-allotments made in connection with the offering of the Firm
Shares. If any Additional Shares are to be purchased, each Underwriter agrees,
severally and not jointly, to purchase the number of Additional Shares (subject
to such adjustments to eliminate fractional shares as you may determine) that
bears the same proportion to the total number of Additional Shares to be sold by
such Seller as the number of Firm Shares set forth in Schedule A hereto opposite
the name of such Underwriter bears to the total number of Firm Shares.

3.3. Market Standoff Provision.

Each Seller hereby agrees that, without the prior written
consent of Thomas Weisel Partners LLC, it will not, during the period ending 180
days after the date of the Prospectus, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold
hereunder, or (B) the issuance by the Company of shares of Common Stock upon the
exercise of options or warrants or the conversion of a security outstanding on
the date hereof of which the Underwriters have been advised in writing and which
is described in the Prospectus. In addition, each Selling Stockholder, agrees
that, without the prior written consent of Thomas Weisel Partners LLC, it will
not, during the period ending 180 days after the date of the Prospectus, make
any demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.

3.4. Terms of Public Offering.

The Sellers are advised by you that the Underwriters propose
to make a public offering of the Shares as soon after the Registration Statement
and this Agreement have become effective as in your judgment is advisable. The
Sellers are further advised by you that the Shares are to be offered to the
public initially at $_____________ a share (the "PUBLIC OFFERING PRICE") and to
certain dealers selected by you at a price that represents a concession not in
excess of $______ a share under the Public Offering Price, and that any
Underwriter may allow, and such

11.
<PAGE> 16

dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.

4. Payment and Delivery.

4.1. Firm Shares.

Payment for the Firm Shares to be sold by each Seller shall be
made to such Seller in immediately available funds against delivery of such Firm
Shares for the respective accounts of the several Underwriters at 10:00 a.m.,
New York City time, on ____________, 1999, or at such other time on the same or
such other date, not later than _________, 1999, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "CLOSING DATE".

4.2. Additional Shares.

Payment for any Additional Shares to be sold by the Sellers
shall be made to such Seller in immediately available funds in New York City
against delivery of such Additional Shares for the respective accounts of the
several Underwriters at 10:00 a.m., New York City time, on the date specified in
the notice described in Section 3.2 or at such other time on the same or on such
other date, in any event not later than _______, 1999, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "OPTION CLOSING DATE."

4.3. Delivery of Certificates.

Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than one (1) full business day prior to
the Closing Date or the Option Closing Date, as the case may be. The
certificates evidencing the Firm Shares and Additional Shares shall be delivered
to you on the Closing Date or the Option Closing Date, as the case may be, for
the respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the Underwriters duly
paid, against payment of the Purchase Price therefor.

5. Covenants of the Company.

In further consideration of the agreements of the Underwriters
herein contained, the Company covenants with each Underwriter as follows:

12.
<PAGE> 17

5.1. Furnish Copies of Registration Statement and Prospectus.

To furnish to you, without charge, four (4) signed copies of
the Registration Statement (including exhibits thereto) and for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without charge, prior
to 10:00 a.m. New York City time on the business day next succeeding the date of
this Agreement and during the period mentioned in Section 5.3 below, as many
copies of the Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.

5.2. Notification of Amendments or Supplements.

Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such rule.

5.3. Filings of Amendments or Supplements.

If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer (the "PROSPECTUS DELIVERY PERIOD"), any event shall occur
or condition exist as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if, in the opinion of counsel for the Underwriters, it is necessary to amend
or supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will furnish to
the Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the Prospectus,
as amended or supplemented, will comply with law.

5.4. Blue Sky Laws.

To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.

5.5. Earnings Statement.

To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen (18) months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Securities Act), an earnings statement of the Company (which need not be
audited) complying with Section 11(a) of the Securities Act and

13.
<PAGE> 18

the rules and regulations thereunder (including, at the option of the Company,
Rule 158).

5.6. Use of Proceeds.

The Company shall apply the net proceeds from the sale of the
Shares sold by it in the manner described under the caption "Use of Proceeds" in
the Prospectus.

5.7. Transfer Agent.

The Company shall engage and maintain, at its expense, a
registrar and transfer agent for the Common Stock.

5.8. Periodic Reporting Obligations.

During the Prospectus Delivery Period, the Company shall file,
on a timely basis, with the Commission and the Nasdaq National Market all
reports and documents required to be filed under the Exchange Act. Additionally,
the Company shall file with the Commission such information on Form 10-Q or Form
10-K as may be required by Rule 463 under the Securities Act.

5.9. Directed Share Program.

That in connection with the Directed Share Program, the
Company will ensure that the Directed Shares will be restricted to the extent
required by the National Association of Securities Dealers, Inc. (the "NASD") or
the NASD rules from sale, transfer, assignment, pledge or hypothecation for a
period of three (3) months following the date of the effectiveness of the
Registration Statement. Thomas Weisel Partners LLC will notify the Company as to
which Participants will need to be so restricted. The Company will direct the
transfer agent to place stop transfer restrictions upon such securities for such
period of time. Furthermore, the Company covenants with Thomas Weisel Partners
LLC that the Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program.

5.10. Exchange Act Compliance.

During the Prospectus Delivery Period, the Company will file
all documents required to be filed with the Commission pursuant to Section 13,
14 or 15 of the Exchange Act in the manner and within the time periods required
by the Exchange Act.

6. Conditions to the Underwriters' Obligations.

The obligations of the Seller to sell the Shares to the
several Underwriters and the several obligations of the Underwriters to purchase
and pay for the Shares on the Closing Date are subject to the following
conditions:

14.
<PAGE> 19

6.1. Effective Registration Statement.

The Registration Statement shall have become effective not
later than [__________] (New York City time) on the date hereof.

6.2. Rule 462 Registration Statement.

If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462 Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462 Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
under the Securities Act.

6.3. Prospectus Filed with Commission.

The Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under the Securities
Act) in the manner and within the time period required by Rule 424(b) under the
Securities Act; or the Company shall have filed a post-effective amendment to
the Registration Statement containing the information required by such Rule
430A, and such post-effective amendment shall have become effective.

6.4. No Stop Order.

No stop order suspending the effectiveness of the Registration
Statement, any Rule 462 Registration Statement, or any post-effective amendment
to the Registration Statement, shall be in effect and no proceedings for such
purpose shall have been instituted or threatened by the Commission.

6.5. No NASD Objection.

The NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.

6.6. No Material Adverse Change.

There shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise, or in
the earnings, business or operations of the Company, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement) that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.

15.
<PAGE> 20

6.7. Officer's Certificate.

The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the Chief Executive Officer or
President of the Company, to the effect set forth in Sections 6.4 and 6.6 above
and to the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date and that
the Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before the
Closing Date.

6.8. Opinion of Company Counsel.

The Underwriters shall have received on the Closing Date an
opinion of Cooley Godward LLP, counsel for the Company, dated the Closing Date,
the form of which is attached hereto as Exhibit A. The opinion shall be rendered
to the Underwriters at the request of the Company and shall so state therein.

6.9. Opinion of Selling Stockholders Counsel.

The Underwriters shall have received on the Closing Date an
opinion of Freeborn Peters, counsel to the Selling Stockholders, dated the
Closing Date, the firm of which is attached hereto as Exhibit B. The opinion
shall be rendered to the Underwriters at the request of the Selling
Stockholders.

6.10. Opinion of Patent Counsel.

The Underwriters shall have received on the Closing Date an
opinion of Finnegan, Henderson, Farabow, Garrett & Dunner LLP, patent counsel to
the Company, dated the Closing Date, the form of which is attached hereto as
Exhibit C. The opinion shall be rendered to the Underwriters at the request of
the Company and shall so state therein.

6.11. Opinion of Underwriters Counsel.

The Underwriters shall have received on the Closing Date an
opinion of Brobeck, Phleger & Harrison LLP, counsel for the Underwriters, dated
the Closing Date, covering the matters referred to in Exhibit A, paragraphs
(vi), (vii), (ix) (but only as to the statements in the Prospectus under
"Description of Capital Stock" and "Underwriters") and (x). With respect to
paragraph (x) of Exhibit A, such counsel may state that their opinion and belief
are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and review
and discussion of the contents thereof, but are without independent check or
verification, except as specified.

6.12. Accountant's Comfort Letter.

The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters, from
KPMG LLP, independent public accountants,

16.
<PAGE> 21

containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus; provided that the letter delivered on the Closing
Date shall use a "cut-off date" not earlier than the date hereof.

6.13. Lock-Up Agreements.

The "lock-up" agreements, each substantially in the forms of
Exhibit D hereto, between you and certain stockholders, officers and directors
of the Company, delivered to you on or before the date hereof, shall be in full
force and effect on the Closing Date.

6.14. Selling Stockholders Certificate.

The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the Attorney-in-Fact of each
Selling Stockholder, to the effect that the representations and warranties of
the Selling Stockholders contained in this Agreement are true and correct as of
the Closing Date and that the Selling Stockholders have complied with all of the
agreements and satisfied all of the conditions on their part to be performed or
satisfied hereunder on or before the Closing Date.

6.15. Selling Stockholder Documents.

On the date hereof, the Company and the Selling Stockholders
shall have furnished for review by the Representatives copies of the Powers of
Attorney and Custody Agreements executed by each of the Selling Stockholders and
such further information, certificates and documents as the Representatives may
reasonably request.

6.16. Additional Documents.

On the Closing Date, the Representatives and counsel for the
Underwriters shall have received such information, documents and opinions as
they may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.

The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction of each of the above
conditions on or prior to the Option Closing Date and to the delivery to you on
the Option Closing Date of such documents as you may reasonably request with
respect to the good standing of the Company, the due authorization and issuance
of the Additional Shares and other matters related to the issuance of the
Additional Shares.

17.

<PAGE> 22
7. Expenses.

Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, the Sellers agree to pay or
cause to be paid all expenses incident to the performance of their obligations
under this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel, the Company's accountants and counsel for the Selling
Stockholders in connection with the registration and delivery of the Shares
under the Securities Act and all other fees or expenses in connection with the
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky or legal investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state securities laws as
contemplated by Section 5.4 hereof, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or legal investment
memorandum, (iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the NASD, (v) all fees and
expenses in connection with the preparation and filing of the registration
statement on Form 8-A relating to the Common Stock and all costs and expenses
incident to listing the Shares on the Nasdaq National Market, (vi) the cost of
printing certificates representing the Shares, (vii) the costs and charges of
any transfer agent, registrar or depositary, (viii) the costs and expenses of
the Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show, (ix) all expenses in connection with any offer and sale of the Shares
outside of the United States, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection with offers and
sales outside of the United States, (x) all reasonable fees and disbursements of
counsel incurred by the Underwriters in connection with the Directed Share
Program and stamp duties, similar taxes or duties or other taxes, if any,
incurred by the Underwriters in connection with the Directed Share Program and
(xi) all other costs and expenses incident to the performance of the obligations
of the Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this Section,
Section 8 entitled "Indemnity and Contribution", and the last paragraph of
Section 11 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel and any advertising expenses
connected with any offers they may make.

Each Selling Stockholder will pay (directly or by
reimbursement) all fees and

18.
<PAGE> 23

expenses incident to the performance of such Selling Stockholder's obligations
under this Agreement which are not otherwise specifically provided for herein,
including but not limited to such Selling Stockholder's pro rata share of fees
and expenses of the attorneys-in-fact and all expenses and taxes incident to the
sale and delivery of the Shares to be sold by such Selling Stockholder to the
Underwriters hereunder.

The provisions of this Section shall not supersede or
otherwise affect any agreement that the Sellers may otherwise have for the
allocation of such expenses among themselves.

8. Indemnity and Contribution.

8.1. Indemnification of the Underwriters.

The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except (i)
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.

8.2. Indemnification of Company by the Selling Stockholders.

Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Selling Stockholder
furnished in writing by or on behalf of such Selling Stockholder expressly for
use in the Registration Statement, any preliminary prospectus, the Prospectus or
any amendments or supplements thereto.

8.3. Indemnification of Underwriters by Selling Stockholders.

Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained under the caption
"Principal and Selling Stockholders" in the Registration Statement or any
amendment thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only with reference

19.
<PAGE> 24

to information relating to such Selling Stockholder furnished in writing by or
on behalf of such Selling Stockholder expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendments or
supplements thereto.

8.4. Indemnification by the Underwriters.

Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Selling Stockholders, the directors
of the Company, the officers of the Company who sign the Registration Statement
and each person, if any, who controls the Company or any Selling Stockholder
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.

8.5. Indemnification Procedures.

In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this

20.
<PAGE> 25

Section 8, such person (the "INDEMNIFIED PARTY") shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party, upon request of the indemnified party, shall
retain counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for (i) the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Underwriters and all
persons, if any, who control any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, (ii) the
fees and expenses of more than one separate firm (in addition to any local
counsel) for the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either such Section and (iii) the fees and expenses of more than one separate
firm (in addition to any local counsel) for all Selling Stockholders and all
persons, if any, who control any Selling Stockholder within the meaning of
either such Section, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Underwriters
and such control persons of any Underwriters, such firm shall be designated in
writing by Thomas Weisel Partners LLC. In the case of any such separate firm for
the Company, and such directors, officers and control persons of the Company,
such firm shall be designated in writing by the Company. In the case of any such
separate firm for the Selling Stockholders and such control persons of any
Selling Stockholders, such firm shall be designated in writing by the persons
named as attorneys-in-fact for the Selling Stockholders under the Powers of
Attorney. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.

Notwithstanding anything contained herein to the contrary, if
indemnity may be sought pursuant to Section 8.4 hereof in respect of such action
or proceeding, then in addition to such separate firm for the indemnified
parties, the indemnifying party shall be liable for the

21.
<PAGE> 26

reasonable fees and expenses of not more than one separate firm (in addition to
any local counsel) for Thomas Weisel Partners LLC for the defense of any losses,
claims, damages and liabilities arising out of the Directed Share Program, and
all persons, if any, who control Thomas Weisel Partners LLC within the meaning
of either Section 15 of the Act or Section 20 of the Exchange Act.

8.6. Limitation of Selling Stockholder Liability.

The liability of each Selling Stockholder under the indemnity
and contribution provisions of this Section 8 shall be limited to an amount
equal to the initial public offering price of the Shares sold by such Selling
Stockholder, less the underwriting discount, as set forth on the front cover
page of the Prospectus. The Company and the Selling Stockholders may agree, as
among themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.

8.7. Indemnification for Directed Share Program.

The Company agrees to indemnify and hold harmless Thomas
Weisel Partners LLC and each person, if any, who controls Thomas Weisel Partners
LLC within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act ("THOMAS WEISEL PARTNERS ENTITIES"), from and against any
and all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in the prospectus wrapper
material prepared by or with the consent of the Company for distribution in
foreign jurisdictions in connection with the Directed Share Program attached to
the Prospectus or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein, when considered in conjunction with
the Prospectus or any applicable preliminary prospectus, not misleading; (ii)
caused by the failure of any Participant to pay for and accept delivery of the
shares which, immediately following the effectiveness of the Registration
Statement, were subject to a properly confirmed agreement to purchase; or (iii)
related to, arising out of, or in connection with the Directed Share Program,
provided that, the Company shall not be responsible under this subparagraph
(iii) for any losses, claim, damages or liabilities (or expenses relating
thereto) that are finally judicially determined to have resulted from the bad
faith or gross negligence of Thomas Weisel Partners Entities.

8.8. Contribution Agreement.

To the extent the indemnification provided for in this Section
8 is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion

22.
<PAGE> 27

as is appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and of the indemnified party or parties on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Sellers on the one hand and the Underwriters
on the other hand in connection with the offering of the Shares shall be deemed
to be in the same respective proportions as the net proceeds from the offering
of the Shares (before deducting expenses but after deducting the underwriting
discounts and commissions) received by each Seller and the total underwriting
discounts and commissions received by the Underwriters. The relative fault of
the Company, the Selling Stockholders and the Underwriters shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 8 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.

8.9. Contribution Amounts.

The Sellers and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Section 8 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 8.8. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.

8.10. Survival of Provisions.

The indemnity and contribution provisions contained in this
Section 8 and the

23.
<PAGE> 28

representations, warranties and other statements of the Company and the Selling
Stockholders contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, any Selling Stockholder or any person controlling any Selling
Stockholder, or the Company, its officers or directors or any person controlling
the Company and (iii) acceptance of and payment for any of the Shares.

9. Effectiveness.

This Agreement shall become effective upon the execution and
delivery hereof by the parties hereto.

10. Termination.

This Agreement shall be subject to termination by notice given
by you to the Company, if (a) after the execution and delivery of this Agreement
and prior to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
or California shall have been declared by either federal or New York or
California state authorities or (iv) there shall have occurred any outbreak or
escalation of hostilities or any change in financial markets or any calamity or
crisis that, in your judgment, is material and adverse, or (v) in the judgment
of the Representatives, there shall have occurred any material adverse change,
or any development that could reasonably be expected to result in a material
adverse change, in the condition, financial or otherwise, or in the earnings,
business, operations or prospects, whether or not arising from transactions in
the ordinary course of business, of the Company, and (b) in the case of any of
the events specified in clauses 10(a)(i) through 10(a)(v), such event,
individually or together with any other such event, makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.

11. Defaulting Underwriters.

If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule A bears to the
aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may

24.
<PAGE> 29

specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 11 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you, the Company and the Selling Stockholders, for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders. In any such
case either you or the relevant Sellers shall have the right to postpone the
Closing Date, but in no event for longer than seven (7) days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. If, on the Option
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased, the non-defaulting Underwriters shall have
the option to (i) terminate their obligation hereunder to purchase Additional
Shares or (ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.

If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of any Seller to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason any Seller shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.

12. Counterparts.

This Agreement may be signed in counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.

13. Headings; Table of Contents.

The headings of the sections of this Agreement and the table
of contents have been inserted for convenience of reference only and shall not
be deemed a part of this Agreement.

25.
<PAGE> 30

14. Notices.

All communications hereunder shall be in writing and shall be
mailed, hand delivered or telecopied and confirmed to the parties hereto as
follows:

If to the Representatives:

Thomas Weisel Partners LLC
One Montgomery Street, Suite 3700
San Francisco, California 94104
Facsimile: (415) 364-2694
Attention: David Crowder

with a copy to:

Thomas Weisel Partners LLC
One Montgomery Street, Suite 3700
San Francisco, California 94104
Facsimile: (415) 364-2694
Attention: David A. Baylor, Esq.

If to the Company:

Exactis.com, Inc.
707 17th Street, Suite 2850
Denver, CO 80202
Facsimile: (303) 675-2300
Attention: E. Thomas Detmer

If to the Selling Stockholders:

John Funk
22583 Anasazi Way
Golden, CO 80401

With a copy to each Selling Stockholder at the address listed
in their respective Powers of Attorney.

Any party hereto may change the address for receipt of communications by giving
written notice to the others.

15. Successors.

This Agreement will inure to the benefit of and be binding
upon the parties

26.
<PAGE> 31

hereto, including any substitute Underwriters pursuant to Section 11 hereof, and
to the benefit of the officers and directors and controlling persons referred to
in Section 8, and in each case their respective successors, and no other person
will have any right or obligation hereunder. The term "successors" shall not
include any purchaser of the Shares as such from any of the Underwriters merely
by reason of such purchase.

16. Partial Unenforceability.

The invalidity or unenforceability of any Section, paragraph
or provision of this Agreement shall not affect the validity or enforceability
of any other Section, paragraph or provision hereof. If any Section, paragraph
or provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.

17. Governing Law.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.

18. Failure of the Selling Stockholders to Sell and Deliver Shares.

If one or more of the Selling Stockholders shall fail to sell
and deliver to the Underwriters the Shares to be sold and delivered by such
Selling Stockholders at the Closing Date pursuant to this Agreement, then the
Underwriters may at their option, by written notice from the Representatives to
the Company and the Selling Stockholders, either (i) terminate this Agreement
without any liability on the part of any Underwriter or, except as provided in
Sections 7 and 8 hereof, the Company or the Selling Stockholders, or (ii)
purchase the shares which the Company and other Selling Stockholders have agreed
to sell and deliver in accordance with the terms hereof. If one or more of the
Selling Stockholders shall fail to sell and deliver to the Underwriters the
Shares to be sold and delivered by such Selling Stockholders pursuant to this
Agreement at the Closing Date or the Option Closing Date, then the Underwriters
shall have the right, by written notice from the Representatives to the Company
and the Selling Stockholders, to postpone the Closing Date or the Option Closing
Date, as the case may be, but in no event for longer than seven (7) days in
order that the required changes, if any, to the Registration Statement and the
Prospectus or any other documents or arrangements may be effected.

19. Entire Agreement.

This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.

27.
<PAGE> 32

20. Amendments.

This Agreement may only be amended or modified in writing,
signed by all of the parties hereto, and no condition herein (express or
implied) may be waived unless waived in writing by each party whom the condition
is meant to benefit.

21. Sophisticated Parties.

Each of the parties hereto acknowledges that it is a
sophisticated business person who was adequately represented by counsel during
negotiations regarding the provisions hereof, including, without limitation, the
indemnification and contribution provisions of Section 8, and is fully informed
regarding said provisions. Each of the parties hereto further acknowledges that
the provisions of Section 8 hereto fairly allocate the risks in light of the
ability of the parties to investigate the Company, its affairs and its business
in order to assure that adequate disclosure has been made in the Registration
Statement, any preliminary prospectus and the Prospectus (and any amendments and
supplements thereto), as required by the Securities Act and the Exchange Act.

[Remainder of page intentionally left blank]

28.
<PAGE> 33

If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.

Very truly yours,

EXACTIS.COM, INC.

By:
---------------------------------
Name: E. Thomas Detmer, Jr.
Title: President and Chief
Executive Officer

THE SELLING STOCKHOLDERS

By:
---------------------------------
Name:
Title: Attorney-in-Fact acting
on behalf of each of the
Selling Stockholders
named in Schedule B to
this Agreement

Accepted as of the date hereof
Thomas Weisel Partners LLC
Dain Rauscher Wessels
Wit Capital Corporation

Acting severally on behalf of themselves and the several Underwriters named in
Schedule A hereto.
By: Thomas Weisel Partners LLC

By:
------------------------------------------
Title:
Name:

29.
<PAGE> 34

SCHEDULE A

NUMBER OF FIRM
UNDERWRITER SHARES TO BE PURCHASED
----------- ----------------------
<S> <C>
Thomas Weisel Partners LLC
Dain Rauscher Wessels
Wit Capital Corporation
[NAMES OF OTHER UNDERWRITERS]

----------------------
Total 3,800,000
======================
</TABLE>

<PAGE> 35

SCHEDULE B

TOTAL NUMBER
TOTAL NUMBER OF ADDITIONAL
OF FIRM SHARES TO BE SOLD IF
THE SELLING STOCKHOLDERS SHARES TO BE SOLD MAXIMUM OPTION IS EXERCISED
------------------------ ----------------- ---------------------------
<S> <C> <C>
John Funk 178,184 52,795
Raymond H. Vanwagener 8,4401 2,501
Gus Bigos 34,155 10,120
Kenneth Cook 14,580 4,320
Jeffrey Horn 13,500 4,000
Sally Horn 5,400 1,600
Michael Stake 7,560 2,240
Homer John Livingston III 2,700 800
Frank Parkinson 2,700 800
Thomas Finke 1,350 400
Jack Walter Funk Educational Trust 1,431 424

----------------- ---------------------------
Total 270,000 80,000
================= ===========================
</TABLE>

<PAGE> 36

EXHIBIT A

MATTERS TO BE COVERED IN THE
OPINION OF COMPANY COUNSEL

(i) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has the
corporate power and authority to own its property and to conduct its business as
described in the Prospectus and, to the best of such counsel's knowledge, is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company.

(ii) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus under the caption
"Description of Securities."

(iii) The shares of Common Stock (including the Shares to be sold by
the Selling Stockholders) outstanding prior to the issuance of the Shares to be
sold by the Company have been duly authorized and are validly issued, fully paid
and non-assessable.

(iv) The Shares to be sold by the Company have been duly authorized
and, when issued, delivered and paid for in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive or, to
such counsel's knowledge, similar rights.

(v) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.

(vi) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, the Underwriting Agreement will not
contravene any provision of applicable law (except with respect to state
securities and Blue Sky laws, as to which such counsel need not express any
opinion) or the certificate of incorporation or by-laws of the Company or, to
the best of such counsel's knowledge, any agreement or other instrument binding
upon the Company that is material to the Company, or, to the best of such
counsel's knowledge, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by the Company of its obligations under
this Agreement (except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the Shares
as to which such counsel need not express any opinion).

(vii) The statements (A) in the Prospectus under the captions "Shares
Eligible" and "Description of Securities" and (B) in the Registration Statement
in Items 14 and 15, in each case insofar as such statements constitute summaries
of the legal matters, documents or proceedings referred to

<PAGE> 37

therein, fairly present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the legal matters,
documents and proceedings referred to therein to the extent required by the Act
and the Regulations.

(viii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened to which the Company is a party or to which
any of the properties of the Company is subject that are required under the Act
and the Regulations to be described in the Registration Statement or the
Prospectus and are not so described such counsel does not know of any contracts
or other agreements that are required under the Act and the Regulations to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required.

(ix) The Company is not and, after giving effect to the issuance and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.

Such counsel shall also state that:

In connection with the preparation of the Registration Statement and
the Prospectus, such counsel has participated in conferences with officers and
representatives of the Company and with its certified public accountants (as you
and your counsel have done). At such conferences such counsel has made inquiries
of such officers, representatives and accountants and discussed the contents of
the Registration Statement and Prospectus. Such counsel has not independently
verified and, accordingly does not render any opinion upon, the accuracy,
completeness or fairness of the Registration Statement or the Prospectus.
Subject to the foregoing, no facts have come to such counsel's attention that
have caused such counsel to believe that, as of its effective date, the
Registration Statement contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its date or the date
hereof, the Prospectus contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided that such counsel expresses no
view as to the financial statements and schedules and other financial and
statistical date included therein.

<PAGE> 38

EXHIBIT B

FORM OF LEGAL OPINION OF SELLING STOCKHOLDERS COUNSEL

(a) The Underwriting Agreement has been duly authorized,
executed and delivered by or on behalf of each of the Selling Stockholders.

(b) The execution and delivery by each Selling Stockholder of,
and the performance by such Selling Stockholder of its obligations under, the
Underwriting Agreement and the Custody Agreement and Powers of Attorney of such
Selling Stockholder will not contravene any provision of applicable law, or the
[articles/certificate] of incorporation or by-laws of such Selling Stockholder
(if such Selling Stockholder is a corporation), or, to such counsel's knowledge,
any agreement or other instrument binding upon such Selling Stockholder or, to
such counsel's knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over such Selling Stockholder, and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by such Selling
Stockholder of its obligations under the Underwriting Agreement or the Custody
Agreement or Power of Attorney of such Selling Stockholder, except such as may
be required by the securities or Blue Sky laws of the various states in
connection with offer and sale of the Shares.

(c) Each of the Selling Stockholders has valid title to the
Shares to be sold by such Selling Stockholder and the legal right and power, and
all authorization and approval required by law, to enter into the Underwriting
Agreement and the Custody Agreement and Power of Attorney of such Selling
Stockholder and to sell, transfer and deliver the Shares to be sold by such
Selling Stockholder.

(d) The Custody Agreement and the Power of Attorney of each
Selling Stockholder have been duly authorized, executed and delivered by such
Selling Stockholder and are valid and binding agreements of such Selling
Stockholder.

(e) Delivery of the Shares to be sold by each Selling
Stockholder pursuant to this Agreement will pass title to such Shares free and
clear of any security interests, claims, liens, equities and other encumbrances.

(f) Such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and schedules and
other financial and statistical data included therein as to which such counsel
need not express any opinion) comply as to form in all material respects with
the Securities Act and the applicable rules and regulations of the Commission
thereunder, (B) has no reason to believe that (except for financial statements
and schedules and other financial and statistical data as to which such counsel
need not express any belief).

<PAGE> 39

EXHIBIT C

MATTERS TO BE COVERED IN THE
OPINION OF PATENT COUNSEL TO THE COMPANY

Such counsel shall state that they are familiar with the technology
used by the Company in its business and the manner of its use thereof and have
read the Registration Statement and the Prospectus, including particularly the
portions of the Registration Statement and the Prospectus referring to patents,
trade secrets, trademarks, service marks or other proprietary information or
materials and:

(i) The Company is listed in the records of the United States Patent
and Trademark Office as the holder of record of the patents listed on a schedule
to such opinion (the "Patents") and each of the applications listed on a
schedule to such opinion (the "Applications"). To the knowledge of such counsel,
there are no claims of third parties to any ownership interest or lien with
respect to any of the Patents or Applications. Such counsel is not aware of any
material defect in form in the preparation or filing of the Applications on
behalf of the Company. To the knowledge of such counsel, the Applications are
being pursued by the Company. To the knowledge of such counsel, the Company owns
as its sole property the Patents and pending Applications;

(ii) The Company is listed in the records of the appropriate foreign
offices as the sole holder of record of the foreign patents listed on a schedule
to such opinion (the "Foreign Patents") and each of the applications listed on a
schedule to such opinion (the "Foreign Applications"). Such counsel knows of no
claims of third parties to any ownership interest or lien with respect to the
Foreign Patents or Foreign Applications. Such counsel is not aware of any
material defect of form in the preparation or filing of the Foreign Applications
on behalf of the Company. To the knowledge of such counsel, the Foreign
Applications are being pursued by the Company. To the knowledge of such counsel,
the Company owns as its sole property the Foreign Patents and pending Foreign
Applications;

(iii) Such counsel knows of no reason why the Patents or Foreign
Patents are not valid as issued. Such counsel has no knowledge of any reason why
any patent to be issued as a result of any Application or Foreign Application
would not be valid or would not afford the Company useful patent protection with
respect thereto;

(iv) As to the statements under the captions "Risk Factors -- Our
limited ability to protect our intellectual property may adversely affect our
competitive position. We are subject to claims alleging intellectual property
infringement and we may need to license third party technologies and we face
risks in doing so." and "Business --Intellectual Property," nothing has come to
the attention of such counsel which caused them to believe that the
above-mentioned sections of the Registration Statement and any amendment or
supplement thereto made available and reviewed

<PAGE> 40

by such counsel, at the time the Registration Statement became effective and at
all times subsequent thereto up to and on the Closing Date and on any later date
on which Option Stock are to be purchased, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and

(v) Such counsel knows of no material action, suit, claim or proceeding
relating to patents, patent rights or licenses, trademarks or trademark rights,
copyrights, collaborative research, licenses or royalty arrangements or
agreements or trade secrets, know-how or proprietary techniques, including
processes and substances, owned by or affecting the business or operations of
the Company which are pending or threatened against the Company or any of its
officers or directors.

<PAGE> 41

EXHIBIT D

FORM OF LOCK-UP AGREEMENT

<PAGE> 1
EXHIBIT 3.2

CERTIFICATE OF AMENDMENT

OF RESTATED CERTIFICATE OF INCORPORATION

EXACTIS.COM, INC.

EXACTIS.COM, INC., a Delaware corporation (the "Corporation"),
organized and existing under the General Corporation Law of the State of
Delaware, hereby certifies as follows:

1. The original name of the Corporation was Mercury Mail, Inc.,
and its current name is Exactis.com, Inc. The original
Certificate of Incorporation of the Corporation was filed with
the Delaware Secretary of State on July 17, 1996.

2. This Restated Certificate of Incorporation of the Corporation
is hereby amended by striking out the definition of "Reserved
Employee Stock" in paragraph 6, Article Four thereof and by
substituting in lieu of said paragraph the following new
paragraph:

""RESERVED EMPLOYEE STOCK" means up to 3,000,000 shares of
Common Stock issuable to employees, directors or
consultants of the Corporation and its Subsidiaries subject
to the approval of the Corporation's Board of Directors."

3. The amendment of the Restated Certificate of Incorporation
herein certified has been duly adopted and written consent has
been given in accordance with the provisions of Sections 141,
228 and 242 of the General Corporation Law of the State of
Delaware.

I, the undersigned, being the Secretary and Chief Financial Officer of the
Corporation, do make and file this Certificate, hereby declaring and certifying
that the facts herein stated are true, and accordingly have hereunto set my
hands this 30th day of September, 1999.

/s/ Kenneth W. Edwards
-------------------------------------------------
Kenneth W. Edwards, Secretary and Chief Financial
Officer

<PAGE> 1

EXHIBIT 23.2

ACCOUNTANTS' CONSENT

The Board of Directors
Exactis.com, Inc.:

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

KPMG LLP

/s/ KPMG LLP

Denver, Colorado

September 30, 1999