EXACTIS COM INC, S-1/A, 1999-09-21

EXACTIS COM INC
S-1/A, 1999-09-21
TELEGRAPH & OTHER MESSAGE COMMUNICATIONS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 1999

REGISTRATION NO. 333-85315
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2

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

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

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707 - 17TH STREET, SUITE 2850
DENVER, CO 80202
(303) 675-2300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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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

<TABLE>
<CAPTION>
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PROPOSED MAXIMUM
TITLE OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value................................ $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 SEPTEMBER 21, 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. 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..................... 16
Conventions which Apply to this Prospectus.................. 16
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Dilution.................................................... 18
Capitalization.............................................. 19
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 31
Management.................................................. 45
Certain Relationships and Related Transactions.............. 54
Principal Stockholders...................................... 57
Description of Securities................................... 59
Shares Eligible for Future Sale............................. 63
Underwriting................................................ 64
Legal Matters............................................... 66
Experts..................................................... 66
Where You Can Find Additional Information................... 66
Index to Financial Statements............................... F-1
</TABLE>

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

<PAGE> 5

PROSPECTUS SUMMARY

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

OUR COMPANY

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

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

OUR STRATEGY

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

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

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

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

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

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

CORPORATE INFORMATION

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

1
<PAGE> 6

THE OFFERING

Common stock offered by
us......................... 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;

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

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

2
<PAGE> 7

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

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

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

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

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

3
<PAGE> 8

<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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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.

4
<PAGE> 9

RISK FACTORS

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

RISKS ASSOCIATED WITH OUR BUSINESS

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

We have not generated enough revenue to cover the substantial amounts we
have spent to create, launch and enhance our services. Our operating costs have
exceeded our revenue in all quarters since our inception. We incurred net losses
of approximately $3.4 million from January 30, 1996, the date of our inception,
through December 31, 1996, $7.7 million in 1997, $4.5 million in 1998 and $3.9
million for the six months ended June 30, 1999. We had an accumulated deficit of
$19.6 million at June 30, 1999. We expect to incur net losses and negative cash
flow for the foreseeable future. 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.

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

The market for outsourced email marketing and communications solutions is
new and rapidly evolving. If sufficient demand for our services does not
develop, our business, financial condition and operating results will be harmed.
Market acceptance of our existing and planned services will depend on the
acceptance and use of outsourced email marketing and communications solutions.
Our current and planned services are very different from the traditional
advertising and direct mail methods that our clients have historically used to
attract new customers and maintain customer relationships. Businesses that have
already invested substantial resources in traditional or other methods of
marketing and communications may be reluctant to adopt new marketing strategies
and methods. Consumers may also be reluctant to alter established patterns of
purchasing goods and services. Moreover, the sales cycle for the new targeted
messaging services that we are developing may be longer than for existing
services.

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

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

5
<PAGE> 10

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

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

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

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

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

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

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

Our failure to manage our growth effectively could harm our business,
financial condition and operating results. We plan to expand our operations
rapidly and to significantly augment our infrastructure. We must effectively
manage our operational, customer service and financial systems, procedures and
controls to manage this future growth. This expansion is expected to place a
significant strain on our managerial, operational and financial resources.

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<PAGE> 11

OUR QUARTERLY OPERATING RESULTS MAY BE DIFFICULT TO PREDICT AND MAY
FLUCTUATE AS A RESULT OF NON-CASH COMPENSATION CHARGES AND VARIATIONS IN
EQUIPMENT EXPENDITURES.

Our operating results will be affected by non-cash charges associated with
stock-based arrangements with employees and strategic partners. 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 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 its warrant. If Sony Music achieves any of the performance goals
set forth in its warrant, we will recognize non-cash charges which we cannot
currently estimate and which will be substantial. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview."

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

Period-to-period comparisons of our operating results are not a good
indication of our future performance. 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.

IF WE DO NOT SUCCESSFULLY ADDRESS THE RISKS INHERENT IN EXPANDING OUR EMAIL
SERVICES AND OPERATIONS INTO INTERNATIONAL MARKETS, OUR BUSINESS COULD SUFFER.

We intend to expand into international markets and to spend significant
financial and managerial resources to do so. If our revenue from international
operations does not exceed the expense of establishing and maintaining these
operations, 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 do not have expertise in
conducting business internationally. Therefore, we face several risks,
including:

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

- difficulties and costs of staffing and managing international operations;

- varying technology standards from country to country;

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

- difficulties in collecting accounts receivable;

- 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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<PAGE> 12

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 many other risks, such as:

- 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.

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.

8
<PAGE> 13

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 and may not 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. Failure to
retain and attract necessary personnel could harm our business, financial
condition and operating results. 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.

RISKS ASSOCIATED WITH OUR TECHNOLOGY

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

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

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

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

Our information technology systems are not currently Year 2000 compliant.
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. 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.

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

9
<PAGE> 14

expenses to remedy any problems. Presently, we are unable to reasonably estimate
the duration and extent of any interruption caused by Year 2000 issues, or to
quantify the effect it may have on our future revenue. We have not yet developed
a comprehensive contingency plan to address these issues. Please refer to our
discussion in "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000."

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

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

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

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

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

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 relocation but have not yet executed a lease. If we are unable to promptly
enter into an acceptable lease

10
<PAGE> 15

for the site we have identified, and if we are unable to rapidly identify an
alternative site, we will continue to be subject to the risk of a power outage
that interrupts our operations. Any failure of our systems would materially harm
our business. Moreover, our relocation to a new site requires that we rebuild
and enhance our system. Although we plan to continue operating in our current
site until our new site is fully operational, any defects or delays in building
our system at the new site could harm our business.

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

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

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. 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 could
damage our reputation, expose us to risk of loss or liability or otherwise harm
our business, operating results and financial condition.

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 two patents and we have two
patents pending in the United States. We may seek additional patents in the
future. We do not know if our pending patent applications or any future patent
applications will be issued with the scope of the claims we seek, if at all, or
whether the patent we own or any patents we receive will be challenged or
invalidated. Furthermore, we may not be successful in obtaining registration of
several pending trademark applications in the United States and in other
countries.

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<PAGE> 16

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 A CLAIM FROM A COMPETITOR ALLEGING INTELLECTUAL PROPERTY
INFRINGEMENT AND MAY BE SUBJECT TO SIMILAR CLAIMS IN THE FUTURE.

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

We intend to continue to license technology from third parties. We are
highly dependent on the technology we license from SendMail, which enables us to
send email through the Internet, and E.piphany, Inc., which will allow us to
offer a variety of targeted marketing capabilities. The market is evolving and
we may need to license additional technologies to remain competitive. We may not
be able to license these technologies on commercially reasonable terms or at
all. Our inability to obtain any of these 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 our assumption that the
Internet will continue to evolve as an attractive platform for marketing and
communications applications and the use of outsourcing to solve businesses'
email marketing and communications needs. Most businesses and consumers have
only limited experience with the Internet as a marketing and communications
medium. 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.

12
<PAGE> 17

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.

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

Although there are currently few laws and regulations directly applicable
to the Internet and commercial email services, the adoption of additional laws
or regulations may impair the growth of our

13
<PAGE> 18

business and the Internet which could decrease the demand for our services and
increase our cost of doing business. A number of laws have been proposed
involving the Internet, including laws addressing:

- user privacy;

- pricing;

- content;

- copyrights;

- characteristics and quality of services; and

- consumer protection.

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

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

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

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

RISKS ASSOCIATED WITH THIS OFFERING

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

Following the offering, our executive officers, directors and our
stockholders who currently own over five percent of our common stock will, in
the aggregate, beneficially own approximately % 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.

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

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

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

The market price of our common stock could fall if our stockholders sell
substantial amounts of common stock, including shares issued upon the exercise
of outstanding options and warrants, in the public

14
<PAGE> 19

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

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<PAGE> 20

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 not 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 pro forma capitalization information in this prospectus gives effect
to the receipt of net proceeds of $8.8 million from our sale of 1,357,284
shares of Series E preferred stock at a price of $6.50 per share and
warrants to purchase 203,586 shares of Series E preferred stock at an
exercise price of $8.00 per share in July and August 1999; and

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

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

- our receipt of the estimated net proceeds from the sale of the
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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<PAGE> 21

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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<PAGE> 22

DILUTION

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

Pro forma net tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the number of shares of
common stock outstanding, including the sale of 1,357,284 shares of Series E
preferred stock and conversion of all outstanding series of preferred stock into
common stock. Without taking into account any other changes in the net tangible
book value after June 30, 1999, other than to give effect to our receipt of the
net proceeds from the sale of the 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.

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<PAGE> 23

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 and 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, net of unearned
compensation............................................ 751 751
Accumulated deficit....................................... (19,646) (19,646)
-------- -------- -------
Total stockholders' equity (deficit)............... (17,791) (17,791)
-------- -------- -------
Total capitalization............................... $ 1,234 $ 10,058 $
======== ======== =======
</TABLE>

19
<PAGE> 24

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

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

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

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

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

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

20
<PAGE> 25

SELECTED FINANCIAL DATA

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

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

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

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

21
<PAGE> 26

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

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

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

22
<PAGE> 27

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, charges for related services and
custom engineering development work. The actual per message fees are related to
each client's monthly email message volume and decline as a client's volume
increases. The majority of our clients execute a 12-month contract with
guaranteed monthly minimum charges based upon their expected volume of messages.
Revenue is recognized in the period in which services are provided. We record
deferred revenue for payments received in advance of services provided.

Cost of revenue consists primarily of sales commissions and network
connectivity charges to our Internet service providers. Internet service
providers charge us for network connectivity based on monthly
23
<PAGE> 28

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

24
<PAGE> 29

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

RESULTS OF CONTINUING OPERATIONS

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

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

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

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

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

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

GENERAL AND ADMINISTRATIVE. General and administrative costs consist
primarily of salaries and other personnel costs related to executive and
administrative personnel, occupancy and general office costs and professional
fees. General and administrative costs increased to $1.9 million in the first
six months of 1999
25
<PAGE> 30

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

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

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

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

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

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

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

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

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

INCOME TAXES

As of December 31, 1998, a net operating loss carryforward for federal
income tax purposes of approximately $11.8 million was available to offset
future federal taxable income, if any, through 2018. No tax benefit for these
losses has been recorded by us in 1996, 1997, 1998 or to date in 1999 due to
uncertainties regarding the utilization of the loss carryforward. The
utilization of a portion of the net operating loss carryforwards will be limited
under Section 382 of the Internal Revenue Code due to changes in ownership
interests.
26
<PAGE> 31

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> 32

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

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

We expect that existing cash resources and the net proceeds of this
offering will be sufficient to fund currently anticipated working capital and
capital expenditure needs at least through the end of 2000. 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> 33

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

YEAR 2000

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

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

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

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

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

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

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

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<PAGE> 34

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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<PAGE> 35

BUSINESS

OVERVIEW

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

INDUSTRY BACKGROUND

GROWTH OF THE INTERNET AND EMAIL

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

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

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

GROWTH OF PERMISSION-BASED EMAIL MARKETING AND COMMUNICATIONS

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

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<PAGE> 36

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

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

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

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

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

CHALLENGES IN IMPLEMENTING EMAIL MARKETING AND COMMUNICATIONS SOLUTIONS

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

- sufficient bandwidth to handle peak volumes of emails;

- email content integration with selected email lists;

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

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

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

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

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

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OUR SOLUTION

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

LEADING EDGE TECHNOLOGIES

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

- send email messages in both text and graphically-rich HyperText Markup
Language (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 25 million email
messages per day without additional hardware or infrastructure improvements. Our
system can accommodate rapid growth in the volume and complexity of the
messaging needs of our clients and is designed to be highly reliable. We have
identified single points of failure and designed redundancy where appropriate.
We maintain two separate Internet connections and have separate routers
connected to one another in the event a router fails. We do not need to
interrupt our service during maintenance periods. Automated performance
monitoring allows us to intervene promptly if required.

BROAD SUITE OF INTEGRATED EMAIL APPLICATIONS

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

COST-EFFECTIVE OUTSOURCED SOLUTIONS

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

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

COMPREHENSIVE SPAM POLICY

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

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

STRATEGY

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

EXTEND INDUSTRY LEADING TECHNOLOGIES

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

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

BROADEN OUR SUITE OF EMAIL SERVICES

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

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

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

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

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

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

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

CONTINUE TO DEVELOP AND LEVERAGE STRATEGIC RELATIONSHIPS

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

INCREASE MARKETING AND SALES EFFORTS

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

ACQUIRE NEW BUSINESSES AND TECHNOLOGIES

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

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SERVICES AND FEATURES

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

CURRENT SERVICES

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

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

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

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

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

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CURRENT FEATURES AND FUNCTIONS

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

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

PLANNED TARGETED MARKETING SERVICES

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

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

- immediate feedback;

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<PAGE> 42

- reporting and measurability features; and

- one-to-one customer communication capabilities.

PLANNED FEATURES AND FUNCTIONS

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

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

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

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

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<PAGE> 43

CUSTOMERS

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

4anything.com
Activision
Advance Internet Services
American Express Company
BBDO Worldwide

ChannelSeven.com

Charles Schwab & Co.
Client Logic
CMPnet
Consumer Net Marketplace
Covad Communications
Creative Planet
Digital Work
DoubleDay
The Economist Newspaper

Egreetings.com

The Financial Times

First Source Bancorp.
First Union Corporation
Forbes, Inc.

KBKids.com

Last Minute Network Limited
Law News Network

Microsoft Web events

MSNBC Interactive News

News Corp.
Network Publishing

Princessnet

Sage Online

Silicon Alley Reporter
Slate Magazine
Sony Music
Spinner.com
Sterling-Rice Group
Strong Funds
TheStreet.com
theWhiz.com
Tribune Media Services

USAToday.com

Wired
Worldly Investor
World Wrestling Federation

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

MARKETING AND SALES

MARKETING STRATEGY

The key components of our marketing strategy are to:

- continue to develop our reputation as an industry leader;

- build brand awareness; and

- aggressively generate sales leads.

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

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<PAGE> 44

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.

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

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

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<PAGE> 45

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

E.PIPHANY

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

TECHNOLOGY

ARCHITECTURE

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

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

DATA CENTER AND NETWORK ACCESS

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

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

NETWORK SECURITY

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

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<PAGE> 46

OFFSITE DISASTER RECOVERY

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

NEW SERVICE DEVELOPMENT

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

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

COMPETITION

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

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

- technical expertise;

- scalability;

- consistent and reliable service;

- features and functionality;

- full service solutions; and

- direct marketing expertise.

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

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

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<PAGE> 47

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

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

INTELLECTUAL PROPERTY

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

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

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

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<PAGE> 48

GOVERNMENT REGULATION

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

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

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

EMPLOYEES

As of August 31, 1999, we employed 120 people, all of whom were full-time.
The 120 employees included 13 in general and administrative functions, 22 in
operations, 31 in development and testing, 20 in sales and marketing, 17 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 one of our patents. 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.

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<PAGE> 49

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

45
<PAGE> 50

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

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

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

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

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

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

CLASSIFIED BOARD OF DIRECTORS

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

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

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

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<PAGE> 51

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

BOARD COMMITTEES

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

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

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

DIRECTOR COMPENSATION

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

EXECUTIVE COMPENSATION

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

SUMMARY COMPENSATION TABLE

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

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

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

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<PAGE> 52

OPTION GRANTS IN 1998

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

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

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

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

- our historical and prospective future revenue and profitability;

- our cash balance and rate of cash consumption;

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

- the status of our financing activities;

- the stability of our management team; and

- the breadth of our service offerings.

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

1998 OPTION EXERCISES AND YEAR-END OPTION VALUES

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

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

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

48
<PAGE> 53

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

401(K) PLAN

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

STOCK PLANS

1996 STOCK OPTION PLAN

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

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

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

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

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

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

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

49
<PAGE> 54

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

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

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

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

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

1997 STOCK OPTION PLAN

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

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

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

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

50
<PAGE> 55

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

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

1999 EQUITY INCENTIVE PLAN

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

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

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

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

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

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<PAGE> 56

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

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

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

1999 EMPLOYEE STOCK PURCHASE PLAN

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

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

52
<PAGE> 57

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

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

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

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

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

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

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

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

SERIES D FINANCING

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

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

SERIES C FINANCING

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

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

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

BRIDGE FINANCING

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

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

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

SERIES B FINANCING

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

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

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

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<PAGE> 60

SERIES A FINANCING

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

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

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

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

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<PAGE> 61

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.

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
The 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)........................... 230,551 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)..................................... 1,251,569 14.5%
</TABLE>

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

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

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

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

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<PAGE> 62

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

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

(6) Consists of (i) the following shares of common stock: (A) 178,995 shares
held by Boulder Ventures, L.P. and (B) 461,539 shares held by Boulder
Ventures II, L.P., and (ii) the following shares of common stock issuable
upon 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 American
Express Travel Related Services.

(9) Includes 215,074 shares of common stock issuable upon exercise of stock
options, of which 2,612 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. Centennial Holdings IV may be deemed to indirectly beneficially own
the shares owned by Centennial Fund IV. Mr. Goldman is a general partner of
Centennial Holdings IV and may be deemed to be the indirect beneficial
owner of the shares owned by Centennial Fund IV. Mr. Goldman disclaims
beneficial ownership of 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 its affiliated entities. Ms. Levinson
disclaims beneficial ownership of all shares held by Global Retail Partners
and its affiliated entities, except to the extent of her pecuniary
interest. The address of Ms. Levinson is Global Retail Partners, 2121
Avenue of the Stars, Suite 1630, Los Angeles, California 90067.

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

(14) Includes shares included under note (12).

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<PAGE> 63

DESCRIPTION OF SECURITIES

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

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

COMMON STOCK

As of the date of this prospectus, there are 8,320,094 shares of common
stock outstanding and held of record by 62 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> 64

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

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

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

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

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

REGISTRATION RIGHTS

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

Subject to certain limitations:

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

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

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<PAGE> 65

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

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

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

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

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

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

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

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

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

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<PAGE> 66

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

LIMITATION OF LIABILITY AND INDEMNIFICATION

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

Each director will continue to be subject to liability for:

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

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

- knowing violations of law;

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

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

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

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

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

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

LISTING

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

TRANSFER AGENT AND REGISTRAR

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

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<PAGE> 67

SHARES ELIGIBLE FOR FUTURE SALE

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 8,320,094 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>
303,500............... Upon the date of this prospectus (shares eligible for resale
under Rule 144(k) and not subject to lock-up agreements)
723,628............... 90 days following the date of this prospectus (shares
eligible for resale under Rules 144 and 701 and not subject
to lock-up agreements)
7,292,966.............. 180 days following the date of this prospectus (lock-up
agreements released)
</TABLE>

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

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

- (ii) the average weekly trading volume of the common stock during the
four calendar weeks preceding the date on which notice of that sale is
filed. In addition, a person who is not considered an affiliate of ours
at any time during the 90 days preceding a sale and who has beneficially
owned the shares proposed to be sold for at least two years is entitled
to sell such shares under Rule 144(k) without regard to the volume
limitations described above.

In addition, following the closing of this offering, we intend to file a
registration statement to register for resale up to 3,500,000 shares of common
stock available for issuance under our stock plans. Accordingly, shares issued
under those plans will become eligible for resale in the public market from time
to time, subject to the lock-up agreements described below and, in the case of
our affiliates, the volume limitations of Rule 144 described above. As of the
date of this prospectus, options and purchase rights to acquire a total of
1,825,169 shares of common stock are outstanding under our stock plans, of which
439,779 are currently exercisable.

Directors, officers and stockholders of Exactis.com holding an aggregate of
7,292,966 shares of common stock have agreed that they will not sell any shares
of common stock without the prior written consent of Thomas Weisel Partners LLC
for a period of 180 days from the date of this prospectus. Please refer to our
discussion in "Underwriting" for further discussion of these agreements.

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

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

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<PAGE> 68

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. 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> 69

extent that any reserved shares are purchased. Any reserved shares not purchased
in this manner will be offered by the underwriters on the same basis as the
other shares offered in this offering.

NO SALES OF SIMILAR SECURITIES

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

INFORMATION REGARDING THOMAS WEISEL PARTNERS LLC AND WIT CAPITAL CORPORATION

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners LLC has been named as a lead or co-manager on 65
filed public offerings of equity securities, of which 32 have been completed,
and has acted as a syndicate member in an additional 32 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 127 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 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
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<PAGE> 70

effect of any such stabilization or other transactions. These transactions may
be effected on the Nasdaq National Market or otherwise and may be discontinued
at any time after they are commenced.

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

LEGAL MATTERS

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

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

EXPERTS

The financial statements of Exactis.com, Inc. (formerly InfoBeat Inc.) as
of December 31, 1997 and 1998 and for the period from inception (January 30,
1996) to December 31, 1996 and for the years ended December 31, 1997 and 1998,
have been included herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits, schedules and amendments) under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information in the registration
statement. For further information about us and our common stock, please refer
to the registration statement. In each instance, please refer to the copy of
that contract, agreement or document filed as an exhibit to the registration
statement.

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

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

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

66
<PAGE> 71

EXACTIS.COM, INC.

INDEX TO FINANCIAL STATEMENTS

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

F-1
<PAGE> 72

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Exactis.com, Inc.:

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

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

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

KPMG LLP

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

F-2
<PAGE> 73

EXACTIS.COM, INC.

BALANCE SHEETS

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

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

EXACTIS.COM, INC.

STATEMENTS OF OPERATIONS

See accompanying notes to financial statements.

F-4
<PAGE> 75

EXACTIS.COM, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT

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

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

See accompanying notes to financial statements.

F-5
<PAGE> 76

EXACTIS.COM, INC.

STATEMENTS OF CASH FLOWS

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

See accompanying notes to financial statements.

F-6
<PAGE> 77

EXACTIS.COM, INC.

Notes to Financial Statements

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

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION

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

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

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

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

(b) CASH EQUIVALENTS AND RESTRICTED CASH

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

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

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

(d) INCOME TAXES

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

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

Notes to Financial Statements -- (Continued)

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

(e) FAIR VALUE OF FINANCIAL INSTRUMENTS

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

(f) REVENUE RECOGNITION

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

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

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

(h) STOCK-BASED COMPENSATION

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

(i) CONTINGENT STOCK PURCHASE WARRANTS

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

Notes to Financial Statements -- (Continued)

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

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

(j) LOSS PER SHARE

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

(2) DISCONTINUED OPERATIONS

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

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

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

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

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

Notes to Financial Statements -- (Continued)

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

(3) PREFERRED STOCK AND STOCKHOLDERS' EQUITY

(a) PREFERRED STOCK

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

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

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

The Series A preferred shares are not redeemable.

(b) WARRANTS

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

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

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

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

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

Notes to Financial Statements -- (Continued)

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

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

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

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

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

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

Notes to Financial Statements -- (Continued)

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

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

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

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

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

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

Notes to Financial Statements -- (Continued)

(4) INCOME TAXES

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

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

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

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

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

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

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

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

Notes to Financial Statements -- (Continued)

(5) LONG-TERM DEBT

Long-term debt consists of the following:

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

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

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

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

Notes to Financial Statements -- (Continued)

(6) COMMITMENTS AND CONTINGENCIES

(a) LEASES

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

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

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

(b) EMPLOYEE BENEFIT PLAN

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

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

(7) SIGNIFICANT CUSTOMERS

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

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

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

Notes to Financial Statements -- (Continued)

(8) SUBSEQUENT EVENTS

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

F-16
<PAGE> 87

PROSPECTUS

[EXACTIS.COM LOGO]

Common Stock

THOMAS WEISEL PARTNERS LLC

DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
WIT CAPITAL CORPORATION
<PAGE> 88

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

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

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 15,985.00
NASD filing fee............................................. 6,250.00
Nasdaq National Market listing application fee.............. 17,500.00
Blue Sky fees and expenses.................................. 10,000.00
Printing and engraving expenses............................. 175,000.00
Legal fees and expenses..................................... 300,000.00
Accounting fees and expenses................................ 100,000.00
Transfer agent and registrar fees........................... 10,000.00
Miscellaneous expenses...................................... 15,265.00
-----------
Total.................................................. 650,000.00
===========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

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

Each director will continue to be subject to liability for:

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

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

- knowing violations of law;

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

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

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

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

II-1
<PAGE> 89

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

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

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

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

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

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

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

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

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

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

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

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

II-2
<PAGE> 90

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

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

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.

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

II-3
<PAGE> 91

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

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

* To be filed by amendment.

** Previously filed.

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

(b) FINANCIAL STATEMENT SCHEDULES.

Not applicable.

ITEM 17. UNDERTAKINGS.

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

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes:

(1) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

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

II-4
<PAGE> 92

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 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 September 21, 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. 2 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 September 21, 1999
- ----------------------------------------------------- Directors
Adam Goldman

/s/ E. THOMAS DETMER, JR. President, Chief Executive September 21, 1999
- ----------------------------------------------------- Officer and Director
E. Thomas Detmer, Jr. (Principal Executive
Officer)

/s/ KENNETH W. EDWARDS, JR. Chief Financial Officer, September 21, 1999
- ----------------------------------------------------- Secretary and Treasurer
Kenneth W. Edwards, Jr. (Principal Financial and
Accounting Officer)

* Director September 21, 1999
- -----------------------------------------------------
Pierric D. Beckert

* Director September 21, 1999
- -----------------------------------------------------
Linda Fayne Levinson

* Director September 21, 1999
- -----------------------------------------------------
David D. Williams

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

II-5
<PAGE> 93

EXHIBIT INDEX

<PAGE> 94

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

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

* To be filed by amendment.

** Previously filed.

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

<PAGE> 1
EXHIBIT 3.1

RESTATED CERTIFICATE OF INCORPORATION

EXACTIS.COM, INC.

EXACTIS.COM, INC., a Delaware corporation, hereby certifies as follows:

1. The original name of the Corporation was Mercury Mail, Inc., and its
current name is Exactis.com, Inc. The original Certificate of Incorporation of
the Corporation was filed with the Delaware Secretary of State on July 17, 1996.

2. This Restated Certificate of Incorporation amends and restates the
provisions of the Certificate of Incorporation of the Corporation and has been
duly adopted in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.

3. The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:

ARTICLE ONE

The name of the corporation is Exactis.com, Inc. (the "CORPORATION" or
the "COMPANY").

ARTICLE TWO

The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805. The name of its
registered agent at such address is The Prentice-Hall Corporation System, Inc.

ARTICLE THREE

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

ARTICLE FOUR

The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is twenty-four million
five hundred thousand (24,500,000) shares, thirteen million five hundred
thousand (13,500,000) shares of which shall be Common Stock (the "COMMON
STOCK"), $.01 par value per share, and eleven million (11,000,000) shares of
which shall be Preferred Stock, $.01 par value per share (the "PREFERRED
STOCK").

DESIGNATION OF PREFERRED STOCK

Eight hundred eighty thousand (880,000) of the authorized shares of
Preferred Stock are hereby designated "Series A Preferred Stock" (the "SERIES A
PREFERRED"), two million five

2.
<PAGE> 2

hundred seventy thousand (2,570,000) of the authorized shares of Preferred Stock
are hereby designated "Series B Preferred Stock" (the "SERIES B PREFERRED"),
three million five hundred fifty thousand (3,550,000) of the authorized shares
of Preferred Stock are hereby designated "Series C Preferred Stock" (the "SERIES
C PREFERRED"), one million three hundred thousand (1,300,000) of the authorized
shares of Preferred Stock are hereby designated "Series D Preferred Stock" (the
"SERIES D PREFERRED"), and two million five hundred thousand (2,500,000) of the
authorized shares of Preferred Stock are hereby designated "Series E Preferred
Stock" (the "SERIES E PREFERRED"). The relative rights, preferences privileges,
restrictions and other matters relating to the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred
(hereinafter collectively referred to as the "PREFERRED STOCK") are as follows:

1. DIVIDEND RIGHTS.

a. Holders of Preferred Stock, in preference to the holders of
Common Stock and any other stock of the Corporation that is not by its terms
expressly senior in right of payment to the Preferred Stock (collectively,
"JUNIOR STOCK"), shall be entitled to receive dividends if, when and as declared
by the Corporation's Board of Directors, but only out of funds that are legally
available therefor. In the event that the Corporation declares or pays any
dividends upon the Common Stock (whether payable in cash, securities or other
property) other than dividends payable solely in shares of Common Stock, the
Corporation shall also declare and pay to the holders of the Preferred Stock, at
the same time that it declares and pays such dividends to the holders of the
Common Stock, the dividends which would have been declared and paid with respect
to the Common Stock issuable upon conversion of the Preferred Stock had all of
the outstanding Preferred Stock been converted immediately prior to the record
date for such dividend, or if no record date is fixed, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined.
No dividends shall be paid on the Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred or Series E Preferred unless equivalent
dividends (determined on an as-converted basis) are concurrently paid on the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred.

b. So long as any Preferred Stock remains outstanding, without the
prior written consent of the holders of a majority in interest of the
outstanding shares of Preferred Stock, voting together as a separate class with
each holder of Preferred Stock entitled to a number of votes equal to the number
of whole shares of Common Stock issuable upon conversion of the aggregate number
of shares of Preferred Stock held by such holder (the "REQUIRED HOLDERS"), the
Corporation shall not, nor shall it permit any Subsidiary to, directly or
indirectly redeem, purchase or otherwise acquire any Junior Stock, nor shall the
Corporation directly or indirectly pay or declare any dividend or make any
distribution upon any Junior Stock. The provisions of this Section l(b) shall
not, however, apply to (i) the acquisition of shares of any Junior Stock solely
in exchange for shares of any other Junior Stock, (ii) the payment of cash
dividends on the Common Stock to the extent that equivalent dividends are paid
on the Preferred Stock as provided above, or (iii) any repurchase of any vested
Reserved Employee Stock from former employees, directors or consultants in
connection with termination of employment or service as a director or consultant
pursuant to contractual repurchase rights or that is otherwise approved by the
Corporation's Board of Directors.

2.
<PAGE> 3

2. VOTING RIGHTS.

a. GENERALLY. Except as otherwise provided herein or as required
by law, the Preferred Stock shall vote with the shares of the Common Stock of
the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same
manner as the Common Stock, in either case upon the following basis: each holder
of shares of Preferred Stock shall be entitled to such number of votes as shall
be equal to the whole number of shares of Common Stock into which such holder's
aggregate number of shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred are convertible (pursuant
to Section 5 below) on the record date fixed for such meeting or the effective
date of such written consent.

b. ELECTION OF DIRECTORS. In each election of directors of the
Corporation, the holders of the Preferred Stock, voting together as a separate
class with each holder of Preferred Stock entitled to a number of votes equal to
the number of whole shares of Common Stock issuable upon conversion of the
aggregate number of shares of Preferred Stock held by such holder, shall be
entitled to elect four (4) directors (the "INVESTOR DIRECTORS") to serve on the
Corporation's Board of Directors until such persons' successors are duly elected
by the holders of the Preferred Stock or such persons are removed from office by
the holders of the Preferred Stock. If the holders of the Preferred Stock for
any reason fail to elect a director to fill any such directorship, such position
shall remain vacant until such time as the holders of the Preferred Stock elect
a director to fill such position and shall not be filled by resolution or vote
of the Corporation's Board of Directors or the Corporation's other stockholders.
During the existence of an Event of Noncompliance and for a period of six (6)
months after such Event of Noncompliance has been cured or waived, the directors
elected by the holders of Preferred Stock shall be deemed to constitute a
separate class of directors of the Corporation within the meaning of Section
141(d) of the Delaware General Corporation Law, and such directors shall
together be entitled to cast a number of votes on each matter considered by the
Board of Directors (including for purposes of determining the existence of a
quorum) equal to the sum of the number of votes entitled to be cast by all other
members of the Board of Directors plus one.

c. CLASS VOTE REQUIREMENT. Without the affirmative vote of the
Required Holders, the Corporation will not (i) create, issue or authorize the
issuance of any additional Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred or any other capital stock
of the Corporation that is senior to or pari passu with the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
with respect to the payment of dividends, redemptions or payments in connection
with the liquidation of the Corporation, (ii) engage in any merger,
consolidation, recapitalization, liquidation or sale of substantial assets
outside the ordinary course of business, (iii) engage in any acquisition of
substantial assets outside the ordinary course of business or engage in any
business other than the business of the Corporation described in the Company's
most recent annual business plan, (iv) increase the amount of Reserved Employee
Stock or (v) engage in any transaction with an affiliate of the Corporation that
is not approved by a majority of the Corporation's disinterested directors. In
addition, the Corporation will not amend its Restated Certificate of
Incorporation or by-laws in a manner that adversely affects the holders of
Series A

3.
<PAGE> 4

Preferred, Series B Preferred or Series E Preferred without the affirmative vote
of the holders of two-thirds of the shares of the affected series of Preferred
Stock.

d. SERIES C AND SERIES D RIGHTS. In addition to any other rights
provided by law, so long as any Series C Preferred and/or Series D Preferred
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than a majority,
or, if two or more of the original holders of the Series C Preferred who
purchased such Series C Preferred in the initial closing in July 1997 vote
against or withhold their consent to such proposed action, sixty-six and
two-thirds percent (662/3%), of the outstanding shares of Series C Preferred and
Series D Preferred, voting together as a single class separate from the Common
Stock and other series of Preferred Stock of the Corporation:

(i) Amend or repeal any provision of, or add any provision
to, the Corporation's Certificate of Incorporation or Bylaws which adversely
affects any of the rights of the holders of the Series C Preferred or Series D
Preferred or which changes the number of authorized directors of the
Corporation;

(ii) Authorize or issue, or obligate itself to issue, shares
of any class or series of stock that is senior to or pari passu with the Series
C Preferred or Series D Preferred with respect to dividends, redemption,
liquidation preference, voting or other rights of the Series C Preferred or
Series D Preferred ("SENIOR PREFERRED"), or authorize or issue, or obligate
itself to issue, shares of stock of any class or series or any bonds,
debentures, notes or other obligations convertible into or exchangeable for, or
having option rights to purchase, any shares of Senior Preferred;

(iii) Reclassify any class or series of any securities of the
Corporation into shares that have rights that are senior to or pari passu with
the Series C Preferred or Series D Preferred with respect to dividends,
redemption, liquidation preference, voting or other rights of the Series C
Preferred or Series D Preferred;

(iv) Apply any of its assets to the redemption, retirement,
purchase or acquisition, directly or indirectly, through affiliates or
otherwise, of any shares of any class or series of Preferred Stock or Common
Stock, except (A) by redemption in accordance with Section 4 hereof but in no
event prior to the scheduled date of redemption of the Series C Preferred or
Series D Preferred; (B) by conversion in accordance with Section 5 hereof; or
(C) by repurchase from former employees, advisors, officers, directors or
consultants of the Corporation if a majority of the directors elected by holders
of the Preferred Stock approves such repurchase; or

(v) Pay or declare any dividend on the Common Stock.

3. LIQUIDATION RIGHTS.

a. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock or the holders of
Series A Preferred, Series B Preferred, Series C Preferred or

4.
<PAGE> 5

Series D Preferred, the holders of Series E Preferred shall be entitled to be
paid out of the assets of the Corporation an amount with respect to each share
of Series E Preferred equal to the sum of $6.50, as appropriately adjusted for
any future stock splits, stock combination, stock dividends or similar
transactions affecting the Series E Preferred (the "ORIGINAL SERIES E ISSUE
PRICE"), plus all declared but unpaid dividends thereon (the "SERIES E
LIQUIDATION VALUE").

b. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock, (i) the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Corporation an amount with respect to each share of Series A Preferred equal to
the sum of $1.25, as appropriately adjusted for any future stock splits, stock
combination, stock dividends or similar transactions affecting the Series A
Preferred (the "ORIGINAL SERIES A ISSUE PRICE"), plus all declared but unpaid
dividends thereon (the "SERIES A LIQUIDATION VALUE"), (ii) the holders of Series
B Preferred shall be entitled to be paid out of the assets of the Corporation an
amount with respect to each share of Series B Preferred equal to the sum of
$3.00, as appropriately adjusted for any future stock splits, stock combination,
stock dividends or similar transactions affecting the Series B Preferred (the
"ORIGINAL SERIES B ISSUE PRICE"), plus all declared but unpaid dividends thereon
(the "SERIES B LIQUIDATION VALUE"), (iii) the holders of Series C Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series C Preferred equal to the sum of $4.00, as
appropriately adjusted for any future stock splits, stock combination, stock
dividends or similar transactions affecting the Series C Preferred (the
"ORIGINAL SERIES C ISSUE PRICE"), plus all declared but unpaid dividends thereon
(the "SERIES C LIQUIDATION VALUE"), and (iv) the holders of Series D Preferred
shall be entitled to be paid out of the assets of the Corporation an amount with
respect to each share of Series D Preferred equal to the sum of $5.08, as
appropriately adjusted for any future stock splits, stock combination, stock
dividends or similar transactions affecting the Series D Preferred (the
"ORIGINAL SERIES D ISSUE PRICE"), plus all declared but unpaid dividends thereon
(the "SERIES D LIQUIDATION VALUE"). The Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred shall rank on a parity as to the
receipt of the respective preferential amounts for each such series.

c. After the payment of the full liquidation preference of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred as set forth in Sections 3(a) and (b) above, the
remaining assets of the Corporation legally available for distribution, if any,
shall be distributed to the holders of Junior Stock entitled to a preference
over the Common Stock and, thereafter, to the holders of Common Stock. The
holders of Preferred Stock shall be entitled to participate in distributions to
holders of the Common Stock such that, giving effect to all distributions
pursuant to Sections 3(a) and (b) and all exercises of Options and conversions
of Convertible Securities effected on or prior to the date on which
distributions are made to holders of Common Stock, the holders of Preferred
Stock receive aggregate distributions equal to the greater of the Series A
Liquidation Value, Series B Liquidation Value, Series C Liquidation Value,
Series D Liquidation Value or Series E Liquidation Value (as applicable) and the
amounts that such holders would have received if the Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred or Series E Preferred (as
applicable) had been converted into Common Stock immediately prior to such
liquidation, dissolution or winding up of the Corporation.

5.
<PAGE> 6

d. At the option of (i) the Required Holders as to all of the
Preferred Stock, (ii) the holders of a majority in interest of the outstanding
shares of Series C Preferred and Series D Preferred, voting together as a
separate class with each holder of Preferred Stock entitled to a number of votes
equal to the number of whole shares of Common Stock issuable upon conversion of
the aggregate number of shares of Preferred Stock held by such holders, as to
the Series C Preferred and Series D Preferred only, or (iii) the holders of a
majority in interest of the outstanding shares of Series E Preferred, voting
together as a separate class with each holder of Preferred Stock entitled to a
number of votes equal to the number of whole shares of Common Stock issuable
upon conversion of the aggregate number of shares of Preferred Stock held by
such holders, as to the Series E Preferred only, the following events shall be
considered a liquidation under Section 3(a): (i) any consolidation or merger of
the Corporation with or into any other corporation or other entity or person, or
any other corporate reorganization, in which the stockholders of the Corporation
immediately prior to such consolidation, merger or reorganization own capital
stock representing less than fifty percent (50%) of the Corporation's voting
power immediately after such consolidation, merger or reorganization, or any
other transaction or series of related transactions in which capital stock
representing in excess of fifty percent (50%) of the Corporation's voting power
is transferred to any single entity or group of related entities (an
"ACQUISITION"); or (ii) a sale, lease or other disposition of all or
substantially all of the assets of the Corporation (an "ASSET TRANSFER").

e. If, upon any liquidation, distribution, or winding up, the
assets of the Company shall be insufficient to make payment in full to the
holders of Series E Preferred of the amounts set forth in Section 3(a) above,
then such assets shall be distributed ratably to the holders of Series E
Preferred at the time outstanding. If, upon any liquidation, distribution, or
winding up, the assets of the Company shall be sufficient to make payment in
full to the holders of Series E Preferred of the amounts set forth in Section
3(a) above, but shall be insufficient to make payment in full to the holders of
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred of the amounts set forth in Section 3(b) above, then, after payment of
the full amounts set forth in Section 3(a) above, such assets shall be
distributed to the holders of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred at the time outstanding, ratably in proportion
to the full amounts to which they would otherwise be respectively entitled.

4. REDEMPTION RIGHTS.

a. GENERAL. Except as expressly provided in this Section 4, the
Preferred Stock shall not be redeemable at the option of the Corporation or
otherwise.

b. SCHEDULED REDEMPTIONS. The Corporation shall redeem the
corresponding percentage specified below of the then-outstanding Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred on July
31 of each year, commencing in the year specified below (the "PREFERRED
SCHEDULED REDEMPTION DATES"), at a price per share equal to the Series B
Liquidation Value, Series C Liquidation Value, Series D Liquidation Value or
Series E Liquidation Value (as applicable) in effect on the applicable Scheduled
Redemption Date:

<TABLE>
<CAPTION>
SCHEDULED
SERIES REDEMPTION DATE SPECIFIED PERCENTAGE
------ --------------- --------------------
<S> <C> <C>
Series B, Series C, Series D
and Series E July 31, 2003 33-1/3%
July 31, 2004 50%
July 31, 2005 100%
</TABLE>

6.
<PAGE> 7

c. REDEMPTION PAYMENTS. For each share of Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred that is to be
redeemed hereunder, the Corporation shall be obligated on the Scheduled
Redemption Date to pay to the holder thereof (upon surrender by such holder at
the Corporation's principal office of the certificate representing such share)
an amount in cash equal to the Series B Liquidation Value, Series C Liquidation
Value, Series D Liquidation Value or Series E Liquidation Value (as applicable).
If the funds of the Corporation legally available for redemption of Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred on any
Scheduled Redemption Date are insufficient to redeem the total number of shares
to be redeemed on such date, those funds that are legally available shall be
used to redeem (i) first, the maximum possible number of shares pro rata among
the holders of Series E Preferred to be redeemed based upon the aggregate Series
E Liquidation Value and (ii) then, the maximum possible number of shares pro
rata among the holders of Series B Preferred, Series C Preferred and Series D
Preferred to be redeemed based upon the aggregate Series B Liquidation Value,
Series C Liquidation Value and Series D Liquidation Value (as applicable). At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred, such funds shall immediately be used to redeem
(i) first, the balance of the Series E Preferred shares which the Corporation
has become obligated to redeem on any Scheduled Redemption Date but which it has
not redeemed and (ii) then, the balance of the Series B Preferred, Series C
Preferred and Series D Preferred shares which the Corporation has become
obligated to redeem on any Scheduled Redemption Date but which it has not
redeemed.

d. NOTICE OF REDEMPTION. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred to each record
holder thereof not more than 60 nor less than 30 days prior to the Scheduled
Redemption Date. The holders of Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred to be redeemed shall in any event have the
right to convert their shares into Common Stock at any time prior to the close
of business on the Scheduled Redemption Date. In case fewer than the total
number of shares represented by any certificate are redeemed, a new certificate
representing the number of unredeemed shares shall be issued to the holder
thereof without cost to such holder within five (5) business days after
surrender of the certificate representing the redeemed shares.

e. DETERMINATION OF THE NUMBER OF SHARES TO BE REDEEMED. The
number of shares of Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred to be redeemed from each holder thereof in redemptions
hereunder shall be the number of shares determined by multiplying the total
number of shares of Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred to be redeemed times a fraction, the numerator of which
shall be the total number of shares of Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred then held by such holder and the
denominator of which shall be the total number of shares of Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred (as applicable) to
be redeemed then outstanding.

7.
<PAGE> 8

f. OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall not,
nor shall it permit any Subsidiary to, redeem or otherwise acquire any shares of
Preferred Stock, except as expressly authorized herein or pursuant to a purchase
offer made pro rata to all holders of Preferred Stock on the basis of the number
of shares owned by each such holder.

5. CONVERSION RIGHTS.

The holders of the Preferred Stock shall have the following rights with
respect to the conversion of the Preferred Stock into shares of Common Stock:

a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 5, any shares of Preferred Stock may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series A
Preferred being converted. The number of shares of Common Stock to which a
holder of Series B Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series B Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series B
Preferred being converted. The number of shares of Common Stock to which a
holder of Series C Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series C Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series C
Preferred being converted. The number of shares of Common Stock to which a
holder of Series D Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series D Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series D
Preferred being converted. The number of shares of Common Stock to which a
holder of Series E Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series E Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series E
Preferred being converted.

b. SERIES A, SERIES B, SERIES C, SERIES D AND SERIES E CONVERSION
RATES. The conversion rate in effect at any time for conversion of the Series A
Preferred (the "SERIES A CONVERSION RATE") shall be the quotient obtained by
dividing the Original Series A Issue Price, plus any declared but unpaid
dividends thereon, by the "Series A Conversion Price" calculated as provided in
Section 5(c). The conversion rate in effect at any time for conversion of the
Series B Preferred (the "SERIES B CONVERSION RATE") shall be the quotient
obtained by dividing the Original Series B Issue Price, plus any declared but
unpaid dividends thereon, by the "Series B Conversion Price" calculated as
provided in Section 5(c). The conversion rate in effect at any time for
conversion of the Series C Preferred (the "SERIES C CONVERSION RATE") shall be
the quotient obtained by dividing the Original Series C Issue Price, plus any
declared but unpaid dividends thereon, by the "Series C Conversion Price"
calculated as provided in Section 5(c). The conversion rate in effect at any
time for conversion of the Series D Preferred (the "SERIES D

8.
<PAGE> 9

CONVERSION RATE") shall be the quotient obtained by dividing the Original Series
D Issue Price, plus any declared but unpaid dividends thereon, by the "Series D
Conversion Price" calculated as provided in Section 5(c). The conversion rate in
effect at any time for conversion of the Series E Preferred (the "SERIES E
CONVERSION RATE") shall be the quotient obtained by dividing the Original Series
E Issue Price, plus any declared but unpaid dividends thereon, by the "Series E
Conversion Price" calculated as provided in Section 5(c).

c. SERIES A, SERIES B, SERIES C, SERIES D AND SERIES E CONVERSION
PRICES. The conversion price for the Series A Preferred (the "SERIES A
CONVERSION PRICE") shall initially be the Original Series A Issue Price. The
conversion price for the Series B Preferred (the "SERIES B CONVERSION PRICE")
shall initially be the Original Series B Issue Price. The conversion price for
the Series C Preferred (the "SERIES C CONVERSION PRICE") shall initially be the
Original Series C Issue Price. The conversion price for the Series D Preferred
(the "SERIES D CONVERSION PRICE") shall initially be the Original Series D Issue
Price. The conversion price for the Series E Preferred (the "SERIES E CONVERSION
PRICE") shall initially be the Original Series E Issue Price. Such initial
Series A, Series B, Series C, Series D and Series E Conversion Prices shall be
adjusted from time to time in accordance with this Section 5. If and whenever on
or after the Original Issue Date, as defined in Section 6 of this Article, the
Corporation issues or sells, or in accordance with this Section 5(c) is deemed
to have issued or sold, any shares of its Common Stock (other than pursuant to a
Permitted Issuance) for a consideration per share less than the Series A
Conversion Price in effect immediately prior to the time of such issue or sale,
then immediately upon such issue or sale or deemed issue or sale the Series A
Conversion Price shall be reduced to the amount determined by dividing (a) the
sum of (1) the product derived by multiplying the Series A Conversion Price in
effect immediately prior to such issue or sale by the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the
consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale. All references to the
Series A Conversion Price herein shall mean the Series A Conversion Price as so
adjusted. If and whenever on or after the Original Issue Date the Corporation
issues or sells, or in accordance with this Section 5(c) is deemed to have
issued or sold, any shares of its Common Stock (other than pursuant to a
Permitted Issuance) for a consideration per share less than the Series B
Conversion Price in effect immediately prior to the time of such issue or sale,
then immediately upon such issue or sale or deemed issue or sale the Series B
Conversion Price shall be reduced to the amount determined by dividing (a) the
sum of (1) the product derived by multiplying the Series B Conversion Price in
effect immediately prior to such issue or sale by the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the
consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale. All references to the
Series B Conversion Price herein shall mean the Series B Conversion Price as so
adjusted. If and whenever on or after the Original Issue Date the Corporation
issues or sells, or in accordance with this Section 5(c) is deemed to have
issued or sold, any shares of its Common Stock (other than pursuant to a
Permitted Issuance) for a consideration per share less than the Series C
Conversion Price in effect immediately prior to the time of such issue or sale,
then immediately upon such issue or sale or deemed issue or sale the Series C
Conversion Price shall be reduced to the amount determined by dividing (a) the
sum of (1) the product derived by multiplying the

9.
<PAGE> 10

Series C Conversion Price in effect immediately prior to such issue or sale by
the number of shares of Common Stock Deemed Outstanding immediately prior to
such issue or sale, plus (2) the consideration, if any, received or deemed to
have been received by the Corporation upon such issue or sale, by (b) the number
of shares of Common Stock Deemed Outstanding immediately after such issue or
sale. All references to the Series C Conversion Price herein shall mean the
Series C Conversion Price as so adjusted. If and whenever on or after the
Original Issue Date the Corporation issues or sells, or in accordance with this
Section 5(c) is deemed to have issued or sold, any shares of its Common Stock
(other than pursuant to a Permitted Issuance) for a consideration per share less
than the Series D Conversion Price in effect immediately prior to the time of
such issue or sale, then immediately upon such issue or sale or deemed issue or
sale the Series D Conversion Price shall be reduced to the amount determined by
dividing (a) the sum of (1) the product derived by multiplying the Series D
Conversion Price in effect immediately prior to such issue or sale by the number
of shares of Common Stock Deemed Outstanding immediately prior to such issue or
sale, plus (2) the consideration, if any, received or deemed to have been
received by the Corporation upon such issue or sale, by (b) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or sale. All
references to the Series D Conversion Price herein shall mean the Series D
Conversion Price as so adjusted. If and whenever on or after the Original Issue
Date the Corporation issues or sells, or in accordance with this Section 5(c) is
deemed to have issued or sold, any shares of its Common Stock (other than
pursuant to a Permitted Issuance) for a consideration per share less than the
Series E Conversion Price in effect immediately prior to the time of such issue
or sale, then immediately upon such issue or sale or deemed issue or sale the
Series E Conversion Price shall be reduced to the amount determined by dividing
(a) the sum of (1) the product derived by multiplying the Series E Conversion
Price in effect immediately prior to such issue or sale by the number of shares
of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus
(2) the consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale. All references to the
Series E Conversion Price herein shall mean the Series E Conversion Price as so
adjusted. For purposes of determining the adjusted Series A, Series B, Series C,
Series D and Series E Conversion Prices, the following shall be applicable:

(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any
manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of any Convertible Securities issuable upon exercise of such Options,
is less than the Series A Conversion Price, the Series B Conversion Price, the
Series C Conversion Price, the Series D Conversion Price or the Series E
Conversion Price (as applicable) in effect immediately prior to the time of the
granting or sale of such Options, then for purposes of such Conversion Price the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued and sold by the Corporation at the time of the
granting or sale of such Options for such price per share. For purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (A) the total amount, if any, received or receivable by
the Corporation as consideration for the granting or sale of such Options, plus
the minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such Options
which relate to

10.
<PAGE> 11

Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. In the event of an
adjustment to the Series A, Series B, Series C, Series D Conversion Price or
Series E Conversion Price as a result of the grant or sale of Options, no
further adjustment to such Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of the Convertible Securities issued pursuant to such Options.

(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation
in any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is less
than the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price or Series E Conversion Price (as
applicable) in effect immediately prior to the time of such issue or sale, then
for purposes of such Conversion Price the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities shall
be deemed to have been issued and sold by the Corporation at the time of the
issuance or sale of such Convertible Securities for such price per share;
provided, however, that if such Convertible Securities contain a default or
similar provision that provides for the issuance of additional securities upon
the occurrence of a future event, no adjustment will be made to the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D
Conversion Price or Series E Conversion Price with respect to such additional
securities until the occurrence of such event. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. In the event of an adjustment to
the Series A Conversion Price, Series B Conversion Price, Series C Conversion
Price, Series D Conversion Price or Series E Conversion Price as a result of the
issuance or sale of Convertible Securities, no further adjustment of such
Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of such Conversion Price had been or are to be made pursuant
to other provisions of this Section 5, no further adjustment of such Conversion
Price shall be made by reason of such issue or sale.

(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price or Series E Conversion Price (as applicable) in effect at the time of such
change shall be immediately adjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed

11.
<PAGE> 12

purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold, but without prejudice to any
other adjustment required by this Section 5.

(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price, Series D Conversion Price or Series E Conversion
Price (as applicable) then in effect hereunder shall be adjusted immediately to
the Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued, but without prejudice to any other adjustment required by this Section
5.

(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor (net of discounts,
commissions and related expenses). If any Common Stock, Option or Convertible
Security is issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be the fair
value of such consideration. If any Common Stock, Option or Convertible Security
is issued to the owners of the non-surviving entity in connection with any
merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined
jointly by the Corporation and the Required Holders. If such parties are unable
to reach agreement within a reasonable period of time, the fair value of such
consideration shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the Corporation and the
Required Holders. The determination of such appraiser shall be final and binding
upon the parties, and the fees and expenses of such appraiser shall be borne by
the Corporation.

(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.

(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.

d. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price and Series E Conversion Price in effect immediately before that
subdivision shall be proportionately decreased. Conversely, if the Corporation
shall at

12.
<PAGE> 13

any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares, the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D
Conversion Price and Series E Conversion Price in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 5(d) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

e. ADJUSTMENT FOR COMMON STOCK DIVIDENDS and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A Conversion Price, Series
B Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price, Series D Conversion Price
or Series E Conversion Price (as applicable) then in effect by a fraction (1)
the numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (2) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price and Series E Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price and Series E Conversion Price
shall be adjusted pursuant to this Section 5(e) to reflect the actual payment of
such dividend or distribution.

f. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Preferred Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation which
they would have received had the Preferred Stock been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the holders of the Preferred Stock or with respect to
such other securities by their terms.

g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If
at any time or from time to time after the Original Issue Date, the Common Stock
is changed into the same or a different number of shares of any class or classes
of stock, whether by recapitalization, reclassification or otherwise (other than
a subdivision or combination of shares or stock dividend

13.
<PAGE> 14

or a reorganization, merger or consolidation provided for elsewhere in this
Section 5), in any such event each holder of Preferred Stock shall have the
right thereafter to convert such stock into the kind and amount of stock and
other securities and property receivable in connection with such
recapitalization, reclassification or other change with respect to the maximum
number of shares of Common Stock into which such shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustments as provided
herein or with respect to such other securities or property by the terms
thereof.

h. REORGANIZATIONS, MERGERS OR CONSOLIDATIONS. If at any time or
from time to time after the Original Issue Date, the Common Stock is converted
into other securities or property, whether pursuant to a reorganization, merger
or otherwise (other than a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 5), as a part of such transaction, provision shall be made so that
the holders of the Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred the number of shares of stock or other
securities or property of the Corporation to which a holder of the maximum
number of shares of Common Stock deliverable upon conversion would have been
entitled in connection with such transaction, subject to adjustment in respect
of such stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5
with respect to the rights of the holders of Preferred Stock after such
transaction to the end that the provisions of this Section 5 (including
adjustment of the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price then
in effect and the number of shares issuable upon conversion of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred) shall be applicable after that event and be as nearly equivalent as
practicable. The Corporation shall not be a party to any reorganization, merger
or consolidation in which the Corporation is not the surviving entity unless the
entity surviving such transaction assumes, by written instrument satisfactory to
the Required Holders, all of the Corporation's obligations hereunder.

i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price or Series E Conversion Price or
the number of shares of Common Stock or other securities issuable upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred, the Corporation, at its expense, shall
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of Preferred Stock at the holder's address as shown in the Corporation's
books. The certificate shall set forth such adjustment or readjustment, showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (1) the consideration received or deemed to be received
by the Corporation for any additional shares of Common Stock issued or sold or
deemed to have been issued or sold, (2) the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price in effect before and after such adjustment, (3) the
number of additional shares of Common Stock issued or sold or deemed to have
been issued or sold, and (4)

14.
<PAGE> 15

the type and amount, if any, of other property which at the time would be
received upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred.

j. NOTICES OF RECORD DATE. Upon (i) any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or
other capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Preferred Stock at least twenty (20) days prior to the
record date specified therein a notice specifying (1) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (2) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (3) the date, if any, that is to be fixed for determining the
holders of record of Common Stock (or other securities) that shall be entitled
to exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.

k. AUTOMATIC CONVERSION. Each share of Series A Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series A Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series A Preferred. Each share of Series B Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series B Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series B Preferred. Each share of Series C Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series C Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series C Preferred. Each share of Series D Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series D Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series D Preferred. Each share of Series E Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series E Conversion Price, at any time upon the affirmative
election of the holders of sixty six and two-thirds percent (66 2/3%) of the
outstanding Series E Preferred. Each share of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price or Series
D Conversion Price, as applicable, immediately upon the closing of a firmly
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation in which (i) the per share price
to the public is at least $15.00 per share (as adjusted for stock splits,
recapitalizations and the like) and (ii) the gross cash proceeds to the
Corporation (before

15.
<PAGE> 16

underwriting discounts, commissions and fees) are at least $20,000,000. Each
share of Series E Preferred shall automatically be converted into shares of
Common Stock, based on the then-effective Series E Conversion Price, immediately
upon the closing of a firmly underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation
in which (i) the per share price to the public is at least $19.50 per share (as
adjusted for stock splits, recapitalizations and the like) and (ii) the gross
cash proceeds to the Corporation (before underwriting discounts, commissions and
fees) are at least $20,000,000. Upon such automatic conversion, all declared but
unpaid dividends on the Preferred Stock, if any, shall be paid in accordance
with Section 5(l).

L. MECHANICS OF CONVERSION.

(i) OPTIONAL CONVERSION. Each holder of Preferred Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
5 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for such securities, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred being converted. Thereupon, the Corporation shall promptly
issue and deliver at such office to such holder a certificate or certificates
for the number of shares of Common Stock to which such holder is entitled and
shall promptly pay in cash or, to the extent sufficient funds are not then
legally available therefor, in Common Stock (at the Common Stock's fair market
value determined by the Board of Directors as of the date of such conversion) or
a combination of cash and Common Stock, any declared but unpaid dividends on the
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred being converted. Such conversion shall be deemed
to have been made at the close of business on the date of such surrender of the
certificate representing the shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred to be converted,
and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.

(ii) AUTOMATIC CONVERSION. Upon the occurrence of the event
specified in Section 5(k) above, the outstanding shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
(as applicable) shall be converted into Common Stock automatically without any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent; provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless the certificates evidencing such shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred are
either delivered to the Corporation or its transfer agent as provided below, or
the holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon surrender by any holder of the
certificates formerly representing shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred at the
office of

16.
<PAGE> 17

the Corporation or any transfer agent for such securities, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred surrendered were convertible on the date on which such automatic
conversion occurred, and the Corporation shall promptly pay in cash or, to the
extent sufficient funds are not legally available therefor, in Common Stock (at
the Common Stock's fair market value determined by the Board as of the date of
such conversion) or a combination of cash and Common Stock, all declared but
unpaid dividends on the shares of Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred or Series E Preferred being converted. Until
surrendered as provided above, each certificate formerly representing shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred shall be deemed for all corporate purposes to represent
the number of shares of Common Stock resulting from such automatic conversion.

m. FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred by a holder thereof shall be aggregated for purposes of
determination whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.

6. CERTAIN DEFINITIONS.

"EVENT OF NONCOMPLIANCE" means any material deviation by the
Corporation from its most recent strategic plan approved by the Corporation's
Board of Directors without the prior approval of the Board of Directors by a
majority of the Investor Directors.

"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the sum of
the number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock issuable pursuant to Options and Convertible
Securities outstanding on the Original Issue Date to the extent that such
Options and/or Convertible Securities remain outstanding as of the date of
determination, plus the number of shares of Common Stock deemed to have been
issued pursuant to Section 5(c) hereof whether or not the Options or Convertible
Securities are actually exercisable at such time.

"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.

"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

17.
<PAGE> 18

"ORIGINAL ISSUE DATE" means (i) February 14, 1996, with respect to
Series A Preferred, (ii) July 17, 1996, with respect to Series B Preferred,
(iii) June 23, 1997, with respect to Series C Preferred; (iv) June 8, 1998 with
respect to the Series D Preferred; and (v) July 15, 1999 with respect to the
Series E Preferred.

"PERMITTED ISSUANCE" means (i) any issuance of Common Stock upon
conversion of shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred, (ii) any issuance of
warrants to purchase equity securities of the Corporation in connection with a
commercial loan or leasing transaction approved by the Corporation's Board of
Directors, (iii) any issuance of Reserved Employee Stock or (iv) shares of
Common Stock issued or issuable pursuant to the exercise or conversion of
options, warrants or convertible securities outstanding as of the Original Issue
Date applicable to the Series E Preferred.

"RESERVED EMPLOYEE STOCK" means up to 1,600,000 shares of Common Stock
issuable to employees, directors or consultants of the Corporation and its
Subsidiaries subject to the approval of the Corporation's Board of Directors.

"SUBSIDIARY" means any corporation of which the shares of outstanding
capital stock possessing the voting power (under ordinary circumstances) in
electing at least a majority of the board of directors are, at the time as of
which any determination is being made, owned by the Corporation either directly
or indirectly through Subsidiaries.

7. AMENDMENT AND WAIVER.

Subject to the provisions of Delaware General Corporation Law, no
amendment, modification or waiver of any of the terms or provisions of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred shall be binding or effective without the prior written
consent of the holders of two-thirds of the outstanding Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred, as applicable, and no change in the terms hereof may be accomplished
by merger or consolidation of the Corporation with another corporation or entity
unless the Corporation has obtained the prior written consent of the holders of
two-thirds of the outstanding Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred, as applicable. Any
amendment, modification or waiver of any of the terms or provisions of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred approved in the manner described in this Section 7,
whether prospective or retroactively effective, shall be binding upon all
holders of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred, as applicable.

8. REGISTRATION OF TRANSFER.

The Corporation shall keep at its principal office a register for the
registration of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred. Upon the surrender of any certificate
representing Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred or Series E Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor

18.
<PAGE> 19

representing in the aggregate the number of shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate.

9. REPLACEMENT.

Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.

10. RESERVATION OF COMMON STOCK ISSUABLE UPON CONVERSION.

The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then-outstanding
shares of the Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred and Series E Preferred, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.

11. NOTICES.

Any notice required by the provisions of this Article IV shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All notices to stockholders shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Corporation.

19.
<PAGE> 20

12. PAYMENT OF TAXES.

The Corporation will pay all taxes (other than taxes based upon income)
and other governmental charges that may be imposed with respect to the issue or
delivery of shares of Common Stock upon conversion of shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred, excluding any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred so converted were
registered.

13. NO DILUTION OR IMPAIRMENT.

The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, and
will at all times in good faith assist in carrying out of all of the provisions
of this Restated Certificate of Incorporation and in taking all such action as
may be necessary or appropriate to protect the conversion rights and other
rights of the holders of the Preferred Stock against impairment.

14. NO REISSUANCE OF SERIES A PREFERRED, SERIES B PREFERRED, SERIES C
PREFERRED, SERIES D PREFERRED OR SERIES E PREFERRED.

No share or shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued.

ARTICLE FIVE

The Corporation is to have perpetual existence.

ARTICLE SIX

The Corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.

ARTICLE SEVEN

No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seven shall
apply to or have any effect on the liability or alleged liability of any
director of

20.
<PAGE> 21

the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.

ARTICLE EIGHT

1. NATURE OF INDEMNITY. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he (or a person of
which he is the legal representative) is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent which it is empowered to do so by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including attorney's fees
actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall inure to the benefit of such person's
heirs, executors and administrators; provided, however, that except as provided
in Section 2 of this Article Eight, the Corporation shall not indemnify any such
person in connection with a proceeding initiated by such person unless such
proceeding was authorized by the Board of Directors of the Corporation. The
Corporation may, by action of the Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.

2. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any
indemnification of a director or officer of the Corporation under Section 1 of
this Article Eight or advance of expenses under Section 5 of this Article Eight
shall be made promptly and, in any event within 30 days, upon the written
request of the director or officer. If a determination by the Corporation that
the director of officer is entitled to indemnification pursuant to this Article
Eight is required, and the Corporation fails to respond within 60 days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article Eight shall be enforceable by the director
or officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the Corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the Corporation.
Neither the

21.
<PAGE> 22

failure of the Corporation (including the Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because such person met the applicable standard of conduct set
forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.

3. NONEXCLUSIVITY OF ARTICLE EIGHT. The rights to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article Eight shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
certificate of incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.

4. INSURANCE. The Corporation may purchase and maintain insurance on
its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary or agent of the Corporation or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, whether or not the Corporation would have the power to indemnify such
person against such liability under this Article Eight.

5. EXPENSES. Unless the Board of Directors shall have determined that a
person described in Section 1 of this Article Eight has failed to meet the
applicable standard of conduct for indemnification under the Delaware General
Corporation Law, expenses incurred by such person in defending a proceeding
shall be paid by the Corporation in advance of such proceeding's final
disposition upon receipt of an undertaking by or on behalf of such person to
repay such amounts if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.

6. EMPLOYEES AND AGENTS. Persons who are not covered by the foregoing
provisions of this Article Eight and who are or were employees or agents of the
Corporation, or who are or were serving at the request of the Corporation as
employees or agents of another corporation, partnership, joint venture, trust or
other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the Board of Directors.

7. CONTRACT RIGHTS. The provisions of this Article Eight shall be
deemed to be a contract right between the Corporation and each director or
officer who serves in any such capacity at any time while this Article Eight and
the relevant provisions of the General Corporation Law of the State of Delaware
or other applicable law are in effect, and any repeal or modification of this
Article Eight or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.

22.
<PAGE> 23

8. MERGER OR CONSOLIDATION. For purposes of this Article Eight,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
Eight with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued.

ARTICLE NINE

The Board of Directors shall have the power to adopt, amend or repeal
the Corporation's Bylaws, except as may be otherwise be provided in the Bylaws
and in this Restated Certificate of Incorporation.

ARTICLE TEN

1. In recognition that American Express Travel Related Services
Company, Inc. ("AMEX") is a substantial stockholder of the Corporation, and in
anticipation that the Corporation and such stockholder may engage in the same or
similar activities or lines of business and have an interest in the same area of
corporate opportunities, and in recognition of the benefits to be derived by the
Corporation through its possible continued contractual, corporate and business
relations with such stockholder, the provisions of this Article Ten are set
forth to regulate and define the conduct of certain affairs of the Corporation
as they may involve such stockholder and its officers, directors and employees,
and the powers, rights, duties and liabilities of the Corporation and its
officers, directors and stockholders in connection therewith.

2. AmEx shall have no duty to refrain from any of the following: (a)
engaging in the same or similar activities or lines of business as the
Corporation; (b) doing business with any client or customer of the Corporation;
and (c) investing (publicly or privately) in, or developing other relationships
with, other persons or entities in the same or similar businesses as that of the
Corporation; provided, however, that nothing in this Article Ten shall be
construed to limit in any way the duty of any director of the Corporation to
hold in confidence, and not to use, except for the benefit of the Corporation,
or to disclose to any person or entity without the written authorization of the
Board of Directors of the Corporation, any trade secrets or other confidential
proprietary information of the Corporation.

3. In the event that AmEx or any officer, director or employee of AmEx
acquires knowledge of a potential transaction or matter which may be a corporate
opportunity for both AmEx and the Corporation (where such knowledge comes from
other than an officer, director or employee of the Corporation), neither AmEx
nor its officers, directors or employees shall have any duty to communicate or
offer such corporate opportunity to the Corporation, and neither AmEx nor its
officers, directors or employees shall be liable to the Corporation or its
stockholders for breach of any fiduciary or other duty, as a stockholder or
otherwise, by reason of the fact that AmEx pursues or acquires such corporate
opportunity for itself, directs such corporate

23.
<PAGE> 24

opportunity to another person or entity, or does not communicate such corporate
opportunity or information regarding such corporate opportunity to the
Corporation; provided, however, that this Article Ten, Section 3 shall not apply
to any director of the Corporation designated by AmEx with respect to any
corporate opportunity for the Corporation that has come to the attention of such
director solely and exclusively in his capacity as a director of the
Corporation.

4. Any person or entity purchasing or otherwise acquiring any interest
in shares of the capital stock of the Corporation shall be deemed to have
consented to the provisions of this Article Ten.

5. Any reference in this Article Ten to "AMEX" shall mean AmEx and its
Affiliates. Any reference in this Article Ten to the "Corporation" shall mean
the Corporation and its Affiliates. "Affiliate" shall mean, when used with
respect to a specified "Person", another "Person" that directly, or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with the "Person" specified. "PERSON" shall mean any individual,
firm, corporation, partnership, trust, joint venture, governmental authority or
other entity, and shall include any successor (by merger or otherwise) of such
entity.

[SIGNATURE PAGE FOLLOWS]

24.
<PAGE> 25

I, the undersigned, being the Chief Financial Officer of the
Corporation, do make and file this Certificate, hereby declaring and certifying
that the facts herein stated are true, and accordingly have hereunto set my
hands this _____ day of July, 1999.

---------------------------------------
Kenny Edwards, Chief Financial Officer

<PAGE> 1
EXHIBIT 4.2

<TABLE>

======================================================================================================
<S> <C> <C>
NUMBER [EXACTIS.COM LOGO] SHARES

INCORPORATED UNDER THE LAWS CUSIP 30064G 10 4
OF THE STATE OF DELAWARE EXACTIS.com, INC. SEE REVERSE FOR CERTAIN DEFINITIONS

THIS CERTIFIES THAT

is the record holder of

FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE OF
- --------------------------------- -------------------------
- --------------------------------- EXACTIS.com, INC. -------------------------
- --------------------------------- -------------------------
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:

/s/ Kenneth W. Edwards, Jr. /s/ E. Thomas Detmer, Jr.
CHIEF FINANCIAL OFFICER AND SECRETARY CHIEF EXECUTIVE OFFICER AND PRESIDENT
[SEAL]

COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. BOX 1596
DENVER, CO. 80201

BY TRANSFER AGENT
AND REGISTRAR

AUTHORIZED SIGNATURE

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

<PAGE> 2
EXACTIS.COM, INC.

A statement of all of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights as established by the Certificate of Incorporation,
as amended, may be obtained by any stockholder upon request and without charge
from the principal office of the Corporation.

The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:

<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _____________ Custodian _____________
(Cust) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors
JT TEN - as joint tenants with right
of survivorship and not as Act _____________________________________
tenants in common (State)

UNIF TRF MIN ACT - _________ Custodian (until age ______)
(Cust)
_______________ under Uniform Transfers
(Minor)

to Minors Act ___________________________
(State)
Additional abbreviations may also be used though not in the above list.
</TABLE>

ASSIGNMENT

For Value Received _________________________ hereby sell(s), assign(s) and
transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------

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

- ------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE(S)

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

- ------------------------------------------------------------------------------
of the Shares of capital stock represented by the within Certificate and do(es)
hereby irrevocably constitute and appoint _____________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.

Dated
------------------------ --------------------------------------

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

NOTE: The signature to this assignment
must correspond with the names as
written upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
Signature must be guaranteed.

Signature(s) Guaranteed:

By
-----------------------------------------
THE SIGNATURES MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-15.

<PAGE> 1
EXHIBIT 5.1

COOLEY GODWARD LLP ATTORNEYS AT LAW San Francisco, CA
415 693-2000

Palo Alto, CA
2595 Canyon Boulevard, 650 843-5000
Suite 250
Boulder, CO Menlo Park, CA
80302-6737 650 843-5000
Main 303 546-4000
Fax 303 546-4099 San Diego, CA
619 550-6000

www.cooley.com Denver, CO
303 606-4800

JAMES C. T. LINFIELD
303 546-4010
[email protected]

October ____, 1999

Exactis.com, Inc.
707 - 17th Street, Suite 2850
Denver, Colorado 80202

Ladies and Gentlemen:

You have requested our opinion with respect to certain matters in connection
with the filing by Exactis.com, Inc. (the "Company") of a Registration Statement
on Form S-1 (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission"), including a prospectus to be filed with the
Commission pursuant to Rule 424(b) of Regulation C promulgated under the
Securities Act of 1933, as amended, and the underwritten public offering of up
to _____________ shares of the Company's Common Stock (the "Shares"), and
_______ shares for which the underwriters have been granted an over-allotment
option.

In connection with this opinion, we have (i) examined and relied upon the
Registration Statement, and (ii) reviewed the Company's Certificate of
Incorporation and Bylaws, as amended and as proposed to be amended prior to the
closing of the public offering, and the originals or copies certified to our
satisfaction of such records, documents, certificates, memoranda and other
instruments as in our judgment were necessary or appropriate to enable us to
render the opinion expressed below, and (iii) assumed that the Shares to be sold
to the underwriters by the Company will be sold at a price established by the
Board of Directors of the Company or the Pricing Committee thereof in accordance
with Section 153 of the Delaware General Corporation Law, and we have undertaken
no independent verification with respect thereto.

On the basis of the foregoing and in reliance thereon, we are of the opinion
that the Shares (when issued and paid for in accordance with the underwriting
agreement filed as an exhibit to the Registration Statement) will be, validly
issued, fully paid and nonassessable.

We consent to the reference to our firm under the caption "Legal Matters" in the
prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.

Very truly yours,

Cooley Godward LLP

By:
-------------------------------
James C. T. Linfield

<PAGE> 1
EXHIBIT 10.2

INFOBEAT INC.

1997 STOCK OPTION PLAN

ADOPTED MARCH 17, 1997

1. PURPOSES.

(a) The purpose of the 1997 Stock Option Plan (the "Plan") of InfoBeat
Inc., a Delaware corporation (the "Company"), is to provide a means by which
selected Employees and Directors of, and Consultants to, the Company, and its
Affiliates, may be given an opportunity to purchase stock of the Company.

(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

(c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.

2. DEFINITIONS.

(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.

(b) "BOARD" means the Board of Directors of the Company.

(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.

(e) "COMPANY" means InfoBeat Inc., a Delaware corporation.

(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided

1.
<PAGE> 2

that the term "Consultant" shall not include Directors who are paid only a
director's fee by the Company or who are not compensated by the Company for
their services as Directors.

(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.

(h) "DIRECTOR" means a member of the Board.

(i) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(k) "FAIR MARKET VALUE" means the value of the Common Stock of the
Company as determined in good faith by the Board.

(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

(m) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

(n) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(o) "OPTION" means a stock option granted pursuant to the Plan.

(p) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

(q) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.

(r) "PLAN" means this Stock Option Plan.

(s) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.

2.
<PAGE> 3

3. ADMINISTRATION.

(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).

(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Options; when and how each Option shall
be granted; whether an Option will be an Incentive Stock Option or a
Nonstatutory Stock Option; the provisions of each Option granted (which need not
be identical), including the time or times such Option may be exercised in whole
or in part; and the number of shares for which an Option shall be granted to
each such person.

(ii) To construe and interpret the Plan and Options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

(iii) To amend the Plan or an Option as provided in Section
11.

(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company.

(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"). If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofor possessed by the Board (and
references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. Additionally, and notwithstanding anything to the contrary contained
herein, the Board may delegate administration of the Plan to any person or
persons and the term "Committee" shall apply to any person or persons to whom
such authority has been delegated.

4. SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate one million six hundred thousand (1,600,000) shares of
Common Stock of the Company. This share reserve shall be comprised of: (i) up to
seven hundred thousand (700,000) shares of Common Stock of the Company from any
options granted under the Company's 1996 Stock Option Plan which subsequently
for any reason expire or terminate, in whole or in part, without having been
exercised in full, so that such shares of Common Stock of the Company are not
issued pursuant

3.
<PAGE> 4

to the terms of such options, plus (ii) an additional nine hundred thousand
(900,000) shares of Common Stock of the Company. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not purchased under such Option shall revert to and
again become available for issuance under the Plan.

(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

5. ELIGIBILITY.

(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.

(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.

6. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.

(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of either the grant or
the exercise of the Option, (a) by delivery to the Company of other Common Stock
of the Company, (B) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of other
Common Stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.

4.
<PAGE> 5

In the case of any deferred payment arrangement, interest shall be payable at
least annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred payment
arrangement.

(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 under the Exchange Act and the rules thereunder (a "QDRO"), and shall
be exercisable during the lifetime of the person to whom the Option is granted
only by such person or any transferee pursuant to a QDRO. The person to whom the
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.

(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (i) the issuance of
the shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

5.
<PAGE> 6

(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant, or such longer or shorter period specified in the Option Agreement,
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.

(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.

(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option at the date of death) by the Optionee's estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.

(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.

-6-
<PAGE> 7

(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the Common Stock of the
Company otherwise issuable to the participant as a result of the exercise of the
Option; or (3) delivering to the Company owned and unencumbered shares of the
Common Stock of the Company.

7. COVENANTS OF THE COMPANY.

(a) During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such Options.

(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.

8. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of stock pursuant to Options shall constitute general
funds of the Company.

9. MISCELLANEOUS.

(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.

(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.

(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment or relationship as a
Director or Consultant of any Employee, Director, Consultant or Optionee with or
without cause.

7.
<PAGE> 8

(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds One
Hundred Thousand Dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.

(e) The Board or the Committee shall have the authority to effect, at
any time and from time to time (i) the repricing of any outstanding Options
under the Plan to reduce the exercise price of such Options and/or (ii) with the
consent of the affected holders of Options, the cancellation of any outstanding
Options and the grant in substitution therefor of new Options under the Plan
covering the same or different numbers of shares of Common Stock, but having an
exercise price per share not less than fifty percent (50%) of the Fair Market
Value (one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of a ten percent (10%) stockholder (as
defined in subsection 5(c)), not less than one hundred and ten percent (110%) of
the Fair Market Value)) per share of Common Stock on the new grant date.

10. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the outstanding Options will be appropriately adjusted in
the class(es) and number of shares and price per share of stock subject to such
outstanding Options.

(b) In the event of: (1) a sale of substantially all of the assets of
the Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, or (4) any
other capital reorganization in which the Company's shareholders receive less
than fifty (50%) of the outstanding voting shares of the new or surviving
corporation, then the time during which such Options may be exercised shall be
accelerated to permit the optionee to exercise all such Options in full prior to
such event, and the Options shall terminated if not exercised prior to such
event. In the event that any such accelerated option vesting received or to be
received by an optionee pursuant to this subsection 10(b)(the "Benefit") would
(i) constitute a "parachute payment" within the meaning of Section 280G of the
Code and (ii) but for this subsection 10(b), be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), then such Benefit shall
be reduced to the extent necessary so that no portion of the Benefit would be
subject to the Excise Tax, as determined in good faith by the Company; provided,
however, that if, in the absence of any such reduction (or after such
reduction), the optionee believes that the Benefit or any portion thereof (as
reduced, if applicable) would be subject to the Excise Tax, the Benefit

8.
<PAGE> 9

shall be reduced (or further reduced) to the extent determined by the optionee
in his or her discretion so that the Excise Tax would not apply. If,
notwithstanding any such reduction (or in the absence of such reduction), the
Internal Revenue Service ("IRS") determines that the optionee is liable for the
Excise Tax as a result of the Benefit, then the optionee shall be obligated to
return to the Company, within thirty (30) days of such determination by the IRS,
a portion of the Benefit sufficient such that none of the Benefit retained by
the optionee constitutes a "parachute payment" within the meaning of Code
Section 280G that is subject to the Excise Tax.

11. AMENDMENT OF THE PLAN AND OPTIONS.

(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

(i) Increase the number of shares reserved for Options under
the Plan;

(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or

(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.

(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.

(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.

(e) The Board at any time, and from time to time, may amend the terms
of any one or more Options; provided, however, that the rights and obligations
under any Option shall not be

9.
<PAGE> 10

altered or impaired by any such amendment unless (i) the Company requests the
consent of the person to whom the Option was granted and (ii) such person
consents in writing.

12. TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the ten (10) year anniversary of
the date the Plan is adopted by the Board or approved by the stockholders of the
Company, whichever is earlier. No Options may be granted under the Plan while
the Plan is suspended or after it is terminated.

(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.

13. EFFECTIVE DATE OF PLAN.

The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.

10.

<PAGE> 1
EXHIBIT 10.3

EXACTIS.COM, INC.

1999 EQUITY INCENTIVE PLAN

ADOPTED AUGUST 11, 1999
APPROVED BY STOCKHOLDERS AUGUST 11, 1999
TERMINATION DATE: AUGUST 10, 2009
AMENDED: SEPTEMBER __, 1999

1. PURPOSES.

(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.

(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.

(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2. DEFINITIONS.

(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

(b) "BOARD" means the Board of Directors of the Company.

(d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).

(e) "COMMON STOCK" means the common stock of the Company.

(f) "COMPANY" means Exactis.com, Inc., a Delaware corporation.

(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for

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<PAGE> 2

such services or (ii) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include either Directors who are not
compensated by the Company for their services as Directors or Directors who are
merely paid a director's fee by the Company for their services as Directors.

(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

(j) "DIRECTOR" means a member of the Board of Directors of the Company.

(k) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.

(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.

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<PAGE> 3

(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.

(iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.

(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.

(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

(s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

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(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

(y) "PLAN" means this Exactis.com, Inc. 1999 Equity Incentive Plan.

(z) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.

(bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.

(cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

(dd) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.

3. ADMINISTRATION.

(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.

(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

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<PAGE> 5

(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

(iii) To amend the Plan or a Stock Award as provided in
Section 12.

(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.

(i) GENERAL. The Board may delegate administration of the Plan
to a Committee or Committees of one (1) or more members of the Board, and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.

(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a Committee may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

4. SHARES SUBJECT TO THE PLAN.

(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate three million
(3,000,000) shares of Common Stock. This share reserve shall be comprised of:
(i) up to one million six hundred thousand (1,600,000) shares of Common Stock of
the Company from any options granted under the Company's 1997 Stock Option Plan
which subsequently for any reason expire or terminate, in whole or in part,

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<PAGE> 6

without having been exercised in full, so that such shares of Common Stock of
the Company are not issued pursuant to the terms of such options, plus (ii) an
additional one million four hundred thousand (1,400,000) shares of Common Stock
of the Company.

(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.

(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.

(d) SHARE RESERVE LIMITATION. Prior to the Listing Date and to the
extent then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage as calculated in accordance with the conditions
and exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made.

5. ELIGIBILITY.

(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.

(b) TEN PERCENT STOCKHOLDERS.

(i) A Ten Percent Stockholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.

(ii) Prior to the Listing Date, a Ten Percent Stockholder
shall not be granted a Nonstatutory Stock Option unless the exercise price of
such Option is at least (i) one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.

(iii) Prior to the Listing Date, a Ten Percent Stockholder
shall not be granted a restricted stock award unless the purchase price of the
restricted stock is at least (i) one hundred percent (100%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is

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permitted by Section 260.140.41 of Title 10 of the California Code of
Regulations at the time of the grant of the Option.

(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than seven hundred
thousand (700,000) shares of Common Stock during any calendar year. This
subsection 5(c) shall not apply prior to the Listing Date and, following the
Listing Date, this subsection 5(c) shall not apply until (i) the earliest of:
(1) the first material modification of the Plan (including any increase in the
number of shares of Common Stock reserved for issuance under the Plan in
accordance with Section 4); (2) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or
(4) the first meeting of stockholders at which Directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.

(d) CONSULTANTS.

(i) Prior to the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, either the
offer or the sale of the Company's securities to such Consultant is not exempt
under Rule 701 of the Securities Act ("Rule 701") because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by Rule 701, unless
the Company determines that such grant need not comply with the requirements of
Rule 701 and will satisfy another exemption under the Securities Act as well as
comply with the securities laws of all other relevant jurisdictions.

(ii) From and after the Listing Date, a Consultant shall not
be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.

(iii) As of April 7, 1999 Rule 701 and Form S-8 generally are
available to consultants and advisors only if (i) they are natural persons; (ii)
they provide bona fide services to the issuer, its parents, its majority-owned
subsidiaries or majority-owned subsidiaries of the issuer's parent; and (iii)
the services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the issuer's securities.

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6. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:

(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.

(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than eighty-five percent (85%) of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

(d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board; provided, however, that at
any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.

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<PAGE> 9

In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.

(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and, to the extent provided
in the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.

(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:

(i) Options granted prior to the Listing Date to an Employee
who is not an Officer, Director or Consultant shall provide for vesting of the
total number of shares of Common Stock at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Option was granted, subject
to reasonable conditions such as continued employment; and

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<PAGE> 10

(ii) Options granted prior to the Listing Date to Officers,
Directors or Consultants may be made fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company.

(i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.

(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

(k) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which period shall not be less than six (6) months for
Options granted

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<PAGE> 11

prior to the Listing Date) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

(m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Subject to the "Repurchase Limitation" in subsection 10(h), any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.

(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option.

(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.

(p) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares of Common Stock
equal to the number of shares of Common Stock surrendered as part or all of the
exercise price of such Option; (ii) have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option shall be subject to the same exercise price and
term provisions heretofore described for Options under the Plan.

Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a)

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<PAGE> 12

and the "Section 162(m) Limitation" on the grants of Options under subsection
5(c) and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.

7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

(i) CONSIDERATION. A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit.

(ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement
may, but need not, be subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the Board.

(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.

(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares of Common Stock under the stock bonus
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a stock bonus award made on or after the Listing
Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.

(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

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<PAGE> 13

(i) PURCHASE PRICE. Subject to the provisions of subsection
5(b) regarding Ten Percent Stockholders, the purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. For
restricted stock awards made prior to the Listing Date, the purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
For restricted stock awards made on or after the Listing Date, the purchase
price shall not be less than eighty-five percent (85%) of the Common Stock's
Fair Market Value on the date such award is made or at the time the purchase is
consummated.

(ii) CONSIDERATION. The purchase price of Common Stock
acquired pursuant to the restricted stock purchase agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock's
"par value," as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

(iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board.

(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.

(v) TRANSFERABILITY. For a restricted stock award made before
the Listing Date, rights to acquire shares of Common Stock under the restricted
stock purchase agreement shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award made on or
after the Listing Date, rights to acquire shares of Common Stock under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.

8. COVENANTS OF THE COMPANY.

(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

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<PAGE> 14

(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.

9. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

10. MISCELLANEOUS.

(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.

(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

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<PAGE> 15

(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award; provided, however, that no
shares are withheld with a value exceeding the minimum amount of tax required to
be withheld by law; or (iii) delivering to the Company owned and unencumbered
shares of Common Stock.

(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.

(h) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:

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(i) FAIR MARKET VALUE. If the repurchase option gives the
Company the right to repurchase the shares of Common Stock upon termination of
employment at not less than the Fair Market Value of the shares of Common Stock
to be purchased on the date of termination of Continuous Service, then (i) the
right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.

(ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives
the Company the right to repurchase the shares of Common Stock upon termination
of Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (ii) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness for
the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of
Options after such date of termination, within ninety (90) days after the date
of the exercise) or such longer period as may be agreed to by the Company and
the Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").

11. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)

(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.

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(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
or continue any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration paid
to the stockholders in the transaction described in this subsection 11(c)) for
those outstanding under the Plan. In the event any surviving corporation or
acquiring corporation refuses to assume or continue such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full,
and the Stock Awards shall terminate if not exercised (if applicable) at or
prior to such event. With respect to any other Stock Awards outstanding under
the Plan, such Stock Awards shall terminate if not exercised (if applicable)
prior to such event.

(d) CHANGE IN CONTROL--SECURITIES ACQUISITION. After the Listing Date,
in the event of an acquisition by any person, entity or group within the meaning
of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or an Affiliate) of the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
Directors, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full.

12. AMENDMENT OF THE PLAN AND STOCK AWARDS.

(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the

17
<PAGE> 18

Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.

(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.

(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.

14. EFFECTIVE DATE OF PLAN.

The Plan shall become effective as determined by the Board, but no
Stock Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.

15. CHOICE OF LAW.

The law of the State of Colorado shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.

<PAGE> 1

EXHIBIT 23.2

ACCOUNTANTS' CONSENT

The Board of Directors
Exactis.com, Inc.:

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

KPMG LLP

/s/ KPMG LLP

Denver, Colorado

September 21, 1999