EXACTIS COM INC, S-1/A, 1999-08-23

EXACTIS COM INC
S-1/A, 1999-08-23
TELEGRAPH & OTHER MESSAGE COMMUNICATIONS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1999

REGISTRATION NO. 333-85315

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

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)
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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.
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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

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<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................................ $57,500,000.00 $15,985.00
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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 prospectus is not complete and may be changed. These
securities may not be sold nor may offers to buy be accepted prior to the time
this prospectus is delivered in final form. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED AUGUST 23, 1999

PROSPECTUS

[EXACTIS.COM LOGO]

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 shares in this offering. No public market currently
exists for our common stock. We anticipate that the initial public offering
price will be between $ and $ 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 A HIGH DEGREE OF RISK. PLEASE SEE "RISK
FACTORS" STARTING ON PAGE 5 TO READ ABOUT RISKS THAT YOU SHOULD CONSIDER
CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.
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<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds to us $ $
</TABLE>

The underwriters have an option to purchase additional shares of
common stock from us 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

Prospectus dated , 1999
<PAGE> 3

FRONT COVER
Company logo and tagline

INSIDER FRONT COVER
Company logo and tagline, followed by:

Our mission is to deliver a comprehensive suite of scalable Email Marketing
Solutions to empower our clients to acquire, retain and strengthen profitable
customer relationships.

GATEFOLD LEFT
In the background, a graphic of a large yellow and black exclamation
point -- this is part of the Exactis.com logo.

At the bottom of the page in blue, is the first half of a timeline. The
timeline's title is The evolution of direct marketing channels. There are three
graphics on this half of the timeline: a vacuum cleaner, an envelope and
telephones. The graphics titles are door-to-door, mail and telephone.

The upper four-fifths of the left side of the page contains the following text:

WHY EMAIL?

Email brings a new channel to personal communications. With many new and unique
characteristics, email meets businesses needs for direct marketing and
communications.

Benefits of email campaigns:
- - PRICE - email costs pennies on the dollar compared to postal mail
- - PERSONALIZATION - relevant user-oriented content
- - SPEED - improved campaign frequency and response times
- - ELECTRONIC NATURE - feature-rich (graphics, audio and video) and
interactive
- - LINKS - email is a gateway to the Web

GATEFOLD RIGHT
At the bottom of this page in blue is the second half of the timeline. There are
three graphics on this half of the timeline: a radio, a television and a globe
connected to three PC's. The graphics titles are radio, television and the
email revolution.

The upper four-fifths of the page contains a large table or chart. The chart's
title is Exactis.com Email Marketing Solutions(SM) matrix. The x-axis of the
chart is labeled Markets. The y-axis is labeled Solutions. The markets from left
to right are Publishing, 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.

In the chart at the intersections of Publishing and Communicate news and
information, Financial Services and Deliver event-triggered communications, and
Ecommerce and create and manage targeted email marketing campaigns (currently in
beta testing) are cascading PC screen shots of email samples. Respectively,
these are titled:
- - Email newsletter from InfoBeat,
- - Email sample of trade confirmation and
- - Email sample of customized catalog (currently in beta testing).

At all other intersections, the word yes appears.

INSIDE BACK COVER
At the bottom of this page there is a one-and-one-half-inch blue border
identical to the blue background behind the timeline appearing on the gatefold
pages. There are no graphics, text or lines. The company logo and tagline is at
the bottom right in this blue border.

The upper four-fifths of the page contains logos for the following Exactis.com
clients:
- - MSNBC
- - Forbes.com
- - Sony Music
- - CMP.net
- - USATODAY.com
- - Tribune Media Services
- - TheStreet.com
- - The Economist

The title of the page at upper left is Our clients include...

The upper four-fifths of the page also contains background shading. Drawing a
diagonal from upper right to lower left to diagonally cut the page in half, the
lower right diagonal half of the page is shaded in yellow color similar to the
yellow of the Exactis.com logo exclamation point.

BACK COVER
Company logo and tagline: Email Marketing Solutions(SM)
<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

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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 5
Forward-Looking Statements; Market Data..................... 17
Conventions which Apply to this Prospectus.................. 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Dilution.................................................... 19
Capitalization.............................................. 20
Selected Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 32
Management.................................................. 46
Certain Relationships and Related Transactions.............. 54
Principal Stockholders...................................... 56
Description of Securities................................... 58
Shares Eligible for Future Sale............................. 62
Underwriting................................................ 63
Legal Matters............................................... 65
Experts..................................................... 65
Where You Can Find Additional Information................... 65
Index to Financial Statements............................... F-1
</TABLE>

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UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), 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., The Economist, Egreetings Network, First Union,
Forbes, Last Minute Network, MSNBC Interactive News, News Corp., Sony Music,
Slate Magazine, TheStreet.com and USAToday.com. 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 direct and indirect 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 into 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.

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<PAGE> 6

THE OFFERING

Common stock offered by
us......................... shares

Common stock outstanding
after this offering........ 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;

- 1,400,000 shares that could be issued under our 1999 equity incentive
plan; 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.
---------------------

Unless we tell you otherwise, "Exactis.com," "we," "us" and "our" in this
prospectus refer to Exactis.com, Inc.

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., and simultaneously 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.

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<TABLE>
<CAPTION>
JUNE 30, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 557 $ 9,381 $
Working capital (deficit)................................. (453) 8,371
Total assets.............................................. 6,793 15,617
Long-term debt and capital lease obligations, net of
current portions and discount.......................... 300 300
Redeemable convertible preferred stock and warrants....... 18,725 27,549
Total stockholders' equity (deficit)...................... (17,791) (17,791)
</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
shares of common stock we are selling in this offering at an assumed
initial public offering price of $ per share, after deducting
estimated underwriting discounts and commissions and offering expenses.

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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.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business, results of operations
and financial condition.

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. 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 (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. 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.

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, our
business, financial condition and operating results will be harmed.

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

We operate in the rapidly evolving Internet market. We have only a limited
operating history upon which you can evaluate our business and prospects. As a
young company, we face risks and uncertainties relating to our ability to
successfully implement our business plan. You should consider the risks,
expenses and difficulties that we may encounter when making your investment
decision. These risks include our ability to:

- expand our customer base and retain key clients;

- introduce new services;

- compete in a highly competitive market;

- upgrade our systems and infrastructure to handle any increases in
messaging traffic or other technical requirements of our clients;

- expand our sales and marketing activities;

- create and maintain strategic relationships;

- manage growing operations;

- reduce service interruptions;

- recruit and retain key personnel; and

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<PAGE> 10

- acquire businesses and technologies.

We may not successfully address all of the risks we face or accomplish our
business strategies. We may not become profitable even if we do successfully
address these risks and accomplish our business strategies.

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. 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. If sufficient demand for our services does not
develop, our business, financial condition and operating results will be harmed.

DUE TO THE EMERGING NATURE OF THE EMAIL SERVICES MARKET, OUR FUTURE REVENUE
IS UNPREDICTABLE AND OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.

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 revenues could fall short of our expectations if we experience
delays or cancellations of even a small number of contracts. Our operating
results are likely to fluctuate for many reasons, including the following:

- 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;

- 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 will be affected by non-cash charges
associated with stock-based arrangements with employees and strategic partners.
In May 1999, we issued 658,000 stock options with an exercise price below fair
market value. This grant resulted in a total non-cash compensation expense of
$1.9 million that 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. We recognized expenses of $46,000
for the year ended December 31, 1997, $118,000 for the year ended December 31,
1998 and $24,000 for the six month period ended June 30, 1999 in connection with
the American Express warrant. Should American Express achieve one or both
remaining milestones, then we
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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. To date, Sony
Music has not achieved any of the performance goals set forth in their warrant.
If Sony Music achieves any of the performance goals set forth in their warrant,
we will recognize non-cash charges which we cannot currently estimate and which
may 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 receipt 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. It is likely that our operating results in
some quarters will be below market expectations. In this event, the price of our
common stock is likely to decline.

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 accounts for most of our revenue. 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 E-Greetings
Network 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 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. If we lose existing clients and do not replace them with new
clients, our business, financial condition and operating results will be harmed.

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

We may experience delays in the development and launch of new services. 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
cannot assure you that we will not 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. Any delays or differences
could harm our business, financial condition and operating results.

WE DEPEND ON KEY STRATEGIC RELATIONSHIPS 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. 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

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terminated early in certain circumstances. If these relationships are terminated
early, it would harm our business, financial condition and operating results. 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.

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. Our failure to manage our growth
effectively could harm our business, financial condition and operating results.

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

Competition in the email services market is intense. 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. If we do not
respond successfully to competitive pressures, our business, financial condition
and operating results would be harmed. See "Business -- Competition" for a list
of our current and potential competitors.

IF WE DO NOT SUCCESSFULLY ADDRESS THE RISKS INHERENT IN EXPANDING OUR
INTERNATIONAL OPERATIONS, 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, our business, financial condition and operating results will suffer.
We have limited experience in international operations and may not be able to
compete effectively in international markets. We face certain risks inherent in
conducting business internationally, such as:

- complying 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;

- political and economic instability;

- fluctuations in currency exchange rates;

- imposition of currency exchange controls; and

- potentially adverse tax consequences.

Any of these factors could adversely affect our international operations
and, consequently, our business and operating results.

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WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT DILUTE OUR STOCKHOLDERS, CAUSE US
TO INCUR DEBT OR ASSUME CONTINGENT LIABILITIES.

We expect to review acquisition or investment prospects that would
complement our current services, enhance our technical capabilities or offer
growth opportunities. If we pursue these opportunities, we could:

- issue equity securities which would dilute our stockholders;

- incur debt; or

- assume unknown or contingent liabilities.

These actions by us could harm our operating results and the price of our
common stock. Acquisitions could also entail numerous risks, including:

- difficulties in integrating acquired operations, technologies or
services;

- unanticipated costs associated with the acquisitions that harm our
operating results;

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

- diversion of management's attention from other business concerns; 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.

We believe that our existing capital resources, including the anticipated
proceeds of this offering, will enable us to maintain our current and planned
operations at least through the end of 2000. However, 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 harm our business, financial condition and
operating results.

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. 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. Any restriction
in developing strategic relationships could limit our ability to compete
effectively, which could harm our business.

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

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. The loss of any member of our senior
management team could negatively affect our future operating results.

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. We cannot assure you that they will be able
to work together effectively. If our management team is unable to work together
effectively, our business could be harmed.

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. We plan to
significantly expand our operations and we will need to hire additional
personnel as our business grows. Competition for qualified personnel is 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. Failure to retain and attract necessary
personnel could harm our business, financial condition and operating results.

RISKS ASSOCIATED WITH OUR TECHNOLOGY

WE NEED TO UPGRADE OUR SYSTEMS AND INFRASTRUCTURE TO ACCOMMODATE INCREASES
IN EMAIL TRAFFIC.

We must continue to expand and adapt our network infrastructure as the
number of clients and the volume and complexity of information they wish to
transmit increases and as their requirements change. If we do not add sufficient
capacity to handle a growing volume and complexity of messages that our systems
process, 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. We cannot assure you, however, that our services will be
able 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. If we fail to do
so, our business, financial condition and operating results could suffer.

OUR 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 systems are not currently Year 2000 compliant. Although our hardware
systems are certified Year 2000 compliant, we need to upgrade some of our
operating systems to Year 2000 compliant versions. Additionally, 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

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revenue. We have not yet developed a comprehensive contingency plan to address
these issues. We are prepared to develop a contingency plan if our ongoing
assessment indicates areas of significant exposure.

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, our business, operating results and financial condition would be
harmed. 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.

Our industry 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 proprietary technology and necessary service
enhancements entail significant technical and business risks and require
substantial expenditures and lead-time. We may not be able to keep pace with the
latest technological developments or adapt our services to client requirements
or emerging industry standards. If we do not successfully respond to new
developments or do not respond in a cost-effective manner, our business,
financial condition and operating results will be harmed.

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.

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 harm our business and operating results and 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
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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. In the past, we have experienced disruptions and
delays in our email service due to service disruption from those providers. We
cannot assure you that these companies will continue to provide services to us
without disruptions, at the current cost, or at all. Although we believe that we
could obtain these services from other sources if necessary, 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. Any interruption by our service providers would also likely
disrupt the operation of the messaging platform, causing a loss of revenue and a
potential loss of clients. These losses could harm our business, financial
condition and results of operations.

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. Although
we test our software, we may not discover software defects that affect current
or planned services or enhancements until after they are deployed. 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, any of which could cause our business to suffer.

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 or otherwise harm our business, operating results and financial
condition. Although we have implemented network security measures, our servers
are vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, 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 failure to prevent
security breaches may harm our business and operating results.

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

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 one patent and we have two
patents pending in the United States. We may seek additional patents in the

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<PAGE> 17

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.

The unauthorized misappropriation of our proprietary rights could harm our
business, financial condition and operating results. If we resort to legal
proceedings to enforce our proprietary rights, the proceedings could be
burdensome and expensive and the outcome could be uncertain.

WE ARE SUBJECT TO CLAIMS ALLEGING INTELLECTUAL PROPERTY INFRINGEMENT.

We are subject to claims alleging that we have infringed third party
proprietary rights and might be subject to additional claims. 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. Any of these events could harm our business,
financial condition and operating results.

We are currently involved in litigation with MessageMedia, Inc., one of our
competitors. We filed an infringement claim against eMail Publishing, Inc.,
which was acquired by MessageMedia in December 1998. In response, MessageMedia
has asserted that we are infringing one of its patents. If we are unable to
settle these proceedings in a satisfactory manner, the legal proceedings may be
time-consuming and expensive and the outcome may be adverse to us. If we were
found to be infringing a patent held by MessageMedia, our business may be
harmed.

WE MAY NEED TO LICENSE THIRD PARTY TECHNOLOGIES AND WE FACE RISKS IN DOING
SO.

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 licenses could delay the development
of our services until equivalent technology can be identified, licensed and
integrated. Any delays could cause our business and 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 future success will depend substantially upon the widespread adoption
of the Internet 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. Our business,
financial condition and operating results will be harmed if the Internet does
not achieve continuing, widespread acceptance as a marketing and communications
medium.

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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. 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. If use of the
Internet as a medium for consumer and business communications does not continue
to increase, our business, financial condition and operating results may be
harmed.

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.

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. There is a risk that 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 exclusions that are contained
within these policies. In this case, we may need to use capital contributed by
our stockholders to settle claims. 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 business and operating results or
could result in the imposition of criminal penalties.

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, which could harm our business, financial condition and operating
results.

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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.

Government regulation may impose additional burdens on our business.
Although there are currently few laws and regulations directly applicable to the
Internet and commercial email services, 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. The adoption
of any additional laws or regulations may impair the growth of the Internet
which could decrease the demand for our services and increase our cost of doing
business. Moreover, 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 or otherwise harm our
business, financial condition and operating results.

RISKS ASSOCIATED WITH THIS OFFERING

CONTROL BY EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO INFLUENCE THE
OUTCOME OF DIRECTOR ELECTIONS AND OTHER MATTERS REQUIRING STOCKHOLDER APPROVAL.

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 % 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 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.

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.
Restrictions under the securities laws and lock-up agreements limit the number
of shares of common stock that may be sold in the public market.

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However, 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.

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.

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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.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of 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 now grow at these
projected rates, it may harm our business, financial condition and operating
results.

CONVENTIONS WHICH APPLY TO THIS PROSPECTUS

This offering is for shares; however, the underwriters have a
30-day option to purchase up to additional shares from us to cover
over-allotments. 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 information in this prospectus relating to our capitalization
presented on a pro forma basis 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 information in this prospectus relating to our capitalization
presented on a pro forma as adjusted basis 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
shares of common stock we are selling in this offering at
an assumed initial public offering price of $ 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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USE OF PROCEEDS

We estimate that the net proceeds from the sale of shares
offered by us will be approximately $ million, assuming an initial
public offering price of $ 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 $ million in net proceeds from this offering.

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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DILUTION

Our pro forma net tangible book value as of June 30, 1999, which 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, was $9.5 million, or
approximately $1.15 per share of common stock. 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 shares of common stock in this offering at an assumed initial public
offering price of $ per share, our pro forma as adjusted net tangible book
value as of June 30, 1999 would have been approximately $ , or $
per share of common stock. This represents an immediate increase in net tangible
book value of $ per share to existing stockholders and an immediate dilution
of $ per share to new investors. The following table illustrates this per
share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before this
offering............................................... $ 1.15
Increase per share attributable to new investors..........
--------
Pro forma as adjusted net tangible book value per share
after this offering.......................................
--------
Pro forma as adjusted dilution per share to new investors... $
========
</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 $ 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 % $27,257,138 % $3.28
New investors...........................
--------- ----- ----------- -----
Total......................... 100.0% $ 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.

19
<PAGE> 24

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 $
======== ======== =======
Long-term debt and capital lease obligations, net of current
portions and discount..................................... 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; 15,000,000 shares authorized pro
forma; 35,000,000 shares authorized pro forma as
adjusted; 1,009,053 shares outstanding actual and pro
forma; shares outstanding pro forma as
adjusted................................................ 10 10
Additional paid-in capital................................ 751 751
Accumulated deficit....................................... (19,646) (19,646)
-------- -------- -------
Total stockholders' equity (deficit)............... (17,791) (17,791)
-------- -------- -------
Total capitalization............................... $ 1,234 $ 10,058 $
======== ======== =======
</TABLE>

20
<PAGE> 25

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;

- 1,400,000 shares that could be issued under our 1999 equity incentive
plan; 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.

21
<PAGE> 26

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 and
simultaneously 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.

22
<PAGE> 27

<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 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>

23
<PAGE> 28

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 that involve risks and uncertainties. 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. 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 company.
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 and charges for related services,
such as list setup 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
24
<PAGE> 29

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

25
<PAGE> 30

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
direct and indirect 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 and charges for
related services, such as list setup 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, represented $1.5 million of the increase 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
26
<PAGE> 31

from $823,000 in the first six months of 1998. Non-cash stock option
compensation expense related to options granted in May 1999 represented $707,000
of the increase in the 1999 period. 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.
27
<PAGE> 32

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;

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<PAGE> 33

- 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 (excluding a $3.3 million gain on the sale of
discontinued operations) and $1.6 million for the six months ended June 30,
1999. 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. 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. 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 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.

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<PAGE> 34

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 such computer programs or hardware, including, among other things,
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 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, as well as our non-information technology
systems, such as our phone systems, power supplies and other systems. Our
systems are not yet 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: (i) date calculations will neither cause any abnormal termination of
performance nor generate inconsistent results and (ii) when sorting by date, all
records will be sorted in accurate sequence.

We are a comparatively new enterprise, and, 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 three 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 as well as to 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 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 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.
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<PAGE> 35

To date, we have not incurred any significant expenses with respect to
attaining Year 2000 compliance, and we do not anticipate that any future cost
associated with our Year 2000 remediation will be material. However, 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 revenues. We have not yet
developed a comprehensive contingency plan to address the effects of a failure.
We are prepared to develop a contingency plan if our ongoing assessment
indicates areas of significant exposure.

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> 36

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.

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., The Economist, Egreetings Network, First Union,
Forbes, Last Minute Network, MSNBC Interactive News, News Corp., Sony Music,
Slate Magazine, TheStreet.com and USAToday.com. As email continues to gain
widespread acceptance as a marketing and communications channel, we anticipate
that businesses will grow increasingly dependent on outsourced email marketing
and communications services.

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 television set-top boxes, personal digital
assistants, 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

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<PAGE> 37

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 approximately $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.

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<PAGE> 38

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.

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 HyperText Markup Language ("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 6.5 million email messages
per weekday in July 1999. We have the capacity to deliver up to 15 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 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.

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<PAGE> 39

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.

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 opt-in
methods.

We are members of the Direct Marketing Association and the Association for
Interactive Media (AIM) and we serve on AIM's 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

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<PAGE> 40

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.

- 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 email list procurement, 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 DIRECT AND INDIRECT 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 indirect 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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<PAGE> 41

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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<PAGE> 42

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 (messages deliv- - Client selects time periods
ered, bounces, click throughs to evaluate results
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 to determine which - Tracking of customer response
customers opened the email
(HTML only)
- -----------------------------------------------------------------------------------------------------------
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, reporting and measurability features and one-to-one
customer communication capabilities.

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<PAGE> 43

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> <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 ad hoc, un- - Clients can react to market
scheduled 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 or sensitive information to
be 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>

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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<PAGE> 44

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
BigHand
CarParts.com
ChannelSeven.com
Charles Schwab & Co.
Client Logic
CMPnet
Consumer Net Marketplace
Covad Communications
Creative Planet
Digital Work
DoubleDay
The Economist Newspaper
Egreetings Network
First Source Bancorp.
First Union Corporation
Forbes, Inc.
Hewlett-Packard Company
IC Direct
KBKids.com
Last Minute Network Limited
Law News Network
London Financial Times
Microsoft Web events
Miller Freeman
MSNBC Interactive News
News Corp.
Network Publishing
Organic Media
Princessnet
Rokenbok Toy Company
Sage Online
Silicon Alley Reporter
Slate Magazine
Sony Music
Spinner.com
Sterling-Rice Group
Strong Funds
TheStreet.com
theWhiz.com
Tribune Media Services
United Media
USAToday.com
Wired
Worldly Investor
World Wrestling Federation

A small number of clients account for a significant portion of our revenue.
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 accounted for approximately 18% and
Egreetings Network accounted for approximately 11%. 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

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<PAGE> 45

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.

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 June 30, 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 two 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 June 30, 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 June 30, 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.

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<PAGE> 46

- 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.

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
customer-centric, analytic and campaign management solutions, to 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 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 perform any of
the feed, build, send, bog or inbound functions. All of the host functions can
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, local fiber loop 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
local loop fiber providers to prevent a loss of connectivity in the event of a
local loop provider failure 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.

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<PAGE> 47

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.

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. It will receive continuous data
feeds from our principal facility and be able to convert to sending mode within
30 minutes of any service interruption which results in an outage in 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
proprietary email engine allows us to send large volumes of email messages. 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 Lyris and L-Soft, 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

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<PAGE> 48

Critical Path, Mail.com and USA.Net, have the technical capabilities and
infrastructure to enter our market.

Several competitors maintain and rent opt-in 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,
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 one patent that has 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

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<PAGE> 49

on our proprietary technology. Please see "Legal Proceedings" for a more
detailed description of our current litigation.

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 July 31, 1999, we employed 105 people, all of whom were full-time.
The 105 employees included ten in general and administrative functions, 16 in
operations, 30 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
4,653 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. On October 19, 1998, we filed a claim in the United States District
Court for the District of Colorado against eMail Publishing, which was acquired
by MessageMedia, one of our competitors, in December 1998, claiming infringement
of our patent. The patent relates to a system and method for delivering
customized email. We have requested injunctive relief and unspecified damages.

On October 29, 1998, MessageMedia filed a claim in the United States
District Court for the Southern District of California seeking damages from us
for infringement of one of their patents. MessageMedia has requested injunctive
relief and unspecified damages. See "Risk Factors -- We may be subject to claims
alleging intellectual property infringement."

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<PAGE> 50

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> 51

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 a 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 the Vice President of Interactive
Enterprise Development, a division of American Express Relationship Services
(AERS) 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 AERS. 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 to provide for, among other things, 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 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

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<PAGE> 52

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.

48
<PAGE> 53

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 5% and 10% 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

49
<PAGE> 54

discussed above to be $4.32 per share), minus the per share exercise price,
multiplied by the number of shares underlying the option.

401(K) PLAN

Our employees are eligible to participate in our 401(k) Plan. Pursuant to
the 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 ($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 (the "1996 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). 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 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.
50
<PAGE> 55

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 (the "1997 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.

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 the 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 transferable by will or
by the laws of descent and distribution or pursuant to 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.

51
<PAGE> 56

1999 EQUITY INCENTIVE PLAN

Our 1999 Equity Incentive Plan (the "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. The Incentive Plan will terminate on August
10, 2009 unless sooner terminated by the Board (or 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.

Under Section 162(m) of the Code (which 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), no person may be
granted options under the Incentive Plan covering more than 700,000 shares of
common stock in any calendar year.

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 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 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 such period as the stock
awarded pursuant to 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

52
<PAGE> 57

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 (the "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 purchased for
accounts of employees participating in the Purchase Plan at a price per share
equal to the lower of (i) 85% of the fair market value of a share of common
stock on the date of commencement of participation in the offering or (ii) 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.
53
<PAGE> 58

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
Tribune Company................................... 153,811 23,071 1,000,002
</TABLE>

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

54
<PAGE> 59

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
Tribune Company................................... 326,075 33,884 1,304,335
</TABLE>

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.

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
SoftBank Holdings, Inc. .................................... 440,000 1,320,000
Telecom Partners, L.P....................................... 400,000 1,200,000
Tribune Company............................................. 666,667 2,000,001
</TABLE>

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 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.

55
<PAGE> 60

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to beneficial
ownership of our common stock as of August 13, 1999 for:

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

- each of our directors;

- our executive officers listed in the Summary Compensation Table; and

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

The information has been adjusted to reflect the sale of the common stock
in this offering (assuming no exercise of the underwriters' over-allotment
option) and the conversion of all outstanding shares of preferred stock into
common stock.

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 August 13, 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
8,314,115 shares of common stock outstanding before this offering and
shares of common stock outstanding after this offering. An asterisk indicates
ownership of less than one percent.

<TABLE>
<CAPTION>
PERCENT OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES --------------------------------
BENEFICIAL OWNERS BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ----------------- ------------------ --------------- --------------
<S> <C> <C> <C>
Centennial Fund IV, L.P.(1)........................ 2,237,789 26.5%
American Express Travel Related Services Company,
Inc.(2).......................................... 1,176,250 13.7
Tribune Company(3)................................. 1,218,374 14.5
Telecom Partners, L.P.(4).......................... 1,031,290 12.4
Global Retail Partners, L.P.(5).................... 944,393 11.3
Boulder Ventures, L.P. and Boulder Ventures II,
L.P.(6).......................................... 716,949 8.5
Softven No. 2 Investment Enterprise
Partnership(7)................................... 444,906 5.4
Eric R. Belcher.................................... 22,055 *
Pierric D. Beckert(8).............................. -- --
Craig M. Deans..................................... 16,666 *
E. Thomas Detmer, Jr.(9)........................... 231,105 2.7
John T. Funk(10)................................... 676,552 8.1
Adam Goldman(11)................................... -- --
Linda Fayne Levinson(12)........................... 944,393 11.3
Raymond H. Van Wagener, Jr. ....................... 31,260 *
David D. Williams(13).............................. -- --
All executive officers and directors as a group (9
persons)(14)..................................... 1,289,945 14.9%
</TABLE>

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

(1) Includes 117,691 shares of common stock issuable upon exercise of warrants.
The address of Centennial Fund IV, L.P. ("Centennial Fund IV") 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

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<PAGE> 61

American Express Travel Related Services Company, Inc. ("AMEX") 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 ("Tribune") is 435 North Michigan
Avenue, 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. ("Global Retail"), (B) 171,609 shares
held by DLJ Diversified Partners, L.P. ("DLJ"), (C) 63,729 shares held by
DLJ Diversified Partners -- A, L.P. ("DLJ-A"), (D) 37,439 shares held by
GRP Partners, L.P. ("GRP"), (E) 39,652 shares held by Global Retail
Partners Funding, Inc. ("Global Funding") and (F) 9,912 shares held by DLJ
ESC II, L.P. ("DLJ ESC"), 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 509
shares held by DLJ ESC. DLJ, DLJ-A, GRP, Global Funding and DLJ-ESC are
affiliates of Global Retail and are referred to herein collectively as the
"GRP Affiliates." The address of Global Retail and the GRP 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. ("Boulder Ventures I") and (B) 461,539
shares held by Boulder Ventures II, L.P. ("Boulder Ventures II"), and (ii)
the following shares of common stock issuable upon the 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 AMEX.

(9) Includes 215,628 shares of common stock issuable upon exercise of stock
options, of which 3,125 of such shares shall vest upon completion of this
offering.

(10) The address of Mr. Funk is 22583 Anasazi Way, Golden, Colorado 80401.

(11) The sole General Partner of Centennial Fund IV is Centennial Holdings IV,
L.P. ("Holdings IV"). Holdings IV may be deemed to indirectly beneficially
own the shares owned by Centennial Fund IV. Mr. Goldman is a general
partner of 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 the shares held by Centennial Fund IV, except to
the extent of his pecuniary interest.

(12) Ms. Levinson is a Principal of Global Retail. The shares listed represent
shares held by Global Retail and the GRP Affiliates. Ms. Levinson disclaims
beneficial ownership of all shares held by Global Retail and the GRP
Affiliates, except to the extent of her pecuniary interest.

(13) Mr. Williams is President and Chief Executive Officer of Tribune Media
Services, Inc., a wholly-owned subsidiary of Tribune.

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

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<PAGE> 62

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 8,314,115 shares of common
stock outstanding and held of record by 60 stockholders. Upon the closing of
this offering, there will be 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.

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> 63

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

Pursuant to the Third Amended and Restated 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> 64

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, fifteen percent (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> 65

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 to serve as the transfer agent and registrar
for the common stock.

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<PAGE> 66

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. We cannot predict what effect, if any, market sales of shares or the
availability of shares for sale will have on the market price of our common
stock prevailing from time to time. Nevertheless, sales of substantial amounts
of common stock in the public market, or the perception that such sales could
occur, could adversely affect the market price of the common stock and could
impair our future ability to raise capital through the sale of our equity
securities.

Upon the closing of this offering, we will have a total of 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 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 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>
............. Upon the date of this prospectus (shares eligible for resale
under Rule 144(k) and not subject to lock-up agreements)
............. 90 days following the date of this prospectus (shares
eligible for resale under Rules 144 and 701 and not subject
to lock-up agreements)
............. 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
(approximately 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 the 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
shares of common stock are outstanding under our stock plans, of which
are currently exercisable.

Directors, officers and stockholders of Exactis.com holding an aggregate of
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 pursuant thereto.

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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<PAGE> 67

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 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.............................................
========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters are subject to various conditions, such as approval of legal
matters by counsel. 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 additional shares of our common stock
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 expenses payable by us:

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

RESERVED SHARES

The underwriters, at our request, have reserved for sale at the initial
public offering price up to 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

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<PAGE> 68

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

Our directors, officers and stockholders who hold shares in the
aggregate, have agreed that they will not offer, sell, or agree to sell,
directly or indirectly, or otherwise dispose of 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.

In addition, 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 56
filed public offerings of equity securities, of which 33 have been completed,
and has acted as a syndicate member in an additional 28 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 75 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 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

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<PAGE> 69

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, pursuant to an e-Dealer
Agreement, 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 each of the e-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. Statements contained in this prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete. 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. You may also inspect these
reports, proxy statements and other information at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.

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.

65
<PAGE> 70

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> 71

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> 72

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 43,138 750,253
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> 73

EXACTIS.COM, INC.

STATEMENTS OF OPERATIONS

See accompanying notes to financial statements.

F-4
<PAGE> 74

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 ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ---------- --------- ------- ---------- ------------ ------------
<S> <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)
Stock options issued as
compensation at less than fair
value.......................... -- -- -- -- 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 $750,253 $(19,645,555) $(17,790,798)
======= ========== ========= ======= ======== ============ ============
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 75

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> 76

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> 77
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> 78
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> 79
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> 80
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.

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> 81
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> 82
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> 83
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> 84
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> 85
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> 86

PROSPECTUS

[EXACTIS.COM LOGO]

Common Stock

THOMAS WEISEL PARTNERS LLC

DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED

WIT CAPITAL CORPORATION
<PAGE> 87

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......... $ 15,985.00
NASD filing fee............................................. 6,250.00
Nasdaq National Market listing application fee.............. 5,000.00
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...................................... 27,765.00
-----------
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.

otherwise, 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. The Company received cash proceeds
II-2
<PAGE> 89

from the 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> 90

<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> 91

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 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 August 23, 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. 1 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 August 23, 1999
- ----------------------------------------------------- Directors
Adam Goldman

/s/ E. THOMAS DETMER, JR. President, Chief Executive August 23, 1999
- ----------------------------------------------------- Officer and Director
E. Thomas Detmer, Jr. (Principal Executive Officer)

/s/ KENNETH W. EDWARDS, JR. Chief Financial Officer, August 23, 1999
- ----------------------------------------------------- Secretary and Treasurer
Kenneth W. Edwards, Jr. (Principal Financial and
Accounting Officer)

* Director August 23, 1999
- -----------------------------------------------------
Pierric D. Beckert

* Director August 23, 1999
- -----------------------------------------------------
Linda Fayne Levinson

* Director August 23, 1999
- -----------------------------------------------------
David D. Williams

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

II-5
<PAGE> 92

EXHIBIT INDEX

<PAGE> 93

<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
** CERTAIN CONFIDENTIAL
MATERIAL CONTAINED IN THIS
DOCUMENT HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE
406 OF THE SECURITIES ACT OF
1933, AS AMENDED.

EXHIBIT 10.13

EXECUTION COPY

ASSET PURCHASE AGREEMENT

between

INFOBEAT INC.

(the Seller)

and

SONY MUSIC, A GROUP OF SONY MUSIC ENTERTAINMENT INC.

(the Buyer)

Dated December 15, 1998

<PAGE> 2

ASSET PURCHASE AGREEMENT

AGREEMENT (the "AGREEMENT"), dated December 15, 1998, among INFOBEAT
INC., a Delaware corporation (the "SELLER") and SONY MUSIC, A GROUP OF SONY
MUSIC ENTERTAINMENT INC., a Delaware corporation (the "BUYER").

WHEREAS, Seller desires to sell, and Buyer desires to purchase,
substantially all of the assets of Seller relating to the operation of Seller's
Publishing Business (as hereinafter defined), upon the terms and conditions
hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the parties hereto hereby
agree as follows:

ARTICLE I

DEFINITIONS

The capitalized terms used in this Agreement shall have the meanings
specified in this ARTICLE I. As used in this Agreement, all pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular, or the plural, as the context may require. The words "this Agreement,"
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole, including the Exhibits and Schedules hereto, as the
same may from time to time be amended or supplemented. The word "including" when
used herein is not intended to be exclusive, or to limit the generality of the
preceding words, and means "including, without limitation."

"ACTIVE SUBSCRIBERS" shall mean a unique e-mail address that is enabled
to receive e-mail from the Publishing Business and, as of the Closing Date, (i)
is subscribed to at least one service of the Publishing Business and (ii) has
been sent an e-mail of the latest issue of the service for which it is
subscribed.

"ADJUSTMENT FACTOR" shall have the meaning set forth in SECTION 2.5(B).

"ADVERTISING AGREEMENT" shall mean any Contract pursuant to which
Seller has agreed to provide advertising space on the Web Site or on e-mails
distributed as part of the Publishing Business.

"AFFILIATE" shall mean, with respect to any Person, a Person who
directly or indirectly, through one or more intermediaries, has control of, is
controlled by, or is under common control with, such Person. For these purposes,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management of any Person, whether through the
ownership of voting securities, by contract or otherwise.

"ASSETS" shall have the meaning set forth in SECTION 2.1.

"ASSUMED LIABILITIES" shall have the meaning set forth in SECTION 2.3.
<PAGE> 3

"BROADCAST SERVICES" shall have the meaning set forth in SECTION
9.3(c).

"BUSINESS DAY" shall mean a day other than Saturday or Sunday on which
banks are open for business in New York City.

"BUYER" shall have the meaning set forth in the Preamble to this
Agreement.

"BUYER INDEMNITEES" shall mean the Buyer, Buyer's current and future
Affiliates and their respective successors and assigns.

"CLAIM" shall have the meaning set forth in SECTION 11.2.

"CLOSING" shall have the meaning set forth in SECTION 2.4.

"CLOSING BELL SERVICES" shall have the meaning set forth in SECTION
9.3(c).

"CLOSING DATE" shall have the meaning set forth in SECTION 2.4.

"COMMERCE AGREEMENT" shall mean any contract pursuant to which Seller
receives payment (including payment which Seller has waived) for delivering
visitors to a Web site of a third party.

"CONTENT" shall mean any graphical, audio, visual, audiovisual,
textual, or multimedia materials displayed or displayable on and over the
Internet or distributed by e-mails.

"CONTENT AGREEMENT" shall mean any Contract pursuant to which Seller
has acquired any right to Content for use in the Publishing Business, excluding
the Excluded Assets.

"CONTRACT" shall mean any contract, indenture, mortgage, deed of trust,
note, instrument, lease, license, arrangement or other agreement, whether oral
or written, including without limitation, all Content Agreements, Subscriber
Agreements, Technology Licenses, Advertising Agreements, Commerce Agreements and
Distribution Agreements.

"CORE PERSONNEL" shall have the meaning set forth in SECTION 9.3(A).

"DISTRIBUTION AGREEMENT" shall mean any agreement pursuant to which
Seller has acquired rights to distribute the Web Site or any other element of
the Publishing Business, including any agreement for co-branded Web sites,
whether such distribution is by means of a third Person Web site or otherwise,
or any other agreement for Subscriber acquisition.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.

"EXCLUSIVE NEGOTIATION PAYMENT" shall mean an amount equal to one
hundred percent (100%) of any fee paid by Buyer to Seller for the right to
exclusive negotiation with respect to the Assets and Service Bureau Business as
set forth in paragraph 10(g) of the Letter of Intent, provided that, if the
Closing shall occur after December 31, 1998, the Exclusive Negotiation Payment,
for purposes of calculating the Initial Payment, shall equal zero (0).

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"EXCLUDED ASSETS" shall have the meaning set forth in SECTION 2.2.

"EXCLUDED LIABILITIES" shall have the meaning set forth in SECTION 2.3.

"FINANCIAL STATEMENTS" shall have the meaning set forth in SECTION
3.11.

"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time, applied on a
consistent basis.

"GOVERNMENTAL AUTHORITY" shall mean any federal, state, local, foreign
or other governmental or administrative body, instrumentality, department or
agency or any court, tribunal, administrative hearing, arbitration panel,
commission or other similar dispute resolving panel or body.

"HTML E-MAILS" shall mean the electronic mail in HTML format delivered
to Subscribers as part of the Publishing Business.

"INFOBEAT DOMAIN NAMES" shall mean all domain names used by Seller in
connection with the Publishing Business, including the domain names set forth in
SCHEDULE 3.5(b).

"INFOBEAT MARKS" shall mean all trade names, trademarks and service
marks used by Seller in connection with the Publishing Business and all marks
and logos associated therewith, including such trade names, trademarks and
service marks set forth in SCHEDULE 3.5(b).

"INFOBEAT SOFTWARE" shall mean the computer programs developed or
designed by employees of the Seller, or by consultants on Seller's behalf, or
otherwise acquired, and owned by Seller, used in the Publishing Business, other
than the Excluded Assets.

"INFOBEAT TECHNOLOGY" shall mean the computer hardware, processes,
inventions and technology, other than the InfoBeat Software, designed or
developed by Seller, or by consultants on Seller's behalf, or otherwise
acquired, and owned by Seller, used in the Publishing Business, other than the
Excluded Assets.

"INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 11.1.

"INITIAL PAYMENT" shall have the meaning set forth in SECTION 2.5(a).

"INDEMNIFYING PARTY" shall have the meaning set forth in SECTION 11.1.

"INTELLECTUAL PROPERTY RIGHTS" shall mean all industrial and
intellectual property rights of Seller used in the Publishing Business other
than such intellectual property rights that are Excluded Assets, including
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights, copyright
registrations, know-how, certificates of public convenience and necessity,
franchises, licenses, trade secrets, proprietary processes, computer programs
and other computer software, technology and formulae, including any and all
rights of Seller with respect thereto as a licensee.

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"LIEN" shall mean any mortgage, charge, pledge, lien, security
interest, claim, encumbrance or restriction of any kind or nature.

"LETTER OF INTENT" shall mean the Letter of Intent Subject to Contract,
dated November 11, 1998, between Buyer and Seller.

"MATERIAL ADVERSE EFFECT" shall mean any event or circumstance which
results in, or is reasonably likely to result in, a material adverse effect on
the value of the Assets, any of the rights in the Assets herein granted to Buyer
or the Publishing Business.

"OFFSET AMOUNT" shall have the meaning set forth in SECTION 2.10.

"PERMITTED USE PERIOD" shall mean the period commencing on the Closing
Date and ending on the earlier to occur of (a) the date which is six (6) months
after the Closing Date and (b) the date on which Seller shall acquire ownership
of or a license to use a trademark for use in connection with the Service Bureau
Business which does not incorporate the words "InfoBeat" or "Mercury" (or any
variant thereof) and is not confusingly similar to any of the InfoBeat Marks or
InfoBeat Domain Names.

"PERSON" shall mean any individual, partnership, corporation, limited
liability company, unincorporated organization or association, trust, or other
entity.

"POST CLOSING PAYMENT" shall have the meaning set forth in SECTION
2.5(a).

"PROCEEDING" shall mean any claim, audit, threat, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding) or prosecution.

"PUBLISHING BUSINESS" shall mean the Internet-based service operated by
Seller as of the date of execution of the Letter of Intent, which provides daily
customized news and information e-mails to a base of Subscribers on topics that
include entertainment, sports, news, finance, snow and weather, including the
Web Site.

"PURCHASE PRICE" shall have the meaning set forth in SECTION 2.5(a).

"PURCHASE PRICE REDUCTION" shall have the meaning set forth in SECTION
2.5(b).

"REDUCTION RATIO" shall have the meaning set forth in SECTION 2.5(b).

"SELLER" shall have the meaning set forth in the Preamble to this
Agreement.

"SELLER INDEMNITEES" shall mean the Seller, the Seller's current and
future Affiliates and their respective successors and assigns.

"SERVICE AGREEMENT" shall mean the Service Agreement in the form
attached as EXHIBIT A hereto, between Buyer and Seller, pursuant to which Seller
shall furnish to Buyer services of the Service Bureau Business, including,
without limitation, bulk e-mail distribution, daily back-ups of the database,
database security, a disaster recovery plan, customer service and support and

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engineering support, and shall include the warrant to be issued to Buyer
pursuant to Section 12.2 of the Service Agreement the form of which is attached
as Exhibit H thereto.

"SERVICE BUREAU BUSINESS" shall mean the business operated by Seller
which provides bulk e-mail distribution services currently under the name
"InfoBeat Express".

"STATEMENT" shall have the meaning set forth in SECTION 2.5(b).

"SUBSCRIBER" shall mean any registered subscriber of the Publishing
Business.

"SUBSCRIBER AGREEMENT" shall mean any Contract setting forth the terms
and conditions pursuant to which Subscribers subscribe to the transmission of,
request e-mail from, or consent to the transmission of e-mail from, the
Publishing Business.

"SUBSCRIBER DATA" shall mean the names of each Subscriber, all
information contained in the Subscriber profile completed by each Subscriber,
and any other data concerning Subscribers and all other databases and other
information derived therefrom or related thereto, including the database schema
with respect to the Subscribers as such database schema shall exist on the
Closing Date.

"SYSTEMS" shall have the meaning set forth in SECTION 3.16.

"TAX" or "TAXES" shall mean any and all taxes, charges, fees, levies or
other assessments of any nature whatsoever (including, without limitation, all
federal, state, local and foreign income taxes, estimated taxes, withholding
taxes, excise taxes, sales taxes, use taxes, transfer taxes, gross receipts
taxes, franchise taxes, employment and payroll related taxes, property taxes and
import duties) together with any related penalties, interest and additions to
taxes.

"TECHNOLOGY LICENSE" shall mean any Contract pursuant to which Seller
has acquired any right with respect to any invention, process, design, computer
program, computer hardware or other form of technology for use in the Publishing
Business.

"TOTAL SUBSCRIBERS" shall mean all Active Subscribers and other unique
e-mail addresses that were once Active Subscribers but are no longer Active
Subscribers.

"WEB SITE" shall mean the multimedia, interactive computer program, or
group of programs, designed to run on the World Wide Web protocol of the
Internet, and currently accessible at the url: http://www.infobeat.com and all
elements thereof, including without limitation, all Content displayed or
displayable thereon, any and all rights therein under any copyright, patent,
trademark, trade secret or other laws affecting intellectual property, any
associated computer programs (including any server applications) and any
proprietary information contained thereon (other than the Excluded Assets).

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ARTICLE II

SALE AND PURCHASE OF ASSETS

2.1 SALE AND PURCHASE OF ASSETS. On the Closing Date, Seller shall
convey, sell, transfer, assign and deliver to Buyer or its designee, all of
Seller's right, title and interest in and to the assets and properties of every
kind and description, wherever located, used, owned or held by Seller for use in
the Publishing Business, tangible and intangible, and whether or not
specifically referred to herein (collectively, the "ASSETS"), including, without
limitation, the Subscriber Data (which shall be electronically transferred); all
of Seller's rights under all Subscriber Agreements, Content Agreements,
Technology Licenses, Distribution Agreements, Advertising Agreements and
Commerce Agreements and other Contracts relating to the Publishing Business; all
of Seller's right, title and interest in and to the Content; all of Seller's
rights with respect to any InfoBeat Technology and InfoBeat Software, the
InfoBeat Marks and InfoBeat Domain Names and any variations or derivations
thereof, in perpetuity, including all logos, trademarks and other materials
containing such names and all good will of the Publishing Business as a going
concern; all other Intellectual Property Rights; the Web Site; all vendor and
customer lists relating to the Publishing Business (which shall be
electronically transferred); works in progress and computerized information with
respect to the Publishing Business; and any certifications, licenses, permits,
authorizations and approvals issued by any domestic or foreign Governmental
Authority in connection with the Publishing Business; all of the Seller's claims
and causes of action against others arising out of or relating to the Publishing
Business; all of the Seller's rights, privileges and franchises relating to or
arising out of the Publishing Business; and originals or copies of all of the
Seller's books, records, forms, promotional materials and documents relating to
the Publishing Business or the Assets.

2.2 EXCLUDED ASSETS. Seller shall retain all of its right, title and
interest in and to all of Seller's assets other than the Assets, including,
without limitation, the following assets (the "EXCLUDED ASSETS"):

(a) Cash and cash equivalents;

(b) Accounts receivable;

(d) All assets of the Service Bureau Business including, without
limitation, the intellectual property rights set forth on SCHEDULE
2.2 hereof.

2.3 ASSUMPTION OF LIABILITIES. Subject to the terms and conditions set
forth herein, on the Closing Date, Buyer or its designee shall assume all
monetary and non-monetary obligations of Seller arising subsequent to the
Closing Date and to be performed after the Closing Date, under the Subscriber
Agreements, as well as the Content Agreements, Technology Licenses, Distribution
Agreements, Advertising Agreements, Commerce Agreements and other Contracts set
forth in SCHEDULE 3.4(a), 3.4(b), 3.4(c), 3.4(d), and 3.4(e) (the "ASSUMED
LIABILITIES"). Seller acknowledges that it shall remain liable for all other
monetary and non-monetary obligations under any Contract not specifically
included in the Assumed Liabilities;

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provided that if any Contract has been inadvertently excluded from the
aforementioned Schedules, Buyer shall be entitled to the benefits of such
Contract so long as it agrees to accept the monetary and non-monetary
obligations of Seller under such Contract arising subsequent to, and to be
performed after, the date from which Buyer begins to receive the benefits
thereof. Except for the Assumed Liabilities, Buyer shall not incur or assume any
of Seller's liabilities or obligations of any kind or nature whatsoever, whether
known or unknown, liquidated or contingent, with respect to the Assets or
otherwise. Without limiting the generality of the foregoing, Buyer shall not
assume the following liabilities (the "EXCLUDED LIABILITIES"):

(a) any liability or obligation, direct, indirect or contingent, of the
Seller to the extent the same was required to be (without giving effect to any
applicable grace period) paid, performed or discharged prior to the Closing Date
including, without limitation, any liability for breach of any Contract on or
prior to the Closing Date;

(b) any liability or obligation, direct, indirect or contingent, of the
Seller to any Affiliate of Seller, for borrowed money or otherwise;

(c) any liability or obligation, direct, indirect or contingent, of the
Seller arising out of or in connection with any Claim, or Proceeding (regardless
of whether made or instituted prior to or subsequent to the Closing Date) to the
extent arising out of or in connection with any transaction or event which
occurred on or prior to the Closing Date (including, without limitation, in
respect of any audit by any Person relating to royalties or other amounts
payable pursuant to a Subscription Agreement, Content Agreement, Technology
License, Distribution Agreement, Advertising Agreement, Commerce Agreement or
other Contract, to the extent that such audit relates to royalties or other
amounts accrued prior to the Closing Date);

(d) any liability or obligation, direct, indirect or contingent,
arising under or with respect to any employment agreements and employee benefit
and pension plans, including any liability arising under or with respect to any
employee benefit plan within the meaning of Section 3(3) of ERISA at any time
sponsored by, maintained by or contributed to by the Seller or any Affiliate of
the Seller or with respect to which the Seller or any Affiliate at any time had
any obligation to make any contributions;

(e) any liability or obligation, direct, indirect or contingent, of the
Seller for Taxes, except as set forth in SECTION 2.7;

(f) any liability or obligation, direct, indirect or contingent, of the
Seller arising out of or in connection with non-compliance with any law,
regulation or order applicable to the Publishing Business, the Assets or the
Excluded Assets (including, without limitation, those relating to occupational
safety and health, privacy, protection of minors, foreign and corrupt practices,
antitrust, hiring, wages, hours, employee benefit plans and programs, collective
bargaining, exchange control, environmental conditions, or the payment of
withholding, social security and other Taxes) on or prior to the Closing Date;
or

(g) any liability or obligation, direct, indirect or contingent,
arising out of or relating to any Excluded Asset.

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2.4 Closing. The closing (the "CLOSING") of the transactions
contemplated in this ARTICLE II shall take place at 10:00 a.m. on the fifth
Business Day after the fulfillment or waiver of the last of the conditions
specified in ARTICLE VII OR VIII hereof, but in no event later than December 31,
1998, at the offices of Rosenman & Colin LLP, 575 Madison Avenue, New York, New
York 10022. The date on which the Closing shall take place is herein referred to
as the "CLOSING DATE". The Closing may be held at such other date, time and
place as may be agreed upon in writing by the parties.

2.5 Purchase Price.

(a) In consideration of Seller's representations, warranties and
agreements hereunder and Buyer's purchase of the Assets, Buyer, or its designee,
shall pay to Seller (i) on the Closing Date, the sum of Five Million
($5,000,000) Dollars, less the amount of any Exclusive Negotiation Payment (the
"INITIAL PAYMENT") and (ii) promptly after the date that is six (6) months after
the Closing Date, the sum of One Million Five Hundred Thousand ($1,500,000)
Dollars (the "POST CLOSING PAYMENT" and, together with the Initial Payment, the
"PURCHASE PRICE"). The Purchase Price shall be reduced by the Purchase Price
Reduction.

(b) On or prior to December 15, 1998 (or, if earlier, the Closing
Date), Seller shall deliver to Buyer a statement setting forth (i) the number of
Active Subscribers and Total Subscribers and (ii) the number of HTML E-Mails
opened by Subscribers, during the period from and including November 1, 1998 to
and including December 15, 1998 (the "STATEMENT"). Buyer shall have the right to
review the Statement and to directly, or through an independent accounting firm
retained by Buyer, audit the records of the Seller upon reasonable notice,
during normal business hours, in order to verify the accuracy of such Statement.
If Buyer does not object to any items contained in the Statement within five (5)
days after receipt thereof, the Statement shall be final and binding on the
parties. In the event Buyer objects to any items contained in the Statement,
Buyer and Seller shall attempt in good faith to resolve such objections and, if
so resolved, the Statement shall be deemed modified to reflect the agreed
resolution. If, after ninety (90) days, Buyer and Seller shall not be able to
resolve such objections, Buyer and Seller shall submit such dispute for
determination to a member of a "big five" accounting firm or representative from
Nielsen I/Pro or a similar auditing firm located in New York, New York,
satisfactory to both Buyer and Seller. The decision of such arbitrator shall be
binding on the parties and upon such decision, the Statement shall be deemed
modified to reflect such decision. The Purchase Price shall be reduced by an
amount equal to the product obtained by multiplying (a) the Purchase Price by
(b) the Reduction Ratio (the reduction as so calculated, the "PURCHASE PRICE
REDUCTION"). The "REDUCTION RATIO" is the sum derived by subtracting one (1)
from the quotient of (w) the number of HTML E-Mails opened by Subscribers as set
forth in the Statement divided by (x) 22,500,000; provided, however, that, if
the number of Active Subscribers is greater than or equal to [ ** ] and
the number of Total Subscribers is greater than or equal to [ ** ], then
the Purchase Price Reduction shall be decreased by the amount by which the
Reduction Ratio exceeds the result of subtracting one (1) from the quotient of
(y) the number of Total Subscribers divided by (z) [ ** ] (the "ADJUSTMENT
FACTOR"). In no event, however, shall the Adjustment Factor be greater than 0.2.
Examples of the calculation of the Purchase Price Reduction are set forth on
EXHIBIT B. Seller shall pay over the Purchase Price Reduction to Buyer by wire
transfer to an account designated by Buyer within one (1) Business Day after the
amount thereof shall have been determined,

** INDICATES CONFIDENTIAL TREATMENT REQUESTED

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provided that the Purchase Price Reduction may, at Buyer's option, be offset
against the Service Fee (as defined in the Service Agreement) under the terms of
the Service Agreement for the third and fourth quarterly period of the first
Contract Year (as defined in the Service Agreement) thereof, and for all or any
portion of the Service Fee for the second and third Contract Years, up to the
full amount of the Purchase Price Reduction; and, provided further that if the
Buyer has not yet paid the Post Closing Payment, the Purchase Price Reduction
may, at Buyer's option, be offset against the Post Closing Payment.

(c) The Initial Payment shall be reduced by an amount equal to the
product obtained by multiplying (i) the total compensation, cash or otherwise,
received by Seller pursuant to the Advertising Agreements which have been
delivered as of the Closing Date and (ii) one (1) minus the quotient obtained by
dividing (a) the number of guaranteed impressions, downloads or new customer
bounties under such Advertising Agreements which have been delivered as of the
Closing Date by (b) the total number of guaranteed impressions, downloads or new
customer bounties under such Advertising Agreements (provided such amount is not
less than zero (0)), pursuant to a procedure to be negotiated in good faith by
the parties prior to the Closing.

2.6 Nonassignable Assets and Nonassumable Liabilities. Subject to
SECTION 7.7 hereof, to the extent that the assignment or attempted assignment of
any Asset, or the assumption of any Assumed Liability hereunder would be invalid
or would constitute a breach of any Contract or other commitment to which Seller
is a party or by which it or any of the Assets may be bound, or if any consent
of a licensor would be required in connection with the assignment of any such
Contract or commitment, this Agreement shall not constitute an assignment of
such Asset or assumption of such Assumed Liability; provided, however, that any
such Asset or Assumed Liability, as applicable, shall be held and/or received by
Seller for the benefit of Buyer, its successors and assigns. Seller will use its
reasonable efforts to obtain all consents required for the assignment of any
Asset to or the assumption of any Assumed Liability by Buyer. Until such consent
is obtained, Seller will cooperate with Buyer, its successors and assigns in any
reasonable arrangement designed to provide for Buyer, its successors and assigns
the benefit of such Asset or Assumed Liability, as applicable, including
enforcement for the benefit of Buyer, its successors and assigns, of any and all
rights of Seller arising out of the breach or cancellation of any Contract or
other commitment constituting such Asset or Assumed Liability, as applicable.

2.7 Transfer Tax. Buyer shall be responsible for the payment of any and
all sales, use, recordation, gains, transfer or similar Taxes or fees imposed by
the State of New York or any locality therein with regard to the sale of the
Assets hereunder, and shall deliver copies of any Tax returns or other
documentation filed with respect thereto to Seller promptly after filing. Seller
shall be responsible for the payment of any and all sales, use, recordation,
gains, transfer or similar Taxes or fees imposed by the State of Colorado or any
locality therein with regard to the sale of the Assets hereunder, and shall
deliver copies of any Tax returns or other documentation filed with respect
thereto to Buyer promptly after filing

2.8 Seller's Rights to Use Names. Notwithstanding the provisions of
SECTION 2.1 and SECTION 2.3, Seller, as long as it shall comply with the terms
and conditions of this Agreement, shall have (i) a limited, worldwide, exclusive
license to use the mark "InfoBeat

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Express" and the domain name "INFOBEATEXPRESS.com" solely in connection with the
marketing of the Service Bureau Business and solely for the Permitted Use
Period, and (ii) a limited, non-exclusive, worldwide, license, for a period
commencing on the date of expiration of the Permitted Use Period and expiring on
the date ninety (90) days thereafter, to use the mark "InfoBeat Express", but
not the domain name "INFOBEATEXPRESS.com" solely in conjunction with the word
"formerly" (ie. "formerly, InfoBeat Express" or "formerly INFOBEATEXPRESS.com")
and solely for the purpose of informing Persons that Seller no longer markets
any goods or services under the "InfoBeat" mark. Buyer shall not use the mark
"InfoBeat Express" and the domain name "INFOBEATEXPRESS.com" during the
Permitted Use Period.

2.9 Receipt of Funds. From and after the Closing Date, if Seller
receives any amounts arising out of or on account of the conduct of the
Publishing Business or the Assets, but not such amounts arising out of or on
account of the exploitation of the Excluded Assets, following the Closing,
Seller shall promptly pay such amounts to Buyer.

2.10 Right of Offset. Seller agrees that, notwithstanding anything to
the contrary contained in this Agreement, and in addition to any other remedy
which is available to Buyer hereunder or under the Service Agreement, if at the
time of any payment or payments payable by Buyer to Seller under the provisions
of this Agreement or the Service Agreement there is any amount due and payable
(the "Offset Amount") to the Buyer arising out of or relating, directly or
indirectly, to this Agreement, or the Service Agreement, and the transactions
contemplated hereby, including the indemnification provisions set forth in
SECTION 11 hereof, the amount otherwise payable to Seller under this Agreement,
or the Service Agreement, may be applied by the Buyer in whole or in part to the
extent necessary to offset in whole or in part such amount owing by Seller;
provided, that, if Seller disputes such Offset Amount, Buyer shall place such
amount in escrow until such dispute is conclusively adjudicated in a court
proceeding pursuant to SECTION 12.4 hereof.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

The Seller hereby represents and warrants to the Buyer Indemnitees as
follows:

3.1 Organization; Good Standing; Qualification. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Seller has the power and authority to own and operate the
Assets and to carry on the Publishing Business and the Service Bureau Business
as now being conducted. Seller uses no trademarks, trade names or service marks,
other than the InfoBeat Marks set forth on SCHEDULE 3.5(b). The Seller is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in the jurisdictions set forth on SCHEDULE 3.1, which jurisdictions
constitute all jurisdictions in which it is required to be so qualified or
licensed, except where the failure to be so qualified or licensed has not had
and will not have a Material Adverse Effect.

3.2 Authorization and Validity of Agreement. Except as set forth in
SCHEDULE 3.2, Seller has the corporate power and authority and has taken all
necessary corporate actions to

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execute and deliver this Agreement and the Service Bureau Agreement, to
consummate the transactions contemplated hereby and thereby and to take all
other actions required to be taken by it pursuant to the provisions hereof and
thereof. This Agreement has been duly executed and delivered by the Seller. This
Agreement is, and the Service Agreement when executed and delivered will be,
legal, valid and binding upon and enforceable against the Seller, in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, moratorium, insolvency, fraudulent conveyance, reorganization, or
other similar laws affecting the enforcement of creditors' rights. Except as set
forth in SCHEDULE 3.2, neither the execution, delivery or performance of this
Agreement or the Service Agreement, nor the consummation of the transactions
contemplated hereby or thereby will (a) violate (with or without the giving of
notice or the lapse of time or both) any law, rule, regulation, court order,
writ, judgment, injunction or decree applicable to the Seller, (b) violate or
breach the Certificate of Incorporation, Bylaws or other governing instruments
of the Seller or (c) violate or breach, or constitute a default under or grounds
for termination of, or result in the acceleration of the performance of the
obligations of the Seller under any Contract relating to the Publishing Business
to which Seller is a party or by which Seller or any of its respective assets
(including the Assets) are bound or affected.

3.3 No Approvals, Consents or Notices Required. Except as set forth on
SCHEDULE 5.5, no authorization, approval, order, license, permit, franchise or
consent of, and no registration, declaration, notice or filing by or with, any
third Person or any domestic or foreign Governmental Authority is required in
connection with the execution, delivery and performance of this Agreement or the
Service Agreement by Seller, or the consummation by Seller of the transactions
contemplated hereby or thereby, including the assignment and transfer of the
Contracts included in the Assets to Buyer or its designee, which shall be an
Affiliate thereof.

3.4 Contracts.

(a) SCHEDULE 3.4(a) is a complete and correct list of all Content
Agreements to which Seller is a party, including the name of the Content
provider, a brief description of the Content delivered, and to be delivered, and
the expiration date of each such Content Agreement. SCHEDULE 3.4(b) is a
complete and correct list of all Distribution Agreements to which Seller is a
party and the expiration date of each such Distribution Agreement. SCHEDULE
3.4(c) is a complete and correct list of all Advertising Agreements to which
Seller is a party, including the name of each advertiser, a summary of the rates
charged under each such Agreement, the term of each advertising commitment and
the number of guaranteed impressions thereunder. SCHEDULE 3.4(d) is a complete
and correct list of all Commerce Agreements, including the name of each
affiliate, and the expiration date of each Commerce Agreement. SCHEDULE 3.4(e)
is a complete and correct list of all other Contracts (which are not Content
Agreements, Distribution Agreements, Advertising Agreements, Commerce Agreements
or Technology Licenses) included in or relating to any of the Assets to which
Seller is a party.

(b) Each Content Agreement, Technology License, Distribution Agreement,
Subscriber Agreement, Advertising Agreement, Commerce Agreement and other
Contract included in the Assets is a legal, valid and binding obligation of
Seller and each of the other parties signatory thereto, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, moratorium, insolvency, fraudulent conveyance, reorganization,

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or other similar laws affecting the enforcement of creditors' rights, and is in
full force and effect, and there are no defaults (or events which, with notice
or lapse of time or both, would constitute a default) by Seller or, to Seller's
knowledge, by any other Person party to any such Content Agreement, Technology
License, Distribution Agreement, Advertising Agreement, Commerce Agreement or
other Contract included in the Assets. Seller has made available to Buyer or its
advisers true and complete copies of the Content Agreements, Technology
Licenses, Distribution Agreements, Advertising Agreements, Commerce Agreements
and other Contracts set forth on SCHEDULES 3.4(a), 3.4(b), 3.4(c), 3.4(d), and
3.4(e), for review.

(c) Except as otherwise set forth on SCHEDULE 5.5, all of the Content
Agreements, Technology Licenses, Distribution Agreements, Subscriber Agreements,
Advertising Agreements, Commerce Agreements and other Contracts included in the
Assets are freely assignable, in whole or in part by Seller without the consent
of any other Person. No Content Agreement, Technology License, Distribution
Agreement, Subscriber Agreement, Advertising Agreement, Commerce Agreement or
other Contract included in the Assets contains a provision permitting it to be
terminated upon a change of control or ownership of the Publishing Business or a
sale of the Assets or if a specific individual ceases to be employed by or
otherwise associated with the Publishing Business. No waiver of any right of
first refusal or consent of any third party is required for the consummation of
the transactions contemplated hereby by Seller, including, without limitation,
for the transfer of the Assets to Buyer.

(d) The Seller (i) owns all right, title and interest in, or possesses
valid licenses to use for all purposes material to the operation of the
Publishing Business, the Content, (ii) has not granted to any other Person any
of its interest in the Content or any element thereof, as licensee or otherwise,
and (iii) has filed all certificates, affidavits and other documents, and taken
all other actions, necessary to retain its title to such Content which it owns
and to keep the same in effect. The Content does not infringe upon or violate
the rights of any Person, including any rights of privacy or publicity, any
moral rights or any rights under the laws of copyright, patent, trademark and
trade secret, and no claim alleging any such infringement or violation has been
received by Seller. The Content does not contain any material errors, omissions,
deficiencies, inaccuracies, obscenities or defamatory or libelous materials or
information.

(e) There are no pending royalty claims, requests for audits, or
pending audits and disputes or, to the best knowledge of Seller, threats thereof
against Seller, in connection with any Contract.

3.5 InfoBeat Software and Technology; Other Proprietary Rights.

(a) SCHEDULE 3.5(a) is a complete and correct list and brief
description of all InfoBeat Software and InfoBeat Technology. The Seller (i)
owns all right, title and interest in each item of InfoBeat Software and
InfoBeat Technology, free and clear of all Liens, (ii) has not granted to any
other Person any interest in or right to exploit any such InfoBeat Software or
InfoBeat Technology, as licensee or otherwise, and (iii) none of such InfoBeat
Software or InfoBeat Technology infringes upon or violates the rights of any
Person, including any rights under the laws of copyright, United States patent,
trademark and trade secret, and no claim alleging any such infringement or
violation has been made to the Seller. There are no sums owing or to become due
to any Person in respect of Seller's ownership or exploitation of such

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InfoBeat Software or InfoBeat Technology. Set forth in SCHEDULE 3.5(a) is a list
of all registrations and applications for registration filed with the United
States Copyright Office, the United States Patent and Trademark Office or any
similar foreign intellectual property rights depository with respect to the
InfoBeat Software and InfoBeat Technology. Except as set forth in SCHEDULE
3.5(a), Seller does not own any patents, patent applications, registered
copyrights or copyright applications used in or related to the Publishing
Business.

(b) SCHEDULE 3.5(b) is a complete and correct list of the InfoBeat
Marks and InfoBeat Domain Names. The Seller (i) owns all right, title and
interest in each of the InfoBeat Marks and the InfoBeat Domain Names, free and
clear of all Liens, (ii) has not granted to any other Person any interest in any
of the InfoBeat Marks or InfoBeat Domain Names, as licensee or otherwise, and
(iii) has filed all certificates, affidavits and other documents, required to be
filed under the U.S. Trademark Act, and taken reasonable precautions necessary
to retain its title to such InfoBeat Marks and the InfoBeat Domain Names and to
keep the same in effect. None of the InfoBeat Marks or InfoBeat Domain Names is
invalid and none infringes upon or violates the rights or claimed rights of any
Person, including any rights under the laws of copyright, patent, trademark and
trade secret, and no claim alleging any such infringement or violation has been
received by Seller. The representations in this SECTION 3.5(b) shall not apply
to any intellectual property rights which are Excluded Assets.

(c) SCHEDULES 3.4(a), 3.4(b), 3.4(c), 3.5(a) and 3.5(b) set forth all
of the Intellectual Property Rights used in or required by Seller in the normal
operation and conduct of the Publishing Business, other than such Intellectual
Property Rights, the absence of which would not, individually or in the
aggregate, have a Material Adverse Effect and such intellectual property rights
which are Excluded Assets.

(d) Seller owns all right, title and interest in, or possesses valid
licenses to use for all purposes material to the operation of the Publishing
Business, all the Intellectual Property Rights included in the Assets and not
set forth on SCHEDULES 3.4(a), 3.4(b), 3.4(c), 3.5(a) and 3.5(b) (collectively,
the "RESIDUAL INTELLECTUAL PROPERTY"), free and clear of all Liens. Seller has
not granted to any other Person any interest in any Residual Intellectual
Property, as licensee, sublicense or otherwise. The Residual Intellectual
Property does not infringe upon the rights of any Person, including any rights
under the laws of copyright, patent, trademark or trade secret, and no claim
alleging any such infringement or violation has been received by Seller. The
representations in this SECTION 3.5(d) shall not apply to any intellectual
property rights which are Excluded Assets.

(e) The Content, the InfoBeat Technology, the InfoBeat Software, and
the Residual Intellectual Property does not contain any copy protection,
computer virus, malicious code, or destructive feature. The representations in
this SECTION 3.5(e) shall not apply to any intellectual property rights which
are Excluded Assets.

3.6 Ownership; Liens. All of the Assets are owned directly by the
Seller, free and clear of all Liens. No Affiliate of Seller owns or holds any
right, title or interest in or to any of the Assets.

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3.7 Taxes. Seller has filed within the time (subject to applicable
extensions, if any) and in the manner prescribed by law all federal, state,
local and foreign Tax returns which are required to be filed by Seller. Such
returns reflect accurately all liability for Taxes for the period covered
thereby. All such Taxes have been paid when due (subject to applicable
extensions, if any). There are no claims against Seller for any alleged
deficiency in Tax, and there are no current or pending Tax audits or Proceedings
with respect to Seller. There are no Liens for Taxes on any Asset.

3.8 Legal Proceedings. Except as set forth on SCHEDULE 3.8, there are
no Proceedings pending or, to the knowledge of Seller, threatened against Seller
or affecting any of the Assets. Seller is not subject to any judgment, order or
decree of any Governmental Authority.

3.9 Compliance With Law. Seller has operated the Publishing Business so
as to comply with all applicable domestic and foreign, Federal, state and local
statutes, laws, ordinances, codes, governmental rules and regulations
(including, without limitation, those relating to occupational safety and
health, privacy, protection of minors, foreign and corrupt practices, antitrust,
hiring, wages, hours, employee benefit plans and programs, collective
bargaining, exchange control, environmental conditions, or the payment of
withholding, social security and other Taxes). Seller is not in violation of any
foreign or domestic statutes, laws, ordinances, codes, governmental rules or
regulations, or any judgment, order or decree (federal, state, local or foreign)
to which it is subject. Except as set forth in SCHEDULE 5.5, no licenses,
permits, franchises or other governmental authorizations are necessary for the
ownership or operation of the Assets or the conduct of the Publishing Business
as presently conducted.

3.10 Title to and Condition of Properties. Seller has good and
merchantable title to all tangible personal property included in the Assets,
free and clear of all Liens. All tangible personal property included in the
Assets is in good condition and repair, normal wear and tear excepted.

3.11 Financial Information. Seller has furnished to Buyer (i) its
unaudited balance sheet as at October 31, 1998 and the related statement of
income, cash flow and stockholders' equity for the ten-month period then ended,
and (ii) its audited balance sheet as at December 31, 1997 and the related
statement of income, cash flow and stockholder's equity for the year then ended
(collectively, the "FINANCIAL STATEMENTS"). The Financial Statements, (x) are in
accordance with the books and records of the Seller, (y) fairly present the
financial condition of Seller as at the respective dates indicated and the
results of operations of Seller for the respective periods indicated and (z)
have been prepared in accordance with GAAP applied consistently with past
practices of Seller. There has been no fact, change, event or circumstance which
has caused a Material Adverse Effect since October 31, 1998. Since October 31,
1998, the Seller has conducted the Publishing Business only in the ordinary
course. Except as set forth on SCHEDULE 3.11, since October 31, 1998, there has
not been any of the following:

(a) Any damage, destruction or loss relating to the Assets, whether or
not covered by insurance, having or which could have a Material Adverse Effect;

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(b) Any liability created, assumed, guaranteed or incurred, or any
material transaction, contract or commitment entered into, by the Seller,
affecting the Assets, or the Publishing Business, other than in the ordinary
course of business;

(c) Any payment, discharge or satisfaction of any material Lien or
liability by Seller or any cancellation by Seller of any material debts or
claims or any amendment, termination or waiver of any rights of Seller having or
which could have a Material Adverse Effect;

(d) Any license, sale, transfer, pledge, mortgage or other disposition
of any material tangible or intangible Asset (including any Intellectual
Property Rights) of Seller, other than in the ordinary course of business;

(e) Any termination of, or written indication of an intention to
terminate or not renew, any material Contract relating to the Publishing
Business;

(f) Any material write-down or write-up of the value of any Asset or
any material reduction in Subscribers;

(g) Any agreement, understanding, authorization or proposal, whether in
writing or otherwise, for Seller to take any of the actions specified in
paragraphs (a) through (f) above.

3.12 Liabilities. Except as set forth on SCHEDULE 3.12, Seller does not
have any liabilities, absolute, contingent or otherwise, direct or indirect,
matured or unmatured, which are not reflected in the Financial Statements or
disclosed with reasonable specificity in the Schedules to this Agreement and
which are associated with the Assets or the Publishing Business.

3.13 Advertising Customers. SCHEDULE 3.13 hereto is a complete and
correct list of all current advertising customers of the Publishing Business.

3.14 Employees; Independent Contractors; Contracts. All of the current
and past employees of Seller who are or were involved in the creation of
Intellectual Property Rights are or were employed pursuant to "work-for-hire"
agreements which also contain or contained appropriate assignments to Seller of
such employees' work product, including invention assignment agreements, where
appropriate. Seller has executed appropriate contracts with all independent
contractors of Seller involved in the creation of Intellectual Property Rights
containing assignments to Seller of all rights of such independent contractors
in their work product.

3.15 Brokerage Commissions. Seller has not incurred any liability for
finder's, brokerage, agent's or advisory fees or commissions in connection with
this Agreement, the Service Agreement or the transactions hereby or thereby
contemplated.

3.16 Year 2000. All of the software, data and data bases included in
the Assets (collectively, the "SYSTEMS") comply with the following standards:
(i) the occurrence in or use by the Systems of dates before, on or after January
1, 2000 will not adversely affect the performance of the Systems with respect to
date-dependent data, computations, output or other functions, including, without
limitation, calculating, comparing and sequencing; (ii) the Systems

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will not abnormally end or provide invalid or incorrect results as a result of
date-dependent data; and (iii) the Systems can accurately process and manipulate
date-dependent data, including, without limitation, single century formulas and
leap years. The representations set forth in this Section 3.16 shall not apply
to output, results, errors or abnormal terminations caused by (a) any
modifications to the Systems made after the Closing other than such
modifications made by or on behalf of Seller or (b) any data provided to the
Systems which does not specify the century or is incorrect, other than any such
data provided by or on behalf of Seller.

3.17 Web Site Software. The items set forth on SCHEDULE 3.5(a)
constitute all of the computer programs necessary to operate the Web Site.

3.18 Full Disclosure. Neither this Agreement nor any written
information furnished by or on behalf of Seller to Buyer in connection with the
negotiation of this Agreement and the transactions contemplated hereby, contains
any untrue statement of a material fact or omits to state a material fact
required to be stated herein or therein necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

The Buyer hereby represents and warrants to the Seller Indemnitees as follows:

4.1 Organization; Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has the corporate power and authority to own or lease and operate its
properties and to carry on its business and activities as now being conducted.

4.2 Authorization and Validity of Agreement. Buyer has the corporate
power and authority and has taken all necessary corporate actions to execute and
deliver this Agreement and the Service Agreement, to consummate the transactions
contemplated hereby and to take all other actions required to be taken by it
pursuant to the provisions hereof. This Agreement is, and the Service Agreement
when executed and delivered will be, valid and binding upon and enforceable
against Buyer in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency, fraudulent
conveyance, reorganization, or other similar laws affecting the enforcement of
creditors' rights. Neither the execution, delivery or performance of this
Agreement or the Service Agreement, nor the consummation of the transactions
contemplated hereby will (a) violate (with or without the giving of notice or
the lapse of time or both) any law, rule, regulation, court order, writ,
judgment, injunction or decree applicable to Buyer, (b) violate or breach the
Certificate of Incorporation, Bylaws or other governing instruments of Buyer, or
(c) violate or breach, or constitute a default under or grounds for termination
of, or result in the acceleration of the performance of the obligations of the
Buyer under any Contract to which Buyer is a party or by which Buyer or any of
its assets are bound or affected.

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4.3 No Governmental Approvals or Notices Required. Except as set forth
in SCHEDULE 5.5, no authorization, approval, order, license, permit, franchise
or consent of, and no registration, declaration, notice or filing by or with,
any domestic or foreign Governmental Authority, is required in connection with
the execution, delivery and performance of this Agreement or the Service
Agreement by Buyer, or the consummation by Buyer of the transactions
contemplated hereby or thereby.

4.4 Brokerage Commissions. Buyer has not incurred any liability for
finder's, brokerage, agent's or advisory fees or commissions in connection with
this Agreement or the Service Agreement or the transactions hereby or thereby
contemplated.

ARTICLE V

PRE-CLOSING COVENANTS OF SELLER

From and after the date hereof to the Closing Date:

5.1 Conduct of Business. Seller shall conduct the Publishing Business
in the ordinary course of the Publishing Business and shall not take any action,
or omit to take any action which could diminish the value of the Publishing
Business, the Service Bureau Business or the Assets. Specifically, without
limiting the foregoing, Seller shall not, without Buyer's consent:

(a) Sell, transfer or assign any of the Assets or any rights therein;

(b) Place or permit any Person to place any Liens on the Assets;

(c) Commit any material breach of any material Subscriber Agreement,
Content Agreement, Distribution Agreement, Technology License , Advertising
Agreement, Affiliate Agreement or other Contract; or

(d) Amend or waive any material defaults under any Subscriber
Agreement, Content Agreement, Distribution Agreement, Technology License,
Advertising Agreement, Commerce Agreement or other Contract.

5.2 No Breach of Representations and WarrantieS. Seller will not take
any action which would cause or constitute a material breach, or would, if it
had been taken prior to the date hereof, have caused or constituted a material
breach, of any of the representations and warranties set forth in ARTICLE III
hereof. Seller will, in the event of, or promptly after the occurrence of, or
promptly after obtaining knowledge of the occurrence of or the impending or
threatened occurrence of, any fact or event which would cause or constitute a
material breach of any of the representations and warranties set forth in
ARTICLE III hereof as of the Closing Date, give reasonably detailed notice
thereof to Buyer; and Seller will use its best efforts to prevent, or promptly
remedy, such breach.

5.3 Access by Buyer. The directors, officers, employees and
representatives of Buyer will be permitted, at Buyer's cost, access, on
reasonable prior notice, during usual business hours, and as often as may be
reasonably requested, to, and will be permitted to make

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copies of and extracts from, the Subscriber Agreements, Content Agreements,
Distribution Agreements, Technology Licenses, Advertising Agreements, Commerce
Agreements and other Contracts of Seller, Seller's books and records to the
extent such books and records relate to the Publishing Business and such other
information relating to the Assets and the Publishing Business as Buyer shall
request.

5.4 No Solicitation. Seller will not, directly or indirectly, (i)
solicit, initiate or encourage the submission of inquiries, proposals or offers
or accept any such proposals or offers from any Person relating to, or otherwise
negotiate or cooperate with any Person or entity in respect of, any acquisition
or purchase of all or any portion of the Publishing Business or any of the
Assets, or (ii) participate in any discussion or negotiation regarding, or
furnish to any other Person any financial or other information with respect to,
any of the foregoing.

5.5 Consents. Seller will use its best efforts to obtain all those
third party consents and approvals of Governmental Authorities set forth on
SCHEDULE 5.5, including, without limitation, any consents necessary from
Subscribers to secure the consent of each such Subscriber to the transfer of
names and identifying data to Buyer or its designee as contemplated herein.

5.6 Confidential Treatment. In obtaining the consents and approvals set
forth on SCHEDULE 5.5, Seller will use its best efforts to obtain agreements
from such entities from which such consents are required not to disclose the
transaction that is the subject of this Agreement or any other confidential
information of Buyer, which agreements shall provide that Buyer shall be a third
party beneficiary thereof, and, upon Buyers request and at Buyer's expense,
enforce such agreements.

5.7 Best Efforts. Seller will use its best efforts to effectuate the
transactions hereby contemplated and to fulfill the conditions to Buyer's
obligations under ARTICLE VII of this Agreement.

ARTICLE VI

PRE-CLOSING COVENANTS OF BUYER

6.1 No Breach of Representations and Warranties. Buyer will not take
any action which would cause or constitute a material breach, or would, if it
had been taken prior to the date hereof, have caused or constituted a material
breach, of any of the representations and warranties set forth in ARTICLE IV
hereof. Buyer will, in the event of, or promptly after the occurrence of, or
promptly after obtaining knowledge of the occurrence or the impending or
threatened occurrence of, any fact or event which would cause or constitute a
material breach of any of the representations and warranties set forth in
ARTICLE IV hereof as of the Closing Date, give reasonably detailed notice
thereof to Seller; and Buyer will use its best efforts to prevent, or promptly
to remedy, such breach.

6.2 Best Efforts. Buyer will use its best efforts to effectuate the
transactions hereby contemplated and to fulfill the conditions to Seller's
obligations under ARTICLE VIII of this Agreement.

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ARTICLE VII

CONDITIONS TO BUYER'S OBLIGATIONS

All obligations of Buyer under this Agreement are subject to fulfillment
at the Closing of each of the following conditions, any or all of which may be
waived in whole or in part, at or prior to the Closing Date, by Buyer in its
sole discretion:

7.1 Representations and Warranties. The representations and warranties
of Seller contained in ARTICLE III hereof shall be true (i) as of the date of
this Agreement in all material respects, and (ii) at and as of the Closing Date
as though such representations and warranties were made at and as of such time
except for such changes occurring between the date hereof and the Closing Date
as will not result in a Material Adverse Effect.

7.2 Covenants. Seller shall have performed and complied in all material
respects with all covenants, agreements and conditions on its part required by
this Agreement to be performed or complied with prior to or at the Closing Date.

7.3 Officer's Certificate. Buyer shall have received a certificate of
an officer of the Seller, dated the Closing Date, certifying to the fulfillment
of the conditions specified in SECTIONS 7.1 and 7.2 hereof.

7.4 Opinion of Counsel. Buyer shall have received an opinion of counsel
for Seller, dated the Closing Date, in form and substance reasonably acceptable
to Buyer.

7.5 Good Standing Certificate. Buyer shall have received a Good
Standing Certificate for Seller dated within ten (10) days of the Closing Date,
issued by the Secretary of State of the state of incorporation of the Seller.

7.6 Institution of Proceedings; Injunction. There shall not have been
instituted by any Person (including any Governmental Authority) any bona fide
Proceeding to restrain or invalidate the transactions contemplated by this
Agreement, and there shall not be in effect any injunction or restraining order
issued by a court of competent jurisdiction in a Proceeding against the
consummation of the transactions contemplated by this Agreement.

7.7 Consents. Seller shall have delivered to Buyer all consents of
third Persons and governmental approvals set forth on SCHEDULE 7.7.

7.8 Bill of Sale and Assignment. Buyer shall have received from Seller
a Bill of Sale transferring title to the Assets, in form and substance
satisfactory to Buyer.

7.9 Assignment of Copyrights, Patents, Marks and Domain Names. Buyer
shall have received from Seller the following:

(a) An assignment of copyright, in a form suitable for recordation in
the United States Copyright Office, for each registered copyright and copyright
application included in the Assets, in form and substance satisfactory to Buyer.

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(b) An Assignment of trademark, in a form suitable for recordation in
the United States Patent and Trademark Office, for each registered trademark and
service mark included in the Assets, in form and substance satisfactory to
Buyer.

(c) An executed Registrant Name Change Agreement - Transfers, in a form
suitable for recordation with Network Solutions, Inc. for each domain name
included in the Assets, in form and substance satisfactory to Buyer.

7.10 Service Agreement. Buyer shall have received the Service
Agreement, duly executed by Seller.

7.11 Key Man Employment Agreement. Seller shall have delivered an
employment agreement executed by Doug Fahoury, satisfactory to Buyer pursuant to
which Mr. Fahoury shall agree to continue his employment with Seller for a
period of six (6) months from the Closing Date.

7.12 Cox Agreement. Seller shall have obtained amendments to its Agency
Representation Agreement dated January 1, 1998 with Cox Interactive Sales, Inc.,
to include a revised list of "non-commissionable" clients comprised of the
"Total E" and the Sony Parties (as defined in the Service Agreement).

7.13 Documentation. All documentation and instruments necessary to give
effect to the transaction contemplated hereby shall be satisfactory in form and
substance to Buyer.

7.14 Seller's Obligations. Seller shall have used its best efforts to
satisfy all outstanding financial obligations related to the Publishing Business
as of the Closing.

7.15 Other Deliveries. Seller shall deliver or cause to be delivered
such other documents and instruments as may reasonably be requested by Buyer or
its counsel to consummate the transactions contemplated hereby.

ARTICLE VIII

CONDITIONS TO SELLER'S OBLIGATIONS

All obligations of Seller under this Agreement are subject to the
fulfillment, at the Closing Date, of each of the following conditions, any or
all of which may be waived in whole or in part, at or prior to the Closing Date,
by Seller in its sole discretion:

8.1 Representations and Warranties. The representations and warranties
of Buyer contained in ARTICLE IV hereof shall be true in all material respects
(i) as of the date of this Agreement, and (ii) at and as of the Closing Date as
though such representations and warranties were made at and as of such time.

8.2 Covenants. Buyer shall have performed and complied in all material
respects with all agreements and conditions on its part required by this
Agreement to be performed or complied with prior to or at the Closing Date.

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8.3 Officer's Certificate. Seller shall have received a certificate of
an officer of Buyer, dated the Closing Date, certifying to the fulfillment of
the conditions specified in SECTIONS 8.1 and 8.2 hereof.

8.4 Purchase Price. The Initial Payment shall have been paid as set
forth in SECTION 2.5.

8.5 Opinion of Counsel. Seller shall have received an opinion of
counsel for Buyer, dated the Closing Date, in form and substance reasonably
acceptable to Seller.

8.6 Good Standing Certificate. Seller shall have received a Good
Standing Certificate for Buyer dated within ten (10) days of the Closing Date,
issued by the State of Delaware.

8.7 Institution of Proceedings; Injunction. There shall not have been
instituted by any Person (including any Governmental Authority) any bona fide
Proceeding to restrain or invalidate the transactions contemplated by this
Agreement or the Service Agreement, and there shall not be in effect any
injunction or restraining order issued by a court of competent jurisdiction in a
Proceeding against the consummation of the transactions contemplated by this
Agreement or the Service Agreement.

8.8 Consents. Buyer shall have delivered to Seller all consents of
third Persons and governmental approvals set forth on SCHEDULE 5.5.

8.9 Service Agreement. Seller shall have received the Service Agreement
duly executed by Buyer.

8.10 Other Deliveries. Buyer shall deliver or cause to be delivered
such other documents and instruments as may reasonably be requested by Seller or
its counsel to consummate the transactions contemplated hereby.

ARTICLE IX

POST-CLOSING COVENANTS

9.1 Further Assurances. From and after the Closing Date, each party to
this Agreement shall, at any time and from time to time, make, execute and
deliver, or cause to be made, executed and delivered, such assignments, deeds,
bills of sale, drafts, checks, returns, filings and other instruments,
agreements, consents and assurances, and take or cause to be taken all such
actions as counsel for the other party may reasonably request to effectuate the
transactions contemplated by this Agreement. Seller shall cause its employees to
reasonably cooperate with Buyer as needed from and after the Closing Date to
facilitate the transfer of the Assets and Publishing Business and shall make
such employees reasonably available to answer questions relating to the
Subscriber Agreements, Content Agreements, Distribution Agreements, Technology
Licenses, Advertising Agreements, Commerce Agreements other Contracts and other
Assets being transferred.

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9.2 Public Announcements. Except as provided in the next sentence, the
parties hereto shall not (and each party shall cause its directors, officers,
employees and agents not to) issue or cause the publication of any press release
or other public announcement with respect to the transactions contemplated by
this Agreement prior to the Closing without the prior written consent of the
other party hereto. After the Closing, Buyer shall be permitted to issue such a
press release or make such a public announcement without the consent of Seller,
provided that (i) Buyer shall obtain Sellers Consent, which shall not be
unreasonably withheld or delayed, solely with respect to the text of any
references to Seller or the InfoBeat Marks contained in any such press release,
and (ii) Buyer shall afford Seller a reasonable time (which in no event shall
exceed three (3) days) to notify its employees of such transaction prior to such
press release or pubic announcement. If any party hereto is required to make any
public disclosure or filing with respect to the transactions contemplated by
this Agreement by applicable law or pursuant to any listing agreement with, or
the rules or regulations of, any securities exchange on which the securities of
such party or any of its Affiliates are listed or traded, such party shall use
reasonable efforts to give the other party prior notice of such disclosure and,
to the extent confidential treatment of such information is available, to use
reasonable efforts to obtain such treatment. Notwithstanding the provisions of
this SECTION 9.2, after the Closing, Seller shall be permitted to confirm to
third Persons the fact that Buyer is a customer of the Service Bureau Business
(but shall not disclose any term of the Service Agreement).

9.3 Noncompetition; Nonsolicitation. (a) Seller covenants and agrees
that from and after the Closing Date it shall not, and shall cause any of its
Affiliates in which Seller has a fifty percent (50%) or greater ownership
interest or of which Seller otherwise exercises management control ("RESTRICTED
ENTITIES") not to, at any time prior to the expiration of the initial or any
renewal term of the Service Agreement, directly or indirectly, own, manage,
operate, join or control, participate in, consult for, be employed by, render
services to, or invest in or otherwise be connected with in any manner any
entity which is engaged in a business the same as, similar to or competitive
with, the Publishing Business; provided, that, nothing contained in this SECTION
9.3 shall preclude the Seller from effecting a sale of the Company in its
entirety, whether by means of a merger, reorganization, sale of assets or other
similar transaction. Nothing in this SECTION 9.3 shall prohibit Seller from
rendering consulting services to clients of the Service Bureau Business on
issues relating to the publishing business provided that (i) all members of
Seller's editorial staff (including Doug Fahoury and Margot Drees), customer
service staff and advertising sales staff (including Eric Belcher, Perri
Feldman, Kam Rope and Kristin Wyman) providing services to Buyer pursuant to the
Service Agreement (the "CORE PERSONNEL") shall not have any involvement in such
consulting services and shall be placed behind a "Chinese wall" with respect
thereto, (ii) Seller shall not reassign any Core Personnel away from providing
Services (as defined in the Service Agreement) to Buyer for the sole purpose of
avoiding the intent and spirit of the agreement of the parties as expressed in
clause (i) of this SECTION 9.3(a), (iii) Seller shall provide Buyer with no less
than thirty (30) days' written notice of any reassignment of any Core Personnel,
which notice shall include the name, job title and tenure, and job functions of
such Core Personnel, (iv) Buyer shall have a one-time right, during the Initial
Term or the Additional Term (as such terms are defined in the Service Agreement)
of the Service Agreement, to veto a reassignment of certain designated Core
Personnel, (v) John Funk and Raymond V Wagener shall not, for a period of six
months after the Closing Date, perform any consulting services related to any of
the service categories currently offered by Seller as part of the Publishing
Business or any other services categories which Buyer

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<PAGE> 24

may create after the Closing Date, (vi) Seller shall not be permitted to use any
confidential information relating to the service categories currently operated
by Seller as part of the Publishing Business or any other information learned by
Seller in the course of providing Services (as such term is defined in the
Service Agreement) under the Service Agreement, including information concerning
subscription popularity, subscriber feedback, editorial staffing, subscriber
acquisition, future product plans, market research, surveys, and content
acquisition, and (vii) Buyer shall, at no additional charge, have reasonable
access to Seller's consulting staff and shall generally have the benefit of the
knowledge of such staff at a level commensurate with Buyer's status as a
top-level customer of the Service Bureau Business.

Seller covenants and agrees that, from and after the Closing, it shall
not and shall cause each of its Restricted Entities not to, at any time prior to
the expiration of the initial or any renewal term of the Service Agreement, for
itself or on behalf of any other Person, or by action in concert with any other
Person, solicit, induce or encourage any other Person known by it to have a
contractual relationship with the Publishing Business acquired by Buyer to
discontinue, terminate, cancel or refrain from entering into any contractual
relationship with the Buyer or any of its Affiliates.

(c) Notwithstanding any provision in this SECTION 9.3 to the contrary,
so long as Seller shall have fulfilled its obligations hereunder and under the
Service Agreement, and Seller's involvement in such services is not visible to
the users thereof, (i) Seller shall be permitted to provide to Charles Schwab &
Co., Inc., on a "private label" basis, the services known as "Full Closing
Bell", "Early Closing Bell" and "Weekender", in their currently existing form,
(collectively the "CLOSING BELL SERVICES") for the term of the Service
Agreement, (ii) Seller shall be permitted to provide Charles Schwab & Co., Inc.
with services known as "Alerts", "Morning Call", "Midday Update", "Currencies",
"Commodities", "Internet Daily" and "Money Daily" (collectively, the "BROADCAST
SERVICES") for a period of one (1) year from the Closing Date, and (iii) Seller
shall be permitted to provide the Closing Bell Services to other financial
service clients, provided, that Seller shall pay Buyer a monthly fee in an
amount equal to $.02 per subscriber for the first 250,000 subscribers (in the
aggregate, exclusive of Charles Schwab and Co., Inc.) and $.03 per subscriber
for each subscriber over 250,000. Seller agrees to credit Buyer under the
Service Agreement for its proportionate share of fees for Editorial Services and
reimburse Buyer for its proportionate share of Content license fees relating to
Content used in such Closing Bell Services.

(d) Notwithstanding any provision in this SECTION 9.3 to the contrary,
Seller shall be permitted to continue to provide services to American Express
Travel Related Services Company, Inc. for a period of up to ninety (90) days
from the Closing Date, in accordance with the level and extent of services being
provided by Seller to such company as of the Closing Date.

(e) The parties acknowledge that the time, scope, geographic area and
other provisions of this SECTION 9.3 have been specifically negotiated by
sophisticated commercial parties and agree that all such provisions are
reasonable under the circumstances of the transactions contemplated by this
Agreement. If any portion of this SECTION 9.3 shall be determined to be invalid
or unenforceable as written, each such portion shall be enforced to the extent
reasonable under the circumstances and such determination shall not affect the
validity or enforceability of the balance hereof, and such balance shall remain
in full force and effect. It is

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<PAGE> 25

understood that Seller is entering into this non-competition and
non-solicitation agreement in order to induce Buyer to enter into this
Agreement. Seller agrees that any breach by Seller of the covenants in this
SECTION 9.3 shall cause irreparable harm which cannot be reasonably or
adequately compensated for in damages in an action at law, and that, in addition
to any other remedies Buyer may have, Buyer shall be entitled to injunctive
relief to enforce the provisions of this SECTION 9.3.

9.4 Use of Marks; Linking. (a) Buyer hereby grants Seller a limited,
non-transferable, non-exclusive, royalty-free license to use the mark "Closing
Bell" together with the mark "InfoBeat" solely for purposes of marketing the
Closing Bell Services, provided that (i) Seller shall at all times use such
marks together as "InfoBeat's Closing Bell", (ii) such marks shall not be
viewable by the subscribers of such Closing Bell Services marketed by Seller,
(iii) Seller shall obtain Buyer's prior consent before distributing any
advertising or marketing materials containing such marks, and (iv) all good will
derived by the use of such marks by Seller as contemplated by this SECTION
9.4(a) shall inure to Buyer. In the event Buyer elects to use a different name
to describe the service currently known as "Closing Bell", Seller shall cease
all use of the foregoing marks and use the new marks designated by Buyer, and
Buyer shall grant Seller a license with respect to such marks under the same
terms as set forth in this SECTION 9.4(a).

(b) Seller shall use its best efforts to cease all use of the marks
"InfoBeat Express" and the domain name "INFOBEATEXPRESS.com" on or prior to the
date which is ninety (90) days after the Closing Date, and, in any event, shall
cease all use of such mark and such domain name, or any other mark or domain
name confusingly similar to the InfoBeat Marks and InfoBeat Domain Names, on or
prior to the expiration of the Permitted Use Period. Seller shall use its best
efforts to cause its corporate name to be changed from "InfoBeat, Inc." to
another name not incorporating the words "InfoBeat" or "Mercury", and not
confusingly similar to any of the InfoBeat Marks or InfoBeat Domain Names, and
correct all necessary corporate and tax registrations, within fourteen (14) days
after the Closing Date, and, in any event shall have caused such corporate name
change and corrections to occur on or prior to the date which is ninety (90)
days from the Closing Date. Except as set forth in this SECTION 9.4 and in
SECTION 2.8, Seller shall cease all use of the words "InfoBeat" and "Mercury",
the InfoBeat Marks and the InfoBeat Domain Names as of the Closing Date, and
shall, at Buyer's option, deliver to Buyer or destroy any marketing materials in
the possession of Seller containing any of the InfoBeat Marks or the InfoBeat
Domain Names.

(c) Commencing on the Closing Date, until the expiration of the
Permitted Use Period, (i) Seller shall place a hypertext link on its
InfoBeatExpress.com Web site, in a prominent location on such Web site, linking
such Web site to the Web Site (ii) Buyer shall place hypertext links on the Web
Site in a prominent location on such Site, linking such Site to Seller's
InfoBeatExpress.com Web site.

(d) Buyer hereby agrees to maintain the "Select" content program
operated by Seller as part of the Publishing Business for a period of ninety
(90) days from the Closing Date, provided that (i) Seller shall on Buyer's
behalf, remove from the "Select" program any "Select" content provider the
subscription for which grows by five thousand or more Subscribers during such
ninety (90) days period and (ii) Seller shall pay over to the Buyer any and all
amounts

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<PAGE> 26

received by Seller on account of operation of the "Select" program for
such period. Seller hereby grants Buyer a limited, royalty-free, worldwide,
non-exclusive license to place hypertext links on the Web Site linking the Web
Site to the Web sites of such "Select" program members for such period.

9.5 Access to Books and Records. Seller covenants and agrees that from
and after the Closing Date the directors, officers, employees and
representatives of Buyer will be permitted access, on reasonable prior notice,
during usual business hours, and as often as may be reasonably requested, to,
and will be permitted to make copies of and extracts from Seller's books and
records to the extent such books and records are not included in the Assets but
relate to the Publishing Business.

9.6 MailCity. If, on or prior to the Closing, Seller has not made such
modifications to its systems to enable distribution of e-mails to subscribers of
the MailCity e-mail service, Seller shall, promptly after the Closing, convert
e-mails sent to such subscribers from HTML E-Mails to text e-mails.

9.7 Transfer of Subscriber Data. Promptly after the Closing, and in any
event within fifteen (15) days after such event, Seller shall execute an
electronic transfer of a copy of all Subscriber Data to a secure location off of
Seller's premises as a means of disaster avoidance.

9.8 Ad Server. Seller shall use its best efforts as expeditiously as
possible to improve the performance of the ad server currently employed by
Seller so that it more closely meets the performance expectations for such
server of Accipiter Inc. and performs substantially consistently with the
traffic reported by the audit server currently employed by Seller.

9.9 Amazon.com. Seller shall, promptly upon notice delivered by Buyer
to Seller after the Closing, change all hypertext links to the Amazon.com Web
site to links to the "Total E" Web site.

ARTICLE X

TERMINATION

10.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:

(a) By mutual consent of Buyer and Seller;

(b) By Buyer, if there has been a material violation or breach by
Seller of any agreement, representation, warranty, or condition contained in
this Agreement not cured to the reasonable satisfaction of Buyer prior to the
Closing Date;

(c) By Seller, if there has been a material violation or breach by
Buyer of any agreement, representation, warranty, or condition contained in this
Agreement not cured to the reasonable satisfaction of Seller prior to the
Closing Date; or

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<PAGE> 27

(d) By Seller or Buyer, if the Closing has not been consummated on or
prior to December 31, 1998, other than by reason of a material violation or
breach by the party electing to terminate of any agreement, representation,
warranty, or condition contained in this Agreement.

10.2 No Waiver. Neither the Closing nor any termination of this
Agreement pursuant to SECTION 10.1, shall be deemed to constitute a release or
waiver by either party of any claim against the other party based on any breach
by such party of its agreements, representations and warranties contained
herein.

ARTICLE XI

INDEMNIFICATION

11.1 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of each party pursuant to this
Agreement shall survive the Closing and shall expire on the second anniversary
of the Closing Date; provided, however, that if, at any time prior to the
Survival Date, any party seeking indemnification under this SECTION 11 (an
"INDEMNIFIED PARTY") (acting in good faith) delivers to the party from whom such
indemnification is sought (an "INDEMNIFYING PARTY") a written notice alleging
the existence of a breach of any of the representations and warranties made by
the Indemnifying Party or a breach of any covenant contained herein (and setting
forth in reasonable detail the basis for such Indemnified Party's belief that
such a breach may exist) and asserting a claim for recovery under SECTION 11.2
or SECTION 11.3, whichever is applicable, based on such alleged breach, then the
claim asserted in such notice shall survive the Survival Date until such time as
such claim is fully and finally resolved.

11.2 By Seller. Seller agrees to indemnify and hold harmless the Buyer
Indemnitees from and against, and to reimburse the Buyer Indemnitees on demand
with respect to, any and all loss, damage, liability, claims, cost and expense,
including reasonable attorneys' and accountants' fees (collectively, "CLAIMS"),
incurred by the Buyer Indemnitees by reason of or arising out of or in
connection with (i) any Excluded Asset, (ii) the breach of any representation or
warranty contained in ARTICLE III hereof or in any certificate or other document
delivered to Buyer pursuant to the provisions of this Agreement, (iii) the
failure of the Seller to perform any act required under this Agreement or the
Service Agreement, (iv) a Claim by any third party with respect to any
liability, obligation, Contract, other commitment or state of facts which
constitutes a breach of any representation or warranty contained in ARTICLE III
hereof or in any certificate or other document delivered by or on behalf of
Shareholder or Seller to the Buyer pursuant to the provisions of this Agreement,
(v) any liability or obligation of Seller or any of its Affiliates which is not
an Assumed Liability, including, without limitation, all those liabilities and
obligations set forth in SECTIONS 2.3(a) through (g) hereof, or (vi) any breach
by Seller of the agreements set forth on SCHEDULE 3.2, or the agreements set
forth on SCHEDULE 5.5 the consents to which shall not be obtained by Seller on
prior to the Closing Date, caused by Seller's execution of and delivery and
performance under this Agreement or the Service Agreement . The Buyer agrees to
give prompt notice to Seller of any Claim for which Buyer seeks indemnification
hereunder, which notice shall include a reasonably detailed description of such
Claim. If any Claim is brought against Buyer for which indemnification is sought
from Seller

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<PAGE> 28

under this SECTION 11.2, then Buyer shall control the contest, defense,
settlement or compromise of any such Claim (including the engagement of counsel
in connection therewith), at Seller's cost and expense (if indemnification is
finally determined to be due pursuant to this SECTION 11.2), including the cost
and expense of reasonable attorneys' fees in connection with such contest,
defense, settlement or compromise, and Seller shall have the right to
participate in the contest, defense, settlement or compromise of any such Claim
at its own cost and expense, including the cost and expense of attorneys' fees
in connection with such participation; provided, however, that the Buyer shall
not settle or compromise any such Claim without the prior written consent of
Seller, which consent shall not be unreasonably withheld. Any amounts owed to
Buyer pursuant to this SECTION 11.2 shall be reimbursed to Buyer by Seller
within five (5) Business Days after notice by Buyer, furnished pursuant to
SECTION 12.2, of such amounts, and if not so reimbursed, such amounts may, at
Buyer's election, be offset against the Post Closing Payment or otherwise as
provided in SECTION 2.10, including against any amounts owing by Buyer to Seller
under the Service Agreement.

11.3 By Buyer. Buyer agrees to indemnify and hold harmless the Seller
Indemnitees from and against, and to reimburse the Seller Indemnitees with
respect to, any and all Claims against the Seller Indemnitees by reason of or
arising out of or in connection with (i) the breach of any representation or
warranty contained in ARTICLE IV hereof, or any certificate or other document
delivered by the Buyer to Seller under this Agreement, (ii) the failure of the
Buyer to perform any act required under this Agreement, (iii) a Claim by any
third party with respect to any liability, obligation, Contract, other
commitment or state of facts which constitutes a breach of any representation or
warranty contained in said ARTICLE IV or in any certificate or other document
delivered by or on behalf of Buyer to Seller pursuant to the provisions of this
Agreement or (iv) any Assumed Liability. Seller agrees to give prompt notice to
the Buyer of any Claim for which Seller seeks indemnification hereunder, which
notice shall include a reasonably detailed description of such Claim. If any
Claim is brought against Seller for which indemnification is sought from Buyer
under this SECTION 11.3, then Seller shall control the contest, defense,
settlement or compromise of any such claim (including the engagement of counsel
in connection therewith), at Buyer's cost and expense (if indemnification is
finally determined to be due pursuant to this SECTION 11.3), including the cost
and expense of attorneys' fees in connection with such contest, defense,
settlement or compromise, and Buyer shall have the right to participate in the
contest, defense, settlement or compromise of any such Claim at its own cost and
expense, including the cost and expense of attorneys' fees in connection with
such participation; provided, however, that Seller shall not settle or
compromise any such Claim without the prior written consent of Buyer, which
consent shall not be unreasonably withheld. Any amounts owed to Seller pursuant
to this SECTION 11.3 shall be reimbursed to Seller within five (5) Business Days
after notice by Seller, furnished pursuant to SECTION 12.2, of such amounts.

11.4 Threshold; Ceiling.

(a) Subject to SECTION 11.4(b), an Indemnifying Party shall not be
required to make any indemnification payment pursuant to SECTIONS 11.2 or 11.3,
as applicable, until such time as the total amount of all damages that have been
directly or indirectly suffered or incurred by an Indemnified Party pursuant to
a Claim, or to which an Indemnified Party has otherwise become subject, exceeds
$100,000 in the aggregate. At such time as the total amount of all

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damages pursuant to a Claim exceed $100,000, the Indemnified Party shall be
entitled to be indemnified against the total amount of such damages (and not
merely the portion of such damages exceeding $100,000). Notwithstanding the
foregoing, the provisions of this SECTION 11.4(a) shall not apply to any Claim
with respect to the Assumed Liabilities or the Excluded Liabilities.

(b) Claims for indemnity pursuant to the provisions of SECTIONS 11.2 or
11.3, as applicable, shall be limited to (i) during the period terminating on
the first anniversary of the Closing Date for all claims other than those
relating to the representation of Seller in SECTION 3.16 ("Year 2000"), and
during the period terminating eighteen months after the Closing Date for any
claim relating to the representation of Seller in SECTION 3.16 ("Year 2000"), an
amount equal to the Purchase Price, and (ii) during the period after the first
anniversary of the Closing Date, for all claims other than those relating to the
representation of Seller in SECTION 3.16 ("Year 2000"), and during the period
commencing eighteen months after the Closing Date for any claim relating to the
representation of Seller in SECTION 3.16 ("Year 2000") an amount equal to Three
Million Dollars ($3,000,000). Notwithstanding the foregoing, the provisions of
this SECTION 11.4(b) shall not apply to (i) any Claim with respect to the
Assumed Liabilities or the Excluded Liabilities or (ii) any willful misconduct,
fraud, gross negligence, bad faith or recklessness on the part of the
Indemnifying Party.

11.5 Exclusivity of Indemnification Remedies. The Buyer and the Seller
shall have no claim or cause of action, whether in contract, tort, under statute
or otherwise, for monetary damages arising out of, or relating to, this
Agreement apart from the right to indemnification pursuant to this SECTION 11
other than claims or causes of action based on fraud.

ARTICLE XII

MISCELLANEOUS

12.1 Survival of Representations and Warranties. Notwithstanding any
right of any party hereto to investigate the affairs of any of the parties
hereto and notwithstanding any knowledge of facts determined or determinable by
any party hereto pursuant to such investigation or right of investigation or
otherwise acquired or learned by any of the parties hereto, each of the parties
shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other party hereto contained in this Agreement
and to pursue all rights and remedies in connection therewith. All
representations, warranties, covenants and agreements made herein shall survive
the Closing Date.

12.2 Notices. All communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered personally with receipt acknowledged, (ii) sent by registered or
certified mail, return receipt requested, (iii) sent by telecopy with
confirmation or (iv) sent by overnight courier for next Business Day delivery,
addressed to the parties at the following addresses and facsimile numbers or to
such other addresses or facsimile numbers as any party shall hereafter specify
by communication to the other parties in the manner provided herein:

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If to Seller: InfoBeat Inc.
707 17th Street, Suite 2850
Denver, Colorado 80202
Attn: John Funk, President
Tel: 303-675-2300
Fax: 303-675-2399

With a copy to: Cooley Godward LLP
2595 Canyon Boulevard, Suite 250
Boulder, CO 80302
Attn: James C.T. Linfield, Esq.
Tel: (303) 546-4000
Fax: (303) 546-4099

If to Buyer: Sony Music, a Group of
Sony Music Entertainment Inc.
550 Madison Avenue
New York, New York 10022
Attn: Senior Vice President, Business Affairs
and Administration
Tel: 212-833-8922
Fax: 212-833-

With a copy to: Sony Music, a Group of
Sony Music Entertainment Inc.
550 Madison Avenue
New York, New York 10022
Attn: Senior Vice President and General Counsel
Tel: 212-833-8086
Fax: 212-833-8083

and: Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attn: Lisa Weiss, Esq.
Tel: 212-940-8800
Fax: 212-940-8776

Notice of change of address shall be deemed given when actually received or upon
refusal to accept delivery thereof; all other communications shall be deemed to
have been given, received and dated on the earlier of: (i) when actually
received or upon refusal to accept delivery thereof, (ii) on the date when
delivered personally or via telecopy, (iii) one (1) Business Day after being
sent by overnight courier and (iv) four (4) Business Days after mailing, as
aforesaid.

12.3 Severability. In case any one or more of the provisions contained
in this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the

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<PAGE> 31

remaining provisions contained herein shall not in any way be affected or
impaired thereby and shall be valid and enforceable to the fullest extent
permitted by law.

12.4 Interpretation, Jurisdiction. This Agreement shall be interpreted
and construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of laws thereof. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the courts of the State
of New York, sitting in New York County, and the courts of the United States for
the Southern District of New York. Each party irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any such
court, any claim that any such suit, action or proceeding brought in such a
court has been brought in an inconvenient forum and the right to object, with
respect to any such suit, action or proceeding brought in any such court, that
such court does not have jurisdiction over such party. In any such suit, action
or proceeding, each party waives, to the fullest extent it may effectively do
so, personal service of any summons, complaint or other process and agrees that
the service thereof may be made by certified or registered mail, addressed to
such party at its address set forth in SECTION 12.2.

12.5 Entire Agreement. The parties hereto agree that all understandings
and agreements heretofore made between them with respect to the subject matter
hereof are merged in this Agreement, which fully and completely expresses their
agreement with respect to the subject matter hereof. There are no promises,
agreements, conditions, understandings, warranties, or representations, oral or
written, express or implied, among the parties hereto, other than as set forth
in this Agreement. All prior agreements among the parties with respect to the
subject matter hereof are superseded by this Agreement, which integrates all
promises, agreements, conditions and understandings among the parties with
respect to the Assets.

12.6 Termination, Revocation, Waiver, Modification or Amendment. No
termination, revocation, waiver, modification or amendment of this Agreement
shall be binding unless agreed to in writing and signed by an authorized officer
of each of the parties hereto.

12.7 Counterparts; Effective Date. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which shall constitute one agreement. The signature of any party to a
counterpart shall be deemed to be a signature to, and may be appended to, any
other counterpart. This Agreement is dated and shall be effective among the
parties as of the date first above written.

12.8 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other party hereto, provided
that Buyer may assign its rights under this Agreement, in whole or in part, to
any Person, so long as Buyer remains jointly and severally liable with such
assignee for its obligations hereunder.

12.9 Binding Effect. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.

12.10 Waiver. No consent or waiver, express or implied, by any party
hereto to or of any breach or default by any other party in the performance by
any other party of its

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obligations hereunder shall be deemed or construed to be a consent to or waiver
of any other breach or default in the performance by such other party of the
same or any other obligation of such party hereunder. Failure on the part of a
party to complain of any act or failure to act of any other party or to declare
such other party in default, irrespective of how long such failure continues,
shall not constitute a waiver by such party of its rights hereunder.

12.11 Additional Remedies. The rights and remedies of any party hereto
under this Agreement shall not be mutually exclusive. The respective rights and
obligations hereunder shall be enforceable by specific performance, injunction
or other equitable remedy, but nothing herein contained is intended to, nor
shall it limit or affect, any other rights in equity or any rights at law or by
statute or otherwise of any party aggrieved as against the other for breach or
threatened breach of any provision hereof, it being the intention of this
SECTION 12.11 to make clear the agreement of the parties hereto that their
respective rights and obligations hereunder shall be enforceable in equity as
well as at law or otherwise.

12.12 Expenses. Each of the parties hereto shall pay the fees and
expenses incurred by it in connection with the negotiation, preparation,
execution and performance of this Agreement, including, without limitation,
attorneys' fees and accountants' fees. Except as set forth in SECTION 2.7,
Seller shall pay all income, capital gains, franchise or other Taxes, together
with any fees or other charges, imposed on it in respect of the transfer of the
Assets to Buyer.

12.13 No Reliance by Third Parties. The provisions of this Agreement
are not for the benefit of any creditor or other Person other than the parties
hereto, and no creditor or Person other than the parties hereto shall obtain any
rights under this Agreement or by reason of this Agreement.

12.14 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.

INFOBEAT INC.

By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------

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

SONY MUSIC, A GROUP OF SONY MUSIC
ENTERTAINMENT INC.

By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I Definitions.................................................................................1

ARTICLE II Sale and Purchase of Assets.................................................................5
2.1 Sale and Purchase of Assets............................................................................5
2.2 Excluded Assets........................................................................................6
2.3 Assumption of Liabilities..............................................................................6
2.4 Closing................................................................................................8
2.5 Purchase Price.........................................................................................8
2.6 Nonassignable Assets and Nonassumable Liabilities......................................................9
2.7 Transfer Tax...........................................................................................9
2.8 Seller's Rights to Use Names..........................................................................10
2.9 Receipt of Funds......................................................................................10
2.10 Right of Offset.......................................................................................10

ARTICLE III Representations and Warranties of Seller...................................................10
3.1 Organization; Good Standing; Qualification............................................................10
3.2 Authorization and Validity of Agreement...............................................................11
3.3 No Approvals, Consents or Notices Required............................................................11
3.4 Contracts.............................................................................................11
3.5 InfoBeat Software and Technology; Other Proprietary Rights............................................13
3.6 Ownership; Liens......................................................................................14
3.7 Taxes.................................................................................................14
3.8 Legal Proceedings.....................................................................................14
3.9 Compliance With Law...................................................................................14
3.10 Title to and Condition of Properties..................................................................14
3.11 Financial Information.................................................................................15
3.12 Liabilities...........................................................................................15
3.13 Advertising Customers.................................................................................16
3.14 Employees; Independent Contractors; Contracts.........................................................16
3.15 Brokerage Commissions.................................................................................16
3.16 Year 2000.............................................................................................16
3.17 Web Site Software.....................................................................................16
3.18 Full Disclosure.......................................................................................16

ARTICLE IV Representations and Warranties of Buyer....................................................17
4.1 Organization; Good Standing...........................................................................17
4.2 Authorization and Validity of Agreement...............................................................17
4.3 No Governmental Approvals or Notices Required.........................................................17
4.4 Brokerage Commissions.................................................................................17
</TABLE>

<PAGE> 35
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE V Pre-Closing Covenants of Seller............................................................18
5.1 Conduct of Business...................................................................................18
5.2 No Breach of Representations and Warranties...........................................................18
5.3 Access by Buyer.......................................................................................18
5.4 No Solicitation.......................................................................................18
5.5 Consents..............................................................................................19
5.6 Confidential Treatment................................................................................19
5.7 Best Efforts..........................................................................................19

ARTICLE VI Pre-Closing Covenants of Buyer.............................................................19
6.1 No Breach of Representations and Warranties...........................................................19
6.2 Best Efforts..........................................................................................19

ARTICLE VII Conditions to Buyer's Obligations..........................................................20
7.1 Representations and Warranties........................................................................20
7.2 Covenants.............................................................................................20
7.3 Officer's Certificate.................................................................................20
7.4 Opinion of Counsel....................................................................................20
7.5 Good Standing Certificate.............................................................................20
7.6 Institution of Proceedings; Injunction................................................................20
7.7 Consents..............................................................................................20
7.8 Bill of Sale and Assignment...........................................................................21
7.9 Assignment of Copyrights, Patents, Marks and Domain Names.............................................21
7.10 Service Agreement.....................................................................................21
7.11 Key Man Employment Agreement..........................................................................21
7.12 Cox Agreement.........................................................................................21
7.13 Documentation.........................................................................................21
7.14 Seller's Obligations..................................................................................21
7.15 Other Deliveries......................................................................................22

ARTICLE VIII Conditions to Seller's Obligations.........................................................22
8.1 Representations and Warranties........................................................................22
8.2 Covenants.............................................................................................22
8.3 Officer's Certificate.................................................................................22
8.4 Purchase Price........................................................................................22
8.5 Opinion of Counsel....................................................................................22
8.6 Good Standing Certificate.............................................................................22
8.7 Institution of Proceedings; Injunction................................................................22
8.8 Consents..............................................................................................23
8.9 Service Agreement.....................................................................................23
8.10 Other Deliveries......................................................................................23

ARTICLE IX Post-Closing Covenants.....................................................................23
9.1 Further Assurances....................................................................................23
9.2 Public Announcements..................................................................................23
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
Page
<S> <C> <C>
9.3 Noncompetition; Nonsolicitation.......................................................................24
9.4 Use of Marks; Linking.................................................................................26
9.5 Access to Books and Records...........................................................................27
9.6 MailCity..............................................................................................27
9.7 Transfer of Subscriber Data...........................................................................27
9.8 Ad Server.............................................................................................27
9.9 Amazon.com............................................................................................27

ARTICLE X Termination................................................................................27
10.1 Termination..........................................................................................27
10.2 No Waiver............................................................................................28

ARTICLE XI Indemnification............................................................................28
11.1 Survival of Representations, Warranties and Covenants.................................................28
11.2 By Seller.............................................................................................28
11.3 By Buyer..............................................................................................29
11.4 Threshold; Ceiling....................................................................................30
11.5 Exclusivity of Indemnification Remedies...............................................................30

ARTICLE XII Miscellaneous..............................................................................30
12.1 Survival of Representations and Warranties............................................................30
12.2 Notices...............................................................................................31
12.3 Severability..........................................................................................32
12.4 Interpretation, Jurisdiction..........................................................................32
12.5 Entire Agreement......................................................................................32
12.6 Termination, Revocation, Waiver, Modification or Amendment............................................32
12.7 Counterparts; Effective Date..........................................................................33
12.8 Assignability.........................................................................................33
12.9 Binding Effect........................................................................................33
12.10 Waiver................................................................................................33
12.11 Additional Remedies...................................................................................33
12.12 Expenses..............................................................................................33
12.13 No Reliance by Third Parties..........................................................................34
12.14 Headings..............................................................................................34
</TABLE>

EXHIBIT 10.14
- -------------------------------------------------------------------------------

SERVICE BUREAU AGREEMENT

BETWEEN

INFOBEAT INC.

AND

SONY MUSIC,
A GROUP OF SONY MUSIC ENTERTAINMENT INC.

JANUARY 1, 1999

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

<PAGE> 2

INFOBEAT INC.
SERVICE BUREAU AGREEMENT

THIS SERVICE BUREAU AGREEMENT (the "AGREEMENT") is entered into this
1st day of January, 1999 (the "EFFECTIVE DATE"), by and between INFOBEAT INC., a
Delaware corporation with a principal business address of 707 17th Street, Suite
2850, Denver, Colorado 80202 ("INFOBEAT") and SONY MUSIC, a Group of SONY MUSIC
ENTERTAINMENT INC., a Delaware corporation with a principal business address of
550 Madison Avenue, New York, New York 10022 ("SONY").

RECITALS

A. Prior to the Effective Date, InfoBeat has operated a daily
customized news and information service for the publication of e-mails to a base
of registered subscribers on topics which include entertainment, sports, news,
finance and weather (the "PUBLISHING BUSINESS").

B. As of the Effective Date, Sony and InfoBeat have entered into
an Asset Purchase Agreement (the "ASSET PURCHASE AGREEMENT") pursuant to which
Sony has acquired certain assets relating to InfoBeat's Publishing Business.

C. The parties wish to enter into an agreement pursuant to which
InfoBeat shall host certain functions relating to the Publishing Business on
behalf of Sony and shall provide to Sony the related services described in this
Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth hereinafter, the parties hereto agree
as follows:

AGREEMENT

1. DEFINITIONS.

As used in this Agreement:

"CONSUMER NEWS E-MAILS" means an e-mail message sent to (but not
necessarily received by) a Subscriber by InfoBeat as part of the E-Mail
Distribution for InfoBeat's news Products listed in Section A(1) of EXHIBIT A or
such other Products as Sony shall create.

"CONTENT" means any graphical, audio, visual, audiovisual, textual, or
multimedia materials displayed or displayable on and over the Internet or
distributed by e-mails as part of the E-Mail Distribution.

"CONTRACT YEAR " means each successive twelve (12) month period of this
Agreement, commencing with the Effective Date.

"CUSTOM SOFTWARE" is defined in Section 2.5(c) ("Sony Custom
Software").

"CUSTOMER SERVICE TRANSACTIONS" means e-mail messages received by
InfoBeat Customer Service requesting service of the type listed in EXHIBIT C and
requiring a human response or action by a customer service representative,
excluding InfoBeat Finance Customer Service Transactions and Unsubscribe
Requests.

1.
<PAGE> 3

"CUSTOMER SUPPORT LEVELS" means the ratio of requests for customer
support to total e-mail volume measured on a monthly basis and expressed as a
percentage.

"CUSTOMER SUPPORT SERVICES" is defined in Section 2.4 ("Customer
Support Services and Reports").

"EDITORIAL SERVICES" is defined in Section 2.2 ("Editorial Services").

"E-MAIL DISTRIBUTION" means the electronic transmission of e-mail
messages to Subscribers to be hosted by InfoBeat as part of the Publishing
Support Services provided under this Agreement.

"ENGINEERING SUPPORT SERVICES" is defined in Section 2.3 ("Engineering
Support Services").

"INFOBEAT FINANCE CUSTOMER SERVICE TRANSACTIONS" means actions taken by
InfoBeat customer service reps to either (a) correct, change or edit a stock
ticker symbol in the content database and/or the customer database, or (b)
correct a Subscriber's request to forward an unresolved ticker symbol/company
name to customer service for resolution.

"INFOBEAT TOOLS" means any tools, procedures or software programs, both
in object code and source code form, and system configurations, network designs
and system architectures which InfoBeat develops or licenses from a third party
(including any tools which InfoBeat develops in the course of providing the
Services), which InfoBeat uses to provide services for third parties. By way of
example, InfoBeat Tools could include, without limitation, toolbars for
maneuvering between web site pages, search engines, Java applets, and ActiveX
controls.

"INITIAL TERM" AND "ADDITIONAL TERM" are defined in Section 7 ("Term
and Termination").

"INFOBEAT TECHNOLOGY" means InfoBeat's computer equipment and software
required to host and perform the Services, including the InfoBeat Tools but
excluding the Publishing Business Assets transferred to Sony and excluding any
telecommunications equipment or services provided by third parties.

"INTELLECTUAL PROPERTY RIGHTS" means all industrial and intellectual
property rights, including patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks, service mark
applications, copyrights, copyright registrations, know-how, certificates of
public convenience and necessity, franchises, licenses, trade secrets,
proprietary processes, computer programs and other computer software, technology
and formulae.

"MARKS" shall have the meaning set forth in the Asset Purchase
Agreement.

"PRODUCTS" means the personalized, subscription-based e-mail delivery
services provided by Sony as part of the Publishing Business under the Marks or
other brand names designated by Sony.

"PUBLISHING BUSINESS" means the publishing business operated by
InfoBeat prior to the Effective Date using the Publishing Business Assets.

2.
<PAGE> 4

"PUBLISHING BUSINESS ASSETS" means those specific Assets (as such term
is defined in the Asset Purchase Agreement) that have been transferred to Sony
pursuant to the Asset Purchase Agreement.

"PUBLISHING SUPPORT SERVICES" means the services to be provided by
InfoBeat to Sony pursuant to this Agreement relating to the hosting of E-Mail
Distribution and Web Sites and related systems maintenance as further described
in EXHIBIT A.

"SERVICES" means all services to be provided to Sony under this
Agreement, including the Publishing Support Services, the Editorial Services,
the Engineering Support Services and the Customer Support Services all as
described in Section 2 ("InfoBeat Services") below.

"SERVICE BUREAU BUSINESS" shall have the meaning set forth in the Asset
Purchase Agreement.

"SERVICE LEVELS" means the performance criteria applicable to
InfoBeat's performance of the Services as specified in EXHIBIT C.

"SONY PARTY OR SONY PARTIES" means any and all Sony affiliates,
subsidiaries, controlling corporations and partnerships or ventures in which
Sony participates.

"SUBSCRIBERS" means a unique e-mail address having an account with Sony
or any third party through which such individual receives all or any portion of
the E-Mail Distribution Services.

"SUBSCRIBER DATA" means Subscriber Data (as defined in the Asset
Purchase Agreement) transferred to Sony pursuant to the Asset Purchase
Agreement.

"UNSUBSCRIBE REQUESTS" means an e-mail message from a Subscriber that
indicates an intent to unsubscribe from a Product service when such e-mail
message contains the words "unsubscribe" or "remove" in the Subject line or the
top four or bottom four lines of an e-mail message and consequently can be
automatically processed.

"WEB SITES" means the branded web site or set of pages hosted by
InfoBeat as part of the Publishing Support Services and providing Subscriber
access to the E-Mail Distribution Services at the URL addresses specified in
EXHIBIT A or such other URL designated by Sony during the Term.

2. INFOBEAT SERVICES.

2.1 PUBLISHING SUPPORT SERVICES. As of the Effective Date, in
consideration of the Service Fees described in Section 5.1 below, InfoBeat will
provide to Sony and, at Sony's request, to any other Sony Parties the Publishing
Support Services described in EXHIBIT A, including the elements listed below.

(a) E-Mail Distribution and Database Management. As part
of the Publishing Support Services, InfoBeat will host the E-Mail Distribution
functions and perform the database management services described in EXHIBIT A.
Sony acknowledges that E-Mail Distribution will conform to InfoBeat's current
spam policy (the "Spam Policy"), attached hereto as EXHIBIT B. InfoBeat may, in
its sole discretion, reasonably revise the Spam Policy, such revisions to be

3.
<PAGE> 5

effective following sixty (60) day written notice to Sony, provided that
InfoBeat may not modify or delete the provision of the Spam Policy entitled
"SONY URGENT MAILINGS" nor shall it modify such Spam Policy in any manner which
materially affects such provision.

(b) Web Site Hosting Services. InfoBeat shall host and
maintain the Web Sites on InfoBeat's computer servers and provide the other Web
Site Hosting Services described in EXHIBIT A. The Web Site Hosting Services
shall include the management of audit, advertisement and DNS servers all as
described in EXHIBIT A. InfoBeat shall bear all applicable license fees incurred
in licensing the third party software required for InfoBeat to operate the ad
server for the first Contract Year. Thereafter, Sony shall be responsible for
licensing such software and all associated fees if Sony elects to renew the
applicable licenses. InfoBeat shall maintain the Web Sites in substantially the
same condition and specifications as in existence as of the Effective Date. Sony
shall be solely responsible for the cost of licensing any Content displayed on
such Web Site as provided in Section 3.2 below.

(c) Systems Maintenance. InfoBeat shall provide systems
maintenance activities relating to the Publishing Support Services as described
in EXHIBIT A.

(d) Limited Exclusivity. In the event that Sony elects to
use a third party or internal technology for any of its e-mail products but
desires to integrate such e-mail products with any website or database hosted by
InfoBeat pursuant to this Agreement, Sony and InfoBeat shall mutually agree to
separate software development and support agreements to be negotiated in good
faith. In addition, Sony shall use commercially reasonable efforts to (a)
deliver semi-annual communications (which may include communications by mail,
e-mail and telephone) providing information about InfoBeat and the Services to
such Sony Parties as Sony determines, in its sole discretion, would benefit from
such information and (b) after InfoBeat requests an introduction to a particular
Sony Party, Sony will use best efforts to provide a name and phone number of an
appropriate contact person.

(e) Product Limitations. Sony or any Sony Parties may
introduce new Products by providing InfoBeat with the information specified in
Section A(2)(a) of EXHIBIT A; provided, however, the parties agree to negotiate
in good faith an adjustment to the fees applicable to such new Products if (i)
the monthly volume of E-Mail Distribution for such Products is less than the
Minimum E-Mail Volume specified in Section A(2)(a)(5) of EXHIBIT A for three (3)
consecutive months beginning by the tenth month after such Products are made
commercially available to consumers or (ii) the cost to InfoBeat of Product
maintenance and Customer Service for any new Products introduced by Sony or any
Sony Party per unit of E-Mail Distribution volume substantially exceeds such
cost to InfoBeat of Product maintenance and Customer Service for the existing
Products.

2.2 EDITORIAL SERVICES. In consideration of the Editorial Fees
described in Section 5.2 below, InfoBeat will provide to Sony, and, at Sony's
request, to any other Sony Parties, the Editorial Services described more fully
in EXHIBIT A in connection with the creation of messages for E-Mail Distribution
of equivalent scope as that which InfoBeat provides under InfoBeat's existing
organizational structure as part of its Publishing Business as of the Effective
Date (as specified in Section B(1) of EXHIBIT A). Upon sixty (60) days written
notice to InfoBeat, Sony may terminate the Editorial Services to be provided by
InfoBeat under this Section, provided that Sony will use its best efforts not to
inform InfoBeat's employees of its planned termination of the

4.
<PAGE> 6

Editorial Services. In the event of such termination Sony may extend offers of
employment to members of InfoBeat's then-current Editorial Services Group, which
such members may reject or accept in their sole discretion.

2.3 ENGINEERING SUPPORT SERVICES. InfoBeat will provide to Sony,
and, at Sony's request, to any other Sony Parties, the Engineering Support
Services described more fully in EXHIBIT A in connection with the Publishing
Support Services. Service upgrades and support of new Products will be provided
as part of the Engineering Support Services in accordance with the procedures
described in Section 2.5(b) below. InfoBeat shall provide up to two thousand
(2000) hours of Engineering Support Services at no charge to Sony which Sony may
apply to its outstanding payment obligations for Engineering Support Services in
any manner. Thereafter, for any additional hours of Engineering Support
Services, InfoBeat will invoice Sony for such services at a rate no higher than
the lowest then-current hourly rate for engineering support services charged to
any InfoBeat customer (which, for purposes of comparison only, is $150 per hour
as of the Effective Date), such fee and the terms under which such additional
support services will be provided being subject to the prior good faith
negotiation between InfoBeat and Sony. Sony agrees to provide a rolling monthly
forecast containing Sony's good-faith estimate of its expected utilization of
Engineering Support Staff resources. InfoBeat shall dedicate the equivalent of
three (3) full-time personnel (who have the skill sets reasonably necessary to
perform the assigned tasks) assigned to perform the Engineering Support Services
as necessary to satisfy Sony's forecasted usage. Sony shall provide InfoBeat
with sufficient advanced notice of any significant changes in Engineering
Support Service levels so that InfoBeat may allocate and reallocate resources
between Sony and InfoBeat's other customers in an efficient and timely manner.

2.4 CUSTOMER SUPPORT SERVICES AND REPORTS.

(a) Customer Service. In consideration of the Service
Fees described in Section 5.1 below, InfoBeat shall provide to Sony, and, at
Sony's request, to any other Sony Parties, Customer Support Services at the at
the following levels: (i) total Customer Service Transactions shall be supported
at no additional cost during any calendar quarter up to a level equivalent to
[ ** ] of e-mail sent pursuant to E-Mail Distribution, and (ii) Total
InfoBeat Finance Customer Service Transactions during any calendar quarter shall
be supported to a level equal to ([ ** ] multiplied by the average
InfoBeat Finance Subscribers during the applicable quarter). Greater levels of
Customer Support Services will be provided for a fee of $[ ** ] per
Customer Service Transaction. There shall be no charges for increased levels of
Customer Service Transactions that are a direct result of a breach of this
Agreement or performance standards set forth in EXHIBIT C, or a breach of any of
the representations, warranties or covenants of InfoBeat set forth in the Asset
Purchase Agreement. InfoBeat agrees to provide the Customer Support Services to
Subscribers substantially in accordance with the standards set forth in EXHIBIT
C; provided that Customer Support Services shall be only to Subscribers of
Products for which InfoBeat is providing E-Mail Distribution or Web Site Hosting
Services under this Agreement.

(b) Reports. InfoBeat shall provide Sony with the
periodic service reports specified in EXHIBIT D.

** INDICATES CONFIDENTIAL TREATMENT REQUESTED

5.
<PAGE> 7

2.5 CHANGE PROCEDURES AND CUSTOM DEVELOPMENT.

(a) InfoBeat Enhancements. InfoBeat may from time to
time, at its sole discretion but with prior notice to Sony, make system
enhancements and changes related to the InfoBeat Technology ("ENHANCEMENTS").
Sony acknowledges that, in connection with such Enhancements, the InfoBeat
Technology may be converted to a new version of software features. Such a
conversion will not have a material adverse effect on the basic functionality of
Services as originally received pursuant to this Agreement and will not affect
Sony's payment obligations under this Agreement. InfoBeat shall offer to Sony at
no extra charge as part of the Services, Enhancements it develops, including
Enhancements developed for other customers of InfoBeat. In the event that
InfoBeat makes changes to the Service that have a materially adverse effect on
Sony or the Services, Sony shall have the right to terminate this Agreement in
accordance with the provisions of Section 7.2(a) below.

(b) Sony Service Upgrades. In the event that Sony desires
to modify the specifications for any of the Services at any time during the term
of this Agreement, Sony shall notify InfoBeat in a written request which
describes the requested changes in appropriate detail (the "CHANGE NOTICE").
Within three (3) days of its receipt of the Change Notice, InfoBeat shall submit
a change order proposal to Sony (the "CHANGE ORDER"), which includes a proposed
implementation schedule and a statement of any additional charges to Sony in
consideration of the requested changes. Such changes shall be implemented as
part of its Engineering Support Services (in consideration of the fees described
in Section 2.3). Any direct fees charged to Sony as a result of the Change Order
will be expensed to Sony as a reimbursable expense paid by InfoBeat (for
example, InfoBeat's expenses for additional software licensed by InfoBeat and
additional hardware required to implement the Change Order). On Sony's written
approval of the Change Order, the Change Order shall become a part of this
Agreement, and Sony will compensate InfoBeat for any implementation of a Change
Order in accordance with its terms.

(c) Sony Custom Software. During the term of this
Agreement Sony may request InfoBeat to develop custom tools or other software,
or to revise or modify the Web Sites ("CUSTOM SOFTWARE"). InfoBeat's development
of the Custom Software shall be performed pursuant to Task Orders agreed to in
writing by Sony and InfoBeat (a "TASK ORDER"). Each Task Order shall include a
specification of the development, a proposed implementation schedule and a
statement of any additional charges to Sony in consideration of InfoBeat's
development of the requested Custom Software. Upon mutual agreement of the Task
Order, the Task Order shall become a part of this Agreement, and Sony will
compensate InfoBeat for any implementation of a Task Order in accordance with
its terms. Sony shall own exclusively all Intellectual Property Rights in and to
the Custom Software as provided in Section 4.1 below.

2.6 SERVICE LEVELS. InfoBeat agrees to perform the Publishing
Support Services substantially in accordance with the Service Levels set forth
in EXHIBIT C. In the event that InfoBeat fails to achieve the Service Levels,
Sony shall be entitled, as its sole remedy and InfoBeat's sole obligation, to
the remedies specified in EXHIBIT C and in Section 7.2(a) of this Agreement;
provided, however, that InfoBeat shall not be responsible for any service
interruptions or delays due to (a) events specified in Section 13.7 ("FORCE
MAJEURE") below, or (b) Sony's failure to provide information required by
InfoBeat to perform the Services. The Service Levels specified in this Agreement
shall, at all times during the Term of this Agreement, be not less favorable to
Sony than any service levels established by InfoBeat for other customers

6.
<PAGE> 8

relating to consumer-level E-Mail Distribution services similar to those
provided under this Agreement for the same or lower service fees.

3. SONY'S OBLIGATIONS.

3.1 SONY ASSISTANCE. Sony will assist InfoBeat, as InfoBeat may
reasonably request from time to time, in the development and deployment of the
Services. Without limiting the generality of the foregoing, Sony will provide
InfoBeat with (A) a periodic forecast of e-mail message traffic volume on an
appropriate interval, (b) reasonable advanced notice of Product enhancements and
or changes which will affect the Services or the InfoBeat Technology, and (C)
all other information as reasonably requested by InfoBeat in order to provide
the Services. Sony shall designate one (1) of its personnel as an InfoBeat
contact person at all times during the term of this Agreement.

3.2 SONY CONTENT.

(a) Content Creation and Management. Except with respect
to the Editorial Services, Sony will be solely responsible for creating,
editing, reviewing, deleting and otherwise controlling all of the Content that
is published and distributed via E-Mail Distribution or on the Web Sites (the
"SONY CONTENT"). Sony also agrees to abide by the terms of the Spam Policy with
respect to any Sony Content provided for any E-Mail Distribution. Except with
respect to the Editorial Services, Sony acknowledges that, InfoBeat is acting as
a passive conduit for the distribution and publishing of Sony Content. The
parties shall use best efforts to resolve outstanding issues relating to Errors
and Omissions and Media Insurance.

(b) Content Delivery. Except as otherwise explicitly
provided herein, Sony will be solely responsible for providing to InfoBeat all
Content in an electronic format reasonably requested by InfoBeat. Sony will bear
all costs associated with the telecommunications and computer hardware, software
and services necessary to generate the Sony Content and deliver it to InfoBeat.

3.3 ADVERTISING SPACE AND ADMINISTRATION. The advertising space on
any of the Web Sites and in any e-mail messages sent on behalf of Sony by
InfoBeat as part of the E-Mail Distribution (the "ADVERTISING") and, except with
respect to the Services performed in connection with advertising set forth in
EXHIBIT A, the administration and management of the Advertising shall be the
sole responsibility of Sony (including, without limitation, the selection,
placement and design of same) and any rights and benefits derived therefrom
shall be owned, retained and/or used exclusively by Sony. Sony will be solely
responsible for providing to InfoBeat all Advertising Content in an electronic
format reasonably required by InfoBeat to serve the Advertisements. InfoBeat's
current Advertising sales staff (consisting of four (4) individuals) (the "SALES
STAFF") shall remain employees of InfoBeat for up to four (4) months after the
Effective Date; provided, however, that Sony shall reimburse InfoBeat for the
wage, benefits and tax expenses borne by InfoBeat that are applicable to the
Sales Staff ("EMPLOYMENT EXPENSES"). InfoBeat shall invoice Sony on a monthly
basis for the Employment Expenses and Sony will pay InfoBeat's invoice within
thirty (30) days of the date of InfoBeat's invoice. At any time during such four
(4) month period, Sony may provide written notice to InfoBeat that the services
provided by the Sales Staff shall no longer be required by Sony, and InfoBeat
may then terminate the employment of such Sales Staff at its sole expense. If
Sony utilizes the services of

7.
<PAGE> 9
the Sales Staff for the entire four (4) month period, InfoBeat shall pay to Sony
[ ** ] percent ([ ** ]%) of the Employment Expenses previously paid
to InfoBeat by Sony for such Sales Staff. Upon written notice to InfoBeat not
later than ten (10) days prior to the end of the four-month period, Sony may, at
its sole option, elect to hire one or more members of the Sales Staff.

3.4 PROMOTION. Sony and InfoBeat shall negotiate in good faith to
permit a mutually-agreeable reference to the InfoBeat Technology powering the
Services in all e-mail messages sent by InfoBeat as part of its E-Mail
Distribution under this Agreement.

4. PROPRIETARY RIGHTS.

4.1 OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS.

(a) Sony Property. Sony shall own (i) any modifications,
improvements, enhancements, and derivative works made to or from any of the
Publishing Business Assets made by either party ("MODIFICATIONS") in connection
with this Agreement and (ii) all Custom Software developed by InfoBeat pursuant
to a Task Order under Section 2.5(c) above, subject to InfoBeat's ownership of
InfoBeat Technology and InfoBeat Tools as specified in subsection (b) below. To
the extent that the rules governing works-for-hire under the U.S. copyright laws
may be applicable to Custom Software or Modifications developed by InfoBeat,
InfoBeat acknowledges that Custom Software and Modifications development by
InfoBeat or its employees or independent contractors is a work-for-hire and
InfoBeat acknowledges Sony's complete ownership in the copyright to such Custom
Software and Modifications. In the event any such Custom Software or
Modifications is not deemed a work-for-hire for any reason, InfoBeat hereby
assigns all right, title and interest in the foregoing works to Sony, including,
without limitation, all right, title and interest in the copyright of such
works. InfoBeat agrees to execute and deliver to Sony such instruments of
transfer and assignment as Sony shall reasonably request to carry out the
purpose of this Section 4.1(a), and, if InfoBeat fails to do so within a
commercially reasonable time after Sony's written requests for such assistance,
Sony shall have the right to do so in InfoBeat's name as InfoBeat's
attorney-in-fact solely for the purpose of executing and delivering such
instruments of transfer and assignment, such appointment being coupled with an
interest and therefore irrevocable. During the Term, InfoBeat has the right to
use or disclose Subscriber Data (but not individual data concerning specific
Subscribers), solely as contemplated by this Agreement, to employees of InfoBeat
with a need to know, for the sole purpose of operating, maintaining and
enhancing the Services. Upon any expiration or termination of this Agreement,
InfoBeat shall promptly deliver to Sony any and all such Subscriber Data in a
form and manner to be specified by Sony, and shall certify to Sony that InfoBeat
has destroyed any and all Subscriber Data in its possession, provided that
InfoBeat shall not be obligated to purge backup and archival copies of any
information made in the ordinary course of business which may contain Subscriber
Data. All Custom Software and Modifications created by InfoBeat under this
Agreement shall be considered Sony's Confidential Information, subject to all
restrictions set forth in Section 9 below.

(b) InfoBeat Property. Except as provided herein,
InfoBeat shall retains exclusive ownership of all Intellectual Property Rights
in InfoBeat Technology and any InfoBeat Tools developed in the course of
performing the Services, whether or not such tools are used in connection with
providing the Services. InfoBeat shall own any modifications, improvements,
enhancements, and derivative works made to or from any of the InfoBeat
Technology and any

** INDICATES CONFIDENTIAL TREATMENT REQUESTED

8.
<PAGE> 10

InfoBeat Tools made in connection with this Agreement; provided that Sony shall
not be charged for the development of any InfoBeat Tools or InfoBeat Technology
created as part of the Services. All InfoBeat Technology and InfoBeat Tools
disclosed to Sony under this Agreement shall be considered InfoBeat's
Confidential Information, subject to all restrictions set forth in Section 9
below.

(c) Cooperation. Each party agrees to cooperate with the
other party in executing and filing any documents and taking any other action
necessary or reasonably requested by the other party in order to give effect to
the foregoing allocation of Intellectual Property Rights.

4.2 SONY LICENSE GRANT. For the term of this Agreement, Sony
hereby grants to InfoBeat a non-exclusive, non-transferable (except as otherwise
provided in Section 6.1 below), royalty-free, worldwide license to reproduce,
distribute, publicly perform and publicly display (A) solely as contemplated
under this Agreement, the Publishing Business Assets as necessary for InfoBeat
to perform the Services as provided in this Agreement, and (B) the Sony Content,
including any Marks contained therein, solely in conjunction with the E-Mail
Distribution contracted for by Subscribers and the Web Site Hosting Services
provided by InfoBeat.

4.3 INFOBEAT LICENSE GRANT. InfoBeat hereby grants to Sony a
non-exclusive, royalty-free, worldwide license to reproduce, distribute,
publicly perform and publicly display any Content sourced from United Media,
Inc. that exists in InfoBeat databases as of the Effective Date (the "UNITED
MEDIA CONTENT") solely in connection with E-Mail Distribution under InfoBeat's
Bonus Products to Subscribers of such Content as of the Effective Date for the
duration of such Subscriber's existing six-month term. Sony shall not permit any
new Subscribers of the Bonus Product to select the United Media Content after
the Effective Date or permit any further distribution of the United Media
Content to any existing Subscribers beyond the expiration of the Subscriber's
existing six-month term.

4.4 TRADEMARK USE. Except as provided in Section 4.2, neither
party may use the other party's trademarks, service marks, trade names, logos,
or other commercial or product designations for any purpose whatsoever without
the prior written consent of the other party. InfoBeat will comply with all
trademark usage guidelines or policies that Sony may furnish to InfoBeat in
writing from time to time concerning use of the Marks; provided that InfoBeat
shall have no liability arising solely out of InfoBeat's compliance with such
guidelines or policies, without limiting any remedies Sony may have under the
Asset Purchase Agreement. All goodwill and other value or benefits derived from
use of the Marks hereunder will inure to the benefit of Sony. Sony has and will
retain exclusive ownership of the Marks, and InfoBeat will not contest or
challenge, or do anything inconsistent with, Sony's exclusive ownership of the
Marks.

9.
<PAGE> 11

5. FEES.

5.1 SERVICE FEES. As consideration for the Publishing Support
Services to be provided by InfoBeat to the Sony Parties hereunder, during the
Term Sony shall pay InfoBeat a service fee (the "SERVICE FEE"), in accordance
with this Section 5.1.

(a) First Contract Year. During the first Contract Year,
the Service Fee shall be comprised of:

(i) a base fee of Two Million Five Hundred
Thousand Dollars ($2,500,000), subject to the price reduction formula set forth
in Section 5.1(f) herein, payable as follows (the "BASE FEE" for the first
Contract Year): (A) One Million Two Hundred Fifty Thousand Dollars ($1,250,000)
payable on the Effective Date; and (B) the remaining One Million Two Hundred
Fifty Thousand Dollars ($1,250,000) payable in four (4) equal installments of
Three Hundred Twelve Thousand Five Hundred Dollars ($312,500) each, payable on
the last day of the third, sixth, ninth and twelfth month of the first Contract
Year; and

(ii) a fee for each Consumer News E-mail sent by
InfoBeat for those Consumer News E-mails sent in excess of [ ** ] (the
"BASELINE VOLUME" for the first Contract Year) per quarter for each quarter of
the first Contract Year (the "PER-QUARTER BENCHMARK" for the first Contract
Year), calculated as follows:

<TABLE>
<CAPTION>
NUMBER OF CONSUMER NEWS E-MAILS PER QUARTER FEE
------------------------------------------- ---
<S> <C>
[ ** ] million e-mails $ [ ** ]
[ ** ] million e-mails $ [ ** ]
[ ** ] million e-mails $ [ ** ]
over [ ** ] million e-mails $ [ ** ]
</TABLE>

(b) Second Contract Year. During the second Contract
Year, the Service Fee shall be comprised of:

(i) a base fee of Two Million Seven Hundred
Fifty Thousand Dollars ($2,750,000), subject to the price reduction formula set
forth in Section 5.1(f) herein, payable as follows (the "BASE FEE" for the
second Contract year): (A) One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) payable on the date that is eleven (11) months after the Effective
Date (subject to satisfaction of the Cash Flow Test described in Section 5.1(f)
below); and (B) the remaining One Million Dollars ($1,000,000) in four (4) equal
installments of Two Hundred Fifty Thousand Dollars ($250,000) each, payable on
the last day of the third, sixth, ninth and twelfth month of the second Contract
Year; and

** INDICATES CONFIDENTIAL TREATMENT REQUESTED

10.
<PAGE> 12

(ii) a fee for each Consumer News E-mail sent by
InfoBeat for those Consumer News E-mail sent in excess of [ ** ] (the
"BASELINE VOLUME" for the second Contract Year)per quarter for each quarter of
the second Contract Year (the "PER-QUARTER BENCHMARK" for the second Contract
Year), calculated as follows:

(i) A base fee of Three Million Dollars
($3,000,000), subject to the price reduction formula set forth in Section 5.1(f)
herein, payable as follows (the "BASE FEE" for the third Contract Year): (A) One
Million Dollars ($1,000,000) payable on the date which is eleven (11) months
after the Effective Date (subject to satisfaction of the Cash Flow Test
described in Section 5.1(f) below); and (B) the remaining Two Million Dollars
($2,000,000) payable in four (4) equal installments of Five Hundred Thousand
Dollars ($500,000) each, payable on the last day of the third, sixth, ninth and
twelfth month of the third Contract year; and

(ii) a fee for each Consumer News E-mail sent by
InfoBeat for those Consumer News E-mails sent in excess of [ ** ] (the
"BASELINE VOLUME" for the third Contract Year) per quarter for each quarter of
the third Contract Year (the "PER-QUARTER BENCHMARK" for the third Contract
Year), calculated as follows:

<TABLE>
<CAPTION>
NUMBER OF CONSUMER NEWS E-MAILS PER QUARTER FEE
------------------------------------------- ---
<S> <C>
[ ** ] million e-mails $ [ ** ]
over [ ** ] million e-mails $ [ ** ]
</TABLE>

(d) CARRYOVER OF SHORTFALLS. To the extent that during
any calendar quarter during the Initial Term, the actual number of Consumer News
E-mails sent is less than the applicable Per-Quarter Benchmark (a
"CARRYFORWARD"), Sony may apply the Carryforward for such quarter to increase
the Per-Quarter Benchmark for the next four (4) calendar quarters (and the
applicable minimums on the first threshold of the increased Service Fee rate set
forth in clause (ii) of each of Sections 5.1(a), 5.1(b) and 5.1(c)) up to the
total amount of the Carryforward. Each calendar quarter's Carryforward, if any,
may be applied by Sony to at most the next four (4) sequential quarters and in
no event shall survive past the third anniversary of the Effective Date. An
example of the use of Carryforwards in conformance with this Section 5.1(d) is
provided in EXHIBIT E, which is provided for illustrative purposes only.

(e) Broadcast E-Mails. The base Service Fee for each of
the first, second, and third Contract Years set forth in clause (i) of each of
Section 5.1(a), 5.1(b) and 5.1(c) hereof, respectively, shall include, in
respect of each such Contract Year, the provision by InfoBeat to Sony of up to
[ ** ] broadcast e-mails to InfoBeat's entire subscription base and such
other e-mail addresses as Sony shall provide (the "BROADCAST E-Mails"), upon
Sony's request, on a no-charge basis. In respect of any Broadcast E-Mail in
excess of [ ** ] in any Contract

** INDICATES CONFIDENTIAL TREATMENT REQUESTED

11.
<PAGE> 13
Year, if the applicable Per-Quarter Benchmark for the applicable Contract Year
has been achieved for the quarter in which such Broadcast E-Mails are sent, Sony
shall be charged at the rate of $[ ** ] for each Broadcast E-Mails sent;
provided that any such excess Broadcast E-Mail mailing that is unrelated to a
recurring database-enabled production cycle shall have a minimum mailing fee of
$500.

(f) CASH FLOW TEST. The $2,750,000 Base Fee prepayments
owed by Sony to InfoBeat pursuant to Section 5.1(b)(i)(A) and 5.1(c)(i)(A) (the
"BASE FEE PREPAYMENT") shall be due and payable in full on the date specified
therein if InfoBeat's financial operations satisfy the Cash Flow Test described
below. In the event that either (i) or (ii) of the Cash Flow Test is not true as
of November 10, 1999, Sony shall pay the Base Fee Prepayment in accordance with
the schedule set forth below; provided, however, that the total remaining
balance of the Base Fee Prepayment shall become immediately due and payable if
(i) Sony Music is comfortable that InfoBeat is a going concern, or (ii) InfoBeat
satisfies the Cash Flow Test (as measured monthly on the tenth day of each
subsequent calendar month):

<TABLE>
<CAPTION>
DATE PAYMENT
---- -------
<S> <C>
November 15, 1999 $687,500
May 15, 2000 $687,500
November 15, 2000 $687,500
May 15, 2001 $687,500
</TABLE>

In addition, in the event that the Cash Flow Test is not satisfied as of
November 10, 1999, InfoBeat and Sony agree to meet to permit InfoBeat to present
evidence of its viability as a going concern. For purposes of this provision,
the following is required for InfoBeat to satisfy the "CASH FLOW TEST" as
measured on the dates specified above (the "TEST DATE"): (i) the sum of (A)
InfoBeat's cash on hand as of the Test Date (as reported on its then-current
financial statements), (B) the Base Fee Prepayment and (C) the firm cash
commitments from lenders or investors, must be greater than the product of (-6)
times the greater of (x) the average of InfoBeat's operating losses during the
two full calendar months preceding the Test Date (as reported on its
then-current financial statements), or (y) 75% of the average of InfoBeat's
operating losses during the four full calendar months preceding the Test Date
(as reported on its then-current financial statements); and (ii) InfoBeat's
average operating income during the two full calendar months preceding the Test
Date is not greater than twenty five percent (25%) above the average monthly
operating loss for the four (4) full calendar months preceding the Test Date
(for purposes of example and not limitation, for the November 10, 1999 Test
Date, Condition (ii) is satisfied if InfoBeat's July through October average
monthly operating loss is $526,500 and InfoBeat's average operating income
during September and October is less than or equal to $395,000.

** Indicates Confidential Treatment Requested

12.
<PAGE> 14

(g) Service Fee Reduction.

(i) The Base Fee of each Contract Year shall be
reduced proportionally by the Reduction Ratio calculated pursuant to Section
2.5(b) of the Asset Purchase Agreement; provided, however, that, in the event of
such a reduction, a "contingency tier" will be added to the quarterly fees in
each Contract Year payable pursuant to clause (ii) of each of Section 5.1(a),
5.1(b) and 5.1(c), which shall be calculated as follows:

<TABLE>
<CAPTION>
NUMBER OF CONSUMER NEWS E-MAILS PER QUARTER FEE
------------------------------------------- ---
<S> <C>
(Baseline Volume * Reduction Ratio) - Baseline Volume Baseline Fee
</TABLE>

Where the "Baseline Fee" is equal to (the Base Fee for the applicable
Contract Year divided by four (4)) divided by the Baseline Volume for
the applicable Contract Year).

(ii) In addition, Sony may, at its option,
satisfy InfoBeat's obligation to repay a certain portion of the purchase price
for the Publishing Business Assets (equal to the Purchase Price Reduction
calculated pursuant to Section 2.5(b) of the Asset Purchase Agreement), if
applicable, by reducing, on a dollar-for-dollar basis, all Base Fees owed by
Sony in each quarter of each Contract Year subsequent to the second quarter of
the first Contract Year up to the full amount of the Purchase Price Reduction.

5.2 EDITORIAL FEES. In consideration for the Editorial Services
provided by InfoBeat, Sony shall pay a monthly fee of [ ** ] (as such
amount may be adjusted pursuant to the next sentence) throughout the Initial
Term and any subsequent Additional Term, unless and until Sony terminates the
Editorial Services pursuant to Section 2.2 of this Agreement (the "EDITORIAL
FEE"). At the end of each Contract Year during the Initial Term or any
subsequent Additional Term, Sony and InfoBeat shall mutually review whether the
Editorial Fee for the succeeding Contract Year should be increased or decreased
to reflect the increase or decrease in the Consumer Price Index over the
preceding Contract Year ("Consumer Price Index," as used herein, means the
Consumer Price Index maintained by the United States Department of Labor Bureau
of Labor Statistics). If (i) Sony desires in it sole discretion to introduce new
editorial services at any time during the Initial Term or Additional Term, and
(ii) Sony desires in its sole discretion to have InfoBeat provide such
additional editorial services, then both parties will make good faith efforts to
negotiate the fee for related incremental editorial services.

5.3 NET PROFIT DISTRIBUTION. Promptly after expiration of the
Initial Term (unless the Initial Term is earlier terminated pursuant to Section
7 below), Sony shall pay to InfoBeat a payment equal to [ ** ] percent
([ ** ]%) of Sony's Net Profits, as defined herein. As used in this
Section, "NET PROFITS" means revenues generated by Sony and its wholly owned
subsidiaries during the Initial Term specifically derived from the revenues
specifically generated from the InfoBeat WebSite and e-mails distributed by
means of the E-Mail Distribution services provided by InfoBeat hereunder less
costs incurred by Sony in generating such revenue, such costs to include,
without limitation, (A) the Service Fees paid to InfoBeat, (B) reasonable and
customary costs paid by Sony Parties for new Subscriber acquisitions, (C) the
Editorial Fees, fees for Engineering Services and any other fees paid to
InfoBeat, (D) reasonable and customary advertising commissions, management and
administration fees paid by Sony, excluding any such

** INDICATES CONFIDENTIAL TREATMENT REQUESTED

13.
<PAGE> 15

fees paid by any Sony Party which were not negotiated on an arms-length basis,
and (E) revenue participations with third parties, excluding any valuation of
non-cash benefit of any co-branding or similar cooperative arrangement and
excluding any revenue participations by any Sony Party which was not negotiated
on an arms-length basis, provided that the cumulative Net Profits over the
Initial Term shall not be less than $0. Sony will keep reasonably complete and
accurate records to document the Net Profits. During the period commencing on
the date of expiration of the Initial Term and ending one year thereafter,
InfoBeat shall be permitted to conduct one audit of Sony's relevant books and
records for the sole purpose of verifying Sony's calculation of the amount owed
by Sony to InfoBeat under this Section 5.3, conducted by an independent audit
professional chosen and reasonably acceptable to Sony, during regular business
hours at Sony's offices and in a manner that does not interfere with Sony's
business operations. InfoBeat shall bear all costs incurred in conducting such
audit.

5.4 PAYMENT TERMS. InfoBeat will bill Sony for the quarterly
Service Fees payable pursuant to clause (ii) of each of Sections 5.1(a), 5.1(b)
and 5.1(c) within fifteen (15) days of the end of each calendar quarter, such
bill including a report on the actual number of Consumer News E-mails sent by
InfoBeat during the prior quarter. InfoBeat will bill Sony monthly in advance
not earlier than the tenth (10th) of each calendar month for the Editorial Fees
to be provided to Sony during such month. All such invoices shall be due and
payable by Sony net thirty (30) days. Any past due amounts which are at least
thirty (30) days in arrears will be subject to a service charge of 1.5% per
month or the highest rate permitted by the laws of New York State, whichever is
less.

5.5 TAXES. Sony will be solely responsible for all applicable
taxes or other governmental fees, charges, or assessments, other than taxes on
InfoBeat's net income (collectively, "TAXES") imposed on or resulting from the
Services provided by InfoBeat under this Agreement, and on all payments made by
Sony to InfoBeat hereunder. Sony agrees to indemnify InfoBeat for any liability
incurred by InfoBeat as a result of Sony's failure to pay any such Taxes. If
InfoBeat is required by law to withhold any Taxes from fees billed and collected
by InfoBeat on Sony's behalf hereunder, InfoBeat will use reasonable efforts to
provide Sony with copies of official receipts for the payment of such Taxes to
the appropriate governmental authority.

5.6 RECORDKEEPING AND AUDIT RIGHTS. InfoBeat will keep complete
and accurate records regarding the Services rendered and fees billed and
collected by InfoBeat hereunder. During the term of this Agreement and for one
(1) year after its termination, Sony will have the right to have an inspection
and audit of InfoBeat's relevant books and records conducted by an independent
audit professional chosen and reasonably acceptable to InfoBeat, no more often
than once every twelve (12) months, during regular business hours at InfoBeat's
offices and in a manner that does not interfere with InfoBeat's business
operations. If any such audit reveals that InfoBeat has under-reported or
over-reported the Services rendered and fees owed by Sony under this Agreement,
then InfoBeat will promptly grant Sony a credit for any amounts overpaid by Sony
or Sony will promptly pay InfoBeat the amount underpaid by Sony, as the case may
be. Sony shall bear all costs incurred in conducting such audit.

14.
<PAGE> 16

6. LIMITED RIGHTS OF ASSIGNMENT.

6.1 ASSIGNMENT. Sony may assign Sony's rights under this Agreement
in whole or in part to any party, and such rights may be similarly assigned by
such assignee. No such assignment shall relieve Sony of any of Sony's
obligations hereunder. InfoBeat shall not have the right to assign this
Agreement without Sony's prior written consent; provided, however, that InfoBeat
may assign this Agreement, in whole only, in connection with either (i) the sale
of all or substantially all of its assets or a consolidation, merger or other
transaction which effectively causes a change of control of InfoBeat or (ii)
upon an internal restructuring, to a wholly owned or controlled entity or
subsidiary of InfoBeat, provided that InfoBeat shall remain jointly and
severally liable with any assignee of InfoBeat pursuant to this Section 6.1 for
all of InfoBeat's obligations under this AGREEMENT. Any purported assignment by
InfoBeat or Sony in violation of this subparagraph shall be void.

6.2 LIMITED ASSIGNMENTS. Notwithstanding anything to the contrary
in this Section 6, the remaining portions of each base Service Fee payable as
provided in clause (i) of each of Sections 5.1(a), 5.1(b) and 5.1(c) hereof
shall be reduced pursuant to Section 6.3 below in the event that:

(a) at any time during the Initial Term or Additional
Term Sony assigns or transfers to an entity other than a Sony Party (the
"LIMITED ASSIGNEE") the right to receive one or more selected Services under
this Agreement (the "ASSIGNED SERVICES") but retains the right to received the
balance of Services; and

(b) InfoBeat and the Limited Assignee thereafter enter
into an agreement (the "SECOND AGREEMENT") pursuant to which InfoBeat provides
the Assigned Services to the Limited Assignee; provided that Sony remains fully
responsible for payments that would be owed to InfoBeat pursuant to Section 5.1
above, including the Base Fees and any amounts, based on the volumes of e-mail
sent by InfoBeat on behalf of Sony, subject to the Service Fee reduction
described in Section 6.3 below.

6.3 SERVICE FEE REDUCTION. The Service Fee reduction (the
"REDUCTION") will be based on the message volume of e-mail delivered by InfoBeat
on behalf of a Limited Assignee during each respective calendar quarter (the
"VOLUME"). The Reduction shall be applied on a calendar quarterly basis and will
be reflected on InfoBeat's invoice for the Service Fees owed in such quarter.
The Reduction shall be calculated as follows:

(a) If Sony's Consumer News E-mail volume for any
calendar quarter has not exceeded applicable Per-Quarter Benchmark for the
quarter, the Reduction shall be an amount equivalent to the Volume multiplied by
the Ratio. For purposes of this Section 6.3, the "RATIO" shall be equal to ((the
Base Fee for the applicable Contract Year divided by four) divided by (the
Per-Quarter Benchmark for the applicable quarter)).

(b) If Sony's Consumer News E-mail volume for any
calendar quarter minus the applicable Volume exceeds the applicable Per-Quarter
Benchmark, then the Reduction shall be equivalent to the applicable Volume
multiplied by $0.001.

15.
<PAGE> 17

(c) If Sony's Consumer News E-mail volume has exceeded
the applicable Per-Quarter Benchmark for any calendar quarter, but Sony's
Consumer News E-mail volume for such quarter minus the applicable Volume does
not exceed the applicable Per-Quarter Benchmark, then the Reduction shall be the
sum of (z) (Sony's Consumer News E-mail volume minus the applicable Per-Quarter
Benchmark) multiplied by $0.001 plus (y) ((the applicable Per-Quarter Benchmark
minus (Sony's Consumer News E-mail volume minus the applicable Volume))
multiplied by the Ratio).

7. TERM AND TERMINATION.

7.1 TERM. The initial term of this Agreement shall commence on the
Effective Date and continue for three (3) years (the "INITIAL TERM") unless
earlier terminated pursuant to Sections 7.2, or 7.3 below. Sony may, at its sole
option, renew this Agreement for up to an additional two (2) year period (the
"ADDITIONAL TERM") provided that Sony give InfoBeat written notice of its
intention to renew at least thirty (30) days prior to the end of the Initial
Term. The parties shall negotiate in good faith the Service fees applicable to
the Additional Term provided that such fees shall not exceed the per message
fees InfoBeat has charged to third parties for services that are substantially
similar to the Services and for the same or lesser volumes of e-mail
transmissions under substantially similar terms and conditions

7.2 EARLY TERMINATION.

(a) For Breach. Either party may, in the event of a
material breach by the other party, terminate this Agreement upon sixty (60)
days written notice if such material breach remains uncured at the end of such
sixty (60) day period.

(b) For Cessation of Business. Sony may terminate this
Agreement upon written notice to InfoBeat if InfoBeat (A) has discontinued that
part of its business relating to the Services or (B) becomes the subject of a
voluntary or involuntary petition in bankruptcy or other proceeding relating to
insolvency, receivership, liquidation, composition or comparable proceeding or
any assignment for the benefit of creditors, if such petition or proceeding is
not dismissed within sixty (60) days of filing.

(c) Pro Rata Reduction of Base Fee. If at the time of a
termination by Sony pursuant to either Section 2.5(a), this Section 7.2
(including any termination under Section 7.2(a)) or Section 13.7 below, Sony has
not reached the Baseline Volume for the Contract Year in which such termination
occurs, the Base Fee applicable to such Contract Year, shall be reduced by an
amount equal to (one (1) minus ((i) the number of Consumer E-Mails sent during
such Contract Year divided by (ii) the Baseline Volume for such Contract Year))
multiplied by the Base Fee for such Contract Year and any subsequent Contract
Years (the "BASE FEE REDUCTION"). If the amount of Base Fees actually paid by
Sony prior to termination exceeds the total Base Fees for such Contract Year
minus the Base Fee Reduction, then InfoBeat shall refund to Sony within thirty
(30) days of such termination the amount by which the total Base Fees actually
paid by Sony prior to termination exceeds (the total Base Fees for such Contract
Year minus the Base Fee Reduction). Otherwise, if the amount of Base Fees
actually paid by Sony prior to termination is less than the total Base Fees for
such Contract Year minus the Base Fee Reduction, then Sony shall pay to InfoBeat
within thirty (30) days of such

16.
<PAGE> 18

termination the amount by which the total Base Fee for such Contract Year minus
the Base Fee Reduction exceeds the amount of Base Fees actually paid by Sony
prior to termination. In addition, in the event of such termination Sony shall
be entitled to a full refund of any prepaid Base Fees actually paid by Sony
prior to termination for any subsequent Contract Year.

7.3 SONY BUY-OUT OPTION. Sony may, at any time during the Initial
Term upon thirty (30) days prior written notice to InfoBeat, terminate this
Agreement (the "BUY-OUT OPTION") by paying to InfoBeat the amount by which
$ [ ** ] exceeds the amount of the Service Fees which Sony has paid, or
shall have been deemed to have paid, to InfoBeat through the date that Sony
elects to exercise its Buy-Out Option, without giving effect to any reduction in
Service Fees calculated pursuant to Section 5.1(f) above. Upon payment of such
amounts this Agreement is terminated, including any obligation with respect to
the distribution of Net Profits pursuant to Section 5.3 unless it is determined
that Sony had no good faith business reason to terminate this Agreement pursuant
to this Section 6.3, other than to avoid such Net Profits distribution, and
neither party shall have any obligation to the other except as provided under
Sections 4.1(a) and 7.4.

7.4 EFFECT OF TERMINATION. Upon termination of this Agreement,
InfoBeat shall discontinue providing the Services, Sony shall promptly pay all
amounts due hereunder and, except in the event of a continuation or transition
of the Services as provided in this Section 7.4 below, each party will promptly
return to the other party all Confidential Information of the other party in its
possession or control. In the event of any termination by Sony pursuant to
Section 7.2 above, unless such termination is based upon the irrevocable failure
of the InfoBeat Technology to provide the Services, Sony may require InfoBeat to
continue providing the Services on the same terms and conditions through the
expiration of the then-current term; provided, however, that the fees applicable
to the provision of Services after termination are subject to adjustment if
InfoBeat has provided to a third party services that are substantially similar
to the Services and for the same or lesser volumes of e-mail transmissions under
substantially similar terms and conditions for per message fees applicable to
such e-mail transmissions that are less than those charged to Sony under this
Agreement. Upon termination of this Agreement, InfoBeat will use its best
efforts to transition the Services to a third party designated by Sony in an
efficient an expeditions manner with Sony's reasonable cooperation and the
reasonable cooperation of such third party; provided, however, that in the event
of a termination of this Agreement for Sony's breach under Section 7.2(a) or due
to Sony's exercise of the Buy Out Option under Section 7.3, Sony shall
compensate InfoBeat on a time and materials basis for its services in connection
with such transition; provided that the hourly rates chargeable to Sony under
this provision will not exceed the hourly rates charged to other customers of
InfoBeat for similar transition services performed under similar terms and
conditions.

7.5 SURVIVAL. All Sections of this Agreement, which by their
nature should survive termination of this Agreement shall survive termination of
this Agreement, including, without limitation, the following provisions: Section
1 ("Definitions"), Section 9 ("Confidentiality"), Section 10
("Indemnification"); Section 11 ("Limitations of Liability") and Section 12
("General").

** INDICATES CONFIDENTIAL TREATMENT REQUESTED

17.
<PAGE> 19

8. WARRANTIES AND COVENANTS.

8.1 SONY. Sony warrants that Sony is the owner, valid licensee, or
authorized user of the Sony Content and that Sony will not provide any Sony
Content or Advertising that: (A) infringes on any third party's copyright,
patent, trademark, trade secret or other proprietary rights; (B) violates any
law, statute, ordinance or regulation, including without limitation the laws and
regulations governing export control; (C) constitutes defamation, trade libel,
invasion of privacy or violation of any right of publicity; (D) is pornographic
or obscene; (E) does not conform to InfoBeat's Spam Policy; or (F) contains
viruses, trojan horses, worms, time bombs, cancelbots or other similar harmful
or deleterious programming routines, provided that Sony makes no representation
or warranty whatsoever with respect to any of the Publishing Business Assets or
to the creation of Sony Content by means of the Editorial Services provided by
InfoBeat.

8.2 INFOBEAT. InfoBeat warrants solely to Sony that:

(a) it has the right to enter into and to fully perform
this Agreement,

(b) it owns or has valid licenses to the InfoBeat
Technology;

(c) the InfoBeat Technology and the InfoBeat Tools,
excluding any Sony Content or Advertising provided by Sony or any Subscriber, as
used to provide the Services do not infringe any person's or entity's U.S.
patent, copyright, trademark or other proprietary right, or materially violate
any U.S. state or federal law, statute, ordinance or regulation, or contain any
viruses, trojan horses, worms, time bombs, cancelbots or other similar harmful
or deleterious programming routines;

(d) the functionality and operation of the InfoBeat
Technology will not be adversely affected as a result of the date change from
December 31, 1999 to January 1, 2000 or any other date values, provided,
however, that InfoBeat shall not be responsible for any adverse affects
attributable to any systemic Internet failures and interruptions in services of
any of InfoBeat's Internet Service Providers, except to the extent that InfoBeat
is indemnified by such Internet Service Providers for third party claims arising
from such service interruptions;

(e) InfoBeat shall satisfy the Year 2000 Compliance Plan
attached hereto as EXHIBIT F in all material respects by the milestone
completion dates specified therein provided, however, that InfoBeat shall not be
responsible for any failure to achieve milestones to the extent attributable to
a vendor's failure to provide information and assistance necessary to complete
such milestone; and

(f) the Service Levels applicable to the Services to be
provided by InfoBeat hereunder are, and shall continue to be, no less than
substantially the same level of services provided to the Publishing Business
prior to the Effective Date.

8.3 REMEDIES AND DISCLAIMERS. In the event that any electronic
messages transmitted via E-Mail Distribution contains material errors
attributable solely to InfoBeat, InfoBeat shall correct such errors and
retransmit the affected messages at no charge to Sony. However, InfoBeat does
not guarantee continuous or uninterrupted Services and does not

18.
<PAGE> 20

guarantee that all e-mail messages sent as part of the E-Mail Distribution will
be received by the Subscribers. InfoBeat's sole obligation and Sony's sole
remedy in the event that the Services provided hereunder do not achieve the
Service Levels shall be as specified in EXHIBIT C in accordance with the
provisions of Section 2.6 above, provided that the foregoing shall not limit
Sony's remedies with respect to further breaches by InfoBeat of any
representation, warranty or convenant specified in this Agreement in addition to
or which may result in a breach of the Service Levels. SONY ACKNOWLEDGES THAT,
EXCEPT AS EXPRESSLY STATED HEREIN, INFOBEAT IS PROVIDING ALL SERVICES PERFORMED
HEREUNDER "AS IS" AND INFOBEAT HAS NOT MADE ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED REGARDING THE SERVICES OR THE INFOBEAT TECHNOLOGY, INCLUDING
ANY IMPLIED WARRANTY OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF
PERFORMANCE.

9. CONFIDENTIALITY.

9.1 CONFIDENTIAL INFORMATION. For purposes of this Agreement,
"CONFIDENTIAL INFORMATION" shall mean all information communicated by one party
to the other party concerning business plans, Product development plans,
pricing, subscriber count, subscriber identity, advertiser count and advertiser
identity, whether communicated verbally or in writing. InfoBeat acknowledges
that Sony's business strategy related to the Services, and the Subscriber Data,
is Sony's Confidential Information. In addition, Sony acknowledges that
InfoBeat's techniques, methods and technical and business strategies relating to
the Service Bureau Business and the InfoBeat Tools and InfoBeat Technology,
including, without limitation, e-mail delivery techniques, database design,
message build and query design, exception handling techniques and ad insertion
techniques is InfoBeat's Confidential Information. Notwithstanding the
foregoing, Confidential Information shall not include information that (A) is in
or enters into the public domain by some action other than breach of this
Agreement by the receiving party, (b) was lawfully in the receiving party's
possession prior to the disclosure, (C) is independently developed by the
receiving party without access to the disclosing party's Confidential
Information, or (D) is lawfully disclosed to the receiving party by a third
party without restriction on disclosure.

9.2 GENERAL CONFIDENTIALITY OBLIGATIONS. Each party agrees that it
will (A) not disclose the other party's Confidential Information to any third
party (other than independent contractors as provided below); (B) use the other
party's Confidential Information only to the extent necessary to perform its
obligations or exercise its rights under this Agreement; (C) disclose the other
party's Confidential Information only to those of its employees and independent
contractors who need to know such information for purposes of this Agreement and
who are bound by confidentiality agreements containing terms no less restrictive
than those in this Section 9.2; and (D) protect all Confidential Information of
the other party from unauthorized use, access, or disclosure in the same manner
as it protects its own confidential information of a similar nature, and in no
event with less than reasonable care. Each party's obligation under this
paragraph shall extend for a period of three (3) years following termination or
expiration of this Agreement.

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9.3 TERMS OF AGREEMENT. Neither party will disclose the existence
or any terms of this Agreement to anyone other than its employees, officers,
directors, affiliates, attorneys, accountants, and other professional advisors,
except (A) pursuant to a mutually acceptable press release; (B) in connection
with a contemplated financing or change of control of such party or sale of such
party's business (provided that (i) any third party to whom the terms of this
Agreement are to be disclosed signs a confidentiality agreement reasonably
satisfactory to the other party hereto before such disclosure is made) and (ii)
no such third party shall be entitled to rely on any representation, warranty or
covenant of either party herein); or (C) as may be required by law, in which
case the disclosing party shall use its best efforts to provide the
non-disclosing party with sufficient prior notice of such required disclosure to
permit the non-disclosing party to obtain a protective order with respect
thereto.

10. INDEMNITY.

10.1 SONY'S INDEMNITY OBLIGATIONS. Subject to Section 10.3 below,
Sony agrees to defend, indemnify and hold harmless InfoBeat and its directors,
officers, agents and employees for any and all losses, costs, liabilities or
expenses (including without limitation reasonable attorneys' and expert
witnesses' fees) incurred by InfoBeat as a result of any third party claim
arising out of or in connection with (A) a breach or alleged breach by Sony of
any representation, warranty or covenant of this Agreement, or (B) Subscribers'
use of the Services except to the extent such claim arises from or relates to
any condition specified in Section 10.2(b) below. Notwithstanding any provision
to the contrary herein, Sony shall have no obligation to indemnify InfoBeat to
the extent any such losses, costs, liabilities or expenses arise out of a breach
of any of InfoBeat's representations or warranties (which shall extend for the
entire term of this Agreement notwithstanding any earlier termination of the
representation and warranties provided in the Asset Purchase Agreement) in the
Asset Purchase Agreement relating to the Publishing Business Assets. In
addition, Sony shall have no obligation to indemnify InfoBeat to the extent any
such losses, costs, liabilities or expenses arise out of Content developed by
InfoBeat in connection with the Editorial Services provided by InfoBeat and are
in excess of Sony's liability insurable coverage limit, which shall not be less
than ten million dollars ($10,000,000).

10.2 INFOBEAT'S INDEMNITY OBLIGATIONS. Subject to Section 10.3
below, InfoBeat hereby agrees to defend, indemnify and hold harmless Sony and
its directors, officers, agents and employees for any and all losses, costs,
liabilities or expenses (including without limitation reasonable attorneys' and
expert witnesses' fees) incurred by Sony as a result of any third party claim
arising out of (A) a breach or alleged breach by InfoBeat of any representation,
warranty or covenant of this Agreement, or (B) Subscribers use of the Services
to the extent such claim arises from or relates to any negligent act or omission
of InfoBeat or from any representation, warranty or covenant by InfoBeat
concerning the Services.

10.3 INDEMNIFIED PARTY'S OBLIGATIONS. The indemnifying party's
obligations shall be contingent upon the indemnified party (A) giving the
indemnifying party prompt notice of any such claim or action, (B) allowing the
indemnifying party sole control of the defense or any settlement (provided that
the indemnifying party shall not, without the consent of the indemnified party,
enter into any settlement that requires an affirmative obligation of, results in
any ongoing liability to or materially prejudices the indemnified party in any
way) and (c) providing reasonable cooperation in the indemnifying party's
defense or settlement activities.

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11. LIMITATIONS ON LIABILITY. EXCEPT FOR LIABILITY FOR BREACH OF SECTION 9
ABOVE, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO SUCH DAMAGES
ARISING FROM BREACH OF CONTRACT OR WARRANTY OR FROM NEGLIGENCE OR STRICT
LIABILITY). IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INTERRUPTED
COMMUNICATIONS, LOST DATA OR LOST PROFITS, ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, EVEN IF INFOBEAT HAS BEEN ADVISED OF (OR KNOWS OR SHOULD KNOW
OF) THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR ANY LIABILITY FOR AMOUNTS DUE
AND PAYABLE UNDER THIS AGREEMENT, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY OR ANY THIRD PARTIES FOR AN AMOUNT GREATER THAN ONE
MILLION DOLLARS ($1,000,000).

12. SONY OPTION TO PURCHASE EQUITY; PERFORMANCE BASED WARRANTS

12.1 OPTION SHARES. During the period commencing on the Effective
Date and ending on the later to occur of (a) the expiration of the Initial Term
and (b) the expiration of the Additional Term, Sony shall have the right to
purchase up to fifty percent (50%) of the shares of InfoBeat stock offered by
InfoBeat in the next material private offering of equity securities proposed by
InfoBeat during such period (the "OPTION SHARES"), and which remain unsold after
having been offered to existing shareholders of InfoBeat as of the Effective
Date (the "EXISTING SHAREHOLDERS"). Sony shall have the right to purchase such
Option Shares at the same price and under the same terms as the price and terms
offered to such Existing Shareholders. InfoBeat shall provide Sony with written
notice of the proposed offering of such Option Shares pursuant to this Section
12.1, setting forth the range of prices at which such offering is to be made (an
"Option Notice"), not less than fifteen (15) days after the Existing
Shareholders have been informed of such offering. Sony shall exercise its option
hereunder by providing InfoBeat with written notice of its intent to purchase
such Option Shares within fifteen (15) days after receipt by Sony of an Option
Notice (the "Election Period"). InfoBeat may issue and sell all Option Shares
not purchased by Sony within the price range specified in the Option Notice
within ninety (90) days after the expiration of the Election Period. The
provisions of this Section 12.1 shall not apply to (a) any Permitted Issuance
(as defined in Section 6 of Article IV of InfoBeat's Certificate of
Incorporation), (b) any issuance of equity securities for non-cash consideration
to non-affiliates of InfoBeat on commercially reasonable terms, and (c) options
to purchase InfoBeat Common Stock pursuant to InfoBeat's Stock Option Plan. In
the event that Sony exercises its option to purchase Option Shares, Sony shall
be entitled to pre-emptive rights with respect to such Option Shares not less
favorable than those granted to holders of InfoBeat's Series D Preferred Stock.

12.2 PERFORMANCE BASED WARRANTS. On the Effective Date, InfoBeat
shall issue a warrant to Sony to purchase up to 600,000 shares of Series D
Preferred Stock of InfoBeat substantially in the form attached hereto as EXHIBIT
H.

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13. GENERAL PROVISIONS.

13.1 GOVERNING LAW. This Agreement will be governed and construed
in accordance with the laws of the State of New York without giving effect to
principles of conflict of laws. Any suit, action or proceeding arising from or
relating to this Agreement must be brought in a federal court in the New York
County, New York, and each party irrevocably consents to the jurisdiction and
venue of any such court in any such suit, action or proceeding.

13.2 INJUNCTIVE RELIEF. It is understood and agreed that,
notwithstanding any other provision of this Agreement, any breach of Section 9.2
("Confidentiality") by either party will cause irreparable damage for which
recovery of money damages would be inadequate, and that the non-breaching party
will therefore be entitled to seek timely injunctive relief to protect such
party's rights under this Agreement in addition to any and all remedies
available at law.

13.3 SEVERABILITY; WAIVER. If any provision of this Agreement is
held to be invalid or unenforceable for any reason, the remaining provisions
will continue in full force without being impaired or invalidated in any way.
The parties agree to replace any invalid provision with a valid provision that
most closely approximates the intent and economic effect of the invalid
provision. The waiver by either party of a breach of any provision of this
Agreement will not operate or be interpreted as a waiver of any other or
subsequent breach.

13.4 NONSOLICITATION. Except as provided herein, during, and for a
period eighteen (18) months after termination of, this Agreement, (i) Sony
agrees not to knowingly solicit for employment by Sony or any subsidiary of Sony
any person known to Sony to be an employee of InfoBeat without InfoBeat's
written permission and (ii) InfoBeat agrees not to knowingly solicit for
employment by InfoBeat or any subsidiary of InfoBeat any person known to
InfoBeat to be an employee of Sony without Sony's written permission; provided,
that, this Section 13.4 shall not apply to responses to employment solicitations
to the general public (through classified advertising or otherwise) or employees
of InfoBeat who approach Sony, or employees of Sony who approach InfoBeat,
independently, without solicitation.

13.5 HEADINGS. Headings used in this Agreement are for reference
purposes only and in no way define, limit, construe or describe the scope or
extent of such section, or in any way affect this Agreement.

13.6 SUCCESSORS AND ASSIGNS. The parties' rights and obligations
will bind and inure to the benefit of their respective successors, heirs,
executors and administrators and permitted assigns.

13.7 FORCE MAJEURE. Neither party will be liable for any failure to
fulfill its obligations hereunder due to causes beyond its reasonable control,
including acts or omissions of government or military authority, acts of God,
shortages of materials, telecommunications failures, transportation delays,
earthquakes, fires, floods, labor disturbances, riots or wars, provided that if
either party shall be unable substantially to fulfill its obligations hereunder
for a period greater than sixty (60) days the other party shall be permitted to
terminate this Agreement upon ten (10) days written notice.

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13.8 INDEPENDENT CONTRACTORS. The parties to this Agreement are
independent contractors. Neither party shall have any right, power or authority
to enter into any agreement for or on behalf of, or incur any obligation or
liability of, or to otherwise bind, the other party. No agency, partnership,
joint venture or employee-employer relationship is intended or created by this
Agreement.

13.9 NOTICE. All notices required or permitted under this Agreement
shall be in writing and shall be given by courier or other personal delivery, by
facsimile (with confirmation) or by registered or certified mail at the
appropriate address first listed above or at a substitute address designated by
notice by the party concerned. Each notice to Sony shall be addressed for the
attention of Sony's Vice President, Business Affairs & Administration, and a
copy of each notice to Sony shall be sent simultaneously to the Sony Music
Entertainment Inc. Law Department for the attention of Sony's Senior Vice
President and General Counsel. Each notice to InfoBeat shall be addressed for
the attention of InfoBeat's Chief Executive Officer. Notices shall be deemed
given on the earlier to occur of, if delivered personally or by facsimile, the
date so delivered, if delivered by overnight courier, one (1) business day after
the date sent, and if delivered by registered or certified mail, four (4)
business days after mailing, except that a notice of change of address shall be
effective only form the date of its receipt.

13.10 ENTIRE AGREEMENT. This Agreement, including the exhibits
attached hereto, sets forth the entire understanding and agreement of the
parties and supersedes any and all oral or written agreements or understandings
between the parties as to the subject matter of this Agreement. There are no
promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied, among the parties hereto,
other than as set forth in this Agreement. All prior agreements among the
parties with respect to the subject matter hereof are superseded by this
Agreement, which integrates all promises, agreements, conditions and
understandings among the parties with respect thereto. This Agreement may be
changed only by a writing signed by both parties.

13.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
be taken together and deemed to be one instrument.

THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY.

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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first written above.

INFOBEAT INC.: SONY MUSIC, A GROUP OF
SONY MUSIC ENTERTAINMENT INC.:

By: By:
---------------------------------------- -----------------------------
Title: Title:
------------------------------------- --------------------------
Street Address: 707 17th Street, Suite 2850 Street Address:
Denver, Colorado 80202 ----------------

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

Mail Address: Same as above Mail Address:
------------------------------ -------------------

--------------------------------
Fax: Fax:
--------------------------------------- ----------------------------

E-Mail: E-Mail:
------------------------------------ -------------------------

24.

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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

August 19, 1999