MINDARROW SYSTEMS INC, S-1/A, 2000-04-03

MINDARROW SYSTEMS INC
S-1/A, 2000-04-03
BUSINESS SERVICES, NEC

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<PAGE>

As filed with the Securities and Exchange Commission on April 3, 2000
Registration No. 333-91819
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------

AMENDMENT NO. 1

To
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------

MindArrow Systems, Inc.

(formerly eCommercial.com, Inc.)
(Exact name of registrant as specified in charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 7372 77-0511097
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

101 Enterprise, Suite 340
Aliso Viejo, California 92656
(949) 916-8705
(Address, including ZIP code and telephone number, including area code, of
registrant's principal executive offices)
---------------
Michael R. Friedl
Chief Financial Officer

MindArrow Systems, Inc.

101 Enterprise, Suite 340
Aliso Viejo, CA 92656
Telephone (949) 916-8705
(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
Copies to:
Attention: Kevin Coyle, Esq.
Gray Cary Ware & Freidenrich LLP

400 Capitol Mall, Suite 2400
Sacramento, CA 95814
Telephone: (916) 930-3240
---------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Title of each class of Amount maximum maximum Amount of
securities to be to be offering price aggregate registration
registered registered per unit offering price fee
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share....... 2,650,782 -- $ 99,086,231 $22,406
================================================================================
</TABLE>

The offering price is estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c), using the closing price
reported by the Over-the-Counter Bulletin Board market for the common stock on
March 30, 2000, based upon the last trade of such shares which was $37.38 per
share.
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.

---------------
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is
a criminal offense.

================================================================================
<PAGE>

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

SUBJECT TO COMPLETION, DATED APRIL 3, 2000

PROSPECTUS

2,650,782 Shares of Common Stock

MindArrow Systems, Inc.

This prospectus covers our registration for possible resale of 2,160,014
shares of our common stock which are issuable upon (i) conversion of shares of
Series B preferred stock into shares of our common stock, or (ii) exercise of
certain warrants issued in connection with our private offering of Series B
preferred stock. We are also registering for resale 15,000 shares of common
stock issuable upon exercise of a warrant granted to a customer and 475,768
shares of currently issued and outstanding common stock issued in a prior
private placement. All proceeds from sale of the shares will be received by the
selling stockholders and not by us.

We are not currently a reporting company as defined in Section 12(g) of the
Securities Exchange Act of 1934. We intend to file a Form 10 to become a
reporting company under the Securities Exchange Act of 1934.

The selling stockholders may sell up to 2,650,782 shares from time to time in
the open market or otherwise at prevailing market prices.

Our common stock is traded on the Over-the-Counter Bulletin Board market
under the symbol "ECRL". On March 31, 2000, the last reported sale price of our
common stock was $40 per share. Effective April 4, 2000, our stock trading
symbol will change to "ARRW".

We will bear substantially all expenses of registration of the shares under
federal and state securities laws. We have also agreed to indemnify the selling
stockholders against liabilities under the Securities Act of 1933. See "Selling
Stockholders" and "Plan of Distribution."

-----------

Investing in the shares involves a high degree of risk.

See "Risk Factors" beginning on page 4.

-----------

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.

The date of this prospectus is , 2000.
<PAGE>

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

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary................................................................... 1
Risk Factors.............................................................. 4
Use of Proceeds........................................................... 11
Dividends................................................................. 11
Capitalization............................................................ 12
Dilution.................................................................. 12
Plan of Distribution...................................................... 12
Selected Financial Data................................................... 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 14
Business.................................................................. 17
Management................................................................ 26
Certain Transactions and Relationships.................................... 32
Market for Common Stock................................................... 32
Significant Stockholders.................................................. 33
Selling Security Holders.................................................. 34
Description of Securities................................................. 40
Legal Matters............................................................. 44
Experts................................................................... 44
Where You Can Find More Information....................................... 44
Financial Statements...................................................... F-1
</TABLE>

We have applied for trademark registration for eCommercial(TM) and Virtual
Prospector(TM). This prospectus also contains trademarks of other companies.

i
<PAGE>

SUMMARY

This summary may not contain all of the information that is important to you
in making a decision of whether or not to invest. To fully understand us and
this offering, you should read the entire prospectus. Most importantly, you
should read the "Risk Factors" beginning on page 4.

The Company

MindArrow Systems, Inc. provides proprietary interactive sales and marketing
automation or SMA systems designed to enhance customer relationships. Our one-
to-one Virtual Prospector(TM) systems are designed to enable our clients to
increase sales by significantly improving their sales and marketing response
rates, at a lower cost, while enhancing the relationships they have with their
customers. Our one-to-many Internet Relationship Marketing systems are designed
to enable our clients to improve the effectiveness of their marketing campaigns
that are targeted to larger groups. Our interactive SMA systems include the
following characteristics:

Rich eCommercial(TM) technology. Our proprietary technology enables our
clients to deliver a "website" to their customers via email. In this context,
"rich" means highly compressed multimedia files that combine high quality audio
and video, graphics, animation, chat, hypertext links, and telecommunication
links.

eCommercials typically generate very high response rates because:

. the recipient is not required to be connected to the Internet when
viewing;

. the recipient is not required to have a high speed or "broadband"
Internet connection; and

. the recipient is not required to install any other software to view the
eCommercial.

Activity tracking, reporting and analysis. Our systems offer technology that
allows for activity tracking and reporting which automatically tracks:

.the email address of the initial recipient of the eCommercial;

.whether the initial recipient forwarded the eCommercial to others; and

.the content reviewed by each recipient, including referrals.

This information allows our clients to accurately measure the interest and
attention generated by their sales and marketing efforts, including the so-
called viral or "pass-along" impact of their content.

Web-based technology. Our Virtual Prospector system is accessible via any
Internet browser and is easy to use, which enables rapid wide-scale deployment.
Our software systems are offered from offsite computer operations centers on
what is known as an Application Service Provider or ASP basis and larger
clients can license our systems and deploy our technology at their locations.

Immediate customer-initiated feedback. Our systems are designed to generate
immediate feedback using embedded telecommunication links that allow recipients
to respond via links to our clients websites.

1
<PAGE>

We expect to generate revenue by:

.licensing our SMA systems to large companies seeking an enterprise
solution;

.charging small and medium-sized businesses on a per-item basis for
delivery and tracking;

.sharing revenue with our clients based on the effectiveness of their sales
and marketing efforts; and

.providing related consulting, implementation, content production and
maintenance services.

We market our systems through our direct sales force and indirectly through
third-party resellers and strategic partners. Our clients include Oracle
Corporation, Hewlett-Packard, Lockheed Martin, Bank of New York, AMFMi (Clear
Channel Communications), BMG, and Warner Bros.

We also intend to aggressively commercialize our proprietary technology into
areas other than the SMA industry. We believe our eCommercial technology offers
a compelling platform for streaming technologies that require users to connect
to content broadcast over the Internet. In addition, we believe our network
configuration architecture can enhance the performance of content delivery over
the Internet, and our proprietary compression algorithms may have multiple
applications in content delivery.

Company Strategy

We intend to create significant shareholder value by becoming a leading
provider of interactive SMA systems to companies seeking to enhance their
customer relationships, and by successfully commercializing our proprietary
technology in non-SMA industries. The principal elements of our strategy
include:

Market leadership adoption across critical industries. By offering what we
believe is a compelling value proposition, we intend to win the adoption of the
market-leading companies across several critical industries, including the
information technology and telecommunication, financial services,
pharmaceutical, media and entertainment, travel, e-commerce, industrial product
and public sector industries.

Increase market penetration by strategic partnerships. We intend to quickly
increase our market penetration through partnerships with companies that enable
us to extend and strengthen our sales presence, including value-added
resellers, database management and analytical customer relationship firms,
information technology firms, advertising agencies, and companies focused on
providing robust solutions to the small and medium-sized business market.

Expanding our business into global markets. Because we believe that
significant commercial opportunities exist outside of the United States, we
intend to rapidly expand our business to promising global markets, principally
through the adoption of our systems and technology by dominant international
companies and Value-Added Resellers, and by partnering with market-leading
local firms.

Partnering to commercialize non-SMA technology applications. We intend to
commercialize our technology in other industries by partnering with market-
leading firms in those industries where our technology provides a compelling
application.

Additional Information

Our business was founded in March 1999 and was incorporated as
eCommercial.com, Inc., a California corporation on April 9, 1999. On April 19,
1999, we merged into Wireless Netcom, Inc., a pre-existing Nevada corporation.
On March 31, 2000, we reincorporated as a Delaware corporation and changed our
name to MindArrow Systems, Inc. Our common stock began trading in the Over-the-
Counter Bulletin Board market under the symbol "ECRL" on April 29, 1999.
Effective April 4, 2000, our common stock will trade under the symbol "ARRW".

Our main office is located at 101 Enterprise, Suite 340, Aliso Viejo,
California 92656 and our telephone number is (949) 916-8705. Our email address
is [email protected] and our website is located at www.mindarrow.com.

2
<PAGE>

The Offering

The shares offered in this offering are (i) issuable upon conversion of
shares of Series B preferred stock into shares of our common stock or exercise
of warrants issued to a customer or issued in connection with our private
offering of Series B preferred stock or (ii) shares of common stock issued in a
prior private placement.

<TABLE>
<C> <S>
Common stock outstanding prior to this offering.. 9,692,295 shares
Common stock issuable on conversion of Series B
preferred(1).................................... 1,513,073 shares
Common stock issuable on exercise of
warrants(2)..................................... 661,941 shares
Common stock outstanding after conversion and
exercise........................................ 11,867,309 shares
Use of Proceeds.................................. We will not receive any of
the proceeds of the sale of
the shares.
Risk Factors..................................... This offering involves a
high degree of risk.
See "Risk Factors"beginning
on page 4.
</TABLE>

The number of shares that will be outstanding after this offering is based
on the number of shares outstanding on February 29, 2000 and excludes 3,000,000
shares of common stock reserved for issuance under the 1999 Stock Option Plan,
and 14,586 shares reserved for issuance upon the exercise of outstanding
warrants not included above.
- --------

(1) Includes 125,000 shares related to shares of Series B preferred that are
issuable upon exercise of an option.

(2) Includes 12,500 shares related to warrants that are issuable upon exercise
of an option.

Summary Financial Information

The following summary financial data should be read together with our
financial statements and the notes thereto included elsewhere in this
prospectus. The statement of operations data for the periods ending
September 30, 1999 and December 31, 1999 and the balance sheet data as of
September 30, 1999 and December 31, 1999 are derived from, and are qualified by
reference to, our financial statements included elsewhere in this prospectus.

<TABLE>
<CAPTION>
September 30, 1999 December 31, 1999
------------------ -----------------
(unaudited)
<S> <C> <C>
Balance Sheet Data
Current assets............................. $4,894,143 $4,913,876
Working capital............................ 2,351,053 2,319,699
Total assets............................... 6,886,141 7,471,732
Total liabilities.......................... 2,543,090 2,594,177
Stockholders' equity....................... 4,343,051 4,877,555
</TABLE>

3
<PAGE>

RISK FACTORS

The purchase of our common stock involves substantial investment risk. You
should carefully consider the following factors and other information in this
prospectus before deciding to invest in shares of our common stock. This
prospectus contains "forward-looking statements" that are subject to a number
of risks and uncertainties, many of which are beyond our control. All
statements, other than statements of historical fact included in this
prospectus regarding our business strategy, future operations, financial
position, estimated revenues, projected costs, prospects, plans and objectives
of management as well as third parties are forward-looking statements. When
used in this prospectus, the words "anticipate," "intend," "estimate,"
"expect," "project," and similar expressions are intended to identify forward-
looking statements, although not all forward-looking statements contain such
identifying words. All forward-looking statements speak only as of the date of
this prospectus. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we can give no assurance that such
expectations will prove to be correct. Important factors that could cause our
actual results to differ materially from our expectations are described below
and elsewhere in this prospectus.

Our limited operating history makes evaluation of our business difficult

Our business was formed as eCommercial.com in March 1999 and we were a
development-stage company through December 31, 1999. In January 2000,
significant principal operations commenced. Accordingly, we have a limited
operating history on which to base our evaluation of current business and
prospects. Our short operating history makes it difficult to predict future
results, and there are no assurances that our revenues will increase, or that
we will achieve or maintain profitability or generate sufficient cash from
operations in future periods.

Our ability to achieve and sustain profitability would be adversely impacted
by our failure to do any of the following:

. effectively market and sell our services;

. develop new and maintain existing relationships with clients;

. continue to develop and upgrade our technology and network
infrastructure;

. respond to competitive developments;

. introduce enhancements to our existing products and services to address
new technologies and standards; and

. attract, retain and motivate qualified personnel. Our operating results
are also dependent on factors outside of our control, such as strength of
competition and the growth of the market for our services. There is no
assurance that we will be successful in addressing these risks, and
failure to do so could have a material adverse effect on our financial
performance.

We expect to incur significant losses for the foreseeable future, and if we
are unable to generate sufficient cash flow or raise the capital necessary to
allow us to continue to meet all of our obligations as they come due, our
business could suffer.

Our future revenues are not predictable, and our results could vary
significantly

Because of our limited operating history and the emerging nature of our
markets, we are unable to reliably forecast our revenues. We plan to
substantially increase our operating expenses in order to:

. expand our sales and distribution network;

. fund increased sales and marketing activities; and

. develop and upgrade our technology. Our expected expense levels are
based, in part, on planned revenues and our ability to raise additional
funding. If we are unsuccessful in generating significant revenues or
raising additional funds, we may be unable to adjust spending in time to
compensate for a shortfall or we may have to forego potential revenue
generating activities, either of which could hurt our financial
performance.

4
<PAGE>

Our quarterly operating results may fluctuate significantly in the future as
a result of a variety of factors. These factors include:

. the demand for our services;

. the addition or loss of individual clients;

. the amount and timing of capital expenditures and other costs relating to
the expansion of our operations;

.the introduction of new products or services by us or our competitors; and

. general economic conditions and economic conditions specific to the
Internet, such as electronic commerce and online media.

Any one of these factors could cause our revenues and operating results to
vary significantly. In addition, as a strategic response to changes in the
competitive environment, we may from time to time make certain pricing, service
or marketing decisions or acquisitions that could significantly hurt our
operating results in a given period.

Due to all of the foregoing factors, we believe that period-to-period
comparisons of our results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. Furthermore, it
is possible that our operating results in one or more quarters will fail to
meet the expectations of securities analysts or investors. In such event, the
market price of our common stock could drop.

Possible need for additional financing

The capital requirements associated with developing our network and
corporate infrastructure have been and will continue to be significant. We have
been substantially dependent on the private placements of our equity securities
to fund such requirements. These private placements have raised approximately
$22 million in gross proceeds. We anticipate that our existing capital
resources and private placements will be sufficient to satisfy our contemplated
cash requirements for at least twelve months following the consummation of this
offering. Although we believe our assumptions to be reasonable, we lack the
operating history of a more seasoned company and there can be no assurance that
our forecasts will prove accurate. In the event that our plans change, our
assumptions change or prove inaccurate, or if future private placements, other
capital resources and projected cash flow otherwise prove to be insufficient to
fund operations, we could be required to seek additional financing sooner than
currently anticipated. We have no current arrangements with respect to sources
of additional financing if and when needed, or that, if available, such
additional financing would be on terms acceptable to us. To the extent that any
such financing involves the sale of our equity securities, the interests of our
shareholders could be substantially diluted. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

We are not sure if the market will accept our systems

Our ability to succeed will depend on the following, none of which can be
assured:

. our marketing and sales efforts;

. market acceptance of our current and future offerings;

. the reliability of our networks and services; and

. the extent to which end users are able to receive eCommercials at
tolerable download speeds.

We operate in a market that is at a very early stage of development, is
rapidly evolving, and is characterized by an increasing number of competitors
and risk surrounding market acceptance of new technologies and services.
Potential customers must accept eCommercials as a viable alternative to
traditional

5
<PAGE>

commercial advertising. Because this market is so new, it is difficult to
predict its size and growth rate. If the market fails to develop as we expect,
our growth will be slower than expected.

Our success also depends on the market acceptance of our technology. For
example, congestion over the Internet may interrupt eCommercial broadcasts,
resulting in unsatisfying user experiences. Some users may block reception of
large files, including email attachments and executable files, which are
necessary to receive an eCommercial. Widespread adoption of eCommercial
technology depends on overcoming these obstacles, improving audio and video
quality and educating clients and users. If our technology fails to achieve
broad commercial acceptance, our growth will be slower than expected.

If we are unable to manage or sustain our growth our operating results could be
impaired

We anticipate that we will be required to rapidly expand our operations in
the near future to address market opportunities. Such growth, if it occurs,
will place a significant strain on our managerial, operational and financial
resources and systems. To manage this growth, we must implement, improve and
effectively utilize operational, management, marketing and financial systems,
and train and manage our employees. There can be no assurance that we will be
able to manage effectively the expansion of operations or that our personnel,
systems, procedures and controls will be adequate to support operations. Any
failure to manage our growth effectively could hurt our financial performance.

Network and system failures could adversely impact our business

The performance, reliability and availability of our websites and network
infrastructure is critical to our reputation and ability to attract and retain
clients. Our systems and operations are vulnerable to damage or interruption
from earthquake, fire, flood, power loss, telecommunications failure, Internet
breakdowns, break-ins, tornadoes and similar events. We carry business
interruption insurance to compensate for losses that may occur, but insurance
is not guaranteed to remove all risk of loss. Services based on sophisticated
software and computer systems often encounter development delays and the
underlying software may contain errors that could cause system failures. Any
system failure that causes an interruption could result in a loss of clients
and could reduce the attractiveness of our services.

We are also dependent upon web browsers, Internet service providers and
online service providers to provide Internet users access to our clients, users
and web sites. Users may experience difficulties due to system failures or
delays unrelated to our systems. These difficulties may hurt audio and video
quality or result in intermittent interruptions in broadcasting and thereby
slow our growth.

Circumvention of our security measures and viruses could disrupt our business

Despite the implementation of security measures, our networks may be
vulnerable to unauthorized access, computer viruses and other disruptive
problems. Anyone who is able to circumvent security measures could steal
proprietary information or cause interruptions in our operations. Service
providers have occasionally experienced interruptions in service as a result of
the accidental actions of users or intentional actions of hackers. We may have
to spend significant capital to protect against security breaches or to fix
problems caused by such breaches. Although we have implemented security
measures, there can be no assurance that such measures will not be circumvented
in the future. Eliminating computer viruses and alleviating other security
problems may require interruptions, delays or cessation of service to users,
which could hurt our business.

Our dependence on short-term contracts could make future revenues volatile

Although future clients may enter into multi-year agreements, all of our
current revenues are derived from contracts with less than three months
duration. Consequently, our clients can stop using our systems quickly and
without penalty, thereby increasing our exposure to competitive pressures.
There can be no assurance that current clients will continue to be clients, or
that we will be able to attract new clients.

6
<PAGE>

We need to be scalable in the number of users we serve

Our success depends on our ability to deliver and track a large of number of
eCommercials. At our current capacity, we can deliver and track approximately
two million eCommercials per week. If demand for our services exceeds capacity,
we may not be able to add to our extensive network capability quickly enough to
serve clients.

We depend on continued growth in use of the Internet

Rapid growth in use of the Internet is a recent phenomenon and there can be
no assurance that use of the Internet will continue to grow or that a
sufficient base of users will emerge to support our business. The Internet may
not be accepted as a viable medium for broadcasting advertising, for a number
of reasons, including:

. potentially inadequate development of the necessary infrastructure;

. inadequate development of enabling technologies;

. lack of acceptance of the Internet as a medium for distributing rich
media advertising; and

. inadequate commercial support for Web-based advertising.

To the extent that Internet use continues to increase, there can be no
assurance that the Internet infrastructure will be able to support the demands
placed upon it, and especially the demands of delivering high-quality video
content.

Furthermore, user experiences on the Internet are affected by access speed.
There is no assurance that broadband access technologies will become widely
adopted. In addition, the Internet could lose its viability as a commercial
medium due to delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet activity, or due to
increased government regulation. Our business could suffer if use of the
Internet grows more slowly than expected, or if the Internet infrastructure
does not effectively support the growth that does occur.

If we do not respond to technological change, we could lose or fail to develop
customers

The development of our eCommercial business entails significant technical
and business risks. To remain competitive, we must continue to enhance and
improve the functionality and features of our technology. The Internet and the
e-commerce industry are characterized by:

. rapid technological change;

. changes in client requirements and preferences;

. frequent new product and service introductions embodying new
technologies; and

. the emergence of new industry standards and practices.

The evolving nature of the Internet could render our existing systems
obsolete. Our success will depend, in part, on our ability to:

. develop and enhance technologies useful in our business;

. develop new services and technology that address the increasingly
sophisticated and varied needs of our current and prospective clients;
and

. adapt to technological advances and emerging industry and regulatory
standards and practices in a cost-effective and timely manner.

7
<PAGE>

Future advances in technology may not be beneficial to, or compatible with,
our business. Furthermore, we may not use new technologies effectively or adapt
our systems to client requirements or emerging industry standards on a timely
basis. Our ability to remain technologically competitive may require
substantial expenditures and lead time. If we are unable to adapt to changing
market conditions or user requirements in a timely manner, we will lose
clients.

We depend on the efforts of key managerial and technical people

Our continued growth and development is dependent upon our ability to retain
and motivate our key employees, including Thomas Blakeley, our Chief Executive
Officer, and Eric McAfee, our Executive Vice President. Competition for top
people is intense and there can be no assurance that we will be able to retain
our key management and technical employees or that we will be able to attract
or retain additional qualified technical personnel and management in the
future. We do not currently maintain key person life insurance on any member of
our management team. If we are unsuccessful in hiring and keeping key people,
our business will suffer.

We could face liability for Internet content

As a distributor of Internet content, we face potential liability for
negligence, copyright, patent or trademark infringement, defamation, indecency
and other claims based on the content of our broadcasts. Such claims have been
brought, and sometimes successfully pressed, against Internet content
distributors. Our general liability insurance may not be adequate to indemnify
us for all liability that may be imposed. Although we generally require our
clients to indemnify us for such liability, such indemnification may be
inadequate. Any imposition of liability that is not covered by insurance or by
an indemnification by a client could harm our business.

Our operating results could be impaired if we become subject to burdensome
government regulations and legal uncertainties concerning the Internet

Due to the increasing popularity and use of the Internet, it is possible
that a number of laws and regulations may be adopted with respect to the
Internet, relating to:

. user privacy;

. pricing, usage fees and taxes;

. content;

. copyrights;

. distribution;

. characteristics and quality of products and services; and

. online advertising and marketing.

The adoption of any additional laws or regulations may decrease the
popularity or impede the expansion of the Internet and could seriously harm our
business. A decline in the popularity or growth of the Internet could decrease
demand for our products and services, reduce our revenues and margins and
increase our cost of doing business. Moreover, the applicability of existing
laws to the Internet is uncertain with regard to many important issues,
including property ownership, intellectual property, export of encryption
technology, libel and personal privacy. The application of laws and regulations
from jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and other online
services, could also harm our business.

8
<PAGE>

Our stock price could be volatile

Our stock price has been and is likely to continue to be highly volatile and
could be subject to wide fluctuations in response to factors such as:

. actual or anticipated variations in quarterly operating results;

. announcements;

. new sales formats or new services offered by us or our competitors;

. changes in financial estimates by securities analysts, conditions or
trends in Internet markets; and

. changes in the market valuations of other Internet companies.

In addition, the stock market in general, and the market for Internet-
related and technology companies in particular, has experienced extreme price
and volume fluctuations that have often been unrelated or disproportionate to
the operating performance of such companies. The trading prices of many
technology companies' stocks are at or near historical highs and reflect
price/earnings ratios substantially above historical levels. There can be no
assurance that these trading prices and price/earnings ratios will be
sustained. These broad market and industry factors may materially adversely
affect the market price of our common stock, regardless of our operating
performance. In the past, following periods of volatility in the market price
of a company's securities, securities class-action litigation has often been
instituted against such company. Such litigation, if instituted, could result
in substantial costs and a diversion of management's attention and resources,
which could seriously damage our business.

Our efforts to protect our intellectual property rights may not sufficiently
protect us and we may incur costly litigation to protect our rights

We have filed fourteen patent applications and we plan to file additional
patent applications in the future with respect to various additional aspects of
our technologies. We mark our software with copyright notices, and intend to
file copyright registration applications where appropriate. We have also filed
several federal trademark registration applications for trademarks and service
marks we use. There can, however, be no assurance that any patents, copyright
registrations, or trademark registrations applied for by us will be issued, or
if issued, will sufficiently protect our proprietary rights.

We also rely substantially on certain technologies that are not patentable
or proprietary and are therefore available to our competitors. In addition,
many of the processes and much of the know-how of importance to our technology
are dependent upon the skills, knowledge and expertise of our technical
personnel, whose skill, knowledge and experience are not patentable. To protect
our rights in these areas, we require all employees, significant consultants
and advisors to enter into confidentiality agreements under which they agree
not to use or disclose our confidential information as long as that information
remains proprietary. We also require that our employees agree to assign to us
all rights to any inventions made during their employment relating to our
activities, and not engage in activities similar to ours during the term of
their employment. There can be no assurance, however, that these agreements
will provide meaningful protection for our trade secrets, know-how or other
proprietary information in the event of any unauthorized use or disclosure of
such trade secrets, know-how or proprietary information. Further, in the
absence of patent protection, we may be exposed to competitors who
independently develop substantially equivalent technology or otherwise gain
access to our trade secrets, knowledge or other proprietary information.

Despite our efforts to protect our intellectual property, a third party or a
former employee could copy, reverse-engineer or otherwise obtain and use our
intellectual property or trade secrets without authorization or could develop
technology competitive to ours.

Our intellectual property may be misappropriated or infringed upon.
Consequently, litigation may be necessary in the future to enforce our
intellectual property rights, to protect our confidential information or

9
<PAGE>

trade secrets, or to determine the validity or scope of the rights of others.
Litigation could result in substantial costs and diversion of management and
other resources and may not successfully protect our intellectual property.
Additionally, we may deem it advisable to enter into royalty or licensing
agreements to resolve such claims. Such agreements, if required, may not be
available on commercially reasonable or desirable terms or at all.

Our technology may infringe on the rights of others

Even if the patents, copyrights and trademarks we apply for are granted,
they do not confer on us the right to manufacture or market products or
services if such products or services infringe on intellectual property rights
held by others. If any third parties hold conflicting rights, we may be
required to stop making, using, or marketing one or more of our products or to
obtain licenses from and pay royalties to others, which could have a
significant and material adverse effect on us. There can be no assurance that
we will be able to obtain or maintain any such license on acceptable terms at
all.

We may also be subject to litigation to defend against claims of
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. If third parties hold trademark,
copyright or patent rights that conflict with our business, then we may be
forced to litigate infringement claims that could result in substantial costs
to us. In addition, if we were unsuccessful in defending such a claim, it could
have a negative financial impact. If third parties prepare and file
applications in the United States that claim trademarks used or registered by
us, we may oppose those applications and be required to participate in
proceedings before the United States Patent and Trademark Office to determine
priority of rights to the trademark, which could result in substantial costs to
us. An adverse outcome in litigation or privity proceedings could require us to
license disputed rights from third parties or to cease using such rights. Any
litigation regarding our proprietary rights could be costly, divert
management's attention, result in the loss of certain of our proprietary
rights, require us to seek licenses from third parties and prevent us from
selling our services, any one of which could have a negative financial impact.
In addition, inasmuch as we broadcast content developed by third parties, our
exposure to copyright infringement actions may increase because we must rely
upon such third parties for information as to the origin and ownership of such
licensed content. We generally obtain representations as to the origin and
ownership of such licensed content and generally obtain indemnification to
cover any breach of such representations; however, there can be no assurance
that such representations will be accurate or given, or that such
indemnification will adequately protect us.

Our officers and directors control a significant percentage of our outstanding
common stock which will enable them to exert control over many significant
corporate actions and may prevent a change in control that would otherwise be
beneficial to our stockholders

Upon completion of this offering, our officers and directors will
beneficially own approximately 44.8% of our outstanding stock. This level of
ownership could have a substantial impact on matters requiring the vote of the
stockholders, including the election of our directors and most of our corporate
actions. This control could delay, defer or prevent others from initiating a
potential merger, takeover or other change in our control, even if these
actions would benefit our stockholders and us. This control could adversely
affect the voting and other rights of our other stockholders and could depress
the market price of our common stock.

10
<PAGE>

USE OF PROCEEDS

Since the only securities being offered are those of the selling
stockholders, we will not receive any of the proceeds from the sale of the
Shares.

Proceeds from exercise of warrants of up to $6,045,528 will be used for
general working capital purposes. However, each warrant contains a cashless
exercise feature so there can be no assurances that we will receive any
proceeds from the exercise of warrants or that any warrants will be exercised
at all.

DIVIDENDS

We have not declared or paid any dividends since our inception and do not
intend to declare or pay any such dividends in the foreseeable future. Our
ability to declare and pay dividends is subject to limitations imposed by
Delaware law.

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<PAGE>

CAPITALIZATION

The following table sets forth our total capitalization:

. on an actual basis as of September 30, 1999;

. on an actual basis as of December 31, 1999;

. on a pro forma basis as of December 31, 1999, giving effect to the
exercise of an option to purchase 125,000 shares of Series B preferred
stock and the conversion of all outstanding shares of Series B
convertible preferred stock into 1,513,073 shares of common stock and the
exercise of warrants to purchase 762,591 shares of common stock. The
exercise of the option and all of the warrants hereunder for cash would
result in proceeds of $6,100,728. Each warrant contains a cashless
exercise feature so there can be no assurances that we will receive any
proceeds for the exercise of warrants or that any warrants will be
exercised at all.

<TABLE>
<CAPTION>
September 30, 1999 December 31, 1999
Actual Actual Pro Forma
------------------ ----------------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Stockholders' Equity
Series B convertible
preferred stock, $0.001 par
value; 2,000,000 shares
authorized; 1,085,573 and
1,388,073 shares issued and
outstanding, actual;
no shares issued and
outstanding, pro forma..... $ 1,086 $ 1,388 $ --
Common stock, $0.001 par
value; 20,000,000 shares
authorized; 9,536,623 and
9,585,583 shares issued and
outstanding, actual;
11,861,247 shares issued
and outstanding, pro
forma...................... 9,537 9,586 11,861
Additional paid-in capital... 7,211,449 9,680,990 15,780,831
Deficit accumulated during
the development stage....... (2,284,546) (4,263,334) (4,263,334)
Unearned stock-based
compensation................ (594,475) (551,075) (551,075)
----------- ----------- -----------
Total stockholders'
equity.................... $ 4,343,051 $ 4,877,555 $10,978,283
=========== =========== ===========
</TABLE>

DILUTION

Since we do not receive the proceeds of the sale of the Shares, we will not
experience any direct dilution. The existing common shareholders paid
substantially less per share than the offering price of the shares sold under
this prospectus.

PLAN OF DISTRIBUTION

The selling stockholders may offer their Shares at various times in one or
more of the following transactions:

1. In the over-the-counter market where our common stock is listed, or on
the Nasdaq National Market, where we have applied to have our common
stock listed;

2. Private transactions;

3. In connection with short sales of our common stock;

4. By pledgees or donees; or

5. A combination of any of the above transactions.

The selling stockholders may sell their shares at the market price
prevailing at the time of sale or at negotiated prices.

The selling stockholders may use broker-dealers to sell their shares. If
this happens, the broker-dealers will either receive discounts or commissions
from the selling stockholders or they will receive commissions from purchasers
of shares for whom they acted as agents. Selling stockholders and broker-
dealers acting on their behalf may be deemed underwriters under the Securities
Act of 1993.

The selling stockholders may attempt to sell all of the shares. This could
cause the supply of shares to exceed demand, which could drive the price of
our shares down.

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<PAGE>

SELECTED FINANCIAL DATA

The following summary financial data should be read together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the notes thereto included
elsewhere in this Prospectus. The Statement of Operations Data for the period
ending September 30, 1999 and the Balance Sheet Data as of September 30, 1999
are derived from, and are qualified by reference to, our audited financial
statements included elsewhere in this Prospectus. The selected financial data
for the three months ended December 31, 1999 is unaudited. The results for the
period ended December 31, 1999 are not necessarily indicative of results that
may be expected for any other interim period or for a full year.

<TABLE>
<CAPTION>
Cumulative from
For the period inception
from inception For the Three (March 26, 1999)
(March 26, 1999) to Months Ended to December 31,
September 30, 1999 December 31, 1999 1999
------------------- ----------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Statement of Operations
Data
Revenues................ $ 6,250 $ 29,390 $ 35,640
----------- ----------- -----------
Operating expenses:
Development........... 320,766 385,651 706,417
Production............ 139,674 164,814 304,488
Sales and marketing... 1,060,795 715,090 1,775,885
General and
administration....... 684,343 671,223 1,355,566
Depreciation and
amortization......... 107,892 122,069 229,961
----------- ----------- -----------
Total operating
expenses........... 2,313,470 2,058,847 4,372,317
----------- ----------- -----------
Operating loss........ (2,307,220) (2,029,457) (4,336,677)
Interest income......... 24,274 52,269 76,543
Provision for income
taxes.................. (1,600) (1,600) (3,200)
----------- ----------- -----------
Net loss.............. $(2,284,546) $(1,978,788) $(4,263,334)
=========== =========== ===========
Net loss per common
share outstanding $ (0.26) $ (0.21) $ (0.47)
=========== =========== ===========
Weighted average common
shares outstanding..... 8,751,760 9,556,737 9,016,188
=========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
September 30, 1999 December 31, 1999
------------------ -----------------
(unaudited)
<S> <C> <C>
Balance Sheet Data
Cash and cash equivalents.................. $4,744,741 $4,661,219
Working capital............................ 2,351,053 2,319,699
---------- ----------
Total assets............................... 6,886,141 7,471,732
Total liabilities.......................... 2,543,090 2,594,177
---------- ----------
Stockholders' equity....................... $4,343,051 $4,877,555
========== ==========
</TABLE>

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<PAGE>

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

The following discussion should be read together with our financial
statements and related notes included elsewhere in this Prospectus.

Overview

Our business was founded in March 1999 and we had our first revenues in
August 1999.

Through December 31, 1999, our revenues were derived from the production and
delivery of eCommercials. eCommercial production services include theme
development, eCommercial design and layout, video production, special effects,
hyperlink recommendations, hyperlink page design and creation, reporting and
sales cycle consultation. In addition, we may generate revenues from corporate
sponsorships and from revenue-sharing arrangements with our clients. We have
made sponsorship arrangements with customers and we have entered into revenue
sharing arrangements with clients, but they have not generated material
revenues to date.

Revenues are recognized when the consulting or production services are
rendered and delivery revenues are recognized when the eCommercials are
delivered. We will recognize software license fee revenue when persuasive
evidence of an agreement exists, the product has been delivered, we have no
remaining significant obligations with regard to implementation, the license
fee is fixed or determinable and collection of the fee is probable.

We record cash receipts from clients and billed amounts due from clients in
excess of revenue recognized as deferred revenue. The timing and amount of cash
receipts from clients can vary significantly depending on specific contract
terms and can therefore have a significant impact on the amount of deferred
revenue in any given period.

We currently sell our products and services through a direct sales force and
are developing a network of resellers to expand our ability to identify
potential clients and develop relationships with them.

Results of operations

For the period from March 26, 1999 (inception) to September 30, 1999,
revenues totaled $6,250 as we focused on developing our technologies and
increasing our ability to serve clients. For the quarter ended December 31,
1999, revenues increased to $29,390.

For the period ended September 30, 1999 our net loss was $2,284,546 or $0.26
per share. For the quarter ended December 31, 1999, our net loss was $1,978,788
or $0.21 per share. The loss for both periods can be attributed to development,
marketing and selling, and general and administrative expenses incurred during
our development stage.

Development expenses consist primarily of salaries and related expenses for
design engineers and other technical personnel, including consultants, and were
focused on continued advancements in eCommercial

technology and development of the eComNetwork. Total costs for the period ended
September 30, 1999 and the quarter ended December 31, 1999 amounted to $320,766
and $385,651. We charge all research and development expenses to operations as
incurred. We believe that continued investment in research and development is
critical to our long-term success. Accordingly, we expect that our research and
development expenses will increase in future periods.

Production efforts focused on building a team of creative and client service
people and producing eCommercials and related websites. Total costs for the
period ended September 30, 1999 and the quarter ended December 31, 1999
amounted to $139,674 and $164,814.

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<PAGE>

Sales and marketing expenses for the period ended September 30, 1999 and for
the quarter ended December 31, 1999 amounted to $1,060,795 and $715,090 and
consisted primarily of salaries and related expenses for developing our direct
and reseller organizations, as well as marketing expenses designed to create
and promote brand awareness for eCommercials. Included in this amount for the
period ended September 30, 1999 is a non-cash charge of $240,000, which
represents the value of the common stock issued upon the signing of a strategic
partnership with Lockheed Martin Corporation, and a non-cash charge of $78,780,
which represents compensation expense related to the issuance of stock options.
Included in the amount for the quarter ended December 31, 1999 is a non-cash
charge of $77,773, which represents compensation expense related to the
issuance of stock options. We intend to pursue aggressive selling and marketing
campaigns and to expand our network of resellers, continue branding efforts and
identifying strategic partners. We therefore expect that our sales and
marketing expenses will increase in future periods.

General and administrative costs of $684,343 for the period ended September
30, 1999 and $671,223 for the quarter ended December 31, 1999 primarily
included salaries and related expenses for administrative, finance and human
resources personnel, professional fees and other corporate expenses related to
establishing our operations. Included in these amounts are non-cash charges of
$86,455 for the period ended September 30, 1999 and $38,576 for the quarter
ended December 31, 1999, which represent compensation expense related to the
issuance of stock options. We expect that, in support of our continued growth
and our operations as a public company, general and administrative expenses
will increase in the foreseeable future.

Recent financing

In December 1999, we completed a private placement offering of 1,388,073
shares of Series B preferred stock at $8 per share. Gross proceeds amounted to
$11,104,584. The shares were sold to approximately 185 accredited investors.
Net proceeds to us, after selling commissions of $829,242 and direct offering
costs of $121,869, totaled $10,153,473, of which $2,392,981 was received after
September 30, 1999. We intend to use the net proceeds in our continuing
operations.

In March 2000, we began a private placement offering of up to 3 million shares
of Series C preferred stock at $25 per share. We have received commitments
totaling approximately $45 million for approximately 1.8 million shares.
Through March 24, 2000, proceeds of $10,225,625 had been received and 409,025
shares of Series C preferred had been issued.

Liquidity and sources of capital

As a service company, we do not expect the liquidity constraints that face
companies that must maintain significant inventories. However, we anticipate
that we will have negative cash flow for the foreseeable future. We also
currently anticipate that we will invest $2 to $4 million in capital
expenditures in the next twelve months to expand our infrastructure.

Since our inception, we have funded our operations by selling stock. As of
December 31, 1999, our cash position reduced short-term liquidity problems.
While we expect to begin generating significant revenues during fiscal 2000, we
do not anticipate that revenues will be sufficient to offset expected
expenditures. Accordingly, we expect we will need to rely on proceeds from the
private placement offering described above to finance our operations.

As of September 30, 1999 and December 31, 1999, we had current assets of
$4,894,143 and $4,913,876, respectively, and current liabilities of $2,543,090
and $2,594,177, respectively. This represents working capital of $2,351,053 at
September 30, 1999 and $2,319,699 at December 31, 1999. Current liabilities at
December 31, 1999 included $2,118,809 of liabilities acquired in acquisitions,
of which $1,800,000 is reserved to pay the judgment in the Voxel matter. In
January 2000, we appealed the judgement and pledged a $2 million certificate of
deposit with the court. One of our significant shareholders, who is also an
officer and director, has agreed to repay to us in common stock or cash, at his
option, any amounts we must pay to the plaintiffs in this matter. See
"Business--Legal Proceedings."

15
<PAGE>

For the period ended September 30, 1999, we used $2,013,188 of cash for
operating activities and for the quarter ended December 31, 1999, we used
$1,761,460 of cash for operating activities, which were primarily focused on
growing our organizational infrastructure to be able to service our clients.
During the same periods, $1,263,133 and $715,564, respectively, was used in
investing activities, primarily for acquisitions of fixed assets used to expand
our technology infrastructure and the eComNetwork. During the periods ended
September 30, 1999 and December 31, 1999, $8,021,062 and $2,393,502 was
provided by financing activities, primarily from issuance of preferred stock.

While we expect to begin generating significant revenues during the next
twelve months, it is likely that we will need to pursue additional funding in
order to continue the development of our technology infrastructure and add to
our capacity to provide services to our clients. We also expect the number of
employees to increase during that time. We expect that we will need to rely on
proceeds from the current private placement offering to continue to grow as
planned.

There can be no assurance the current private placement offering will
completely fund on terms that are acceptable, or at all. If we are unable to
obtain sufficient funding, our business will suffer significantly, as we would
need to cut back research and development, scale back sales and marketing
activities and reduce staffing, all of which could harm our ability to generate
revenues and continue as a going concern.

16
<PAGE>

BUSINESS

Overview

MindArrow Systems, Inc. provides proprietary interactive sales and marketing
automation or SMA systems designed to enhance customer relationships. Our one-
to-one Virtual Prospector systems are designed to enable our clients to
increase sales by significantly improving their sales and marketing response
rates, at a lower cost, while enhancing the relationships they have with their
customers. Similarly, our one-to-many Internet Relationship Marketing systems
are designed to enable our clients to improve the effectiveness of their
marketing campaigns targeted to larger groups.

Company Strategy

We intend to create significant shareholder value by becoming a leading
provider of interactive SMA systems to companies seeking to improve their
profitability and enhance their customer relationships, and by successfully
commercializing our proprietary technology in non-SMA industries. The principal
elements of our strategy include:

Increase market penetration by strategic partnerships. We intend to quickly
increase our market penetration through partnerships with companies that enable
us to extend and strengthen our sales presence, including value-added resellers
("VARs"), database management and analytical customer relationship firms,
Information Technology ("IT") firms, advertising agencies, and companies
focused on providing robust solutions to the small and medium-sized business
market.

Expanding our business into global markets. Because we believe that
significant commercial opportunities exist outside of the United States, we
intend to rapidly expand our business to promising global markets, principally
through the adoption of our systems and technology by dominant international
companies and VARs, and by partnering with market-leading local firms.

Industry Background

The Internet. The Internet and electronic commerce are fundamentally
changing the way businesses interact with customers, suppliers, employees and
other interested constituents. Companies across most industries are using the
Internet and electronic commerce to redefine the way that goods and services
are marketed, sold and distributed. They are also using this new medium to
redefine how they communicate with their customers and constituents. Some key
Internet statistics include:

. Access: In February 2000, the Strategis Group reported the number of
households in the US with Internet access had increased from 14.9 million
in 1995 to 46.5 million. By 2005, that number is expected to increase to
90 million.

. Use: Email is the most widely used Internet application, with the number
of email boxes expected to increase from 234 million worldwide in 1998 to
409 million in 1999, according to eMarketer.

. Commerce: The amount of merchandise sold over the Internet is expected to
increase to $3.2 trillion in 2003, according to Forrester Research.

. Advertising: Worldwide Internet advertising is expected to grow from $3.3
billion in 1999 to $33 billion in 2004, according to Forrester Research.

17
<PAGE>

This growth has been spurred by developments such as easy-to-use Web
browsers, the availability of inexpensive multimedia PCs and Internet access,
the adoption of more robust network architectures, and the emergence of
compelling Web-based content and commerce applications. The proliferation of
email accounts has enabled businesses to use email as the primary means to
proactively communicate with their customers online. For example, email is
often used to confirm electronic transactions and to notify customers of
important new developments or product offerings.

Much of the Internet's rapid evolution towards becoming a mass medium can be
attributed to the accelerated pace of technological innovation, which has
expanded the Web's capabilities and improved users' experiences. Most notably,
the Internet has evolved from a mass of static, text-oriented Web pages and
email services to a much richer environment, capable of delivering graphical,
interactive and multimedia content.

Remaining Competitive. Many websites, particularly consumer-oriented sites,
rely on heavy spending to encourage current and prospective customers to visit
regularly. Concurrently, these companies also spend heavily to understand how
they interact with their website once they have arrived. Our technologies allow
companies to deliver targeted rich media information to their audience via
email, reducing the need for broad-based advertising and fostering a one-to-one
relationship. To remain competitive in this dynamic business environment, many
companies desire to improve both their profitability and their customer
relationships, We believe that companies that are able to improve their sales
and marketing response rates at a lower cost will significantly improve their
overall top-line growth and profitability. In addition, we believe companies
that provide rich, interactive communication to their customers will also
improve their relationships with them.

Direct Marketing. Direct marketing, always a significant portion of overall
advertising spending, is becoming a significant force on the Internet. Some key
statistics:

. Overall: Businesses and other organizations spent approximately $285
billion on general advertising in 1998, of which $163 billion (57%) was
spent on direct marketing, according to the Direct Marketing Association.

. Internet-based: According to a study by CE Underberg Towbin, interactive
marketing expenditures will grow from approximately $1 billion in 1998 to
an estimated $9 billion in 2003.

Online marketing allows businesses to cost-effectively target online
customers through customized email campaigns. Email did not initially gain wide
acceptance as a marketing tool because of concerns regarding privacy and
unsolicited communication. With the recent advent of permission-based email,
where individuals sign up or "opt-in" to receive information from specific
sources on topics of interest to them, email has become an increasingly
important direct marketing tool. Email campaigns offer significant advantages
over traditional direct mail, including shorter production times, reduced cost
and more rapid delivery, which increase flexibility and make it easier to add
greater degrees of personalization. Further, response rates for direct email
campaigns can be much higher than for traditional direct mail campaigns.

Products and Services

General. Companies can use our interactive SMA systems to enhance their per-
customer profitability while improving their customer relationships. Our
systems improve response rates, which may translate into additional sales on
the same number of contacted customers. Further, when compared with traditional
paper collateral and postal delivery, our systems are often much more cost
effective on a per customer basis. Moreover, our activity tracking provides
important feedback to companies using our systems, allowing them to efficiently
tailor their sales and marketing message over time.

Our systems enable companies to provide rich content to their target
audience, which we believe enhances the experience of the recipient, resulting
in greater company loyalty. In addition, our systems enable the recipient to
immediately contact a sales or customer support representative of the company
at their convenience, further improving the sales process and strengthening the
customer relationship.

Finally, our SMA systems are very complementary to website content
management systems because our systems drive traffic to websites and can be
configured to work with content management systems to improve the communication
between companies and their customers.

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<PAGE>

Our proprietary technology enables our clients to deliver a "website" to
their customers via email. eCommercials are highly compressed, multimedia files
that combine high quality audio and video, graphics, animation, chat, hypertext
links, and telecommunication links. eCommercials typically generate very high
response rates because:

.the recipient is not required to be connected to the Internet when
viewing:

.the recipient is not required to have a high speed or "broadband" Internet
connection; and

.the recipient is not required to install any other software to view the
eCommercial.

Activity tracking, reporting and analysis. Our systems offer technology that
allows for activity tracking and reporting which automatically tracks:

.the email address of the initial recipient of the eCommercial;

.whether the initial recipient forwarded the eCommercial to others; and

.the content reviewed by each recipient, including referrals.

Categories. Our systems generally fall into two categories, both utilizing
proprietary eCommercial technologies:

. One-to-One--"Virtual Prospecting": Our business-to-business clients use
our "Virtual Prospector" system to manage the delivery, tracking and
linking of electronic brochures and other rich content to current and
prospective customers.

Our Virtual Prospecting service utilizes Virtual Prospector, our patent-
pending system which is deployed over the Internet on an Application Service
Provider (ASP) basis. Licensed users use the Virtual Prospector system to
deliver eCommercials to individuals with whom they have relationships, much the
same way individual sales representatives deliver printed collateral to
interested parties upon request. Delivering collateral over the Internet is
faster, significantly less expensive, interactive and can yield better results
than traditional paper collateral delivered via postal or overnight delivery.
Virtual Prospector is almost exclusively a business-to-business solution.

We intend to establish Virtual Prospector as a cost-effective alternative to
printed collateral by providing a compelling value proposition for our clients.
The Virtual Prospector system is designed to improve the efficiency and
effectiveness of sales representatives by enabling Internet-based delivery of
electronic collateral and providing reports that help them prioritize their
callbacks. The immediacy of delivery and the compelling nature of rich-media
brochures can help a sales representative turn an unqualified prospect into a
qualified prospect.

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<PAGE>

. One-to-Many--"Internet Relationship Marketing": We help our clients build
"clubs" or "communities" of interested parties who receive eCommercials
with relevant and compelling content.

Our Internet Relationship Marketing (IRM) systems enable our clients to use
our technology to provide eCommercials or other rich content to a constituent
group such as customers, employees or shareholders, generally comprised of
people who have signed up to receive it. Client companies can use our IRM
services to communicate Business-to-Business or Business-to-Consumer messages
to wide audiences.

Our eCommercial technology offers compelling content that is not deliverable
via text or graphic. Such content can be entertaining, educational or
persuasive. Delivering content desired by affinity groups is an excellent use
of the technology.

Other important aspects. Other important aspects of our products and
services include the ability to integrate our products and services with those
currently deployed by our clients, the ability to view eCommercials without a
current web connection, and our technology as a "front-end" for streaming.

Integrate with enterprise systems. We intend to help our clients to
integrate our Virtual Prospector system with their Website Content Management,
Sales Force Automation, Enterprise Resource Planning and Enterprise
Relationship Management packages to enable information sharing between the
systems.

View without a current web connection. Our technology has significant
advantages over on-line, or streaming media content delivery. Recipients can
interact with an eCommercial and can view and respond when convenient, rather
than requiring online viewing. Rather than providing streaming multimedia
content delivery services in which users must have an active connection to the
content provider in order to view rich media content, we deliver eCommercials
in a manner that allows end users to view them at their leisure. In addition,
our technologies allow us to provide highly specific feedback on the
effectiveness of each campaign to our customers.

Front-end for streaming technologies. While eCommercials can generally be
viewed offline, they can also serve as a "front end" for streaming
technologies, which require users to connect to content broadcast over the
Internet. An eCommercial can serve as a viewer and buffer for the Internet
broadcast, by delivering the first 15 to 30 seconds of rich media content then
delivering the remainder using streaming media. For example, if the content is
an announcement by a company CEO, the eCommercial can deliver the first 15
seconds, then seamlessly serve the remainder of the message via streaming
media.

Sources of revenue and internal organization. We generate revenue, and
deliver our products and services through three principal business units:
eComNetwork, eComTracker and eComstudio.

eCommercial Network Deliveries--eComNetwork. eCommercials are typically
delivered as email attachments and are generally the responsibility of our
eComNetwork business unit. Clients that license our architecture and SMA
systems deliver their eCommercials themselves. eCommercial delivery is
generally handled in one of three ways:

. Targeted deliveries to a subscriber base;

. Sent individually using our Virtual Prospector system; and

. For recipients not included in subscriber mailing lists, eCommercials may
be downloaded from ecommerce and other web sites.

eCommercial Activity Tracking and Reporting--eComTracker. Activity tracking
and reporting is handled by our eComTracker unit. eCommercials use industry-
standard web logging techniques to track the effectiveness of a campaign. We
gather information about how often each eCommercial is opened and viewed and
track the activity on related websites that we host.

20
<PAGE>

At the request of our client, when a recipient views or interacts with an
eCommercial, our servers can be configured to automatically log and/or
recognize the following information:

. the email address of the initial recipient of the eCommercial;

. whether the initial recipient forwarded the eCommercial to others; and

. the content reviewed by each recipient; including referrals.

This information allows the sender to accurately measure the interest and
attention generated by a single eCommercial or eCommercial campaign, and this
tracking data may be provided to the marketing partner sponsoring the
eCommercial.

eCommercial Consultation and Production--eComStudio. eCommercial
consultation and production is managed by our eComStudio production unit and
third-party ad agencies. Sound and video production can involve simple editing
or more elaborate on-location filming or special effects. We anticipate that
company-licensed third-party firms such as advertising agencies will
increasingly provide this service. Consultation charges vary depending on the
size, scope and length of a given campaign.

Additional Sources of Revenue. In addition to licensing revenue received
from larger users, per-item delivery and tracking charges, and consultation and
studio services, we receive revenue from revenue sharing and ad-sponsorship.
Sales of products or services through eCommercials may result in variable
commission revenues to us depending on the product or service being sold. In
addition, our clients may choose to sell or have us sell sponsorship
advertisements on their eCommercial. Each eCommercial can support multiple
sponsorships.

Sales and Marketing

Our key marketing objective is to brand ourselves as the leading Internet
sales and marketing automation company. To achieve this objective, we have a
national team of sales people and are pursuing direct sales and sales via
resellers to market leaders in several industries, including, but not limited
to:

. Computer hardware/software

. Financial services

. Entertainment

. Electronic commerce web sites

. Telecommunications

. Travel

. Industrial products

. Government

In addition, we intend to quickly increase our market penetration across
other industries and with smaller and medium-sized businesses by partnering
with companies that enable us to extend and strengthen our sales presence,
including Value Added Resellers database management and analytical customer
relationship firms, information technology solutions/service firms, advertising
agencies, and companies focused on providing robust solutions to the small and
medium-sized business market.

As previously indicated under "Business Strategy," we intend to profitably
commercialize our technology in other industries by partnering with market-
leading firms in those industries where our technology provides a compelling
application.

We are currently in negotiations with prospective clients from each of the
areas noted above.

21
<PAGE>

Strategic Relationships

As noted in our strategy, we intend to enter into strategic relationships to
increase the breadth of market acceptance of our SMA systems and to more
effectively and efficiently commercialize our technology. A summary of our
current strategic relationships is set forth below.

Lockheed Martin: We have a strategic relationship agreement with Lockheed
Martin Integrated Business Solutions (Lockheed), a leading systems integrator,
which provides for joint marketing and service delivery efforts and allows us
to utilize Lockheed in establishing and managing e-commerce projects. Our
Virtual Prospector solution is designed to be integrated with Enterprise
Resource Planning and Enterprise Relationship Management packages. As a premier
systems integrator, Lockheed is in the position to lead integrations for our
large customers. In addition, Lockheed has established relationships with
companies we believe can be key customers for us. Our cross-marketing
arrangement provides for Lockheed to recommend eCommercial solutions to their
customers and for us to recommend Lockheed system integration solutions to our
customers who require systems integration capabilities. We issued 30,000 shares
of our common stock to Lockheed as compensation for them entering into this
arrangement with us. All other aspects of our arrangement are expected to be at
our normal pricing.

eContributor.com: We have entered into a strategic relationship with
eContributor.com, Inc. that provides for joint integration of technologies and
cross-promotion of services. We have also made an equity investment into
eContributor.com in the amount of $100,000 and we intend to share revenues
generated from projects in which we work together. eContributor.com is an
Internet-based fundraising management and donation processing firm. They have
developed proprietary technologies that streamline charitable giving, which we
intend to integrate into related eCommercials. We have worked together on the
Steve Forbes presidential campaign and have several other prospective customers
in common.

The Gingrich Group: We have entered into a strategic relationship with The
Gingrich Group, which is headed by former Speaker of the House, Newt Gingrich.
As a technology and political consultancy to senior management of Fortune 100
companies, The Gingrich Group is in a unique position to introduce eCommercial
solutions to its client base. We receive consulting services at a discounted
rate, and have discounted our pricing for services that they employ in
marketing their services.

Eurpsville USA: We have entered into a strategic relationship with
Eurpsville USA, Inc., a creator of licensed properties dedicated to creating
quality children's properties, storybooks, and products that blend children's
entertainment and literacy. We will act as a distribution channel for
Eurpsville content.

We are currently negotiating several additional strategic relationships,
primarily with technology companies that provide products or services which
enhance the functionality or marketing of our technologies.

Intellectual Property

We regard our copyrights, trademarks, trade secrets and similar intellectual
property as critical to our success, and we rely on a combination of copyright
and trademark laws, trade secret protection, confidentiality and non-disclosure
agreements and contractual provisions with our employees and with third parties
to establish and protect our proprietary rights.

We have filed fourteen patent applications through the U.S. Patent and
Trademark Office (USPTO) under the Patent Cooperation Treaty designating all
member countries, including the United States, essentially all of Europe,
Japan, Korea, China, Canada and Mexico. These patent applications were filed in
October 1999 and cover aspects of our proprietary eCommercial authoring
software and our network architecture, as well as methods of using eCommercials
and related media in marketing. The USPTO is currently reviewing the
applications, and we plan to file additional patent applications in the future
with respect to various additional aspects of these and other technologies.

22
<PAGE>

We continue to develop proprietary computer software. We mark our software
with copyright notices, and intend to file copyright registration applications
where appropriate. We have also filed several federal trademark registration
applications for trademarks and service marks we use. In addition, we seek to
protect certain proprietary aspects of our products through nondisclosure
agreements with our employees, contractors and other third parties. There can,
however, be no assurance that any patents, copyright registrations, or
trademark registrations applied for by us will be issued, or if issued, will
sufficiently protect our proprietary rights.

We intend to continue to seek patent protection for technologies that we
consider important to the development of our business. We also intend to rely
upon copyright, trademark, trade secrets, know-how, and continuing
technological innovations to develop and maintain a competitive advantage.

Government Regulation

Although there are currently few laws and regulations directly applicable to
the Internet, it is likely that new laws and regulations will be adopted in the
United States and elsewhere covering issues such as broadcast license fees,
copyrights, privacy, pricing, sales taxes and characteristics and quality of
Internet services. The adoption of restrictive laws or regulations could slow
Internet growth. The application of existing laws and regulations governing
Internet issues such as property ownership, libel and personal privacy is also
subject to substantial uncertainty. There can be no assurance that current or
new government laws and regulations, or the application of existing laws and
regulations (including laws and regulations governing issues such as property
ownership, taxation, defamation and personal injury), will not expose us to
significant liabilities, slow Internet growth or otherwise hurt us financially.

We currently do not collect nor do we intend to collect sales or other taxes
with respect to the sale of services or products in states and countries where
we believe we are not required to do so. We do collect sales and other taxes in
the states in which we have offices and believe we are required by law to do
so. One or more states or countries have sought to impose sales or other tax
obligations on companies that engage in online commerce within their
jurisdictions. A successful assertion by one or more states or countries that
we should collect sales or other taxes on products and services, or remit
payment of sales or other taxes for prior periods, could have a material
adverse effect on our business, results of operations and financial condition.

The Communications Decency Act of 1996 (the "CDA") was enacted in 1996.
Although those sections of the CDA that, among other things, proposed to impose
criminal penalties on anyone distributing "indecent" material to minors over
the Internet were held to be unconstitutional by the U.S. Supreme Court, there
can be no assurance that similar laws will not be proposed and adopted.
Although we do not currently distribute the types of materials that the CDA may
have deemed illegal, the nature of such similar legislation and the manner in
which it may be interpreted and enforced cannot be fully determined, and
legislation similar to the CDA could subject us to potential liability, which
in turn could have an adverse effect on our business, financial condition and
results of operations. Such laws could also damage the growth of the Internet
generally and decrease the demand for our products and services, which could
adversely affect our business, results of operations and financial condition.

Competition

Although our marketing automation solutions and rich media asynchronous
messaging are rapidly emerging Internet marketing technologies, the market for
Internet marketing and marketing automation services is highly competitive and
we expect that competition will continue to intensify. We compete with other
marketing automation companies that provide various components of our product
and service offerings, including online thin media and streaming media
services, as well as traditional media such as television, radio and print, for
a share of the total budget for production and distribution of marketing
materials and targeted content.

23
<PAGE>

Many of our competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than we do and thus
may be able to respond more quickly to new or changing opportunities,
technologies and customer requirements. Also, many current and potential
competitors have wider name recognition and more extensive customer bases that
could be leveraged, thereby gaining market share to our detriment. Such
competitors may be able to undertake more extensive promotional activities,
adopt more aggressive pricing policies, and offer more attractive terms to
purchasers than we can. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to enhance their products.

Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. Such
competition could materially and adversely affect our ability to obtain
revenues from either license or service fees from new or existing customers on
terms favorable to us. Further, competitive pressures may require us to reduce
the price of our software and services. In either case, our business, operating
results and financial condition would be materially and adversely affected.
There can be no assurance that we will be able to compete successfully with
existing or new competitors or that competition will not have a material
adverse effect on our business, financial condition and operating results.

Research and Development

We have developed several proprietary technologies which are used in a
variety of Internet-related products and services. These products and services
are continually being enhanced to meet the needs of the Internet advertiser and
retailer. The Research and Development department is organized by area of
interest including Multimedia Development, Database Development, Web
Development, and Networking. Each development area requires highly specialized
individuals with extensive backgrounds in their respective disciplines.

Through December 31, 1999, we had incurred $706,417 of research and
development expenses in the engineering of our software tools and the
eComNetwork.

Facilities

Our headquarters and production facilities are at 101 Enterprise, Suite 340,
Aliso Viejo, California 92656. The base rent is $29,642 per month and the lease
expires in November 2004. In March 2000, we leased additional sales offices in
San Clemente, California at a monthly rental of $3,675 through February 2001.
We also lease an office in Cupertino, California at a current monthly rent of
$12,251, a portion of which will be subleased to an unrelated party. This lease
expires September 1, 2004. In addition, effective December 1, 1999, we opened
an office in New York City, in space we are subleasing for $2,883 per month.

We anticipate that we will require additional space within the next
12 months and that suitable additional space will be available on commercially
reasonable terms, although there can be no assurance in this regard. We do not
own any real estate.

Legal Proceedings

Although we have not become a party to any material legal proceeding since
eCommercial.com was founded, we are named as a defendant in a lawsuit filed on
March 25, 1999 in the US Bankruptcy Court. The lawsuit arises from an Asset
Purchase Agreement, dated November 25, 1998, pursuant to which our predecessor,
Wireless Netcom, had proposed to acquire the assets of Voxel, Inc. for $5
million. A dispute about the terms of the agreement arose, and Wireless Netcom
did not complete the acquisition. The Bankruptcy trustee then sold the assets
of Voxel for less and sued Wireless Netcom for the difference. We acquired this
lawsuit when we subsequently merged with Wireless on April 19, 1999.

On October 27, 1999, the trial judge granted a summary judgment motion in
favor of the plaintiffs in the amount of $1.8 million. In January 2000, we
appealed the decision and pledged a $2 million certificate of deposit to the
court. We plan to aggressively pursue a resolution of this matter.

24
<PAGE>

Pursuant to an indemnity agreement, one of our significant shareholders, who
is also an officer and director, has agreed to reimburse to us in common stock
or cash, at his option, any amounts we must pay to the plaintiffs. Accordingly,
we have recorded the entire amount as part of our current liabilities of
September 30, 1999, and will record any reductions in the balance due or
amounts received in repayment as additional paid-in capital at the time such
amounts are received.

Employees

As of February 29, 2000, we had 57 full-time employees. None of our
employees are subject to a collective bargaining agreement and we believe that
our relations with our employees are good.

25
<PAGE>

MANAGEMENT

Directors and Executive Officers

The directors and executive officers of the company, their respective ages
and positions with us as of February 29, 2000 are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Thomas J. Blakeley...... 41 Chief Executive Officer, President, Chairman of the Board
Eric A. McAfee.......... 37 Executive Vice President, Corporate Secretary, Director
Mark Grundy............. 38 Chief Operating Officer, Executive Vice President, Director
John Troiano............ 29 Director
Michael R. Friedl....... 36 Chief Financial Officer, Treasurer
Rick McEwan............. 35 Executive Vice President of Engineering
Michael Briola.......... 29 Executive Vice President, Creative Director
Donald R. Howren........ 40 Vice President of Sales
</TABLE>

Thomas J. Blakeley, 41, CEO, President and Chairman of the Board. Mr.
Blakeley co-founded MindArrow Systems, and currently serves as President, Chief
Executive Officer and Chairman of the Board. From 1998 until founding the
Company, Mr. Blakeley served as Vice President of Sales for Zap International,
which was subsequently acquired by eCommercial.com. From 1996 to 1998, he
served as director of marketing and sales for Cubic Videocomm, creators of
CVideo-Mail, one of the first retail video email products. From 1987 until
1996, he was a principal of Blakeley & Associates, a marketing consulting and
training organization which produced training seminars for marketing
executives.

Eric A. McAfee, 37, Executive Vice President and Director. Mr. McAfee is the
co-founder of MindArrow Systems and currently serves as Executive Vice
President, Corporate Secretary and a Director of the company. Mr. McAfee is
also a principal at Berg McAfee Companies, a venture capital partnership based
in Cupertino, California, with investments in Internet, software and
telecommunications companies. From 1995 until joining us, he operated McAfee
Capital, a venture capital firm. In 1992, Mr. McAfee co-founded New Media
Corporation, a PC-card manufacturing company and served as its Chief Financial
Officer and Director until 1995. Mr. McAfee has also served for six years as a
member of the Board of Directors of the California Manufacturer's Association.
Mr. McAfee is a graduate of Fresno State University with a B.S. in Management
(with an emphasis in statistics) and the Stanford Graduate School of Business
Executive Program.

Mark Grundy, 38, Executive Vice President, Chief Operating Officer and
Director. Mr. Grundy joined the Company in May 1999 as Executive Vice
President, Chief Operating Officer and a director. In 1990, he founded
Destination America, Inc. a company that provided English language tours of the
United States. Mr. Grundy served as President of Destination America from its
inception until joining eCommercial.com in May 1999. From 1981 to 1990, he
developed sales and marketing strategies for Americantours International, Inc.,
where he served as Vice President, Sales and Marketing.

John Troiano, 29, Director. Mr. Troiano, who joined our Board in November
1999, is the Managing Director of @ONEX LLC, a significant shareholder of the
Company. @ONEX LLC is wholly-owned by Onex Corporation. Mr. Troiano has led
Onex' strategic investments in a number of areas, particularly e-commerce and
the Internet. He has also initiated and developed value creation ideas in a
number of other industry sectors where Onex may now invest, specifically
telecommunications, financial services and consumer products. Before joining
Onex, he was employed by Donaldson, Lufkin & Jenrette in both the Investment
Banking and Merchant Banking Groups. He also worked in corporate finance for
Gleacher & Co. in New York. Mr. Troiano received his B.S. in Economics (summa
cum laude) from the Wharton School, University of Pennsylvania; and his M.B.A.
from the Harvard Graduate School of Business Administration. Mr. Troiano was
elected to our Board in November 1999 as a representative of @ONEX LLC as a
result of our Series B preferred stock financing.

26
<PAGE>

Michael R. Friedl, CPA, 36, Chief Financial Officer. Mr. Friedl joined the
company as Chief Financial Officer and Treasurer in May 1999. Prior to joining
us, Mr. Friedl served as President of DialRight Software, Inc., a database
utility company for which he continues to serve as a member of its board of
directors. Prior to joining DialRight, Mr. Friedl was the Chief Financial
Officer of V-Systems, Inc., a software company that spun out DialRight as a
separate venture. From 1995 to 1997, Mr. Friedl served as Chief Financial
Officer for publicly-held Grip Technologies, Inc., an Irvine, California,
manufacturer of golf club components. From 1993 to 1995, Mr. Friedl served as
Corporate Controller for New Media Corporation, a high-tech manufacturing
company. From 1986 to 1993, Mr. Friedl worked in public accounting, most
recently for Arthur Andersen & Co. where he served as an Audit Manager. Mr.
Friedl is a graduate of Kent State University and is a Certified Public
Accountant licensed in Ohio and California.

Richard R. McEwan, 35, Executive Vice President of Engineering. Mr. McEwan
joined the company in April 1999 as Vice President of Engineering. Prior to
joining us, Mr. McEwan served as President, CEO, and a co-founder of Zap
International, a video compression technology company which was acquired by
the Company in April 1999. Prior to co-founding Zap International, Mr. McEwan
was a manager with Fourth Communications Network from 1993 through 1998, where
he managed the development of Internet systems for the hotel industry based on
Microsoft Windows NT Server, Windows 3.1/95, and NT Workstation as well as the
database systems for statistical gathering for all of Fourth Communications'
Internet-related advertising and commerce information. Prior to joining Fourth
Communications, Mr. McEwan ran his own consulting business where he created
custom sales information databases for various organizations. Before entering
the consulting field, Mr. McEwan spent over eight years in several technical
and marketing duties for SuperMac Technology, RasterOps Corporation, and
Ramtek Corporation.

Michael Briola, 29, Vice President, Creative Director. Mr. Briola joined
the company in April 1999 as Vice President, Creative Director. Prior to
joining us, Mr. Briola founded and served as Vice President of Marketing and a
director of Zap International, where he played a major role in the development
of the Zap Media Messenger technology. Prior to his work at Zap International,
Mr. Briola co-founded Cameo International (now AnTares Systems) where he
served as Vice President of Technology and Marketing. Prior to founding Cameo,
Mr. Briola worked for MegaChips Corporation, a Japanese semiconductor design
firm specializing in audio/video codec and systems technologies. Previously,
Mr. Briola served as Technical Sales Director, Professional Products Division
for InVision Interactive, Inc. and was responsible for developing and
maintaining sales channels in the United States and abroad. From 1993 to 1996,
Mr. Briola maintained a consulting practice dedicated to supplying high-end
computer-based multimedia design and production equipment where he designed
facilities and equipment systems for clients.

Donald R. Howren, 40, Vice President of Sales. Mr. Howren joined us in
January 2000. Prior to joining us, he served as Vice President and General
Manager for the Analytic Applications Products division of Best Software,
which in 1999 acquired Omni Vista Software, a company Mr. Howren served as
Vice President of Marketing and Business Development since 1998. From 1995 to
1997, he served as Vice President of Marketing and Strategic Partners for
Epicor Software, a provider of enterprise business software.

Other Significant Employees

Other significant employees of the company, their respective ages and
positions with us are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Serge Herring................. 51 Vice President of Research & Development
Adrian Turcotte............... 49 Vice President of Media Development
</TABLE>

Serge Herring, 51, Vice President of Research & Development. Mr. Herring
joined the company in April 1999 as Director of Program Development, and was
named Vice President of Research & Development in November 1999. Prior to
joining us, Mr. Herring was Senior Software Engineer for Zap International, a

27
<PAGE>

video compression technology company which was acquired by the company in April
1999. From 1997 to 1998, Mr. Herring worked in research and development for
Innovacom, Inc., a video compression company serving the broadcast industry.
From 1996 to 1997, he worked as a Principle Engineer for Intellect Electronics,
Inc., a developer of point-of-sale terminals for the retail and banking
industries.

Adrian Turcotte, 49, Vice President of Media Development. Mr. Turcotte
joined the company as Vice President of Media Development in April 1999. From
1987 until joining us, he was Executive Producer for Odyssey Productions, a
producer of video presentations for the educational and entertainment markets.
Mr. Turcotte holds a Master's Degree from UCLA.

Executive Compensation

The following table sets forth the total compensation for each of our most
highly compensated executive officers whose total salary and bonus for the year
ended September 30, 1999 would have exceeded $100,000 on an annualized basis
(collectively, the "Named Executive Officers"):

Summary Compensation Table

<TABLE>
<CAPTION>
Name and Principal Position Salary Bonus Options
--------------------------- -------- ------- -------
<S> <C> <C> <C>
Thomas Blakeley, Chief Executive Officer(1)........ $178,000 $ -- --
Eric A. McAfee, Executive Vice President(1)........ 172,000 -- --
Mark Grundy, Chief Operating Officer(1)............ 168,000 10,000 225,000
Michael Friedl, Chief Financial Officer............ 110,000 3,000 100,000
Deborah Olinto, Vice President of Sales(2)......... 130,000 -- 100,000
Ross Teasley, Vice President of Marketing(3)....... 120,000 -- 85,000
</TABLE>
- --------
(1) Effective October 1, 1999, we entered into employment contracts with these
executives specifying levels of compensation, duties and cause for
termination.

(2) Effective October 1999, Ms. Olinto left the company.

(3) Effective March 2000, Mr. Teasley left the company.

28
<PAGE>

Fiscal 1999 Stock Option Grants to Executives

The following table sets forth for each of the Named Executive Officers
certain information concerning stock options granted during fiscal 1999.

<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
for Option Term
Name and Principal -----------------
Position Options % of Total Exercise Price Expiration 5% 10%
------------------ ------- ---------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas Blakeley, Chief
Executive Officer...... -- -- -- -- -- --
Eric A. McAfee,
Executive Vice
President.............. -- -- -- -- -- --
Mark Grundy, Chief
Operating Officer...... 175,000(1) 8% $ 1 2005 $ 59,517 $135,023
50,000(2) 2 8 2005 136,038 308,624
Michael Friedl, Chief
Financial Officer...... 100,000(3) 5 1 2004 27,628 61,051
Deborah Olinto, Vice
President of Sales..... 100,000(4,5) 5 8 2005 272,077 617,249
Ross Teasley, Vice
President of
Marketing.............. 85,000(4,6) 4 8 2005 231,265 524,661
</TABLE>

Potential realizable values are net of exercise price, but before the
payment of taxes associated with exercise. Amounts represent hypothetical gains
that could be achieved for the respective options if exercised at the end of
the option term. The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange Commission
and do not represent our estimate or projection of our future common stock
prices. These amounts represent assumed rates of appreciation in the value of
the common stock from the fair market value on the date of grant. Actual gains,
if any, on stock option exercises are dependent on the future performance of
our common stock and overall stock market conditions. The amounts reflected in
the table may not necessarily be achieved.
- --------
(1) This option was granted in April 1999 and vests one-third in April 2000
with the remainder vesting quarterly over the following two years.

(2) This option was granted in September 1999 and vests one-third in September
2000 with the remainder vesting quarterly over the following two years.

(3) This option was granted in April 1999. 60,000 shares of which are
immediately vested, 40,000 shares of which vest one-third in April 2000
with the remainder vesting quarterly over the following two years.

(4) These options were granted in August 1999 and vest one-third in August 2000
with the remainder vesting quarterly over the following two years.

(5) Effective October 1999, Ms. Olinto left the company.

(6) Effective March 2000, Mr. Teasley left the company.

29
<PAGE>

Stock Option Exercises And Year-End Value Table

The following table reflects the number of shares covered by both
exercisable and non-exercisable stock options as of September 30, 1999 for the
Named Executive Officers. Values for "in-the-money" options represent the
spread between the exercise price of existing options and the market value for
our common stock on September 30, 1999, which was $8.125 per share.

<TABLE>
<CAPTION>
Value of
Options Outstanding In-the-Money Options
------------------------- -------------------------
Name and Principal
Position Exercisable Unexercisable Exercisable Unexercisable
------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Thomas Blakeley, Chief
Executive Officer...... -- -- -- --
Eric A. McAfee,
Executive Vice
President.............. -- -- -- --
Mark Grundy, Chief
Operating Officer...... -- 225,000 -- $1,603,125
Michael Friedl, Chief
Financial Officer...... 60,000 40,000 $427,500 285,000
Deborah Olinto, Vice
President of Sales(1).. -- 100,000 -- 12,500
Ross Teasley, Vice
President of Marketing
(2).................... -- 85,000 -- 10,625
</TABLE>
- --------

(1) Effective October 1999, Ms. Olinto left the company.

(2) Effective March 2000, Mr. Teasley left the company.

Compensation of Directors

We may reimburse directors for reasonable expenses pertaining to attending
meetings, including travel, lodging and meals but we do not pay directors for
their service as directors, as all of our directors are either executive
officers or significant shareholders.

Employment Agreements

As of September 30, 1999, each of the Named Executive Officers was a party
to a Change in Control Agreement with us, which provides for payment of two
year's salary to the executive if we are acquired by another company and he (or
she) loses his (or her) job for other than cause, as defined in the agreement.

In addition, effective October 1, 1999, we entered into three-year
employment contracts with Messrs. Blakeley, Grundy and McAfee, setting forth
terms of their employment, as follows:

<TABLE>
<CAPTION>
Year Base Salary Bonus(1)
----- ----------- --------
<S> <C> <C> <C>
Thomas Blakeley, Chief Executive Officer......... 2000 $198,000 3.7%
2001 248,000
2002 298,000

Eric A. McAfee, Executive Vice President......... 2000 182,000 2.4%
2001 232,000
2002 282,000

Mark Grundy, Chief Operating Officer............. 2000 178,000 1.9%
2001 228,000
2002 278,000
</TABLE>
- --------
(1) Bonus is based upon a percentage of operating income.

Each of these employment agreements provides for payment in the amount of
two years salary if we terminate their employment. In addition, each contract
provides a $1 million life insurance policy, a car allowance of $750 per month,
and a car down payment reimbursement of $5,000 every two years.

30
<PAGE>

Stock Option Plans

Our Board of Directors adopted our 1999 Stock Option Plan (the "Plan") in
April 1999. The Plan as amended in December 1999, was established to furnish
incentives for employees, directors and consultants to continue their service
to us. We reserved 3,000,000 shares of common stock for issuance upon exercise
of options granted under the Plan, which have vesting schedules up to 3 years.
However, in the event we undergo a change in control, as defined in the Plan,
all unvested options immediately become fully vested. Under the Plan, options
are granted at a price equal to the fair market value on the date of grant.

As of February 29, 2000, options to purchase 2,802,100 shares of common
stock at exercise prices ranging from $1 to $25 had been issued under the Plan.
Our Board of Directors administers the Plan. We intend to issue additional
options or other incentives to attract and retain qualified management and
directors. Such plans and incentives could have a dilutive effect on our common
stock.

Indemnification of Directors and Officers

Our Bylaws provide for indemnification of our directors, officers and
employees as follows: Any person made a party to an action, suit or proceeding,
by reason of the fact that he/she, his/her testator or intestate representative
is or was a director, officer or general manager of the Corporation, or of any
Corporation in which he/she served as such at the request of the Corporation,
shall be indemnified by the Corporation against the reasonable expenses,
including attorney's fees, actually and necessarily incurred by him/her in
connection with any appeal therein, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding, or in connection with
any appeal therein that such officer, director or general manager is liable for
negligence or misconduct in the performance of his/her duties.

Our Bylaws further state that the foregoing right of indemnification shall
not be deemed exclusive of any other rights to which any officer or director or
general manager may be entitled apart from the provisions of this section.

The amount of indemnity to which any officer, director or general manager
may be entitled shall be fixed by the board of directors, except that in any
case where there is no disinterested majority of the board available, the
amount shall be fixed by arbitration pursuant to the then existing rules of the
American Arbitration Association. In the event that whatever liability
insurance is procured for the protection of the company, its officers,
directors or management, then the indemnification shall not exceed the maximum
percent of policy coverage procured. We have also entered into indemnification
agreements with each of our directors.

31
<PAGE>

CERTAIN TRANSACTIONS AND RELATIONSHIPS

Certain executive officers and directors of the company are former
shareholders of eCommercial.com, Inc., a California corporation ("eCommercial
California"). Pursuant to the terms of the Merger Agreement dated as of April
19, 1999, between us and the shareholders of eCommercial California, those
executive officers and directors acquired an aggregate of 4,000,000 shares of
our common stock in exchange for their eCommercial California shares.

In September 1999, the Company entered into a non-cancelable five-year
sublease for a satellite office in Cupertino, California. The sublease calls
for minimum monthly rental payments ranging from $10,091 per month at the start
of the lease and gradually increasing to $13,358 per month by the end of the
lease. The sublessor is a company related to Clyde Berg, a significant
stockholder and Eric McAfee, an officer, director and significant stockholder.
The sublease terms are identical to the terms of the sublessor's lease with the
landlord, and are favorable to the terms we would have been able to acquire on
our own.

MARKET FOR COMMON STOCK

The principal United States market for our common stock is the OTC Bulletin
Board. Our common stock began trading on the OTC Bulletin Board on April 29,
1999. The high and low bid prices for shares of our common stock for each
quarter since April 29, 1999 were as follows:

<TABLE>
<CAPTION>
Low High
--- ----
<S> <C> <C>
Quarter ended June 30, 1999:.................................. 6 1/2 16
Quarter ended September 30, 1999:............................. 7 10
Quarter ended December 31, 1999............................... 7 1/8 29 1/8
Quarter ended March 31, 2000.................................. 18 7/8 55
</TABLE>
- --------
Source: www.otcbb.com

These quotations represent inter-dealer prices, without retail mark-up,
markdown or commission, and may not represent actual transactions. On March 31,
2000, there were approximately 2,300 holders of record of our common stock and
185 holders of record of our preferred stock.

32
<PAGE>

SIGNIFICANT STOCKHOLDERS

The following sets forth certain information as of February 29, 2000 (the
"Reference Date") with respect to the beneficial ownership of our common stock,
(i) by each person known by us to own beneficially more than five percent of
our common stock, (ii) by each executive officer and director, and (iii) by all
officers and directors as a group. Unless otherwise indicated, all persons have
sole voting and investment powers over such shares, subject to community
property laws. As of the Reference Date, there were 9,692,295 shares of common
stock and 1,388,073 shares of preferred stock outstanding.

<TABLE>
<CAPTION>
Number of Percent
Name and Address of Owner(1) Shares(2) of Class
---------------------------- --------- --------
<S> <C> <C>
Thomas J. Blakeley, CEO, President, Chairman........... 2,000,000 20.9%

Eric A. McAfee, EVP, Corporate Secretary, Director..... 2,036,567 21.2

Mark Grundy, COO, EVP, Director........................ 120,293 1.2

John Troiano, Director(3).............................. 549,500 5.5
c/o @ONEX LLC, 712 Fifth Avenue, 40th Floor New York,
NY 10019

Michael R. Friedl, CFO, Treasurer...................... 60,000 0.6

Ross Teasley, VP, Marketing(5)......................... -- --

All directors and executive officers taken as a group.. 4,487,360 44.8

Clyde Berg............................................. 933,333 9.7
10050 Bandley Drive Cupertino, CA 95014

@ONEX LLC(4)........................................... 525,000 5.2
712 Fifth Avenue, 40th Floor New York, NY 10019

Joseph McCarthy........................................ 480,000 5.0
PO Box 361256, Milpitas, CA 95036-1256
</TABLE>
- --------

(1) Except as otherwise noted, the address for each person is c/o MindArrow
Systems, Inc., 101 Enterprise Suite 340, Aliso Viejo, CA 92656.

(2) Unless otherwise noted, we believe that all persons named in the table have
sole voting and investment power with respect to all shares of common stock
listed as beneficially owned by them. A person is deemed to be the
beneficial holder of securities that can be acquired within 60 days from
the Reference Date upon the exercise of warrants or options. Each
beneficial owner's percentage ownership is determined by including shares,
underlying options or warrants which are exercisable currently, or within
60 days following the Reference Date, and excluding shares underlying
options and warrants held by any other person.

(3) Mr. Troiano is the managing director of @ONEX LLC.

(4) @ONEX LLC is wholly-owned by Onex Corporation. Mr. Gerald W. Schwartz is
the Chief Executive Officer of Onex Corporation and owns stock having a
majority of the voting power of Onex Corporation's outstanding stock. Onex
Corporation and Mr. Schwartz may also be deemed beneficial owners of the
shares owned by @ONEX LLC. The business address of Onex Corporation and Mr.
Schwartz is 161 Bay Street, Toronto, Ontario M5J 2S1, Canada.

(5) Effective March 2000, Mr. Teasley left the company.

33
<PAGE>

SELLING SECURITY HOLDERS

The stockholders who may from time to time offer their shares for sale
pursuant to this prospectus are as follows:

<TABLE>
<CAPTION>
Shares Owned
Prior to Shares Being Shares Owned
this Offered Pursuant After the
Name of Selling Stockholder(1) Offering(2) to this Prospectus Offering(3)
- ------------------------------ ------------ ------------------ ------------
<S> <C> <C> <C>
@ONEX LLC(4)..................... 525,000 525,000 --
Alfred Abiouness................. 11,000 11,000 --
Richard Aghababian............... 6,188 6,188 --
Altech Packaging Co.............. 3,300 3,300 --
Alignment Captial(5) ............ 137,500 137,500 --
America First Associates Corp. .. 1,875 1,875 --
American High Growth Equities
Retirement Trust................ 18,563 18,563 --
Francis Anderson................. 2,614 2,614 --
Barclay M. Armitage.............. 3,713 3,713 --
William Barclay Trust............ 4,950 4,950 --
Barrington Barisic............... 1,444 1,444 --
Darin Barker..................... 2,062 2,062 --
Linda Bassin..................... 3,300 3,300 --
Steve Bauman..................... 8,334 8,334 --
Alan Beinhacker.................. 412 412 --
Melissa Belyski.................. 500 500 --
Jerome & Stuart Bercun........... 2,475 2,475 --
Valery Berger.................... 13,750 13,750 --
Bill Berkley..................... 4,950 4,950 --
Bill & Claudia Berkley........... 6,188 6,188 --
Paul D. Berkley.................. 2,475 2,475 --
Paul & Judith Berkman............ 6,188 6,188 --
Gregory Beyerl................... 6,188 6,188 --
Edwin R. Bindseil................ 4,400 4,400 --
Kostaki Bis...................... 3,713 3,713 --
George Bisnoff................... 2,363 2,363 --
BNB Associates c/o Ben Bollag.... 6,875 6,875 --
Michael Bollag................... 6,875 6,875 --
Richard Bowe..................... 3,300 3,300 --
Steven Braccini.................. 12,375 12,375 --
Christopher Brothers............. 2,062 2,062 --
Alan & Cathy Buraghi............. 1,238 1,238 --
Ronald Buzard.................... 2,200 2,200 --
B V H Holdings c/o Ronald
Krinick......................... 4,400 4,400 --
John Byram....................... 34,375 34,375 --
Sean Cahill...................... 5,500 5,500 --
Capitol Bay Securities........... 722 722 --
Car Cap, Co, LLC c/o Richard
Carney.......................... 11,413 11,413 --
James Carr....................... 3,300 3,300 --
Addie B. Carroll................. 1,856 1,856 --
Susan Carroll.................... 1,375 1,375 --
Richard Casari................... 2,475 2,475 --
Francis Cheong................... 1,238 1,238 --
Timothy & Nadine Cherney......... 2,475 2,475 --
Robert & Phyllis Ching........... 3,988 3,988 --
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
Shares Owned
Prior to Shares Being Shares Owned
this Offered Pursuant After the
Name of Selling Stockholder(1) Offering(2) to this Prospectus Offering(3)
- ------------------------------ ------------ ------------------ ------------
<S> <C> <C> <C>
Robert Ching Trust............... 4,125 4,125 --
Raymond & Ellen Chow............. 4,950 4,950 --
James & Caren Cobb............... 22,000 22,000 --
Marc Cohen....................... 1,650 1,650 --
Del Coleman (Rose Inc.).......... 42,350 42,350 --
Thomas C. Coleman & Donna K.
Norell.......................... 2,200 2,200 --
Tom Coleman IRA.................. 6,875 6,875 --
James F. Corcoran................ 9,900 9,900 --
Edmund Cranch.................... 6,600 6,600 --
Robert W. Crawford............... 3,713 3,713 --
Jonathan Cress IRA............... 3,300 3,300 --
Scott Crowther................... 3,300 3,300 --
Brad Danforth.................... 2,475 2,475 --
Paul De Groot.................... 8,000 8,000 --
Harvey Deckert................... 6,188 6,188 --
Daniel Denihan................... 9,900 9,900 --
Albert Digangi................... 2,475 2,475 --
David B. Doft.................... 2,750 2,750 --
Jacob Doft....................... 5,500 5,500 --
John P. Donohue.................. 7,425 7,425 --
Paul Dorfman..................... 1,378 1,378 --
Yakov Dumanis.................... 3,300 3,300 --
Glenn & Dorothy Egli............. 2,475 2,475 --
Christopher C. Ertz.............. 8,334 8,334 --
Paul Eshelby..................... 3,600 3,600 --
Clifford A. & Helen Falkenau..... 2,200 2,200 --
Tim Farrell...................... 2,475 2,475 --
Aaron Feder...................... 1,856 1,856 --
Dale S. Feinblatt & Jack
Feinblatt....................... 4,400 4,400 --
Michael Fenton................... 20,950 20,950 --
Lloyd Fields..................... 3,713 3,713 --
Kevin Fight...................... 9,281 9,281 --
Michael Finnell.................. 3,438 3,438 --
Jacob & Elizabeth Fish........... 4,813 4,813 --
D. A. Fleming.................... 800 800 --
Fred Foulkes..................... 2,475 2,475 --
Brian Frank...................... 141 141 --
Matthew Frank.................... 2,200 2,200 --
Henry Fredericks................. 11,000 11,000 --
Phil Fresen...................... 2,063 2,063 --
Stanley Friedlander.............. 3,300 3,300 --
Keith Gaeddert................... 3,713 3,713 --
Tim Gannon....................... 2,475 2,475 --
Robert Ganz(6)................... 100,000 100,000 --
Theodore Gardocki Trust.......... 13,338 13,338 --
Kent Garlinghouse c/o Shadow
Capital......................... 8,800 8,800 --
Mark Geller...................... 2,475 2,475 --
Richard E. Gerzof................ 37,125 37,125 --
Ray Glover....................... 3,200 3,200 --
</TABLE>

35
<PAGE>

<TABLE>
<CAPTION>
Shares Owned
Prior to Shares Being Shares Owned
this Offered Pursuant After the
Name of Selling Stockholder(1) Offering(2) to this Prospectus Offering(3)
- ------------------------------ ------------ ------------------ ------------
<S> <C> <C> <C>
Elliot Goldberg................... 2,475 2,475 --
Stanley Goldberg.................. 11,000 11,000 --
Steven Graves..................... 6,188 6,188 --
Sean Green........................ 3,713 3,713 --
Paul & Linda Gridley.............. 3,438 3,438 --
Mark Grundy(7).................... 120,293 100,000 20,293
Martin P. Hanly................... 30,000 30,000 --
Zachary Walker Hanson............. 5,000 5,000 --
Jordan Taylor Hanson.............. 5,000 5,000 --
Clarke Isaac Hanson............... 5,000 5,000 --
John Hatsopoulos.................. 1,091 1,091 --
Lawrence S. and Barbara Heller.... 4,000 4,000 --
R.G. Hildreth Jr. ................ 2,750 2,750 --
Daryl & Joan Hill................. 5,500 5,500 --
David Hodkinson................... 2,000 2,000 --
Douglas & Alexis Hogue............ 3,300 3,300 --
Andrew Howard..................... 1,238 1,238 --
Donald R. Howren, Jr. ............ 4,400 4,400 --
Roger Husted...................... 6,188 6,188 --
IBT, Inc.......................... 40,000 40,000 --
David Ivers....................... 4,950 4,950 --
JAOR c/o James Jacobs............. 5,500 5,500 --
Art Jenkins....................... 3,300 3,300 --
Colleen Jenkins................... 1,100 1,100 --
Irwin & Ruth Kabat................ 1,320 1,320 --
Leo G. & Merle Kailas............. 3,300 3,300 --
Robert Kantor..................... 12,375 12,375 --
Gerald Kay........................ 2,200 2,200 --
Frances Kehoe..................... 600 600 --
Peter Kellner..................... 13,750 13,750 --
Jerry Kessler..................... 1,650 1,650 --
Raji Khabbaz...................... 1,650 1,650 --
Norman O. King.................... 3,300 3,300 --
Aaron Kirzner..................... 2,200 2,200 --
Harvey Kohn....................... 16,500 16,500 --
Helen Kohn........................ 89,016 89,016 --
Jeffrey Kohn...................... 2,200 2,200 --
Michael Kohn...................... 1,562 1,562 --
Stuart Kohn....................... 1,563 1,563 --
Leonard Korets.................... 7,700 7,700 --
Lyudmila Korets................... 2,475 2,475 --
Walter Koschak.................... 6,875 6,875 --
Raymond Kralovic.................. 11,000 11,000 --
Ronald & Elizabeth Krinick........ 3,300 3,300 --
David & Catherine Langlois........ 5,500 5,500 --
Curtis Lanning.................... 3,750 3,750 --
Barbara Lazarus................... 1,856 1,856 --
Eddie E. Lee...................... 11,000 11,000 --
Michael Limberg................... 5,500 5,500 --
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
Shares Owned
Prior to Shares Being Shares Owned
Name of Selling this Offered Pursuant After the
Stockholder(1) Offering(2) to this Prospectus Offering(3)
- --------------- ------------ ------------------ ------------
<S> <C> <C> <C>
Morris Macy............. 3,713 3,713 --
Martin Madorsky & Judith
Richard................ 6,188 6,188 --
Dante & Jeanine Maffeo.. 1,238 1,238 --
Tom Manz................ 10,000 10,000 --
Judy Marcucilli......... 3,300 3,300 --
Robert Margolin......... 2,063 2,063 --
James A. Martens........ 9,900 9,900 --
Lewis Mason............. 20,950 20,950 --
Raina Massand........... 1,650 1,650 --
Robert Mattei........... 1,238 1,238 --
Adam McAfee(8).......... 28,050 28,050 --
George McDonnell........ 3,713 3,713 --
John McMains............ 5,000 5,000 --
John McNierney.......... 3,713 3,713 --
Chris Meiklejohn........ 9,600 9,600 --
Aris Melissarratos...... 6,188 6,188 --
James Milgard........... 13,613 13,613 --
Allen Moore............. 4,400 4,400 --
Stuart Morrice.......... 2,500 2,500 --
Samuel Morse............ 3,300 3,300 --
Dave Mosenson........... 2,888 2,888 --
Peter Moser............. 11,000 11,000 --
Nancy Murdocco.......... 600 600 --
Robert & Barbara
Myerson................ 3,713 3,713 --
Namax Corp.............. 25,000 25,000 --
Irl Nathan.............. 25,000 25,000 --
Barry F. Nathanson...... 12,375 12,375 --
Jules Ness.............. 2,475 2,475 --
Allen Notowitz.......... 3,713 3,713 --
Jerry Novack............ 4,400 4,400 --
Adam & Sherri Ocner..... 9,625 9,625 --
Elizabeth Olander....... 1,000 1,000 --
Jeffrey R. Olander...... 30,000 30,000 --
Peter O'Neill........... 2,564 2,564 --
Peter & Rosemary
O'Neill................ 11,000 11,000 --
Walter O'Neill.......... 3,713 3,713 --
Bertram Ordan........... 1,238 1,238 --
KarenAnn Orlando........ 600 600 --
Anthony Pasco........... 688 688 --
Simon & Adina Pelman.... 3,713 3,713 --
Jonathan Plate.......... 3,713 3,713 --
Gabriel Plaut........... 127 127 --
Donald Poinsette........ 3,713 3,713 --
Paul Potamianos......... 6,600 6,600 --
John & Norma Price...... 2,200 2,200 --
Privet Row, Inc......... 34,375 34,375 --
Sheldon Rabin........... 9,213 9,213 --
Sol Rabinipour.......... 5,500 5,500 --
Edward Raskin........... 11,000 11,000 --
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
Shares Owned
Prior to Shares Being Shares Owned
this Offered Pursuant After the
Name of Selling Stockholder(1) Offering(2) to this Prospectus Offering(3)
- ------------------------------ ------------ ------------------ ------------
<S> <C> <C> <C>
David Raven...................... 37 37 --
Marsha & Barry Reiss............. 2,200 2,200 --
Stacey Richards.................. 1,650 1,650 --
Edwin W. Richardson.............. 3,300 3,300 --
Kevin Riegelsberger.............. 6,875 6,875 --
Ed Roberts....................... 5,000 5,000 --
Margaret Rogers.................. 13,750 13,750 --
Romar Fabrics Corp............... 3,300 3,300 --
John Rose........................ 6,875 6,875 --
David Rosensaft & Debra
Braverman....................... 22,000 22,000 --
Steven Rubel..................... 6,188 6,188 --
Pairoj Ruktanonichai............. 6,188 6,188 --
Richard Santulli c/o Executive
Jet............................. 11,000 11,000 --
David Schneider.................. 3,713 3,713 --
Thomas Schoenauer................ 2,475 2,475 --
Joel Schoenfeld.................. 3,713 3,713 --
Howard Shapiro................... 2,475 2,475 --
Michael L. Shinn................. 6,188 6,188 --
Alexander Slobin................. 3,300 3,300 --
Glenn H. Spears.................. 12,375 12,375 --
Jerold Stern..................... 13,200 13,200 --
Cindy Stewart.................... 16,775 16,775 --
Joseph & Sandra Stewart.......... 3,713 3,713 --
Melissa Stewart.................. 16,775 16,775 --
Sandra Stewart................... 3,438 3,438 --
Ronit Sucoff..................... 92,141 92,141 --
Iris Sultan...................... 325 325 --
Ronald Sumner.................... 4,400 4,400 --
David J. Tadych.................. 3,300 3,300 --
Trude Taylor..................... 6,875 6,875 --
Bruce Toll....................... 55,000 55,000 --
John Troiano(4).................. 16,500 16,500 --
Adrian F. Turcotte, III.......... 25,000 25,000 --
Susan Berzon Turcotte............ 25,000 25,000 --
William D. Turner................ 1,238 1,238 --
Harry Vidger..................... 3,713 3,713 --
Samuel Watts..................... 2,475 2,475 --
Joel & Sandra Wenacur............ 4,331 4,331 --
Susan & Theodore Wenacur......... 4,950 4,950 --
Dean Willard..................... 3,713 3,713 --
Stanton & Jennifer Williams...... 6,188 6,188 --
Xanadu Associates LLC............ 12,375 12,375 --
Alkis P. Zingas.................. 12,375 12,375 --
Simon Zunamon.................... 6,188 6,188 --
</TABLE>
- --------
(1) Each selling stockholder has sole voting and investment power with respect
to the Shares beneficially owned by such selling stockholder. All share
amounts reflect beneficial ownership determined pursuant to Rule 13d-3
under the Exchange Act. Unless otherwise indicated, each selling
stockholder beneficially owns less than 1% of our outstanding common stock.

(2) The Shares listed herein include only the shares issuable upon conversion
of the Series B convertible preferred stock and upon exercise of the Series
B warrants and options.

38
<PAGE>

(3) Assumes all of the Shares of common stock beneficially owned by the selling
stockholders and registered hereunder are sold.

(4) Prior to this offering, @ONEX LLC beneficially owns 5.2% of our outstanding
common stock. John Troiano, a managing director @ONEX LLC, is a member of
our board of directors.

(5) Prior to this offering, Alignment Capital beneficially owns 1.3% of our
outstanding common stock.

(6) Prior to this offering, Robert Ganz beneficially owns 1% of our outstanding
common stock.

(7) Prior to this offering, Mark Grundy beneficially owns 1.2% of our
outstanding common stock.

(8) Adam McAfee is a brother of Eric McAfee, a director, officer and
significant stockholder.

39
<PAGE>

DESCRIPTION OF SECURITIES

We are authorized to issue up to 30,000,000 shares of common stock, par
value $.001 per share, and 10,000,000 shares of preferred stock, par value
$.001 per share. We have designated 1,750,000 shares as Series B preferred
stock and 3 million shares as Series C preferred stock. As of February 29,
2000, there were issued and outstanding 9,692,295 shares of common stock,
1,388,073 shares of Series B preferred stock, options to purchase
2,802,100 shares of common stock and warrants to purchase 664,027 shares of
common stock. In addition, through March 24, 2000, we had issued 409,225 shares
of Series C preferred stock.

Common Stock

Common stockholders are entitled to one vote per share. Subject to the
preferences of outstanding preferred stock, common stockholders are entitled to
receive dividends, if and when they are declared by our Board of Directors. If
we go out of business and are liquidated, common stockholders will receive
their proportionate share of our assets that are available to be distributed,
after all other debts have been paid and the Preferred stockholders receive
their distribution. The common shares have no preemptive, subscription or
conversion rights nor may we redeem them.

Series A Preferred Stock

All shares of Series A preferred stock issued by our predecessor, Wireless
Netcom, were converted into shares of common stock upon the merger with
eCommercial California.

Series B and Series C Preferred Stock

The following is a brief summary of the rights, preferences, privileges and
restrictions and limitations of the Series B and Series C preferred stock (the
"Series B and Series C preferred") as more completely set forth in the
Certificate of Designation of the Company:

Dividends. Dividends will be payable with respect to the holders of Series B
and Series C preferred when and if declared by our Board of Directors and will
be non-cumulative. No dividends (other than those payable solely in common
stock) will be declared or paid with respect to shares of common stock for any
fiscal year until dividends in the aggregate amount of at least $0.90 and $2.25
per share, respectively, (as adjusted for any stock splits or
recapitalizations) have been paid or declared and set apart with respect to the
Series B and Series C preferred during such fiscal year.

Optional Conversion. The shares of Series B and Series C preferred held by
any holder may be converted into shares of common stock at any time upon the
stockholder's election. The total number of shares of common stock into which a
share of Series B and Series C preferred may be converted shall be determined
by dividing the purchase price by the conversion price applicable to the
conversion of the Series B and Series C preferred (the "Conversion Price"). The
Conversion Price is currently equal to the purchase price, resulting in a
conversion ratio of one-to-one, but will be adjusted in the event of stock
splits, stock dividends, recapitalizations and similar events occurring with
respect to our capital stock. The Conversion Price will also be subject to
adjustment in the event of certain dilutive issuances of capital stock of the
Company.

Automatic Conversion. The shares of Series B preferred will be automatically
converted into shares of common stock at the then-effective Conversion Price
upon:

. the effective date of a firm commitment, underwritten offering of common
stock pursuant to an effective registration statement under the
Securities Act, other than a registration relating solely to a
transaction under Rule 145 of the Securities Act (or any successor
thereto) or to any of our employee benefit plans, generating aggregate
proceeds to the Company of not less than $15,000,000 (after deducting
underwriters' discounts and all expenses relating to the offering) and
with a per share offering price (prior to underwriters' discounts and
expenses) of not less than $15.00 per share, as such per share price may
be adjusted to reflect stock subdivisions, combinations or dividends
with respect to such shares; or

. the date specified by affirmative vote or written consent or agreement
of the holders of not less than two-thirds (2/3) of the then-outstanding
shares of Series B preferred.

40
<PAGE>

The shares of Series C preferred will be automatically converted into shares
of Common Stock at the then-effective Conversion Price upon:

. the effective date of a firm commitment, underwritten offering of Common
Stock pursuant to an effective registration statement under the
Securities Act, other than a registration relating solely to a
transaction under Rule 145 of the Securities Act (or any successor
thereto) or to any employee benefit plan of the Company, generating
aggregate proceeds to the Company of not less than $25,000,000 (after
deducting underwriters' discounts and expenses) of not less than $40.00
per share, as such per share price may be adjusted to reflect stock
subdivisions, combinations or dividends with respect to such shares; or

. the date specified by affirmative vote or written consent or agreement
of the holder of not less than two-thirds (2/3) of the then-outstanding
shares of Series C preferred.

Antidilution Protection. If at any time while any shares of Series B and
Series C preferred are outstanding the Company issues any capital stock (which
includes options to acquire our capital stock and instruments convertible into
our capital stock) without consideration or for consideration per share with a
value less than the then-effective Conversion Price, then the Conversion Price
shall be adjusted concurrently with such issue to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by a fraction,
the numerator of which shall be the number of shares of common stock
outstanding immediately prior to such issue (on a fully diluted basis) plus the
number of shares of common stock which the aggregate consideration received by
us for the newly-issued capital stock would purchase at the Conversion Price in
effect immediately prior to such issue, and the denominator of which shall be
the number of shares of common stock outstanding immediately prior to such
issue (on a fully diluted basis) plus the number of additional shares of
capital stock so issued; provided, however, that no such adjustment to the
Conversion Price shall be made with respect to:

. issuances to our employees, consultants, officers and directors pursuant
to stock purchase or stock option plans or agreements or other incentive
stock arrangements approved by our Board of Directors;

. issuances as consideration in connection with mergers, acquisitions or
other business combinations; or

. issuances in connection with strategic investments, licensing
arrangements or debt or equipment financings approved by our Board of
Directors.

Voting Rights. Holders of shares of Series B and Series C preferred are
entitled to vote on all matters submitted to a vote of our stockholders. Each
share of Series B and Series C preferred entitles the holder to that number of
votes equal to the number of shares of common stock into which such share of
Series B and Series C preferred is convertible as of the record date
established for the vote of our stockholders. Fractional votes will not,
however, be permitted, and any fractional voting rights resulting from the
above formula (after aggregating all shares of Common Stock into which shares
of Series B and Series C preferred held by each holder could be converted) will
be rounded to the nearest whole number (with one-half being rounded upward).
Except with respect to the two seats on the Board of Directors allocated to the
purchasers of the Series B preferred or as required by law, the Series B
preferred will vote together with the common stock and not as a separate class.

Board Seats. The Company's Certificates of Designation provides for a Board
of Directors that consists of a minimum of three (3) and up to seven (7)
members. Promptly following the Offering Termination Date, the holders of the
Shares will be entitled to elect two persons to serve on the Company's Board of
Directors upon the terms and conditions set forth in the Investors' Rights
Agreement that is to be entered into between the Company and the purchasers of
the Securities and that is a part of the Subscription Booklet attached as
Exhibit "A" hereto.

41
<PAGE>

Protective Covenants. So long as shares of Series B and Series C preferred
remain outstanding and for such further period as may be required by law, we
will not, without first obtaining the affirmative vote or written consent of
the holders of at least a majority of the then outstanding Series B and Series
C preferred voting separately as a class:

. sell, convey or otherwise dispose of all or substantially all of our
assets, merge with or consolidate the Company into another entity, or
engage in any other form of corporate reorganization or recapitalization
that would require the vote of our shareholders under applicable law;

. increase the number of authorized shares of Series B and Series C
preferred (except as a result of a stock split or combination);

. effect an exchange, reclassification or cancellation of all or a part of
the shares of Series B and Series C preferred (except as a result of a
stock split or combination);

. effect an exchange, or create a right of exchange, of all or part of the
shares of another class into shares of Series B and Series C preferred;

. alter or change the rights, preferences, privileges and restrictions of
the Series B and Series C preferred;

. authorize or issue shares of any class of stock having any rights,
preferences or privileges superior to any such right, preference or
privilege of the Series B and Series C preferred;

. authorize or issue shares of stock of any class or any bonds,
debentures, notes or other obligations convertible or exchangeable for,
or having option rights to purchase, any shares of our stock having any
rights, preferences or privileges superior to any right, preference or
privilege of the Series B and Series C preferred; or

. reclassify any other outstanding shares of stock into shares having any
right, preference or privilege superior to any such preference or
priority of the Series B and Series C preferred.

Stock Dividends, Subdivisions and Consolidations. In the event we declare or
pay any dividend on the common stock payable in shares of common stock, or
effect a subdivision or consolidation of the outstanding shares of common stock
into a greater or lesser number of shares of common stock, then the number of
shares of common stock issuable upon conversion of the Series B and Series C
preferred shall be adjusted accordingly.

Notices of Record Date. In the event that the Company shall propose at any
time to:

. declare any dividend or distribution upon the Common Stock other than
the distributions to shareholders in connection with the repurchase of
shares of former employees or consultants to which at least a majority
of the holders of Series B and Series C preferred have consented;

. to offer for subscription to the holders of any class or series of its
capital stock any additional shares of stock of any class or series or
any other rights;

. to effect any reclassification or recapitalization; or

. to merge or consolidate with or into any other corporation, or sell,
lease or convey all or substantially all its property or business, or to
liquidate, dissolve or wind up; then the Company will send to the
holders of the Series B and Series C preferred, at least 10 days' prior
written notice of the date on which a record shall be taken for such
dividend, distribution, or subscription rights and on which such even
shall take place.

No Impairment. We will not, by amendment of the Certificate of Designation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issuance 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

42
<PAGE>

performed by us with respect to the Series B and Series C preferred but will at
all times in good faith assist in the carrying out of all the provisions of the
Certificate of Designation relating to conversion and in the taking of all such
action as may be necessary or appropriate in order to protect the conversion
rights of the holders of the Series B preferred and Series C preferred against
impairment.

Redemption. Shares of Series B and Series C preferred are not redeemable by
us.

Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Company for an aggregate value of less than $40.00 per share,
either voluntary or involuntary, the holders of the Series B and Series C
preferred shall be entitled to receive, prior and in preference to any
distribution to the holders of the common stock, the amount of $9.00 and
$25.00, respectively, per share (or as such amount shall be adjusted to reflect
subdivisions and combinations of shares and stock dividends) for each share of
Series B and Series C preferred then held by them plus an amount equal to all
accrued and unpaid dividends (the "Liquidation Amount"). If upon occurrence of
any such liquidation, dissolution or winding up the assets and funds available
for distribution among the holders of the Series B and Series C preferred shall
be insufficient to permit the payment of the full Liquidation Amount, then such
assets and funds shall be distributed ratably among the holders of the Series B
preferred in proportion to their respective holdings of Series B and Series C
preferred. After full payment of the Liquidation Amount has been made to the
holders of the Series B and Series C preferred, the remaining assets of the
Company, if any, shall be distributed ratably among the holders of the common
stock.

A liquidation, dissolution or winding up of the Company shall be deemed to
be occasioned by, or to include, a consolidation, merger or reorganization of
the Company with or into any other corporation or entity in which the holders
of our outstanding capital stock immediately before that consolidation, merger
or reorganization do not retain a majority of the voting power in the surviving
corporation immediately thereafter, or a sale, conveyance or disposition of all
or substantially all of our assets.

Registration Rights. Subject to certain restrictions set forth in the
Investors' Rights Agreement, if at any time after the Offering Termination Date
the Company files a registration statement, other than a registration solely to
a corporate reorganization or other transaction on Form S-4 (or any successor
thereto) or to any employee benefit plan of the Company or a registration on
any registration form that does not permit secondary sales, with the
Commission, the holder of the Shares and the holders of Registrable Securities
will be entitled to include any of the Registrable Securities held by such
persons in such registration up to a maximum of three such "piggy-back"
registrations and no more than one such registration in any twelve-month
period. In the event that any of such registrations are underwritten, the
number of shares of Registrable Securities that the holders thereof may include
in such a piggyback registration may be reduced in the underwriters of such
registration determine that market factors require such a reduction.

Subject to certain restrictions set forth in the Investors' Rights
Agreement, at any time after the expiration of one (1) year following the
closing of the initial underwritten offering of our common stock, the holders
of Registrable Securities will be entitled to request that we file a
registration statement on Form S-3 with the Commission covering the shares of
Registrable Securities held by such holders, provided that the aggregate amount
of Registrable Securities to be registered on such Form S-3 shall have an
aggregate price to the public of not less than $1,000,000. In the event that
any of such registrations are underwritten, the number of shares of Registrable
Securities that the holders thereof may include in such a Form S-3 registration
may be reduced if the underwriters of such registration determine that market
factors require such a reduction.

In the event that all Registrable Securities are not sold in our
underwritten offering, the holders of Registrable Securities not sold may be
required to execute "lock-up" agreements pursuant to which they will agree not
to transfer or otherwise dispose of any Registrable Securities for a period of
up to 180 days from the date of commencement of such underwritten offering
without the prior written consent of the managing underwriter of such offering.

43
<PAGE>

Warrants

We have outstanding warrants to purchase common stock prices ranging from
$0.10 to $11.25 per share, expiring at various dates through October 2004. The
warrants for shares registered under this Registration Statement include
warrants for 396,941 shares issuable at $8 per share expiring at various dates
from August through November 2001, 250,000 shares issuable at $7 per share
expiring in October 2004, and 15,000 shares issuable at $11.25 per share
expiring in 2001.

Shares Eligible for Sale

Sales of a substantial number of shares of common stock in the public market
could adversely affect the market price for our common stock. The number of
shares of common stock available for sale in the public market is limited by
restrictions under the Securities Act of 1933, as amended (the "Securities
Act"). As of February 29, 2000, there were 9,692,295 shares of common stock
outstanding, of which 7,604,592 were "restricted shares" under the Securities
Act and 2,087,703 were freely tradable subject to the restrictions and
conditions of SEC Rule 144. In addition, as of February 29, 2000, there were
outstanding warrants to purchase 664,027 shares of our common stock and options
to purchase 2,802,100 shares of our common stock.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is RTT Transfers, Inc.

LEGAL MATTERS

The validity of the issuance of our securities will be passed upon for us by
Gray Cary Ware & Freidenrich, LLP, Sacramento, California. Certain partners of
Gray Cary Ware & Freidenrich, LLP own an aggregate of 2,000 shares of our
stock.

EXPERTS

The financial statements appearing in this Prospectus have been audited by
Grant Thornton LLP, independent certified public accountants, to the extent and
for the periods set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of said firm as
experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed, with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus does not contain all of the information in the
registration statement, the exhibits and schedules. For more information about
our common stock and us, please refer to the registration statement, exhibits
and schedules. Statements made in this prospectus as to the contents of any
contract, agreement or other documents filed as an exhibit are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the registration statement, reference is made to the exhibit
for a more complete description of the matter involved.

The registration statement, exhibits and schedules may be inspected without
charge and copied at the public reference facilities maintained by the SEC in
Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549, and at the SEC's
regional offices located at Citicorp Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material may be obtained from such offices upon the
payment of the fees prescribed by the SEC. The SEC phone number is 1-800-SEC-
0330.

In addition, the SEC maintains a website that contains registration
statements, reports, proxy and other information regarding registrants that
file electronically with the Securities and Exchange Commission. The address
for the website is http://www.sec.gov.

44
<PAGE>

MindArrow Systems, Inc. and Subsidiary

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Certified Public Accountants......................... F-2
Financial Statements:
Consolidated Balance Sheets, September 30, 1999 and December 31, 1999..... F-3
Consolidated Statements of Operations, Period from Inception (March 26,
1999) to September 30, 1999 and the three months ended December 31,
1999..................................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity, Period from
Inception (March 26, 1999) to September 30, 1999 and the three months
ended December 31, 1999.................................................. F-5
Consolidated Statements of Cash Flows, Period from Inception (March 26,
1999) to September 30, 1999 and the three months ended December 31,
1999..................................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>

Report of Independent Certified Public Accountants

Board of Directors

MindArrow Systems, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheet of MindArrow
Systems, Inc. and Subsidiary (a development stage company) as of September 30,
1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period from inception (March 26, 1999) through
September 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of MindArrow
Systems Inc. and Subsidiary as of September 30, 1999, and the consolidated
results of their operations and their consolidated cash flows for the period
from inception (March 26, 1999) through September 30, 1999 in conformity with
generally accepted accounting principles.

Grant Thornton LLP
Reno, Nevada

October 25, 1999 (Except for the second paragraph

of Note H-1, as to which the date is November 5, 1999,

and the third paragraph of Note H-1, as to which the date is March 24, 2000)

F-2
<PAGE>

MindArrow Systems, Inc. and Subsidiary
(a development stage company)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
September 30, December 31,
1999 1999
------------- ------------
<S> <C> <C>
(unaudited)
ASSETS
Current Assets:
Cash................................................ $ 4,744,741 $ 4,661,219
Accounts receivable................................. 25,500 52,549
Prepaid expenses.................................... 108,961 184,744
Other current assets................................ 14,941 15,364
----------- -----------
Total current assets............................... 4,894,143 4,913,876
Cash, pledged........................................ 233,890 263,820
Fixed Assets, net ................................... 936,336 1,494,238
Intangible Assets, net .............................. 744,797 750,460
Deposits............................................. 76,975 49,338
----------- -----------
Total assets....................................... $ 6,886,141 $ 7,471,732
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities............ $ 312,178 $ 419,868
Customer deposits................................... 30,500 55,500
Judgement payable from acquired company............. 1,800,000 1,800,000
Accounts payable remaining from acquired companies.. 400,412 318,809
----------- -----------
Total current liabilities.......................... 2,543,090 2,594,177
----------- -----------
Stockholders' Equity:
Series B Convertible Preferred Stock, $0.001 par
value; 2,000,000 shares authorized; 1,085,573 and
1,388,073 shares issued and outstanding as of
September 30, 1999 and December 31, 1999;
$8,684,584 and $11,104,584 aggregate liquidation
preference as of September 30, 1999 and
December 31, 1999.................................. 1,086 1,388
Common Stock, $0.001 par value; 20,000,000 shares
authorized; 9,536,623 and 9,585,583 shares issued
and outstanding as of September 30, 1999 and
December 31, 1999 ................................. 9,537 9,586
Additional paid-in capital.......................... 7,211,449 9,680,990
Deficit accumulated during the development stage.... (2,284,546) (4,263,334)
Unearned stock-based compensation................... (594,475) (551,075)
----------- -----------
Total stockholders' equity......................... 4,343,051 4,877,555
----------- -----------
$ 6,886,141 $ 7,471,732
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>

MindArrow Systems, Inc. and Subsidiary
(a development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the period Cumulative
from inception Three Months from inception
(March 26, 1999) Ended (March 26, 1999)
to September 30, December 31, to December 31,
1999 1999 1999
---------------- ------------ ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues...................... $ 6,250 $ 29,390 $ 35,640
----------- ----------- -----------
Operating expenses:
Development.................. 320,766 385,651 706,417
Production................... 139,674 164,814 304,488
Sales and marketing.......... 1,060,795 715,090 1,775,885
General and administration... 684,343 671,223 1,355,566
Depreciation and
amortization................ 107,892 122,069 229,961
----------- ----------- -----------
2,313,470 2,058,847 4,372,317
----------- ----------- -----------
Operating loss................ (2,307,220) (2,029,457) (4,336,677)
Interest income............... 24,274 52,269 76,543
Provision for income taxes.... (1,600) (1,600) (3,200)
----------- ----------- -----------
Net loss.................... $(2,284,546) $(1,978,788) $(4,263,334)
=========== =========== ===========
Basic and diluted loss per
share........................ $ (0.26) $ (0.21) $ (0.47)
=========== =========== ===========
Shares used in computation of
basic and diluted loss per
share........................ 8,751,760 9,556,737 9,016,188
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

MindArrow Systems, Inc. and Subsidiary
(a development stage company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

<TABLE>
<CAPTION>
Deficit
Series B Accumulated
Preferred Stock Common Stock Additional During the Unearned
---------------- ------------------- Paid-In Subscriptions Development Stock-Based
Shares Amount Shares Amount Capital Receivable Stage Compensation Total
--------- ------ ---------- ------- ----------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March
26, 1999....... -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ --
Sale of common
stock, net of
issuance
costs.......... -- -- 4,000,000 4,000 595 -- -- -- 4,595
Issuance of
common stock
for acquisition
of Zap
International,
Inc. .......... -- -- 2,640,000 2,640 -- -- -- -- 2,640
Reclassifications
of $.001 common
stock.......... -- -- (6,640,000) (6,640) (595) -- -- -- (7,235)
Issuance of
$.001 common
stock in
connection with
reclassification
of equity...... -- -- 8,758,033 8,758 595 -- -- -- 9,353
Assumption of
liabilities and
subscription
receivable in
connection with
recapitalization.. -- -- -- -- (2,570,000) (47,000) -- -- (2,617,000)
Sale of common
stock, net of
issuance
costs.......... -- -- 475,118 475 941,929 -- -- -- 942,404
Issuance of
common stock
pursuant to
exercise of
warrants....... -- -- 233,613 234 23,123 -- -- -- 23,357
Issuance of
common stock at
a discount as
compensation
for services... -- -- 39,859 40 54,028 -- -- -- 54,068
Issuance of
common stock as
compensation
for services... -- -- 30,000 30 239,970 -- -- -- 240,000
Sales of
preferred
stock, net of
issuance
costs.......... 1,085,573 1,086 -- -- 7,759,406 -- -- -- 7,760,492
Compensation
expense on
option and
warrant
grants......... -- -- -- -- 167,923 -- -- -- 167,923
Unearned
compensation on
option and
warrant
grants......... -- -- -- -- 594,475 -- -- (594,475) --
Collection of
subscriptions
receivable..... -- -- -- -- -- 47,000 -- -- 47,000
Net loss........ -- -- -- -- -- -- (2,284,546) -- (2,284,546)
--------- ------ ---------- ------- ----------- -------- ----------- --------- -----------
Balance,
September 30,
1999........... 1,085,573 1,086 9,536,623 9,537 7,211,449 -- (2,284,546) (594,475) 4,343,051
Sales of
preferred
stock, net of
issuance
costs.......... 302,500 302 -- -- 2,392,679 -- -- -- 2,392,679
Issuance of
common stock
pursuant to
exercise of
options and
warrants....... -- -- 48,960 49 472 -- -- -- 521
Compensation
expense on
option and
warrant
grants......... -- -- -- -- 76,390 -- -- 43,400 119,790
Net loss........ -- -- -- -- -- -- (1,978,788) -- (1,978,788)
--------- ------ ---------- ------- ----------- -------- ----------- --------- -----------
Balance,
December 31,
1999
(Unaudited).... 1,388,073 $1,388 9,585,583 $ 9,586 $ 9,680,990 $ -- $(4,263,334) $(551,075) $ 4,877,555
========= ====== ========== ======= =========== ======== =========== ========= ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

MindArrow Systems, Inc. and Subsidiary
(a development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the
period from For the
inception three Cumulative From
(March 26, months Inception
1999) to ended (March 26, 1999)
September 30, December to December 31,
1999 31, 1999 1999
------------- ----------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss.......................... $(2,284,546) $(1,978,788) $(4,263,334)
Adjustments to reconcile net loss
to net cash used in operations:
Depreciation and amortization.... 107,892 122,069 229,961
Non-cash charges due to stock
issuances....................... 294,068 -- 294,068
Non-cash charges due to stock
option and warrant grants....... 167,923 119,790 287,713
Increase in accounts receivable.. (24,500) (27,049) (51,549)
Increase in prepaid expenses..... (98,743) (75,783) (174,526)
Increase in other current
assets.......................... (14,941) (423) (15,364)
Decrease (Increase) in deposits.. (76,975) 27,637 (49,338)
Increase (Decrease) in accounts
payable and accrued
liabilities..................... (113,866) 107,690 (6,176)
Decrease in accounts payable from
acquired companies.............. -- (81,603) (81,603)
Increase in customer deposits.... 30,500 25,000 55,500
----------- ----------- -----------
Net cash used in operations..... (2,013,188) (1,761,460) (3,774,648)
----------- ----------- -----------
Cash flows from investing
activities:
Increase in cash--pledged......... (233,890) (29,930) (263,820)
Cash acquired in acquisition...... 2,898 -- 2,898
Purchases of fixed assets......... (987,915) (653,025) (1,640,940)
Purchases of patents and
trademarks....................... (44,226) (32,609) (76,835)
----------- ----------- -----------
Net cash used in investing
activities..................... (1,263,133) (715,564) (1,978,697)
----------- ----------- -----------
Cash flows from financing
activities:
Principal payments on notes
payable.......................... (756,786) -- (756,786)
Payment received on subscriptions
receivable....................... 47,000 -- 47,000
Proceeds from issuance of
preferred stock.................. 7,760,492 2,392,981 10,153,473
Proceeds from issuance of common
stock............................ 970,356 -- 970,356
Proceeds from warrant exercises... -- 521 521
----------- ----------- -----------
Net cash provided by financing
activities..................... 8,021,062 2,393,502 10,414,564
----------- ----------- -----------
Net Increase (Decrease) in cash.... 4,744,741 (83,522) 4,661,219
Cash, beginning of period.......... -- 4,744,741 --
----------- ----------- -----------
Cash, end of period................ $ 4,744,741 $ 4,661,219 $ 4,661,219
=========== =========== ===========
Cash paid for income taxes......... $ -- $ -- $ --
=========== =========== ===========
Cash paid for interest............. $ -- $ -- $ --
=========== =========== ===========
Supplemental disclosure of noncash
investing and financing
activities:
The Company acquired its
subsidiary (Zap International,
Inc.) for 2,640,000 shares of
common stock..................... $ 2,640 $ -- $ 2,640
=========== =========== ===========
Assumption of liabilities in
connection with
recapitalization................. $(2,570,000) $ -- $(2,570,000)
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 1999 (data relating to December 31, 1999 is unaudited)

Note A--The Company and Summary of Significant Accounting Policies

MindArrow Systems, Inc., a Delaware corporation ("MindArrow" or the
"Company"), develops and markets proprietary interactive sales and marketing
automation ("SMA") systems, the goal of which is to enhance profitability of
the Company's customers and improve their customer relationships.

The Company's proprietary technology enables companies to deliver highly
compressed, rich content, multimedia files as email attachments that combine
high quality audio and video, graphics, animation, chat, hypertext links, and
telecommunication links (an "eCommercial"). This asynchronous delivery and
compression technology embedded in an eCommercial provides very high response
rates without requiring online connectivity.

The Company was founded on March 26, 1999 and incorporated as
eCommercial.com, Inc., a California corporation, on April 9, 1999.

On April 16, 1999, the Company acquired all of the outstanding common stock
of Zap International, ("Zap"), in exchange for 2,640,000 shares of Common
Stock. The transaction was recorded using the purchase method of accounting
(see Note F). Pro forma disclosures are not meaningful as Zap did not have
significant operations.

On April 19, 1999, Wireless Netcom, Inc. (a non-operating Nevada
corporation) acquired all of the outstanding shares of the Company. For
accounting purposes, the acquisition is treated as a recapitalization with the
Company as the acquirer (a reverse acquisition). Pro forma information is not
presented since the transaction is not a business combination (see Note F).

Effective March 31, 2000, the Company changed its name from eCommercial.com,
Inc. to MindArrow Systems, Inc. and its state of incorporation from Nevada to
Delaware. There was no impact to the Company's financial condition or results
of operations as a result of the reincorporation and name change.

1. Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All significant intercompany balances and
transactions have been eliminated.

2. Interim Financial Statements

The financial statements for the three months ended December 31, 1999 are
unaudited; however, in the opinion of management, all adjustments, consisting
of normal recurring adjustments necessary for a fair presentation of the
Company's financial position and results of operations for such period have
been included. The results for the three months ended December 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2000.

3. Revenue Recognition

The Company's revenues are derived from the production and delivery of
eCommercials as a part of comprehensive direct-response advertising campaigns
developed for each of its customers. eCommercials are delivered to targeted
email subscribers through email subscriber programs utilizing the Company's
unique personalization technology. The Company's eCommercial production
services include theme development, eCommercial design and layout, video
production, special effects, link recommendations, hyperlink page design

F-7
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

and creation, reporting and sales cycle consultation. Revenue for consultation
and production services is recognized when the services are rendered. Revenue
for delivery services is recognized when the eCommercials are delivered.
Revenues from sponsorship arrangements will be recognized at the time of
delivery. Revenues from revenue-sharing arrangements will be recognized as
transactions are completed.

Customers are generally billed in advance of production and delivery of
eCommercials. Accordingly, customer deposits include the customer prepayments
less the portion of service that has been completed.

4. Product Development

The company expenses costs associated with software developed or obtained
for internal use in the preliminary project stage and, thereafter, capitalizes
costs incurred in the developing or obtaining of internal use software.
Capitalized costs are amortized over their useful life. Periodically,
management evaluates the estimated useful life of intangible assets based upon
projected future undiscounted cash flows. Other costs incurred in the research
and development of new products and enhancements to existing products are
charged to expense as incurred.

5. Depreciation and Amortization

Property and equipment, including leasehold improvements, are stated at cost
and depreciated using the straight-line method over the estimated useful lives
of the assets, generally two to five years. Goodwill, patents, and trademarks
are included in intangible assets and carried at cost less accumulated
amortization, which is being provided on a straight-line basis over the
economic lives of the respective assets, generally seven years. The Company
periodically evaluates the recoverability of its long-lived assets based on
expected undiscounted cash flows and recognizes impairments, if any, based on
expected discounted future cash flows.

6. Income Taxes

Income taxes are computed using the asset and liability method. Under the
asset and liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax
bases of assets and liabilities and are measured using the currently enacted
tax rates and laws. A valuation allowance is provided for the amount of
deferred tax assets that, based on available evidence, are not expected to be
realized.

At September 30, 1999, the Company has a deferred tax asset of approximately
$342,000 resulting from net operating loss for the period March 26, 1999
through September 30, 1999. The Company has provided for a valuation allowance
of $342,000 at September 30, 1999. The Provision for Income taxes on the
accompanying Consolidated Statement of Operations represents the minimum
California franchise tax.

7. Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion ("APB")
No. 25, "Accounting for Stock Issued to Employees," and complies with the
disclosure provisions of Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation." Under APB 25, compensation
expense is recognized over the vesting period based on the difference, if any,
on the date of grant between the fair value of the Company's stock and the
amount an employee must pay to acquire the stock.

F-8
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. Basic and Diluted Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the period. Diluted net income
(loss) per share is computed using the weighted average number of common and
common equivalent shares outstanding during the period. Common equivalent
shares consist of the incremental common shares issuable upon conversion of
convertible preferred stock (using the if-converted method) and shares issuable
upon the exercise of stock options and warrants (using the treasury stock
method). Common equivalent shares were excluded from the computation as their
effect was anti-dilutive (see Note H).

9. Use of Estimates

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

10. Cash and Cash Equivalents

All highly liquid instruments with an original maturity of three months or
less are considered cash equivalents, those with original maturities greater
than three months and current maturities less than twelve months from the
balance sheet date are considered short-term investments, and those with
maturities greater than twelve months from the balance sheet date are
considered long-term investments.

As of September 30, 1999, the Company had a Certificate of Deposit account
that was pledged to collateralize an irrevocable letter of credit related to
the lease for the Company's headquarters. The letter of credit amount will
decrease by 50% in December 2000 and expire in December 2001. Additionally in
December 1999 a second Certificate of Deposit was pledged related to the New
York office space. The pledged cash is carried as a long-term asset on the
accompanying consolidated balance sheet.

11. Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash, cash equivalents, and
accounts receivable. Substantially all of the Company's cash and cash
equivalents are held in one financial institution. As of September 30, 1999 and
December 31, 1999, the carrying amount of cash in bank was $4,978,631 and
$4,925,039, and the bank balance was $5,239,321 and $5,009,458, of which
$100,000 was FDIC insured. Accounts receivable are typically unsecured and are
derived from revenues earned from customers primarily located in the United
States. The Company performs ongoing credit evaluations of its customers and
will maintain reserves for potential credit losses as the need arises.

12. Comprehensive Income

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
130, "Reporting Comprehensive Income," which has been adopted by the Company.
SFAS 130 establishes standards for reporting comprehensive income and its
components in a financial statement. Comprehensive income as defined includes
all changes in equity (net assets) during a period from non-owner sources.
Examples of items to be included in comprehensive income, which are excluded
from net income, include foreign currency translation

F-9
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

adjustments and unrealized gains and losses on available-for-sale securities.
As none of these components have impacted the Company, adjustments for
comprehensive income have not been made to the accompanying consolidated
financial statements.

13. Segments

In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information," which establishes standards for the way
companies report information about operating segments in annual financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The Company
believes that it does not operate in more than one segment.

14. Fair Value of Financial Instruments

The fair value of financial instruments approximates their carrying amounts.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133), and in July 1999 issued Financial
Accounting Standard No. 137,"Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB Statement No. 133" (SFAS 137). SFAS 137 delayed the effective
date for SFAS 133 to fiscal years beginning after June 15, 2000. The Company
does not believe that this statement will have a material effect on its
financial position or results of operations.

Note B--Development Stage

From inception (March 26, 1999) to December 31, 1999, the Company was a
development-stage company. In January 2000, significant principal operations
commenced. As shown in the accompanying financial statements, the Company
incurred a net loss of $2,284,546 for the period ended September 30, 1999 and
$1,978,788 for the three months ended December 31, 1999 and did not have
significant revenues. The future of the Company is dependent upon its ability
to generate sufficient cash flows from revenues to cover operating costs. Until
such time, however, the Company expects to seek financing through a combination
of private placements and/or public offerings. There is no assurance, however,
that such plans will be completed or, if completed, will generate sufficient
funds to enable the Company to meet its obligations as they come due. As of
March 24, 2000, the Company had issued 409,025 shares of Series C Preferred
Stock for $25 per share. Net proceeds were $10,225,625 (see Note H-1).

F-10
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note C--Fixed Assets

Fixed assets, at cost, consist of the following:

<TABLE>
<CAPTION>
September 30, December 31,
1999 1999
------------- ------------
(Unaudited)
<S> <C> <C>
Computer equipment................................... $668,361 $ 944,734
Office equipment..................................... 10,723 18,975
Furniture and fixtures............................... 118,246 147,522
Leasehold improvements............................... -- 362,036
Production equipment................................. -- 140,630
Software............................................. 21,451 33,927
-------- ----------
818,781 1,647,824
Less accumulated depreciation........................ (58,463) (153,586)
-------- ----------
760,318 1,494,238
Construction in progress............................. 176,018 --
-------- ----------
$936,336 $1,494,238
======== ==========
</TABLE>

Note D--Intangible Assets

Intangible assets consist of the following:

<TABLE>
<CAPTION>
September 30, December 31,
1999 1999
------------- ------------
(Unaudited)
<S> <C> <C>
Patents and trademarks............................... $ 44,226 $ 76,835
Goodwill............................................. 750,000 750,000
-------- --------
794,226 826,835
Less accumulated amortization........................ (49,429) (76,375)
-------- --------
$744,797 $750,460
======== ========
</TABLE>

Note E--Commitments and Contingencies

1. Operating Leases

In June 1999, the Company entered into a non-cancelable five-year operating
lease for its primary facilities in Aliso Viejo, California and took occupancy
in December 1999. Rent expense increased to $29,642 per month through May 2002
and $30,878 per month through the remaining term of the lease, which expires in
November 2004. The lease contains a five-year renewal option from the date of
expiration.

F-11
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In September 1999, the Company entered into a non-cancelable five-year
sublease for a satellite office in Cupertino, California. The lease calls for
minimum monthly rental payments ranging from $10,091 per month at the start of
the lease and gradually increasing to $13,358 per month by the end of the
lease. The sublessor is a company related to two significant stockholders, one
of whom is an officer and director of the Company. The sublease terms are
identical to the terms of the sublessor's lease with the landlord, and are
favorable to the terms the Company would have been able to acquire on its own.

The minimum lease payments for operating leases for the years ending
September 30 are as follows:

<TABLE>
<CAPTION>
Year ending September 30,
-------------------------
<S> <C>
2000............................................................. $ 459,896
2001............................................................. 506,972
2002............................................................. 518,305
2003............................................................. 529,629
2004............................................................. 519,668
Thereafter....................................................... 61,755
----------
$2,596,225
==========
</TABLE>

Rent expense for the period from inception (March 26, 1999) to September 30,
1999 amounted to $43,148.

Rent expense for the three months ended December 31, 1999 amounted to $108,761.

2. Legal Proceedings

From time to time the Company is subject to legal proceedings and claims in
the ordinary course of business, including claims of alleged infringement of
trademarks, copyrights and other intellectual property rights. Except as
described below, the Company is not currently aware of any legal proceedings or
claims that the Company believes will have, individually or in the aggregate, a
material adverse effect on the Company's consolidated financial position or
results of operations.

The Company has been named as a defendant in an action seeking damages, (the
"Voxel Claim") in connection with an Asset Purchase Agreement, dated as of
November 25, 1998, pursuant to which Wireless Netcom, Inc. had proposed to
acquire the assets of Voxel, Inc. The Company has accrued $1.8 million in
estimated damages as a portion of the liabilities assumed during the
recapitalization. Pursuant to an indemnity agreement, a significant
shareholder, who is also an officer and director, has agreed to reimburse the
Company in common stock or cash, at his option, any amounts paid to the
plaintiffs. Any reduction in the amount due or any amounts received in
reimbursement will be recorded as additional paid-in capital at the time such
amounts are received.

In October 1999, the court ruled in favor of the plaintiffs and awarded them
$1.8 million in damages. In January 2000 the Company appealed the judgement and
pledged a $2 million Certificate of Deposit with the court.

Note F--Acquisition

1. Acquisition of Zap International, Inc.

On April 16, 1999, the Company completed the acquisition of all outstanding
shares of Zap International, Inc. ("Zap"), for 2,640,000 shares of Common
Stock. Zap was a software company which had developed technology that enabled
generation of highly compressed multimedia files that combine audio, video,
graphics and hypertext links, and form the foundation of eCommercials. The
acquisition was accounted for as a

F-12
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

purchase. Under the purchase method of accounting, the purchase price is
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the date of the acquisition. Zap is now a wholly owned
subsidiary of the Company.

The total purchase price of the acquisition was $2,640, which is 2,640,000
shares at a value of $.001. The purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values. Goodwill
has resulted from the excess costs over fair value of net assets acquired.

<TABLE>
<S> <C>
Goodwill.......................................................... $ 750,000
Tangible assets acquired.......................................... 1,000
Liabilities assumed............................................... (748,360)
---------
$ 2,640
=========
</TABLE>

Goodwill is being amortized on a straight-line basis over seven years.
Amortization expense of goodwill was $49,107 for the period from inception
(March 26, 1999) to September 30, 1999 and $26,786 for the three months ended
December 31, 1999.

2. Recapitalization

On April 19, 1999, Wireless Netcom, Inc. (a Nevada corporation) acquired all
of the outstanding common stock of the Company. For accounting purposes, the
acquisition is treated as a recapitalization with the Company as the acquirer
(a reverse acquisition). Pro forma information is not presented since the
transaction is not a business combination. The founding stockholders of
eCommercial.com., Inc. exchanged their common stock for 6,640,000 shares of
common stock (approximately 76% of the outstanding common stock) of Wireless
Netcom, Inc. In connection with the recapitalization, Wireless Netcom, Inc.
changed its name to eCommercial.com, Inc., and the Company assumed liabilities
of $2,570,000.

At the time of the recapitalization described above, Wireless Netcom had
178,502 common stock warrants outstanding. The exercise price of the warrants
was $0.10 per share, and they generally expire on May 15, 2000.

Note G--Strategic Alliances

In July 1999, the Company entered into a strategic alliance with Lockheed
Martin ("Lockheed"), whereby, Lockheed and the Company will work together to
serve mutual customers. Lockheed was issued 30,000 shares of common stock as
part of the agreement, for which the Company recognized a non-cash charge of
$240,000.

Note H--Stockholders' Equity

1. Series B and C Convertible Preferred Stock

As of December 31, 1999, the Company had issued 1,388,073 shares of Series B
Preferred Stock for $8 per share in a private placement which closed in
December 1999. Net proceeds were $10,153,473.

In October 1999, the Company entered into a strategic investment agreement
with @ONEX LLC, ("Onex"). Under the terms of the agreement, Onex made a
$1,000,000 investment into the private placement of Series B Convertible
Preferred Stock, and has the option to invest another $1,000,000 under the same
terms. The option expires on March 31, 2000. Further, Onex received warrants to
purchase 250,000 shares of common stock at the price of $7 per share.

F-13
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

As of March 24, 2000, the Company had issued 409,025 shares of Series C
preferred stock for $25 per share. Net proceeds were $10,225,625. Dividends are
payable to holders of Series B and C Preferred Stock when and if declared by
the Company and will be non-cumulative. No dividends (other than those payable
solely in Common Stock) will be declared or paid with respect to shares of
Common Stock until dividends in the aggregate amount of at least $0.90 and
$2.25 per share, have been paid or declared on the Series B and C Preferred,
respectively.

Holders of shares of Series B and C Preferred are entitled to vote on all
matters submitted to a vote of the stockholders. Each share of Series B and C
Preferred entitles the holder to the number of votes equal to the number of
shares of Common Stock into which the Series B and C Preferred is convertible
as of the record date established for the vote of the stockholders.

Each share of Series B and C Preferred may be converted into one share of
common stock at any time upon the stockholder's election. The shares of Series
B and C Preferred will be automatically converted into shares of common stock
upon (i) the effective date of a firm commitment, underwritten public offering
of common stock pursuant to an effective registration statement under the
Securities Act, other than a registration relating solely to a transaction
under Rule 145 of the Securities Act or to any employee benefit plan of the
Company, generating aggregate proceeds to the Company of not less than
$15,000,000 (after deducting underwriters' discounts and all expenses relating
to the offering) and with a per share offering price (prior to underwriters'
discounts and expenses) of not less than $15.00 per share, as such per share
price may be adjusted to reflect stock subdivisions, combinations or dividends
with respect to such shares, or (ii) the date specified by affirmative vote or
written consent or agreement of the holders of not less than two-thirds ( 2/3)
of the then outstanding shares of Series B and C Preferred.

In the event of liquidation, the holders of the Series B and C Preferred
shall be entitled to receive, prior to and in preference to any distributions
to the holders of common stock, $8.00 per share of Series B and C Preferred
plus any accrued but unpaid dividends if and when declared by the Board of
Directors.

In connection with the private placement of Series B Preferred stock,
warrants to purchase 385,091 shares of common stock at $8 per share were
granted to investors and the placement agent. These warrants expire in August
to December 2001.

In connection with the private placement of Series C Preferred stock,
warrants to purchase 40,903 shares of common stock at $25 per share were
granted to investors. These warrants expire in March 2002.

2. Common Stock

Upon initial incorporation, the Company issued 4,000,000 shares of common
stock with a par value of $0.001 to its founders at par. It subsequently issued
475,118 shares in a private placement. Net proceeds from both transactions were
$946,999.

During the period from inception (March 26, 1999) to September 30, 1999, a
total of 233,613 shares of common stock were issued upon warrant exercises.
Total proceeds amounted to $23,357. During the three months ended December 31,
1999 48,960 shares were issued upon warrant and option exercises. Total
proceeds amounted to $521.

During the period from inception (March 26, 1999) to September 30, 1999, a
total of 69,859 shares were issued as compensation for services. The Company
recorded compensation expense in the amount of $294,068. Such amounts are
inclusive of the shares issued to Lockheed (see Note G).

F-14
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. Warrants

At the time of its acquisition of Zap, warrants to purchase 5,200 shares of
common stock at $5 per share were granted to a former Zap creditor. These
warrants expire in April 2004. In connection with the issuance of the warrants,
the Company recognized an expense of $1,508, which was the fair value of the
warrants at the time of issuance.

In connection with the private placement of common stock, warrants to
purchase 183,500 shares were granted at exercise prices ranging from $0.10 per
share to $0.50 per share, and expire in May 2000.

Warrants to purchase 15,000 shares of common stock at $11.25 per share have
been granted to a customer. They expire in May 2001. In connection with the
issuance of the warrants, the Company recognized an expense of $25,950, which
was the fair value of the warrants at the time of issuance.

Warrants to purchase 635,091 shares of common stock were issued in
connection with the placement of the Series B preferred stock.

As of September 30, 1999 and December 31, 1999, a total of 476,340 and
764,970 warrants were outstanding, with exercise prices ranging from $0.10 to
$11.25 and expiring at various times through April 2004.

4. Options

In April 1999, the Company adopted the 1999 Stock Option Plan (the "Plan").
As amended, the Plan reserves 3,000,000 shares of common stock for grants to
employees.

Pursuant to the consummation of the reverse merger of Wireless Netcom, the
Company assumed and discontinued the Wireless Netcom 1997 Stock Option Plan
(the "Wireless Plan"). There were no outstanding options under the Wireless
Plan.

Under the Plan, incentive stock options may be granted to employees,
directors, and officers of the Company and non-qualified stock options and
stock purchase rights may be granted to consultants, employees, directors, and
officers of the Company. Options granted under the Plan are for periods not to
exceed ten years and must be issued at prices not less than 100% and 85%, for
incentive and nonqualified stock options, respectively, of the fair market
value of the stock on the date of grant, as determined by the Board of
Directors. Options granted to shareholders who own greater than 10% of the
outstanding stock are for periods not to exceed five years and must be issued
at prices not less than 110% of the fair market value of the stock on the date
of grant, as determined by the Board of Directors. Options granted under the
Stock Plan generally vest 33% after the first year of service and ratably each
quarter over the remaining twenty-four month period.

The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans.
If the Company had elected to recognize compensation cost on the fair market
value at the grant dates for awards under the stock option plan, consistent
with the method prescribed by SFAS No. 123, net income and income per share
would have been changed to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
Period ended Three months ended
September 30, 1999 December 31, 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Net loss--
As reported......................... $(2,284,546) $(1,978,788)
Pro forma........................... (2,434,063) (2,167,627)
Basic and diluted loss per share--
As reported......................... $ (0.26) $ (0.21)
Pro forma........................... (0.28) (0.23)
</TABLE>

F-15
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The fair value of the Company's stock options was estimated as of the grant
date using the Black-Scholes option pricing model with the following weighted
average assumptions for the period ended September 30, 1999 and December 31,
1999: dividend yield of 0.0%, expected volatility of 50%, risk free interest
rate of 6.5%, and an expected holding period from 1 to 3 years. The following
table summarizes activity under the Company's stock option plan:

<TABLE>
<CAPTION>
Three months ended
Period ended December 31, 1999
September 30, 1999 (Unaudited)
--------------------------- ---------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- -- 2,070,500 3.13
Granted................. 2,131,500 $3.08 828,000 9.86
Exercised............... -- -- (43,750) 1.00
Forfeited/expired....... (61,000) 1.11 (178,250) 6.11
--------- ---------
Outstanding at end of
period................. 2,070,500 $3.13 2,676,500 $5.02
========= =========
Weighted average fair
value of options
granted during period.. $1.03 $2.71
========= =========
</TABLE>

<TABLE>
<CAPTION>
Stock Options
Stock Options Outstanding at Exercisable at September
September 30, 1999 30, 1999
--------------------------------- ------------------------
Range of Weighted Average Weighted Average Weighted Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
--------------- --------- ---------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$1.00
to
$4.00 1,503,000 5.0 $1.20 359,666 $1.33
$7.00
to
$10.00 567,500 5.6 8.26 31,000 8.65
--------- -------
2,070,500 5.1 $3.08 390,666 $1.91
========= =======

<CAPTION>
Stock Options
Stock Options Outstanding at Exercisable at December
December 31, 1999 31, 1999
--------------------------------- ------------------------
Range of Weighted Average Weighted Average Weighted Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
--------------- --------- ---------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$1.00
to
$4.00 1,421,000 4.7 $1.21 419,332 $1.29
$7.00
to
$10.00 976,000 5.6 8.35 51,000 8.78
$12.00
to
$15.00 279,500 6.0 12.79 -- --
--------- -------
2,676,500 5.2 $5.02 470,332 $2.10
========= =======
</TABLE>

Through September 30, 1999, the Company recorded compensation expense in the
amount of $167,923 related to certain stock options and warrants. As of
December 31, 1999 approximately $551,000 remains to be amortized over the
remaining vesting periods of the options. For the three months ended December
31, 1999 the Company recorded compensation expense in the amount of $119,790
related to certain stock options and warrants.

Note I--Employment Contracts

The Company has employment agreements and arrangements with certain
executive officers. The agreements generally continue until terminated by the
executive or the Company, and provide for severance payments under certain
circumstances. As of September 30, 1999 and December 31, 1999, if all of the
employees under these contracts were to be terminated by the Company, the
Company's liability would be approximately $1.3 million.

F-16
<PAGE>

MindArrow Systems, Inc. and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note J--Profit Sharing Plan

Effective October 1, 1999, the Company implemented a 401(k) Profit Sharing
Plan (the "Plan") for its full-time employees. Each participant in the Plan may
elect to contribute from 1% to 17% of his or her annual compensation to the
Plan. The Company does not yet make matching contributions. However, at its
option, the Company may match employee contributions at a rate of 25%, up to 6%
of the Employee's salary. Employee contributions are fully vested, whereas
vesting in matching Company contributions occurs at a rate of 33.3% per year of
employment.

F-17
<PAGE>

PART II:

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13: Other Expenses of Issuance and Distribution

The estimated expenses payable in connection with the issuance and
distribution of the securities being registered are as follows:

<TABLE>
<S> <C>
SEC registration fee............................................... $ 26,158
Legal fees and expenses............................................ 50,000
Accounting fees and expenses....................................... 30,000
Printing and engraving expense..................................... 30,000
Transfer agent fees and expenses................................... 2,500
Miscellaneous...................................................... 2,500
--------
TOTAL............................................................ $141,158
========
</TABLE>

Except for the SEC registration fee, the above amounts are estimated.

Item 15: Recent Sales of Unregistered Securities

Transactions prior to April 1999 were initiated by Wireless Netcom and its
predecessor company, Rubicon Sports. As described in the following paragraphs,
all preferred shares and convertible debt balances were converted into common
stock upon the merger of Wireless Netcom and eCommercial California in April
1999. As of February 29, 2000, we had only Series B preferred stock and common
stock outstanding.

On May 23, 1997, we undertook a private debt offering of $130,000 (the
"Bridge Financing"), pursuant to the exemption from registration provided by
Rule 506 of the Act. The Bridge Notes had a term of six (6) months, and bore
simple interest at the rate of 8.5% per annum, payable at maturity. Investors
in the Bridge Financing were issued warrants to purchase an aggregate of 5,000
shares of our common stock ("Bridge Financing Investor Warrants"). Bridge
Financing Investor Warrants are exercisable for a term of three (3) years at an
exercise price of the lesser of $.10 per share, or 50% of the initial public
offering price of the common stock. The Bridge Notes were secured by our assets
as evidenced by the filing of a Financing Statement pursuant to the Uniform
Commercial Code. In addition, the Placement Agent received warrants to purchase
5,000 shares of common stock, exercisable on terms equivalent to the Bridge
Financing Investor Warrants. The Bridge Notes have been paid in full.

In June 1997, we undertook a private offering of 9% Series A Cumulative
Convertible preferred stock ("Series A preferred") at the price of $2.50 per
share. The June 1997 Offering was made pursuant to the exemptions from
registration provided by Rule 506 of Regulation D and Section 4(2) of the Act
and applicable Blue Sky laws. We sold 892,400 shares of Series A preferred to
67 accredited investors and received gross proceeds of $2,231,000. We issued
warrants to purchase 7,428 shares of common stock at a price of $0.10 in
connection with this Offering. Concurrent with the merger of Wireless Netcom
and eCommercial California, all Series A preferred shares were converted into
743,658 shares of our common stock.

In June 1998, we undertook a private offering of non-interest bearing
Promissory Notes (the "Notes") maturing twelve (12) months from the date of
issuance. Originally, the Notes were convertible into common stock by each
investor no earlier than thirty (30) days following commencement of trading of
our common stock on the OTC Bulletin Board. We received subscriptions totaling
$500,000 from 16 accredited investors. Concurrent with the merger of Wireless
Netcom and eCommercial California, these Notes were converted into 166,667
shares of our common stock.

II-1
<PAGE>

In July 1998, we undertook a $500,000 private offering of 6% Convertible
Promissory Notes to six accredited investors. Originally, the Notes matured
twelve (12) months from the date of issuance and were convertible into common
stock thirty (30) days following commencement of trading of our common stock on
the OTC Bulletin Board. The number of shares into which the Notes were
convertible was determined by dividing the dollar amount of such amount by the
preceding five (5) day average closing bid price of the Shares, discounted by
twenty percent (20%), as quoted on the OTC Bulletin Board. Concurrent with the
merger of Wireless Netcom and eCommercial California, these Notes were
converted into 166,667 shares of our common stock.

In April 1999, we undertook a private placement of our common stock, at a
price of from $1 to $4 per share ("April 1999 Offering"). The April 1999
Offering was made pursuant to the exemptions from registration provided by
Section 4(2) of the Act, and Rule 505 promulgated thereunder, and the
applicable blue sky laws. We received proceeds of $942,404 and issued 475,118
shares of common stock thereunder. The April 1999 Offering closed in May 1999.

In July 1999, we undertook a private placement of our Series B preferred
stock, at a price of $8 per share ("July 1999 Offering"). The July 1999
Offering was made pursuant to the exemptions from registration provided by
Section 4(2) of the Act, and Rule 505 promulgated thereunder, and the
applicable Blue Sky laws. We received proceeds of $10,153,473 and issued
1,388,073 shares of Series B preferred stock and 635,091 warrants thereunder.
We also issued an option to purchase an additional 125,000 shares of Series B
preferred at $8.00 per share and receive an additional 12,500 warrants,
expiring March 31, 2000. The July 1999 Offering closed in December 1999.

In March 2000, we undertook a private placement of our Series C preferred
stock, at a price of $25 per share ("March 2000 Offering"). The March 2000
Offering was made pursuant to the exemptions from registration provided by
Section 4(2) of the Act, and Rule 505 promulgated thereunder, and the
applicable Blue Sky laws. Through March 24, 2000, we received proceeds of
$10,225,625 and issued 409,025 shares of Series C preferred stock and
40,903 warrants thereunder.

Item 16: Index To Exhibits and Financial Statement Schedules

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger between MindArrow Systems, Inc. (DE)
and eCommercial.com, Inc. (NV)
3.1 Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Investor Rights Agreement
4.2 Form of Registrant's Specimen Common Stock Certificate
4.3 Form of Registrant's Series B Preferred Stock Certificate
4.4* Form of Common Stock Warrants
4.5 Certificate of Designation--Series B Preferred
4.6 Certificate of Designation-Series C
5.1** Opinion on Legality
10.1* Stock Purchase Agreement, dated as of April 16, 1999 between the
Company and Shareholders of Zap International
10.2* Merger Agreement, dated as of April 19, 1999, between Wireless
Netcom, Inc. and the shareholders of eCommercial.com, Inc.
10.3* Employment Agreement--Thomas Blakeley
10.4* Employment Agreement--Mark Grundy
10.5* Employment Agreement--Eric A. McAfee
10.6* Form of Change in Control Executive Retention Agreement
10.7* Registrant's 1999 Stock Option Plan
10.8* Agreement between Registrant and Eric McAfee regarding Voxel
10.9* Form of Indemnification Agreement between Registrant and each of
its directors
10.10* Lease Agreement--Aliso Viejo, CA
10.11 Sublease Agreement--Cupertino, CA
10.12* Strategic Relationship Agreement between Registrant and ONEX
Ventures LLC
10.13* Strategic Relationship Agreement between Registrant and Lockheed
Martin Corporation
23.1 Consent of experts
23.2** Consent of Counsel (see Exhibit 5.1)
24.1* Power of Attorney (included on signature page)
27.1* Financial Data Schedule
</TABLE>
- -------

*Previously filed

**To be filed by amendment

II-2
<PAGE>

Item 17: Undertakings

We hereby undertake to:

1. File, during any period in which we offer or sell securities, a post-
effective amendment to this Registration Statement to:

(a) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(b) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information set
forth in the Registration Statement; and

2. For determining liability under the Act, treat each post-effective
amendment as a new registration of the securities offered, and the
offering of such securities at that time to be the initial bona fide
offering;

3. File a post effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering; and

4. Provide certificates in such denominations and registered in such names
to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the company
pursuant to the foregoing provisions, or otherwise, the company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the company of expenses incurred or paid by a
director, officer or controlling person of the company 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 company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

For the purpose of determining any liability under the Securities Act, the
company will treat 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 Company pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Securities Act as part of this Registration Statement as of
the time the Securities and Exchange Commission declares it effective.

For the purpose of determining any liability under the Securities Act, we
will treat such post-effective amendment that contains a form of prospectus as
a new Registration Statement for the securities offered therein, and treat the
offering of the securities at that time as the initial bona fide offering of
those securities.

II-3
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Aliso Viejo, State of California, on April 3, 2000.

eCommercial.com, Inc.

*
By___________________________________
Thomas J. Blakeley
Chief Executive Officer

IN WITNESS WHEREOF, each of the undersigned has exercised this power of
attorney as of the date indicated.

In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.

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

<S> <C> <C>
* Chairman of the Board Chief April 3, 2000
____________________________________ Executive Officer President
Thomas J. Blakeley (Principal
Executive Officer)

* Chief Operating Officer April 3, 2000
____________________________________ Executive Vice President
Mark Grundy Director

* Executive Vice President April 3, 2000
____________________________________ Secretary, Director
Eric A. McAfee

/s/ Michael R. Friedl Chief Financial Officer April 3, 2000
____________________________________ Treasurer (Principal
Michael R. Friedl Finance and Accounting
Officer)

* Director April 3, 2000
____________________________________
John Troiano
</TABLE>

*
- -------------------------------

Michael R. Friedl

Power of Attorney

II-4
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger between MindArrow Systems, Inc. (DE)
and eCommercial.com, Inc. (NV)
3.1 Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Investor Rights Agreement
4.2 Form of Registrant's Specimen Common Stock Certificate
4.3 Form of Registrant's Specimen Series B Preferred Stock Certificate
4.4* Form of Common Stock Warrants
4.5 Certificate of Designation--Series B Preferred
4.6 Certificate of Designation--Series C Preferred
5.1** Opinion on Legality
10.1* Stock Purchase Agreement, dated as of April 16, 1999 between the
Company and Shareholders of Zap International
10.2* Merger Agreement, dated as of April 19, 1999, between Wireless
Netcom, Inc. and the shareholders of eCommercial.com, Inc.
10.3* Employment Agreement--Thomas Blakeley
10.4* Employment Agreement--Mark Grundy
10.5* Employment Agreement--Eric A. McAfee
10.6* Form of Change in Control Executive Retention Agreement
10.7* Registrant's 1999 Stock Option Plan
10.8* Agreement between Registrant and Eric McAfee regarding Voxel
Form of Indemnification Agreement between Registrant and each of
10.9* its directors
10.10* Lease Agreement--Aliso Viejo, CA
10.11 Sublease Agreement--Cupertino, CA
Strategic Relationship Agreement between Registrant and ONEX
10.12* Ventures LLC
Strategic Relationship Agreement between Registrant and Lockheed
10.13* Martin Corporation
23.1 Consent of experts
23.2** Consent of Counsel (see Exhibit 5.1)
24.1* Power of Attorney (included on signature page)
27.1* Financial Data Schedule
</TABLE>
- --------

*Previously filed

**To be filed by amendment

<PAGE>

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER
----------------------------

THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is entered into
as of March 31, 2000 by and between eCommercial.com, Inc., a Nevada corporation
("eCommercial Nevada"), and MindArrow Systems, Inc., a Delaware, a Delaware
corporation ("eCommercial Delaware").

WITNESSETH:
----------

WHEREAS, eCommercial Delaware is a corporation duly organized and existing
under the laws of the State of Delaware;

WHEREAS, eCommercial Nevada is a corporation duly organized and existing
under the laws of the State of Nevada;

WHEREAS, on the date of this Merger Agreement, eCommercial Delaware has
authority to issue 30,000,000 shares of Common Stock, par value $0.001 per share
(the "eCommercial Delaware Common Stock"), of which 100 shares are issued and
outstanding and owned by eCommercial Nevada and 10,000,000 shares of Preferred
Stock, par value $0.001 per share (the "eCommercial Delaware Preferred Stock),
of which no shares are issued or outstanding;

WHEREAS, on the date of this Merger Agreement, eCommercial Nevada has
authority to issue 30,000,000 shares of Common Stock (the "eCommercial Nevada
Common Stock"), of which 9,585,583 shares are issued and outstanding, and
10,000,000 shares of Preferred Stock (the "eCommercial Nevada Preferred Stock"),
of which 1,388,073 shares are issued and outstanding;

WHEREAS, the respective Boards of Directors for eCommercial Delaware and
eCommercial Nevada have determined that, for the purpose of effecting the
reincorporation of eCommercial Nevada in the State of Delaware, it is advisable
and to the advantage of said two corporations and their shareholders that
eCommercial Nevada merge with and into eCommercial Delaware upon the terms and
conditions herein provided; and

WHEREAS, the respective Boards of Directors of eCommercial Delaware and
eCommercial Nevada, the shareholders of eCommercial Nevada, and the sole
stockholder of eCommercial Delaware have adopted and approved this Merger
Agreement;

NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, eCommercial Nevada and eCommercial Delaware hereby agree to merge
as follows:

1. Merger. eCommercial Nevada shall be merged with and into eCommercial
------
Delaware, and eCommercial Delaware shall survive the merger ("Merger"),
effective upon the date when this Merger Agreement is made effective in
accordance with applicable law (the "Effective Date").

1
<PAGE>

2. Governing Documents. The Certificate of Incorporation of eCommercial
-------------------
Delaware shall continue to be the Certificate of Incorporation of eCommercial
Delaware as the surviving Corporation.

The Bylaws of eCommercial Delaware, in effect on the Effective Date, shall
continue to be the Bylaws of eCommercial Delaware as the surviving Corporation
without change or amendment until further amended in accordance with the
provisions thereof and applicable laws.

3. Directors and Officers. The directors and officers of eCommercial
----------------------
Nevada shall become the directors and officers of eCommercial Delaware upon the
Effective Date and any committee of the Board of Directors of eCommercial Nevada
shall become the members of such committees for eCommercial Delaware.

4. Succession. On the Effective Date, eCommercial Delaware shall succeed
----------
to eCommercial Nevada in the manner of and as more fully set forth in Section
259 of the General Corporation Law of the State of Delaware.

5. Further Assurances. From time to time, as and when required by
------------------
eCommercial Delaware or by its successors and assigns, there shall be executed
and delivered on behalf of eCommercial Nevada such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action, as shall be appropriate or necessary in order to vest, perfect or
confirm, of record or otherwise, in eCommercial Delaware the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of eCommercial Nevada, and
otherwise to carry out the purposes of this Merger Agreement and the officers
and directors of eCommercial Delaware are fully authorized in the name and on
behalf of eCommercial Nevada or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.

6. Stock of ECommercial Nevada.
---------------------------

a. Common Stock. Upon the Effective Date, by virtue of the Merger
------------
and without any action on the part of the holder thereof, each share of
eCommercial Nevada Common Stock outstanding immediately prior thereto shall be
changed and converted into one (1) fully paid and nonassessable share of
eCommercial Delaware Common Stock.

b. Preferred Stock. Upon the Effective Date, by virtue of the Merger
---------------
and without any action on the part of the holder thereof, each share of each
series of eCommercial Nevada Preferred Stock outstanding immediately prior
thereto shall be changed and converted into one (1) fully paid and nonassessable
share of eCommercial Delaware Preferred Stock of an equivalent series.

c. Fractional Shares. No fractional shares which a eCommercial
-----------------
Delaware stockholder would otherwise be entitled to receive by reason of the
exchange of eCommercial Nevada stock for eCommercial Delaware stock shall be
issued.

7. Stock Certificates. On and after the Effective Date, all of the
------------------
outstanding certificates which prior to that time represented shares of
eCommercial Nevada stock shall be deemed for all purposes to evidence ownership
of and to represent the shares of eCommercial

2
<PAGE>

Delaware stock into which the shares of eCommercial Nevada stock represented by
such certificates have been converted as herein provided. The registered owner
on the books and records of eCommercial Delaware or its transfer agent of any
such outstanding stock certificate shall, until such certificate shall have been
surrendered for transfer or otherwise accounted for to eCommercial Delaware or
its transfer agent, have and be entitled to exercise any voting and other rights
with respect to and to receive any dividend and other distributions upon the
shares of eCommercial Delaware stock evidenced by such outstanding certificate
as above provided.

8. Options, Warrants and Promissory Notes. Upon the Effective Date, each
--------------------------------------
outstanding option, warrant, promissory notes, or other right to purchase shares
of eCommercial Nevada stock shall be converted into and become an option,
warrant, promissory note, or right to purchase the same number of shares of
eCommercial Delaware upon the same terms and subject to the same conditions as
set forth in the option plans and other agreements entered into by eCommercial
Nevada pertaining to such options, warrants, promissory notes, or rights. A
number of shares of eCommercial Delaware stock shall be reserved for purposes of
such options, warrants, promissory notes, and rights equal to the number of
shares of eCommercial Nevada stock so reserved as of the Effective Date. As of
the Effective Date, eCommercial Delaware shall assume all obligations of
eCommercial Nevada under agreements pertaining to such options, warrants,
promissory notes and rights, and the outstanding options, warrants, promissory
notes, or other rights, or portions thereof, granted pursuant thereto.

9. Other Employee Benefit Plans. As of the Effective Date, eCommercial
----------------------------
Delaware hereby assumes all obligations of eCommercial Nevada under any and all
employee benefit plans in effect as of said date or with respect to which
employee rights or accrued benefits are outstanding as of said date.

10. Outstanding Common Stock of eCommercial Delaware. Forthwith upon the
------------------------------------------------
Effective Date, the One Hundred (100) shares of eCommercial Delaware Common
Stock presently issued and outstanding in the name of eCommercial Nevada shall
be canceled and retired and resume the status of authorized and unissued shares
of eCommercial Delaware Common Stock, and no shares of eCommercial Delaware
Common Stock or other securities of eCommercial Delaware shall be issued in
respect thereof.

11. Covenants of ECommercial Delaware. eCommercial Delaware covenants and
---------------------------------
agrees that it will, on or before the Effective Date:

a. Qualify to do business as a foreign corporation in all states in
which eCommercial Nevada is so qualified and in which the failure so to qualify
would have a material adverse impact on the business or financial condition of
eCommercial Delaware. In connection therewith, eCommercial Delaware shall
irrevocably appoint an agent for service of process as required under the
provisions of Section 2105 of the California Corporations Code and under
applicable provisions of state law in other states in which qualification is
required hereunder.

b. File any and all documents with the Nevada Franchise Tax Board
necessary to the assumption by eCommercial Delaware of all of the franchise tax
liabilities of eCommercial Nevada.

3
<PAGE>

12. Amendment. At any time before or after approval and adoption by the
---------
stockholders of eCommercial Nevada, this Merger Agreement may be amended in any
manner as may be determined in the judgment of the respective Boards of
Directors of eCommercial Delaware and eCommercial Nevada to be necessary,
desirable or expedient in order to clarify the intention of the parties hereto
or to effect or facilitate the purposes and intent of this Merger Agreement.

13. Abandonment. At any time before the Effective Date, this Merger
-----------
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either eCommercial Nevada or eCommercial Delaware or both,
notwithstanding approval of this Merger Agreement by the sole stockholder of
eCommercial Delaware and the shareholders of eCommercial Nevada.

14. Counterparts. In order to facilitate the filing and recording of this
------------
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.

IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by resolution of the Board of Directors of eCommercial Nevada and eCommercial
Delaware, is hereby executed on behalf of each of said two corporations by their
respective officers thereunto duly authorized.

MINDARROW SYSTEMS, INC., a Delaware corporation

By:
------------------------------------------
Thomas Blakeley, Chief Executive Officer

ECOMMERCIAL.COM, INC., a Nevada corporation

By:
-------------------------------------------
Thomas Blakeley, Chief Executive Officer

4
<PAGE>

CERTIFICATE OF SECRETARY

MINDARROW SYSTEMS, INC.

(a Delaware corporation)

I, Eric McAfee, the Secretary of MindArrow Systems, Inc.,a Delaware
corporation (the "Corporation"), hereby certify that the Agreement and Plan of
Merger to which this Certificate is attached was duly signed on behalf of the
Corporation by its Chief Executive Officer and was approved and adopted by the
unanimous vote of the outstanding stock entitled to vote thereon by written
consent of the sole stockholder of the Corporation dated ____________, 2000.

Executed effective on the ____ day of ___________, 2000.

------------------------------------
Eric McAfee
<PAGE>

CERTIFICATE OF APPROVAL OF

AGREEMENT AND PLAN OF MERGER OF

ECOMMERCIAL.COM, INC.

(a Nevada corporation)

Thomas Blakeley and Eric McAfee certify that:

1. They are the duly elected and acting President and Secretary,
respectively, of eCommercial.com, Inc., a Nevada corporation (the
"Corporation").

2. This Certificate is attached to the Agreement and Plan of Merger dated
as of ______________, 2000, providing for the merger of the Corporation with and
into a Delaware corporation.

3. The Agreement and Plan of Merger in the form attached hereto (the
"Merger Agreement") was approved by the Board of Directors of the Corporation at
a meeting duly noticed and held on _________, 2000.

4. The total number of outstanding shares of the Corporation entitled to
vote on the merger was ___________ shares of Common Stock and __________ shares
of Series B Preferred Stock.

5. The principal terms of the Merger Agreement were approved by an
affirmative vote which exceeded the vote required, such vote being a majority of
the total number of outstanding shares of Common Stock and Series B Preferred
Stock, voting together as a single class and a majority of the outstanding
shares of the Series B Preferred Stock ,voting as a separate class.

Dated: _____________, 2000.

---------------------------------------
Thomas Blakeley, President

---------------------------------------
Eric McAfee, Secretary

1
<PAGE>

The undersigned, Thomas Blakeley and Eric McAfee, President and Secretary,
respectively, of eCcommercial.com, Inc., a Nevada corporation, declare under
penalty of perjury under the laws of the State of Nevada that the matters set
forth in this Certificate are true and correct of their own knowledge.

Executed at ____________, on ____________, 2000.

______________________________________
Thomas Blakeley, President

______________________________________
Eric McAfee, Secretary

<PAGE>

EXHIBIT 3.1

CERTIFICATE OF INCORPORATION
OF
MINDARROW SYSTEMS, INC.

ARTICLE I

The name of the corporation is MindArrow Systems, Inc. (the "Corporation").

ARTICLE II

The address of the Corporation's registered office in the State of Delaware
is Corporation Service Company, 1013 Centre Road, in the City of Wilmington,
County of New Castle 19805. The name of its registered agent at such address is
Corporation Service Company.

ARTICLE III

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
Delaware.

ARTICLE IV

The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock". The total
number of shares that this Corporation is authorized to issue is Forty Million
(40,000,000). The number of shares of Common Stock authorized to be issued is
Thirty Million (30,000,000), par value $.001 per share. The number of shares of
Preferred Stock authorized to be issued is Ten Million (10,000,000), par value
$.001 per share. The Preferred Stock authorized by this Certificate of
Incorporation may be issued from time to time in one or more series. The Board
of Directors of the Corporation is hereby authorized to increase or decrease
(but not below the number of shares of such series then outstanding) the number
of shares of any series of Preferred Stock subsequent to the issue of shares of
such series. The Board of Directors is hereby further authorized to fix, or
alter all or any of, the dividend rights, dividend rate, conversion rights,
voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences of
any wholly unissued series of Preferred Stock, and to fix the number of shares
constituting any such series and the designations of such series. The term
"fixed for such series" and correlative terms as used in this Article IV shall
mean, with respect to any series of Preferred Stock, as stated in a resolution
or resolutions lawfully adopted by the Board of Directors in exercise of such
authority hereinabove granted.

1
<PAGE>

ARTICLE V

The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this right.

ARTICLE VI

The Corporation is to have perpetual existence.

ARTICLE VII

1. Limitation of Liability. To the fullest extent permitted by the General
-----------------------
Corporation Law of the State of Delaware as the same exists or as may hereafter
be amended, a director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.

2. Indemnification. The Corporation may indemnify to the fullest extent
---------------
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the Corporation, or any predecessor of
the Corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to the
Corporation.

3. Amendments. Neither any amendment nor repeal of this Article VII, nor
----------
the adoption of any provision of the Corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal, or adoption of an inconsistent provision.

ARTICLE VIII

The name and mailing address of the Incorporator are as follows:

Quynh Trinh
101 Enterprise, Suite 340
Aliso Viejo, California 92656

2
<PAGE>

The undersigned Incorporator hereby acknowledges that the above Certificate
of Incorporation of MindArrow Systems, Inc. is her act and deed and that the
facts stated therein are true.

Dated: March 31, 2000
-----------------
Quynh Trinh,
Incorporator

<PAGE>

BYLAWS

MINDARROW SYSTEMS, INC.

<PAGE>

TABLE OF CONTENTS
-----------------

Page
----
Article 1. Stockholders................................................... 1
1.1 Place of Meetings........................................ 1
1.2 Annual Meeting........................................... 1
1.3 Special Meetings......................................... 1
1.4 Notice of Meetings....................................... 1
1.5 Voting List.............................................. 1
1.6 Quorum................................................... 2
1.7 Adjournments............................................. 2
1.8 Voting and Proxies....................................... 2
1.9 Action at Meeting........................................ 2
1.10 Notice of Stockholder Business........................... 3
1.11 Conduct of Business...................................... 3
1.12 No Stockholder Action Without Meeting.................... 4

Article 2. Board of Directors............................................. 4
2.1 General Powers........................................... 4
2.2 Number and Term of Office................................ 4
2.3 Vacancies and Newly Created Directorships................ 5
2.4 Resignation.............................................. 5
2.5 Regular Meetings......................................... 5
2.6 Special Meetings......................................... 5
2.7 Notice of Special Meetings............................... 5
2.8 Participation in Meetings by Telephone Conference Calls.. 6
2.9 Quorum................................................... 6
2.10 Action at Meeting........................................ 6
2.11 Action by Consent........................................ 6
2.12 Removal.................................................. 6
2.13 Committees............................................... 6
2.14 Compensation of Directors................................ 7
2.15 Nomination of Director Candidates........................ 7

Article 3. Officers....................................................... 8
3.1 Enumeration.............................................. 8
3.2 Election................................................. 8
3.3 Qualification............................................ 8
3.4 Tenure................................................... 8
3.5 Resignation and Removal.................................. 8
3.6 Chairman of the Board.................................... 8
3.7 Chief Executive Officer.................................. 9
3.8 President................................................ 9
3.9 Vice Presidents.......................................... 9
3.10 Secretary and Assistant Secretaries...................... 9
3.11 Chief Financial Officer.................................. 9
3.12 Salaries................................................. 10

i
<PAGE>

TABLE OF CONTENTS
-----------------
(continued)

Page
----

3.13 Delegation of Authority.................................. 10

Article 4. Capital Stock.................................................. 10
4.1 Issuance of Stock........................................ 10
4.2 Certificates of Stock.................................... 10
4.3 Transfers................................................ 10
4.4 Lost, Stolen or Destroyed Certificates................... 11
4.5 Record Date.............................................. 11

Article 5. General Provisions............................................. 11
5.1 Fiscal Year.............................................. 11
5.2 Corporate Seal........................................... 11
5.3 Waiver of Notice......................................... 11
5.4 Actions with Respect to Securities of Other Corporations. 12
5.5 Evidence of Authority.................................... 12
5.6 Certificate of Incorporation............................. 12
5.7 Severability............................................. 12
5.8 Pronouns................................................. 12
5.9 Notices.................................................. 12
5.10 Reliance Upon Books, Reports and Records................. 12
5.11 Time Periods............................................. 13
5.12 Facsimile Signatures..................................... 13

Article 6. Amendments..................................................... 13
6.1 By the Board of Directors................................ 13
6.2 By the Stockholders...................................... 13

Article 7. Indemnification of Directors and Officers...................... 13
7.1 Right to Indemnification................................. 13
7.2 Right of Claimant to Bring Suit.......................... 14
7.3 Indemnification of Employees and Agents.................. 14
7.4 Non-Exclusivity of Rights................................ 15
7.5 Indemnification Contracts................................ 15
7.6 Insurance................................................ 15
7.7 Effect of Amendment...................................... 15

ii
<PAGE>

EXHIBIT 3.2

BYLAWS OF MINDARROW SYSTEMS, INC.

Article 1. Stockholders
------------

1.1 Place of Meetings. All meetings of stockholders shall be held at
-----------------
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President and Chief Executive
Officer or, if not so designated, at the registered office of the corporation.

1.2 Annual Meeting. The annual meeting of stockholders for the
--------------
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Board of Directors or the President and Chief Executive Officer at the time
and place to be fixed by the Board of Directors or the President and stated in
the notice of the meeting. If no annual meeting is held in accordance with the
foregoing provisions, the Board of Directors shall cause the meeting to be held
as soon thereafter as convenient.

1.3 Special Meetings. Special meetings of Stockholders may be called
----------------
at any time only by the Board of Directors, the Chairman of the Board, the
President or the Chief Executive Officer.

1.4 Notice of Meetings. Written notice of each meeting of
------------------
stockholders, whether annual or special, shall be given not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or as required by law (meaning here and hereafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation). The notices of all meetings shall state the place, date and hour
of the meeting. The notice of a special meeting shall state, in addition, the
purpose or purposes for which the meeting is called. If mailed, notice is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.

1.5 Voting List. The officer who has charge of the stock ledger of the
-----------
corporation shall prepare, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time of the meeting, and may be inspected by any stockholder who is
present. This list shall preemptively determine the identity of the stockholders
entitled to vote at the meeting and the number of shares held by each of them.

1
<PAGE>

1.6 Quorum. Except as otherwise provided by law or these Bylaws, the
------
holders of a majority of the shares of the capital stock of the corporation
entitled to vote at the meeting, present in person or represented by proxy,
shall constitute a quorum for the transaction of business. If a quorum shall
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares of stock entitled to vote who are present, in person or
by proxy, may adjourn the meeting to another place, date or time.

If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting.

1.7 Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these Bylaws by the holders of a majority of the shares of stock present
or represented at the meeting and entitled to vote, although less than a quorum,
or, if no stockholder is present, by any officer entitled to preside at or to
act as Secretary of such meeting. When a meeting is adjourned to another place,
date or time, written notice need not be given of the adjourned meeting if the
place, date and time thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the date of any adjourned
meeting is more than thirty (30) days after the date for which the meeting was
originally noticed, or if a new record date is fixed for the adjourned meeting,
written notice of the place, date, and time of the adjourned meeting shall be
given in conformity herewith. At the adjourned meeting, the corporation may
transact any business which might have been transacted at the original meeting.

1.8 Voting and Proxies. Each stockholder shall have one vote for each
------------------
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by law. Each stockholder of record entitled to vote at a meeting of
stockholders, may vote in person or may authorize any other person or persons to
vote or act for him by written proxy executed by the stockholder or his
authorized agent or by a transmission permitted by law and delivered to the
Secretary of the corporation. No stockholder may authorize more than one proxy
for his shares. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this Section may
be substituted or used in lieu of the original writing or transmission for any
and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile transmission or other reproduction shall be a
complete reproduction of the entire original writing or transmission.

1.9 Action at Meeting. When a quorum is present at any meeting, any
-----------------
election shall be determined by a plurality of the votes cast by the
stockholders entitled to vote at the election, and all other matters shall be
determined by a majority of the votes cast affirmatively or negatively on the
matter (or if there are two or more classes of stock entitled to vote as
separate classes, then in the case of each such class, a majority of each such
class present or represented and voting affirmatively or negatively on the
matter) shall decide such matter, except when a

2
<PAGE>

different vote is required by express provision of law, the Certificate of
Incorporation or these Bylaws.

All voting, including on the election of directors, but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting. The corporation may, and to the extent
required by law, shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof. The
corporation may designate one or more persons as an alternate inspector to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of stockholders, the person presiding at the meeting may, and
to the extent required by law, shall, appoint one or more inspectors to act at
the meeting. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability.

1.10 Notice of Stockholder Business. At an annual meeting of the
------------------------------
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (ii) properly
brought before the meeting by or at the direction of the Board of Directors, or
(iii) properly brought before an annual meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder proposal to be presented at an
annual meeting shall be received at the Corporation's principal executive
offices not less than 120 calendar days in advance of the date that the
Corporation's (or the Corporation's predecessor's) proxy statement was released
to stockholders in connection with the previous year's annual meeting of
stockholders, except that if no annual meeting was held in the previous year or
the date of the annual meeting has been advanced by more than 30 calendar days
from the date contemplated at the time of the previous year's proxy statement,
notice by the stockholders to be timely must be received not later than the
close of business on the tenth day following the day on which the date of the
annual meeting is publicly announced.

A stockholder's notice to the Secretary of the Corporation shall set forth
as to each matter the stockholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the Corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business.

1.11 Conduct of Business. At every meeting of the stockholders, the
-------------------
Chairman of the Board, if there is such an officer, or if not, the person
appointed by the Board of Directors, shall act as Chairman. The Secretary of the
corporation or a person designated by the Chairman of the

3
<PAGE>

meeting shall act as Secretary of the meeting. Unless otherwise approved by the
Chairman of the meeting, attendance at the stockholders' meeting is restricted
to stockholders of record, persons authorized in accordance with Section 1.8 of
these Bylaws to act by proxy, and officers of the corporation.

The Chairman of the meeting shall call the meeting to order, establish the
agenda, and conduct the business of the meeting in accordance therewith or, at
the Chairman's discretion, it may be conducted otherwise in accordance with the
wishes of the stockholders in attendance. The date and time of the opening and
closing of the polls for each matter upon which the stockholders will vote at
the meeting shall be announced at the meeting.

The Chairman shall also conduct the meeting in an orderly manner, rule on
the precedence of, and procedure on, motions and other procedural matters, and
exercise discretion with respect to such procedural matters with fairness and
good faith toward all those entitled to take part. The Chairman may impose
reasonable limits on the amount of time taken up at the meeting on discussion in
general or on remarks by any one stockholder. Should any person in attendance
become unruly or obstruct the meeting proceedings, the Chairman shall have the
power to have such person removed from participation. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at a meeting
except in accordance with the procedures set forth in this Section 1.11 and
Section 1.10 above. The Chairman of a meeting shall, if the facts warrant,
determine and declare to the meeting that any proposed item of business was not
brought before the meeting in accordance with the provisions of this Section
1.11 and Section 1.10, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.

1.12 No Stockholder Action Without Meeting. Any action required or
-------------------------------------
permitted to be taken by the stockholders of the Corporation must be effected at
a duly called annual or special meeting of stockholders of the Corporation and
may not be effected by any consent in writing by such stockholders.

Article 2. Board of Directors
------------------

2.1 General Powers. The business and affairs of the corporation shall
--------------
be managed by or under the direction of a Board of Directors, who may exercise
all of the powers of the corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.

2.2 Number and Term of Office. The number of directors shall be no
-------------------------
less than three (3) and no more than seven (7) and, thereafter, shall be fixed
from time to time exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there exist any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board for adoption). The directors shall
be divided into three classes, with the term of office of the first class to
expire at the first annual meeting of stockholders held after the date of the
filing of the Corporation's Restated Articles of Incorporation implementing a
classified bond (the "Filing Date"); the term
4
<PAGE>

of office of the second class to expire at the second annual meeting of
stockholders held after the Filing Date; the term of office of the third class
to expire at the third annual meeting of stockholders held after the Filing
Date; and thereafter for each such term to expire at each third succeeding
annual meeting of stockholders after such election. All directors shall hold
office until the expiration of the term for which elected and until their
respective successors are elected, except in the case of the death, resignation
or removal of any director.

2.3 Vacancies and Newly Created Directorships. Subject to the rights of
-----------------------------------------
the holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification or other cause (including removal from office by a
vote of the stockholders) may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the next annual meeting of stockholders at which
the term of office of the class to which they have been elected expires. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.

2.4 Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.

2.5 Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.

2.6 Special Meetings. Special meetings of the Board of Directors may be
----------------
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, the President and Chief Executive
Officer, two or more directors, or by one director in the event that there is
only a single director in office.

2.7 Notice of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone or
electronic voice message system at least 24 hours in advance of the meeting,
(ii) by sending a telegram, telecopy or telex, or delivering written notice by
hand, to his last known business or home address at least 24 hours in advance of
the meeting, or (iii) by mailing written notice to his last known business or
home address at least three (3) day in advance of the meeting. A notice or
waiver of notice of a meeting of the Board of Directors need not specify the
purposes of the meeting. Unless otherwise indicated in the notice thereof, any
and all business may be transacted at a special meeting.

5
<PAGE>

2.8 Participation in Meetings by Telephone Conference Calls. Directors or
-------------------------------------------------------
any members of any committee designated by the directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall constitute presence in person at such meeting.

2.9 Quorum. A majority of the total number of authorized directors shall
------
constitute a quorum at any meeting of the Board of Directors. In the event one
or more of the directors shall be disqualified to vote at any meeting, then the
required quorum shall be reduced by one for each such director so disqualified;
provided, however, that in no case shall less than one-third (1/3) of the number
so fixed constitute a quorum. In the absence of a quorum at any such meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice other than announcement at the meeting, until a quorum
shall be present. Interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or at a meeting of a
committee which authorizes a particular contract or transaction.

2.10 Action at Meeting. At any meeting of the Board of Directors at which a
-----------------
quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these Bylaws.

2.11 Action by Consent. Any action required or permitted to be taken at any
-----------------
meeting of the Board of Directors or of any committee of the Board of Directors
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent to the action in writing. Any such written consents shall
be filed with the minutes of proceedings of the Board or committee.

2.12 Removal. Subject to the rights of the holders of any series of
-------
Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least a majority of the voting
power of all of the outstanding shares of capital stock entitled to vote
generally in the election of directors, voting together as a single class.

2.13 Committees. The Board of Directors may designate one or more
----------
committees, each committee to consist of one or more of the directors of the
corporation, with such lawfully delegated powers and duties as it therefor
confers, to serve at the pleasure of the Board. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors and subject to the provisions of the
General Corporation Law of the State of Delaware, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it. Each such

6
<PAGE>

committee shall keep minutes and make such reports as the Board of Directors may
from time to time request. Except as the Board of Directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by such rules, its business shall be conducted as
nearly as possible in the same manner as is provided in these Bylaws for the
Board of Directors.

2.14 Compensation of Directors. Directors may be paid such compensation for
-------------------------
their services and such reimbursement for expenses of attendance at meetings as
the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.

2.15 Nomination of Director Candidates. Subject to the rights of holders of
---------------------------------
any class or series of Preferred Stock then outstanding, nominations for the
election of Directors may be made by the Board of Directors or a proxy committee
appointed by the Board of Directors or by any stockholder entitled to vote in
the election of Directors generally. However, any stockholder entitled to vote
in the election of Directors generally may nominate one or more persons for
election as Directors at a meeting only if timely notice of such stockholder's
intent to make such nomination or nominations has been given in writing to the
Secretary of the Corporation. To be timely, a stockholder nomination for a
director to be elected at an annual meeting shall be received at the
Corporation's principal executive offices not less than 120 calendar days in
advance of the date that the Corporation's (or the Corporation's predecessor's)
proxy statement was released to stockholders in connection with the previous
year's annual meeting of stockholders, except that if no annual meeting was held
in the previous year or the date of the annual meeting has been changed by more
than 30 calendar days from the date contemplated at the time of the previous
year's proxy statement, or in the event of a nomination for director to be
elected at a special meeting, notice by the stockholders to be timely must be
received not later than the close of business on the tenth day following the day
on which such notice of the date of the special meeting was mailed or such
public disclosure was made. Each such notice shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote for the election
of directors on the date of such notice and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(c) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a director of the Corporation if
so elected.

In the event that a person is validly designated as a nominee in accordance
with this Section 2.15 and shall thereafter become unable or unwilling to stand
for election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may

7
<PAGE>

be, may designate a substitute nominee upon delivery, not fewer than five days
prior to the date of the meeting for the election of such nominee, of a written
notice to the Secretary setting forth such information regarding such substitute
nominee as would have been required to be delivered to the Secretary pursuant to
this Section 2.15 had such substitute nominee been initially proposed as a
nominee. Such notice shall include a signed consent to serve as a director of
the Corporation, if elected, of each such substitute nominee.

If the chairman of the meeting for the election of Directors determines
that a nomination of any candidate for election as a Director at such meeting
was not made in accordance with the applicable provisions of this Section 2.15,
such nomination shall be void; provided, however, that nothing in this Section
2.15 shall be deemed to limit any voting rights upon the occurrence of dividend
arrearages provided to holders of Preferred Stock pursuant to the Preferred
Stock designation for any series of Preferred Stock.

Article 3. Officers
--------

3.1 Enumeration. The officers of the corporation shall consist of a Chief
-----------
Executive Officer, a President, a Secretary, a Chief Financial Officer and such
other officers with such other titles as the Board of Directors shall determine,
including, at the discretion of the Board of Directors, a Chairman of the Board,
and one or more Vice Presidents and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate.

3.2 Election. Officers shall be elected annually by the Board of Directors
--------
at its first meeting following the annual meeting of stockholders. Officers may
be appointed by the Board of Directors at any other meeting.

3.3 Qualification. No officer need be a stockholder. Any two or more
-------------
offices may be held by the same person.

3.4 Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote appointing him, or until his earlier death, resignation or removal.

3.5 Resignation and Removal. Any officer may resign by delivering his
-----------------------
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event. Any officer may be removed at any time, with or without cause, by
the Board of Directors.

3.6 Chairman of the Board. The Board of Directors may appoint a Chairman of
---------------------
the Board. If the Board of Directors appoints a Chairman of the Board, he shall
perform such duties and possess such powers as are assigned to him by the Board
of Directors. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders, and, if he is a director, at all
meetings of the Board of Directors.

8
<PAGE>

3.7 Chief Executive Officer. The Chief Executive Officer shall, subject to
-----------------------
the direction of the Board of Directors, have responsibility for the general
management and control of the business and affairs of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of chief executive or which are delegated to him or her by the Board of
Directors. The Chief Executive Officer shall perform such other duties and shall
have such other powers as the Board of Directors may from time to time
prescribe. He or she shall have power to sign stock certificates, contracts and
other instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation, other than the Chairman of the Board.

3.8 President. Should there exist an office of President which is held by a
---------
person other than the Chief Executive Officer and which differs from the office
of Chief Executive Officer, the President shall have the responsibilities
delegated to him or her by the Board of Directors.

3.9 Vice Presidents. Any Vice President shall perform such duties and
---------------
possess such powers as the Board of Directors or the Chief Executive Officer may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the President, the Vice President (or if there shall be more than one,
the Vice Presidents in the order determined by the Board of Directors) shall
perform the duties of the Chief Executive Officer and when so performing shall
have at the powers of and be subject to all the restrictions upon the Chief
Executive Officer. The Board of Directors may assign to any Vice President the
title of Executive Vice President, Senior Vice President or any other title
selected by the Board of Directors.

3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
-----------------------------------
duties and shall have such powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe. In addition, the Secretary
shall perform such duties and have such powers as are incident to the office of
the Secretary, including, without limitation, the duty and power to give notices
of all meetings of stockholders and special meetings of the Board of Directors,
to keep a record of the proceedings of all meetings of stockholders and the
Board of Directors, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.

Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Secretary, the Assistant Secretary (or if there shall be more than one,
the Assistant Secretaries in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Secretary.

In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.

3.11 Chief Financial Officer. Unless otherwise designated by the Board of
-----------------------
Directors, the Chief Financial Officer shall be the Treasurer. The Chief
Financial Officer shall perform

9
<PAGE>

such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the Chief Executive Officer. In addition, the
Chief Financial Officer shall perform such duties and have such powers as are
incident to the office of chief financial officer, including without limitation,
the duty and power to keep and be responsible for all funds and securities of
the corporation, to maintain the financial records of the Corporation, to
deposit funds of the corporation in depositories as authorized, to disburse such
funds as authorized, to make proper accounts of such funds, and to render as
required by the Board of Directors accounts of all such transactions and of the
financial condition of the corporation.

3.12 Salaries. Officers of the corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.

3.13 Delegation of Authority. The Board of Directors may from time to time
-----------------------
delegate the powers or duties of any officer to any other officers or agents,
notwithstanding any provision hereof.

Article 4. Capital Stock.
--------------

4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
-----------------
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.

4.2 Certificates of Stock. Every holder of stock of the corporation shall
---------------------
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the name
of the corporation by, the Chairman or Vice-Chairman, if any, of the Board of
Directors, or the President or a Vice President, and the Chief Financial
Officer, or the Secretary or an Assistant Secretary of the corporation. Any or
all of the signatures on the certificate may be a facsimile.

Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the Bylaws, applicable
securities laws or any agreement among any number of shareholders or among such
holders and the corporation shall have conspicuously noted on the face or back
of the certificate either the full text of the restriction or a statement of the
existence of such restriction.

4.3 Transfers. Except as otherwise established by rules and regulations
---------
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or authenticity of signature
as the corporation or its transfer agent may reasonably require. Except as may
be otherwise required by

10
<PAGE>

law, by the Certificate of Incorporation or by the Bylaws, the corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and the
right to vote with respect to such stock, regardless of any transfer, pledge or
other disposition of such stock until the shares have been transferred on the
books of the corporation in accordance with the requirements of these Bylaws.

4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a new
--------------------------------------
certificate of stock in place of any previously saved certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.

4.5 Record Date. The Board of Directors may fix in advance a date as a
-----------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, concession or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action to which such record date relates.

If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed. The record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating to such purpose.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

Article 5. General Provisions
------------------

5.1 Fiscal Year. The fiscal year of the corporation shall be as fixed by
-----------
the Board of Directors.

5.2 Corporate Seal. The corporate seal shall be in such form as shall be
--------------
approved by the Board of Directors.

5.3 Waiver of Notice. Whenever any notice whatsoever is required to be
----------------
given by law, by the Certificate of Incorporation or by these Bylaws, a waiver
of such notice either in

11
<PAGE>

writing signed by the person entitled to such notice or such person's duly
authorized attorney, or by telecopy, telegraph, cable or any other available
method, whether before, at or after the time stated in such waiver, or the
appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.

5.4 Actions with Respect to Securities of Other Corporations. Except as the
--------------------------------------------------------
Board of Directors may otherwise designate, the President or any officer of the
corporation authorized by the President shall have the power to vote and
otherwise act on behalf of the corporation, in person or proxy, and may waive
notice of, and act as, or appoint any person or persons to act as, proxy or
attorney-in-fact to this corporation (with or without power of substitution) at
any meeting of stockholders or shareholders (or with respect to any action of
stockholders) of any other corporation or organization, the securities of which
may be held by this corporation and otherwise to exercise any and all rights and
powers which this corporation may possess by reason of this corporation's
ownership of securities in such other corporation or other organization.

5.5 Evidence of Authority. A certificate by the Secretary, or an Assistant
---------------------
Secretary, or a temporary Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of the corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.

5.6 Certificate of Incorporation. All references in these Bylaws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.

5.7 Severability. Any determination that any provision of these Bylaws is
------------
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these Bylaws.

5.8 Pronouns. All pronouns used in these Bylaws shall be deemed to refer to
--------
the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.

5.9 Notices. Except as otherwise specifically provided herein or required
-------
by law, all notices required to be given to any stockholder, director, officer,
employee or agent shall be in writing and may in every instance be effectively
given by hand delivery to the recipient thereof, by depositing such notice in
the mails, postage paid, or by sending such notice by prepaid telegram,
mailgram, telecopy or commercial courier service. Any such notice shall be
addressed to such stockholder, director, officer, employee or agent at his or
her last known address as the same appears on the books of the Corporation. The
time when such notice shall be deemed to be given shall be the time such notice
is received by such stockholder, director, officer, employee or agent, or by any
person accepting such notice on behalf of such person, if hand delivered, or the
time such notice is dispatched, if delivered through the mails or be telegram or
mailgram.

5.10 Reliance Upon Books, Reports and Records. Each director, each member
----------------------------------------
of any committee designated by the Board of Directors, and each officer of the
Corporation shall, in the performance of his duties, be fully protected in
relying in good faith upon the books of account

12
<PAGE>

or other records of the Corporation, including reports made to the Corporation
by any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care.

5.11 Time Periods. In applying any provision of these Bylaws which require
------------
that an act be done or not done a specified number of days prior to an event or
that an act be done during a period of a specified number of days prior to an
event, calendar days shall be used, the day of the doing of the act shall be
excluded, and the day of the event shall be included.

5.12 Facsimile Signatures. In addition to the provisions for use of
--------------------
facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.

Article 6. Amendments
----------

6.1 By the Board of Directors. Except as is otherwise set forth in these
-------------------------
Bylaws, these Bylaws may be altered, amended or repealed or new Bylaws may be
adopted by the affirmative vote of a majority of the directors present at any
regular or special meeting of the Board of Directors at which a quorum is
present.

6.2 By the Stockholders. Except as otherwise set forth in these Bylaws,
-------------------
these Bylaws may be altered, amended or repealed or new Bylaws may be adopted by
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any annual meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new Bylaws shall have been stated in the notice
of such special meeting.

Article 7. Indemnification of Directors and Officers
-----------------------------------------

7.1 Right to Indemnification. 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
("proceeding"), by reason of the fact that he or she or a person of whom he or
she 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
or officer 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 or employee or in any other capacity while serving as a
director, officer or employee, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by Delaware Law, 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 expenses, liability and loss reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of his

13
<PAGE>

or her heirs, executors and administrators; provided, however, that, except as
provided in Section 7.2 of this Article 7, the Corporation shall indemnify any
such person seeking indemnity in connection with an action, suit or proceeding
(or part thereof) initiated by such person only if (a) such indemnification is
expressly required to be made by law, (b) the action, suit or proceeding (or
part thereof) was authorized by the Board of Directors of the Corporation, (c)
such indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Delaware General
Corporation Law, or (d) the action, suit or proceeding (or part thereof) is
brought to establish or enforce a right to indemnification under an indemnity
agreement or any other statute or law or otherwise as required under Section 145
of the Delaware General Corporation Law. Such right shall be a contract right
and shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however that, unless the Delaware General Corporation Law then so prohibits, the
payment of such expenses incurred by a director or officer of the Corporation in
his or her capacity as a director or officer (and not in any other capacity in
which service was or is tendered by such person while a director or officer,
including, without limitation. service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section or
otherwise.

7.2 Right of Claimant to Bring Suit. If a claim under Section 7.1 is not
-------------------------------
paid in full by the Corporation within ninety (90) days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if such suit is not frivolous or brought in bad faith, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other then 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 this
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its 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 he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, 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 claimant has not
met the applicable standard of conduct.

7.3 Indemnification of Employees and Agents. The Corporation may, to the
---------------------------------------
extent authorized from time to time by the Board of Directors, grant rights to
indemnification, and to the advancement of related expenses, to any employee or
agent of the Corporation to the fullest extent of the provisions of this Article
with respect to the indemnification of and advancement of expenses to directors
and officers of the Corporation.

7.4 Non-Exclusivity of Rights. The rights conferred on any person in
-------------------------
Sections 7.1 and 7.2 shall not be exclusive of any other right which such
persons may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.

14
<PAGE>

7.5 Indemnification Contracts. The Board of Directors is authorized to
-------------------------
enter into a contract with any director, officer, employee or agent of the
Corporation, or any person serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including employee benefit plans, providing
for indemnification rights equivalent to or, if the Board of Directors so
determines, greater than, those provided for in this Article 7.

7.6 Insurance. The Corporation shall maintain insurance to the extent
---------
reasonably available, at its expense, to protect itself and any such director,
officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.

7.7 Effect of Amendment. Any amendment, repeal or modification of any
-------------------
provision of this Article 7 by the stockholders and the directors of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such amendment, repeal or
modification.

<PAGE>

EXHIBIT 4.1
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

This Amended and Restated Investors' Rights Agreement (this "Agreement") is
made and entered into as of __________ __, 2000, by and between eCommercial.com,
Inc., a Nevada corporation (the "Company") and the persons listed in Exhibit A
attached hereto (collectively the "Investors" and each individually an
"Investor").

R E C I T A L S:
- - - - - - - -

A. WHEREAS, certain of the Investors hold shares of the Company's Series B
Preferred Stock (the "Series B Shares") and warrants (the "Series B Warrants")
to purchase shares of Common Stock issued pursuant to certain Subscription
Agreements for Series B Shares (the "Series B Subscription Agreements") and
possess registration rights and other rights pursuant to an Investors' Rights
Agreement dated as of July 15, 1999 between the Company and such Investors (the
"1999 Agreement");

B. WHEREAS, the Investors who hold Series B Shares and/or Series B
Warrants desire to terminate the 1999 Agreement and to accept the rights created
pursuant hereto in lieu of the rights granted to them under the 1999 Agreement;

C. WHEREAS, certain of the Investors have agreed to purchase shares of the
Company's Series C Preferred Stock, $.001 par value per share (the "Series C
Shares"), pursuant to the terms of certain Subscription Agreements entered into
by and between the Company and such Investors (each, a "Series C Subscription
Agreement" and collectively, the "Series C Subscription Agreements");

D. WHEREAS, pursuant to the terms of the Series C Subscription Agreements,
the Company has agreed to issue to the Investors warrants (the "Warrants") to
purchase the number of shares of the Company's Common Stock, $.001 par value per
share ("Common Stock"), equal to ten percent (10%) of the aggregate number of
Shares purchased by such Investors ;

E. WHEREAS, pursuant to the terms of the Series C Subscription Agreements
and the 1999 Agreement, the Company has agreed to grant the Investors certain
rights relating to the shares of Common Stock issuable upon conversion of the
Series C Shares, the shares of Common Stock issuable in conversion of the Series
B Shares and the shares of Common Stock issuable on exercise of certain warrants
issues to the Investors; and

F. WHEREAS, the Company and the Investors wish to set forth the terms of
such rights in this Agreement as the sole agreement between the Company and the
Investors with respect thereto.

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

1. Definitions
-----------
As used in this Agreement, the following terms shall have the following
respective meanings:
<PAGE>

1.1 "Commission" shall mean the Securities and Exchange Commission or any
----------
other U.S. federal agency at the time administering the Securities Act.

1.2 "Common Stock" shall mean shares of the Company's Common Stock, $.001
------------
par value per share.

1.3 "Conversion Shares" shall mean the shares of Common Stock issued or
-----------------
issuable upon conversion of the Series B and Series C Shares.

1.4 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.

1.5 "Holder or Holders" shall mean each of the Investors listed on Exhibit
-----------------
A attached hereto (and their transferees as permitted by Section 2.10) holding
Registrable Securities.

1.6 "Initiating Holders" shall mean Holders who in the aggregate hold
------------------
greater than fifty percent (50%) of the Registrable Securities.

1.7 "Minimum Registration" shall mean a registration having an aggregate
--------------------
offering price (prior to underwriters' discounts and expenses) of not less than
$5,000,000.

1.8 "Other Holders" shall mean holders of Company securities, other than
-------------
the Holders, proposing to distribute their securities pursuant to a registration
under Section 2 of this Agreement.

1.9 "Registrable Securities" shall mean (i) the Conversion Shares, (ii)
----------------------
the Warrant Shares, and (iii) any Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, the Conversion Chares and the Warrant Shares, excluding in all
cases, however, any Registrable Securities that have been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction or which have been sold in a private transaction in which the
transferor's rights under this Agreement are not assigned.

1.10 The terms "register," "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

1.11 "Registration Expenses" shall mean all expenses, except as otherwise
---------------------
stated below, incurred by the Company in complying with Sections 2.1, 2.2 and
2.3 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, accounting fees, blue sky fees and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company and excluding the fees and expenses of any counsel for any
Holder.).

1.12 "Securities" shall mean Common Stock, Series B Shares or the Series C
----------
Shares.

1.13 "Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
or any similar United States federal statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
<PAGE>

1.14 "Selling Expenses" shall mean all underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the Registrable Securities
registered by the Holders.

1.15 "Series B Shares" shall mean the Company's Series B Preferred Stock,
---------------
$.001 par value per share.

1.16 "Series B Warrants" shall mean the Warrants issues in respect of the
-----------------
offering of the Series B Shares.

1.17 "Series C Shares" shall mean the Company's Series C Preferred Stock,
---------------
$.001 par value per share.

1.18 "Series C Warrants" shall mean the Warrants issues in respect of the
-----------------
offering of the Series C Shares.

1.19 "Shares" shall mean the Series B Shares and the Series C Shares.
------

1.20 "Subscription Agreements" shall mean the Series B Subscription
-----------------------
Agreements and the Series C Subscription Agreements entered into between the
Company and the Investors in connection with the purchase of the Shares.

1.21 "Warrants" shall mean the warrants to purchase shares of Common Stock
--------
issued to the Investors pursuant to the terms of the Subscription Agreements.

1.22 "Warrant Shares" shall mean the shares of Common Stock issued or
--------------
issuable upon exercise of the Warrants.

2. Registration Rights.
--------------------

2.1 Automatic Registration.
- ----------------------

(a) Filing Registration Statement. As soon as practicable following
-----------------------------
the final closing of the offering of any series of Shares, the Company
shall prepare and file with the Commission a registration statement
registering for resale to the public the Registrable Securities.
Notwithstanding the foregoing, in the event the Company fails to file such
registration statement with respect to any registrable Securities relating
to the Series C Shares and the offering of such Series C Shares on or
before December 31, 2000, the Company shall issue to each holder of
Registrable Securities with respect to any registrable Securities relating
to the Series C Shares and the offering of such Series C Shares, without
additional consideration, additional Series C Shares and Series C Warrants
equal to 5% of the Shares and Warrants held by such holder.

(b) Best Efforts. The Company agrees to use its best efforts to
------------
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution the Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities.

2.2 Company Registration.
--------------------
<PAGE>

(a) Notice of Registration. If at any time or from time to time the
----------------------
Company shall determine to register any of its securities for its own
account other than (i) a registration relating solely to employee benefit
plans or (ii) a registration relating solely to a Commission Rule 145
transaction, the Company will:

(i) promptly give to each Holder written notice thereof; and

(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests made within twenty (20) days after receipt of such written notice from
the Company by any Holder.

Notwithstanding the foregoing, the Company shall be obligated to effect in the
aggregate only three (3) such registrations pursuant to this Section 2.2 and no
more than only one (1) such registration in any twelve month period.

(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 2.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall, together with the
Company and the Other Holders, if any, enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 2.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
number of shares of Registrable Securities to be included in such registration
without requiring any limitation in the number of shares to be registered on
behalf of the Company. The Company shall so advise all Holders and Other Holders
and the number of shares that may be included in the registration and
underwriting by all Holders and Other Holders shall be allocated among them, as
nearly as practicable, first, to the Company, second, among the
----- ------
Holders of Registrable Securities in proportion to the respective amounts
of Registrable Securities held by such Holders at the time of filing of the
registration statement, and, third, among the Other Holders in proportion
-----
to the number of shares proposed to be included in such registration by such
Other Holders. To facilitate the allocation of shares in accordance with the
above provisions, the Company may round the number of shares allocated to any
Holder or Other Holder to the nearest one hundred (100) shares. If any Holder or
Other Holder disapproves of the terms of any such underwriting, such holder may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.

(c) Right to Terminate Registration. The Company shall have the
-------------------------------
right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include Registrable Securities in such registration.

2.3 Registration on Form S-3.
------------------------
(a) Request for Registration. If at any time after the expiration of
------------------------
one (1) year following the closing of the initial underwritten public offering
of the Company any Holder or Holders
<PAGE>

request in writing that the Company file a registration statement on Form S-3
under the Securities Act (or any successor form to Form S-3) for a public
offering of shares of the Registrable Securities the reasonably anticipated
aggregate price to the public of which would exceed $1,000,000, and the Company
is a registrant entitled to use Form S-3, the Company shall use its best efforts
to cause such Registrable Securities to be registered for the offering on such
form and to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may reasonably request. The substantive
provisions of Section 2.2(b) shall be applicable to each registration initiated
under this Section 2.3.

(b) Limitations. Notwithstanding the foregoing, the Company shall
-----------
not be obligated to take any action pursuant to this Section 2.3: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act; (ii)
during the period starting with the date sixty (60) days prior to the Company's
estimated date of filing of, and ending on the date six (6) months immediately
following, the effective date of any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or (iii) if the Company shall
furnish to such Holder a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or the Investors as a whole for
registration statements to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed ninety (90) days from the receipt of the
request to file such registration by such Holder, provided, however, that the
Company shall not utilize this right more than once in any twelve (12) month
period.

2.4 Expenses of Registration.
------------------------
(a) Registration Expenses. The Company shall bear all Registration
---------------------
Expenses incurred in connection with all registrations pursuant to Section 2.1
and Section 2.2. The Holders of the Registrable Securities shall bear all
Registration Expenses in connection with all registrations pursuant to Section
2.3.

(b) Selling Expenses. Unless otherwise stated in Section 2.4(a), all
----------------
Selling Expenses and Registration Expenses relating to securities registered on
behalf of the Holders shall be borne by the Holders pro rata on the basis of the
number of shares so registered.

2.5 Registration Procedures. In the case of each registration effected by
-----------------------
the Company pursuant to this Agreement, the Company will:

(a) keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof;

(b) as soon as practicable, prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective until the
earlier of (i) one hundred twenty (120) days or (ii) the distribution described
in the Registration Statement has been completed; provided, however, that (i)
such 120-day period shall be extended for a period of time equal to the period
the Holder refrains from selling any securities included in such registration at
the request of the managing underwriter; (ii) in the case of any
<PAGE>

registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and, provided further, that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement; and (iii)
in the case of an automatic registration under section 2.1, the Company shall
keep such registration statement effective until the earlier of all the
Registrable Securities have been sold thereunder or all Registrable Securities
thereunder are available for sale pursuant to Rule 144(k) or any successor rule;

(c) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;

(d) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;

(e) in the event of an underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;

(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements made therein not misleading in the light of the circumstances then
existing; and

(g) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.

2.6 Indemnification.
---------------

(a) By Company. The Company will indemnify each Holder, each of its
----------
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act and each
Investor and its officers, directors and partners and each person controlling
such Investor within the meaning of Section 15 of the Securities Act, against
all
<PAGE>

expenses, claims, losses, damages or liabilities, joint or several, (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act, the
Exchange Act or any state or federal securities law, or any rule or regulation
promulgated under such Acts or law applicable to the Company in connection with
any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, each Investor, each of its officers, directors
and partners and each person controlling such Investor, for any legal and any
other expenses reasonably incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information regarding a Holder
furnished to the Company by an instrument duly executed by such Holder,
controlling person, underwriter or Investor and stated to be specifically for
use therein. If the Holders and Investors are represented by counsel other than
counsel for the Company, the Company will not be obligated under this Section
2.6(a) to reimburse legal fees and expenses of more than one separate counsel
for all Holders and Investors.

(b) By Holders. Each Holder will, if Registrable Securities held by
----------
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, each of its officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
regarding a Holder furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein. Notwithstanding the
foregoing, the liability of each Holder under this subsection (b) shall be
limited in an amount equal to the public offering price of the shares sold by
such Holder, unless such liability arises out of or is based on willful
misconduct by such Holder.

(c) Procedures. Each party entitled to indemnification under this
----------
Section 2.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any
<PAGE>

litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

(d) Contribution. If the indemnification provided for in this
------------
Section 2.6 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

(e) Controlling Agreement. Notwithstanding the foregoing, to the
---------------------
extent that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions of this Section 2.6, the
provisions in the underwriting agreement shall control.

2.7 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by them as the Company may request in writing
and only as shall be necessary to enable the Company to comply with the
provisions hereof in connection with any registration, qualification or
compliance referred to in this Agreement.

2.8 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:

(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
<PAGE>

(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements);

(c) Furnish to any Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934 (at
any time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as such Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such Holder
to sell any such securities without registration.

2.9 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Holders under Sections 2.1, 2.2 and 2.3 may be
assigned in connection with any transfer or assignment by a Holder of
Registrable Securities provided that: (i) such transfer may otherwise be
effected in accordance with applicable securities laws, (ii) such transfer is
effected in compliance with the restrictions on transfer contained in this
Agreement and in any other agreement between the Company and the Holder, and
(iii) such assignee or transferee is a constituent partner of an Investor or
purchases (I) at least 10,000 shares of Registrable Securities or (II) all
shares of Registrable Securities held by an Investor if transferred to a single
entity. No transfer or assignment will divest a Holder or any subsequent owner
of such rights and powers unless all Registrable Securities are transferred or
assigned.

2.10 Termination. The rights granted pursuant to this Section 2 shall
-----------
terminate as to any Holder at the later of (i) three (3) years after the
Company's initial public offering or (ii) after the effective date of the
Company's first registered public offering of its stock, at such time as such
Holder may sell under Rule 144, or a successor rule, in a three month period all
Registrable Securities then held by such Holder.

2.11 Lockup Agreement. Provided that each officer and director of the
----------------
Company who owns stock or options to purchase stock of the Company also agrees
to such restrictions, each Holder agrees that, if, in connection with the
Company's initial public offering of the Company's securities, the Company or
the underwriters managing the offering so request, the Holder shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time not to exceed 180 days
from the effective date of such registration. This Section 2.11 shall be binding
on all transferees or assignees of Registrable Securities, whether or not such
persons are entitled to registration rights pursuant to Section 2.11.

2.12 Material Information. In the event the Company issues to any holder
- --------------------
a notice under Section 2.5(f) hereof, each such holder agrees not to sell or
otherwise distribute any Registrable Securities covered by the prospectus in
question until such time as the Company shall have delivered a notice stating
that such prospectus no longer includes an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements made therein not misleading in the light of the
circumstances then existing or the Company delivers to such holder an amended
prospectus that does not include an untrue statement of material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements made therein not misleading in the light of the
<PAGE>

circumstances then existing, provided, that such notice or amended prospectus
--------
shall be delivered within 15 days of the date the notice under Section 2.5(f) is
received.

3. Information Rights.
------------------
3.1 Financial Information. The Company will provide each Investor the
---------------------
following reports:

(a) As soon as practicable after the end of each fiscal year, and in
any event within one hundred twenty (120) days thereafter, consolidated balance
sheets of the Company and its subsidiaries (if any) as of the end of such fiscal
year, and consolidated statements of income, stockholders' equity and cash flows
of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles, applied on a
consistent basis, and setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail and audited by
independent auditors of national standing selected by the Company.

(b) As soon as practicable after the end of each fiscal quarter, and
in any event within forty-five (45) days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as of the end of each such
period, consolidated statements of income, consolidated statements of changes in
financial condition, a consolidated statement of cash flow of the Company and
its subsidiaries and a statement of stockholders' equity for such period and for
the current fiscal year to date, and setting forth in each case in comparative
form the figures for corresponding periods in the previous fiscal year, and
setting forth in comparative form the budgeted figures, prepared in accordance
with generally accepted accounting principles (other than for accompanying
notes), applied on a consistent basis, subject to changes resulting from normal
year-end audit adjustments, all in reasonable detail and signed by the principal
financial or accounting officer of the Company.

(c) Such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated to provide information which it deems in good
faith to be confidential proprietary information of the Company.

3.2 Inspection Rights. The Company shall permit each Investor holding not
-----------------
less than 10,000 shares of Registrable Securities, at such Investor's expense,
to visit and inspect the Company's properties, to examine its books of account
and records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by such Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 4.2 to provide access to any information which it reasonably considers
to be a trade secret or similar confidential information.

3.3 Assignment of Rights. The rights granted pursuant to Section 4.1 and
--------------------
4.2 may be assigned or otherwise conveyed by an Investor to a constituent
partner of an Investor or to a transferee. Notwithstanding the foregoing, the
rights granted pursuant to Section 4.1 and 4.2 may not be assigned or otherwise
conveyed to a competitor of the Company, as reasonably determined by the Board
of Directors of the Company excluding any director with an interest in such
transferee. The transferor shall provide the Company with written notice of any
assignment or conveyance of the rights granted pursuant to Section 4.1 and 4.2.

3.4 Termination. The provisions of this Section 4 shall terminate upon
-----------
the closing of a firmly underwritten public offering for any securities of the
Company.
<PAGE>

4. Legends
-------

4.1 Legends. Each Investor understands that the share certificates
-------
evidencing any Registrable Securities shall be endorsed with the following
legends (in addition to any legends required under applicable state securities
laws):

(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."

(b) "THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER OR HIS PREDECESSOR IN INTEREST. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY."

5. Miscellaneous.
-------------

5.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California as applied to contracts made and to be fully
performed entirely within that state between residents of that state. All
disputes arising out of this Agreement shall be subject to the exclusive
jurisdiction and venue of the California state courts of Orange County,
California, (or, if there is exclusive federal jurisdiction, the United States
District Court for the Central District of California) and the parties consent
to the personal and exclusive jurisdiction and venue of these courts.

5.2 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. This Agreement or any term hereof may be amended,
waived, discharged or terminated by a written instrument signed by the Company
and the Investors or transferees of such Investors holding more than fifty
percent (50%) of the Registrable Securities then outstanding.

5.3 Aggregation. For the purposes of determining the number of shares of
-----------
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that, all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single attorney-
in-fact for the purpose of exercising any rights, receiving notices or taking
any action under Sections 2, 3 and 4 of this Agreement.

5.4 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be deemed given if in writing and mailed by registered
or certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to an Investor, at such Investor's address as set
forth on the signature pages attached to this Agreement, or at such other
address as such Investor shall have furnished to the Company in writing, or (b)
if to any other holder of any Registrable Securities, at such
<PAGE>

address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such Registrable Securities who has so furnished
an address to the Company, or (c) if to the Company, at the address of its
principal offices and addressed to the attention of the Corporate Secretary and
with a copy to Graham & James LLP, 400 Capitol Mall, 24th Floor, Sacramento,
California 95814, Attention: Kevin A. Coyle, Esq. or at such other address as
the Company shall have furnished to the Investors.

5.5 Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

5.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

[SIGNATURES ON FOLLOWING PAGE]
<PAGE>

IN WITNESS WHEREOF, the undersigned has executed this Investors' Rights
Agreement as of the date set forth above.

"COMPANY" ECOMMERCIAL.COM, INC.,
a Nevada corporation

----------------------------
Tom Blakeley
President

***INVESTORS' RIGHTS AGREEMENT***
<PAGE>

SIGNATURE OF INDIVIDUAL PURCHASERS:

_____________________ _________________________________
Signature Signature (if jointly held)
_____________________ _________________________________
Print Name Print Name

Executed at:

___________________________ Date: ______________________
City, State

SIGNATURE OF PURCHASERS WHO ARE CORPORATIONS, TRUSTS OR PARTNERSHIPS:

____________________________________________________________
Name of entity (please print or type)

____________________________________________________________
Signature(s) of authorized agent, trustee or general partner(s)

____________________________________________________________
Title of authorized agent, trustee or general partner

Executed at:_________________________ Date: __________________
City, State

***INVESTORS' RIGHTS AGREEMENT***
<PAGE>

***INVESTORS' RIGHTS AGREEMENT***

<PAGE>

EXHIBIT 4.2

eCommercial.com, Inc.

- ----- Incorporated under the laws of the State of Nevada -----
15991 20,000,000 Shares Common Stock Authorized, $.0001 Par Value
- ----- 2,000,000 Shares Preferred Stock Authorized, No Par Value -----

---------------
CUSIP 27889F105
---------------
Certain definitions on reverse
This certifies that:
------------------------------------------------------------
is the owner of
-----------------------------------------------------------------

FULLY PAID and NON-ASSESSABLE SHARES OF COMMON STOCK OF

eCommercial.com, Inc.

Transferable on the Books of the Corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
and the Shares represented hereby are subject to the Laws of the State of
Nevada, and to the Certificate of Incorporation and Bylaws of the Corporation,
as now or hereafter amended. This certificate is not valid unless countersigned
by the Transfer Agent.
WITNESS the facsimile Seal of the Corporation and
the facsimile signature of its duly authorized officers.

DATED:

/s/ TOM BLAKELEY /s/ ERIC A. MCAFEE
- --------------------------- Corporate Seal ---------------------------
PRESIDENT SECRETARY

RTT Transfers, Inc.
530 Merchant St.
Vacaville, CA 95688
(707) 447-0508
<PAGE>

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 the applicable laws or regulations:

<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM --as tenants in common UNIF GIF MIN ACT -- ______________ Custodian _________________
TEN ENT --as tenants by the entireties (Cust) (Minor)
JT TEN --as joint tenants with right
of survivorship and not as under Uniform Gifts to Minors Act_______
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.

For value received, hereby sell, assign and transfer unto
----------

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

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

- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE

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

- --------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
----------------------------------------------

- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.

Dated,
-----------------------------

---------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.

SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR MEMBER
FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK EXCHANGE, PACIFIC STOCK
EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK EXCHANGE.

<PAGE>

EXHIBIT 4.3

eCommercial.com, Inc.

- ----- Incorporated under the laws of the State of Nevada -----
15992 20,000,000 Shares Common Stock Authorized, $.0001 Par Value
- ----- 2,000,000 Shares Preferred Stock Authorized, No Par Value -----

FULLY PAID and NON-ASSESSABLE SHARES OF COMMON STOCK OF
SERIES B PREFERRED STOCK

eCommercial.com, Inc.

DATED:

/s/ TOM BLAKELEY /s/ ERIC A. MCAFEE
- --------------------------- Corporate Seal ---------------------------
PRESIDENT SECRETARY

RTT Transfers, Inc.
530 Merchant St.
Vacaville, CA 95688
(707) 447-0508

<PAGE>

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 the applicable laws or regulations:

For value received, hereby sell, assign and transfer unto
----------

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

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

- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE

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

Dated,
-----------------------------

<PAGE>

EXHIBIT 4.5

CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES B PREFERRED STOCK
OF
MINDARROW SYSTEMS, INC.

It is hereby certified that:

1. The name of the corporation (hereinafter called the "Corporation")
is: MindArrow Systems, Inc.

2. The articles of incorporation of the Corporation authorize the issuance
of Ten Million (10,000,000) shares of Preferred Stock, par value $.001 per share
and expressly vests in the Board of Directors of the Corporation the authority
provided therein to issue any and all of said shares, the designations,
preferences and relative, participating, optional, or other special rights, or
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions of the Board of Directors of the
Corporation.

3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating Series B Preferred Stock:

RESOLVED THAT:

The Corporation's Board of Directors hereby establishes a class of
Preferred Stock authorized to be issued by the Corporation as above stated, with
the designations and amounts thereof with the preferences, conversion and other
rights, and relative participating, optional and other special rights of each
series, and the qualifications, limitations or restrictions thereof, to be as
follows:

1. Designations and Amounts. One Million Seven Hundred Fifty Thousand
(1,750,000) shares of the Corporation's authorized Preferred Stock are
designated as Series B Preferred Stock.

2. Definitions.

For the purposes of this Resolution the following definitions shall apply:

(a) "Board" shall mean the Board of Directors of the Corporation.

(b) "Common Stock" shall refer to the Corporation's common stock with
a par value of $.001 per share.

(d) "Subsidiary" shall mean any corporation at least 51% of whose
outstanding voting stock shall at the time be owned directly or indirectly by
the Corporation or by one or more subsidiaries of the Corporation.

3. Dividends. The holder of each issued and outstanding share of Series B
Preferred Stock shall be entitled to receive dividends when and if declared by
the Board, out of funds
<PAGE>

legally available for such purpose. No dividends (other than those payable
solely in shares of Common Stock) may be declared or paid with respect to shares
of Common Stock during any fiscal year of the Corporation until dividends in the
aggregate amount of not less than $0.90 per share (the "Dividend Preference
Rate") of Series B Preferred Stock (as adjusted as provided herein) have been
paid or declared and set aside with respect to the Series B Preferred Stock
during such fiscal year. If the Corporation shall (a) pay a distribution in
shares of Series B Preferred Stock, (b) subdivide its outstanding shares of
Series B Preferred Stock into a greater number of shares, (c) combine its
outstanding shares of Series B Preferred Stock into a smaller number of shares,
or (d) issue by reclassification of its shares of Series B Preferred Stock any
shares of Series B Preferred Stock, the Dividend Preference Rate shall be
ratably adjusted to an amount equal to the Dividend Preference Rate in effect
immediately prior to such action multiplied by the number of shares of Series B
Preferred Stock outstanding immediately prior to such action divided by the
number of shares of Series B Preferred Stock outstanding immediately after such
action.

4. Redemption. Shares of Series B Preferred Stock are not redeemable by the
Corporation.

5. Liquidation and Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, the holders of the issued and outstanding Series B Preferred Stock
shall be entitled to receive for each share of Series B Preferred Stock, before
any distribution of the assets of the Corporation shall be made to the holders
of any other capital stock, an amount per share equal to the Purchase Price (the
"Liquidation Rate"), plus all accrued and unpaid dividends and distributions
declared thereon, without interest. If the Corporation shall (a) pay a
distribution in shares of Series B Preferred Stock, (b) subdivide its
outstanding shares of Series B Preferred Stock into a greater number of shares,
(c) combine its outstanding shares of Series B Preferred Stock into a smaller
number of shares, or (d) issue by reclassification of its shares of Series B
Preferred Stock any shares of Series B Preferred Stock, the Liquidation Rate
shall be ratably adjusted to an amount equal to the Liquidation Rate in effect
immediately prior to such action multiplied by the number of shares of Series B
Preferred Stock outstanding immediately prior to such action divided by the
number of shares of Series B Preferred Stock outstanding immediately after such
action. After such payment shall have been made in full to the holders of the
issued and outstanding Series B Preferred Stock, or funds necessary for such
payment shall have been set aside in trust for the account of the holders of the
issued and outstanding Series B Preferred Stock so as to be and continue to be
available therefor, then the remaining assets of the Corporation shall be
divided and distributed ratably among the holders of the Common Stock and the
Series B Preferred on an as converted basis. If, upon such liquidation,
dissolution, or winding up, the assets of the Corporation distributable, as
aforesaid, among the holders of the Series B Preferred Stock shall be
insufficient to permit the payment to them of said amount, the entire assets
shall be distributed ratably among the holders of the Series B Preferred Stock.
A consolidation, merger or reorganization of the Corporation with or into
another corporation or entity in which the holders of the Corporation's
outstanding capital stock do not retain a majority of the voting power in the
surviving corporation immediately thereafter or (ii) a sale, conveyance or
disposition of all or substantially all of the Corporation's assets shall be
regarded as a "liquidation, dissolution, or winding up of the affairs of the
Corporation" within the meaning of this paragraph 5.

6. Conversion Rights.

2
<PAGE>

(a) Optional Conversion; Conversion Rate; Conversion Price. Each share
of Series B Preferred Stock shall be convertible, at the option of the holder
thereof, into shares of Common Stock at any time after the issuance of such
share. The number of shares of Common Stock into which each share of Series B
Preferred Stock may be converted shall be determined by dividing $8.00 by a
price, hereinafter referred to as the "Conversion Price," in effect for the
Series B Preferred Stock at the time of the conversion. The Conversion Price per
share of Series B Preferred Stock initially shall be $8.00, subject to
adjustment as provided.

(b) Automatic Conversion. Each share of Series B Preferred Stock shall
automatically be converted into fully paid and nonassessable shares of Common
Stock of the Corporation at the Conversion Price then in effect for the Series B
Preferred Stock (subject to adjustment as provided below) upon the earlier to
occur of:

(i) the effective date of a firm commitment, underwritten public
offering of Common Stock pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), other than a
registration under Rule 145 of the Securities Act (or any successor thereto) or
to any employee benefit plan of the Corporation, generating aggregate proceeds
to the Company of at least Fifteen Million Dollars ($15,000,000) (before
deducting underwriters' discounts and all expenses relating to the offering),
and an offering price (prior to underwriters' discounts and expenses) per share
to the public equal to or greater than Fifteen Dollars ($15.00), appropriately
adjusted for stock dividends, stock splits, stock combinations,
recapitalizations, reclassifications, exchanges and the like ("Initial Public
Offering"); or

(ii) the date on which the holders of two-thirds (2/3) of the then
outstanding shares of Series B Preferred Stock consent in writing to such
conversion.

(c) Conversion Mechanics. The holder of any shares of Series B
Preferred Stock may exercise the conversion rights as to such shares or any part
thereof by delivering to the Corporation during regular business hours, at the
office of any transfer agent of the Corporation, or at the principal office of
the Corporation or at such other place as may be designated by the Corporation,
the certificate or certificates for the shares to be converted, duly endorsed
for transfer to the Corporation (if required by it), accompanied by written
notice stating that the holder elects to convert such shares. Except as set
forth above, conversion shall be deemed to have been effected on the date when
such delivery is made, and such date is referred to herein as the "Conversion
Date." As promptly as practicable thereafter the Corporation shall issue and
deliver to or upon the written order of such holder, at such office or other
place designated by the Corporation, a certificate or certificates for the
number of full shares of Common Stock to which such holder is entitled and a
check for cash with respect to any fractional interest in a share of Common
Stock as provided below. The holder shall be deemed to have become a shareholder
of record for the Common Stock on the applicable Conversion Date unless the
transfer books of the Corporation are closed on the date, in which event such
holder shall be deemed to have become a shareholder of record for the Common
Stock on the next succeeding date on which the transfer books are open. Upon
conversion of only a portion of the number of shares of Series B Preferred
Stock, as the case may be, represented by a certificate surrendered for
conversion, the Corporation shall issue and deliver to or upon the written order
of the holder of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate for the number of shares of Series B
Preferred Stock representing the unconverted portion of the certificate so
surrendered.

3
<PAGE>

(d) No Fractional Shares. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series B Preferred Stock. If
more than one share of Series B Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series B Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series B Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional interest
equal to the fair market value of such fractional interest as determined in good
faith by the Corporation's Board of Directors.

(e) Taxes. The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion pursuant hereto of Series B Preferred Stock. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that in which the Series B Preferred Stock so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any such
tax, or has established, to the satisfaction of the Corporation, that such tax
has been paid.

(f) Share Reserve. The Corporation shall at all times reserve and keep
available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of the Series B Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all Series B
Preferred Stock from time to time outstanding. The Corporation shall from time
to time (subject to obtaining necessary director and shareholder approval, which
the Corporation shall use its best efforts to promptly obtain), in accordance
with the laws of the State of Delaware, promptly increase the authorized amount
of its Common Stock if at any time the authorized number of shares of its Common
Stock remaining unissued shall not be sufficient to permit the conversion of all
of the shares of Series B Preferred Stock at the time outstanding.

(g) Registration or Listing. If any shares of Common Stock to be
reserved for the purpose of conversion of shares of Series B Preferred Stock
require registration or listing with, or approval of, any governmental
authority, stock exchange, quotation system or other regulatory body under any
federal or state law or regulation or otherwise, before such shares may be
validly issued or delivered upon conversion and traded or quoted on an exchange
or quotation system on which other shares of Common Stock are then listed or
quoted, the Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration, listing or approval, as the case may be.

(h) Status Upon Issuance. All shares of Common Stock which may be
issued upon conversion of the shares of Preferred Stock will upon issuance by
the Corporation be validly issued, fully paid and non-assessable and free from
all taxes, liens and charges created by the Corporation with respect to the
issuance thereof.

7. Adjustments.

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<PAGE>

reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Conversion
Price for the Series B Stock in effect immediately prior to each such stock
dividend, combination or subdivision shall be proportionately increased or
decreased, as appropriate, effective at the close of business on the date of
each such stock dividend, combination or subdivision, as the case may be. In the
event that the Corporation shall declare or pay, without consideration, any
dividend on the Common Stock payable in any right to acquire Common Stock for no
consideration then the Corporation shall be deemed to have made a dividend
payable in Common Stock in an amount of shares equal to the maximum number of
shares issuable upon exercise of such rights to acquire Common Stock.

(b) Adjustments for Capital Reorganizations and Reclassifications. In
case of any capital reorganization (other than in connection with a merger or
other reorganization in which the Corporation is not the continuing or surviving
entity) or any reclassification of the Common Stock of the Corporation, the
Series B Preferred Stock shall thereafter be convertible into the number of
shares of stock or other securities or property to which a holder of the number
of shares of Common Stock of the Corporation deliverable upon conversion of the
shares of Series B Preferred Stock immediately prior to each such reorganization
or recapitalization would have been entitled upon such reorganization, or
reclassification; and, in any such case, appropriate adjustment (as determined
by the Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of Series B Preferred Stock, to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as reasonably may be, in
relation to any share of stock or other property thereafter deliverable upon the
conversion.

(i) the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend, or any other
distribution, payable otherwise than in cash; or

(ii) the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to subscribe for or purchase any shares
of stock of any class or to receive any other rights; or

(iii) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another corporation or
conveyance of all or substantially all of the assets of the Corporation to
another corporation; or

(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;

then, and in any such case, the Corporation shall cause to be mailed to the
transfer agent for Series B Preferred Stock, and to the holders of record of the
outstanding Series B Preferred Stock, at least ten (10) days prior to the date
hereinafter specified, a notice stating the date on which (x) a record is to be
taken for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation

5
<PAGE>

or winding up is to take place and the date, if any is to be fixed, as of which
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.

(d) Other Issuances. Upon the issuance by the Corporation of any
Equity Securities (as defined below) without consideration or for consideration
per share of Common Stock issued or issuable upon exchange, exercise or
conversion of such Equity Securities of less than the Conversion Price then in
effect, then the Conversion Price shall be adjusted to a price (calculated to
the nearest cent) determined by multiplying the Conversion Price by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (on a fully diluted basis) plus the number of
shares of Common Stock which the aggregate consideration received by the
Corporation for the newly issued Equity Securities would purchase at the
Conversion Price in effect immediately prior to such issuance, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (on a fully diluted basis) plus the number of
additional shares of Equity Securities so issued. For purposes of this
subsection 7(d) the following provisions will be applicable:

(i) in the case of an issue or sale for cash of shares of Common
Stock, the "consideration per share" received by the Corporation therefor shall
be deemed to be the amount of cash received, before deducting therefrom any
commissions or expenses paid by the Corporation.

(ii) in case of the issuance (otherwise than upon conversion or
exchange of obligations or shares of stock of the Corporation) of additional
shares of Common Stock for a consideration other than cash or a consideration
partly other than cash, the amount of the consideration other than cash received
by the Corporation for such shares shall be deemed to be the fair market value
of such consideration as determined in good faith by the Board of Directors.

(iii) in case of the issuance by the Corporation in any manner of any
rights to subscribe for or to purchase shares of Common Stock, or any options
for the purchase of shares of Common Stock or stock convertible into Common
Stock, all shares of Common Stock or stock convertible into Common Stock to
which the holders of such rights or options shall be entitled to subscribe for
or purchase pursuant to such rights or options shall be deemed "outstanding" as
of the date of the offering of such rights or the granting of such options, as
the case may be, and the minimum aggregate consideration named in such rights or
options for the shares of Common Stock or stock convertible into Common Stock
covered thereby, plus the consideration, if any, received by the Corporation for
such rights or options, shall be deemed to be the "consideration per share"
received by the Corporation (as of the date of the offering of such rights or
the granting of such options, as the case may be) for the issuance of such
shares.

(iv) in case of the issuance or issuances by the Corporation in any
manner of any obligations or of any shares of stock of the Corporation that
shall be convertible into or exchangeable for Common Stock, all shares of Common
Stock issuable upon the conversion or exchange of such obligations or shares
shall be deemed issued as of the date such obligations or shares are issued, and
the amount of the "consideration per share" received by the Corporation for such
additional shares of Common Stock shall be deemed to be the total of (X) the
amount of consideration received by the Corporation upon the issuance of such
obligations or shares, as the case may be, plus (Y) the minimum aggregate
consideration, if

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<PAGE>

any, other than such obligations or shares, receivable by the Corporation upon
such conversion or exchange, except in adjustment of dividends.

The amount of the "consideration per share" received by the
Corporation upon the issuance of any rights or options referred to in subsection
(iii) above or upon the issuance of any obligations or shares which are
convertible or exchangeable as described in subsection (iv) above, and the
amount of the consideration, if any, other than such obligations or shares so
convertible or exchangeable, receivable by the Corporation upon the exercise,
conversion or exchange thereof shall be determined in the same manner provided
in subsections (i) and (ii) above with respect to the consideration received by
the Corporation in case of the issuance of additional shares of Common Stock;
provided, however, that if such obligations or shares of stock so convertible or
exchangeable are issued in payment or satisfaction of any dividend upon any
stock of the Corporation other than Common Stock, the amount of the
"consideration per share" received by the Corporation upon the original issuance
of such obligations or shares or stock so convertible or exchangeable shall be
deemed to be the value of such obligations or shares of stock, as of the date of
the adoption of the resolution declaring such dividend, as determined by the
Board of Directors at or as of that date. On the expiration of any rights or
options referred to in subsection (iii), or the termination of any right of
conversion or exchange referred to in subsection (iv), or any change in the
number of shares of Common Stock deliverable upon exercise of such options or
rights or upon conversion of or exchange of such convertible or exchangeable
securities, the Conversion Price then in effect shall forthwith be readjusted to
such Conversion Price as would have been obtained had the adjustments made upon
the issuance of such options, rights or convertible or exchangeable securities
been made upon the basis of the delivery of only the number of shares of Common
Stock actually delivered or to be delivered upon the exercise of such rights or
options or upon the conversion or exchange of such securities.

(e) Exclusions. Anything herein to the contrary notwithstanding, the
Corporation shall not be required to make any adjustment of a Conversion Price
as a result of the issuance after the effective date of this Certificate of
Designation, of (w) shares of Common Stock (or any options, warrants or rights
to purchase such shares) to officers, directors, employees or consultants of the
Corporation or its subsidiaries pursuant to stock option or stock purchase plans
or agreements or other employee benefit plans and any shares of Common Stock
issued upon exercise or conversion pursuant to such plans or agreements, (x)
shares of Common Stock (or any options, warrants or rights to purchase such
shares), which have been approved by the Board of Directors in connection with
strategic investments, licensing arrangements or debt or equipment financings,
(y) shares issuable upon conversion or exercise of securities which are
outstanding as of the date of this Certificate of Designation or (z) shares of
Common Stock (or any options, warrants or rights to purchase such shares), which
have been approved by the Board of Directors issued as consideration in
connection with mergers, acquisitions or other business combinations.

(f) Definition of Equity Securities. For purposes of this Certificate
of Designation, "Equity Securities" shall mean any securities having voting
rights in the election of the Board of Directors not contingent upon default, or
any securities evidencing an ownership interest in the Company, or any
securities convertible into or exercisable for any shares of the foregoing, or
any agreement or commitment to issue any of the foregoing.

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<PAGE>

avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Series B Preferred Stock against
impairment.

8. Voting Rights. Holders of shares of Series B Preferred Stock shall be
entitled to vote on all matters submitted to a vote of the stockholders of the
Company. Each share of Series B Preferred Stock shall entitle the holder to that
number of votes equal to the number of shares of Common Stock into which such
share of Series B Preferred Stock is convertible as of the record date
established for the vote of the stockholders of the Company. Fractional votes
will not, however, be permitted, and any fractional voting rights resulting from
the above formula (after aggregating all shares of Common Stock into which
shares of Series B Preferred Stock held by each holder could be converted) shall
be rounded to the nearest whole number (with one-half being rounded upward).
Except with respect to the seat on the Board of Directors allocated to the
shares of Series B Preferred Stock as described below or as required by law, the
Series B Preferred Stock will vote together with the Common Stock and not as a
separate class.

9. Board Seat. The Board of Directors shall consist of seven (7) members.
The holders of Series B Preferred Stock, voting together as a single class,
shall be entitled to designate one (1) member of the Board of Directors. The
remaining six (6) directors shall be designated by the holders of the Common
Stock and the Series B Preferred Stock, voting together as a single class.

10. No Preemptive Rights. No holder of the Series B Preferred Stock shall
be entitled, as of right, to purchase or subscribe for any part of the unissued
capital stock of the Corporation or of any capital stock of the Corporation to
be issued by reason of any increase of the authorized capital stock of the
Corporation, or to purchase or subscribe for any bonds, certificates of
indebtedness, debentures or other securities convertible into or carrying
options or warrants to purchase stock or other securities of the Corporation or
to purchase or subscribe for any stock of the Corporation purchased by the
Corporation or by its nominee or nominees, or to have any other preemptive
rights now or hereafter defined by the laws of the State of Delaware.

11. Protective Covenants. So long as shares of Series B Preferred Stock
remain outstanding and for such further period as may be required by law, the
Company will not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority of the then outstanding Series B
Preferred Stock voting separately as a class (i) sell, convey or otherwise
dispose of all or substantially all of assets of the Company, merge the Company
with or consolidate the Company into another entity, or engage in any other form
of corporate reorganization or recapitalization that would require the vote of
the Company's shareholders under applicable law; (ii) increase the number of
authorized shares of Series B Preferred Stock (except as a result of a stock
split or combination); (iii) effect an exchange, reclassification or
cancellation of all or a part of the shares of Series B Preferred Stock (except
as a result of a stock split or combination); (iv) effect an exchange, or create
a right of exchange, of all or part of the shares of another class into shares
of Series B Preferred Stock; (v) alter or change the rights, preferences,
privileges and restrictions of the Series B Preferred Stock; (vi) authorize or
issue shares of any class of stock having any rights, preferences or privileges
superior to any such right, preference or privilege of the Series B Preferred
Stock; (vii) authorize or issue shares of stock of any class or any bonds,
debentures, notes or other obligations convertible into or exchangeable for, or
having option rights to purchase, any shares of stock of the Company

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<PAGE>

having any rights, preferences or privileges superior to any right, preference
or privilege of the Series B Preferred Stock; or (viii) reclassify any other
outstanding shares of stock into shares having any right, preference or
privilege superior to any such right, preference, privilege or priority of the
Series B Preferred Stock.

12. Notices of Record Date. In the event that the Company shall propose at
any time (i) to declare any dividend or distribution upon the Common Stock other
than distributions to shareholders in connection with the repurchase of shares
of former employees or consultants to which at least a majority of the holders
of Series B Preferred Stock have consented, (ii) to offer for subscription to
the holders of any class or series of its capital stock any additional shares of
stock of any class or series or any other rights, (iii) to effect any
reclassification or recapitalization or (iv) to merge or consolidate with or
into any other corporation, or sell, lease or convey all or substantially all
its property or business, or to liquidate, dissolve or wind up; then the Company
will send to the holders of the Series B Preferred Stock, at least ten (10)
days' prior written notice of the date on which a record shall be taken for such
dividend, distribution or subscription rights and on which such event shall take
place.

13. No Implied Limitations. Except as otherwise provided by the express
provisions of this Certificate of Designation of Series B Preferred Stock,
nothing herein shall limit, by inference or otherwise, the discretionary right
of the Board to classify and reclassify and issue any shares of Preferred Stock
and to fix or alter all terms thereof to the full extent provided in the
Certificate of Incorporation of the Corporation.

14. General Provisions. In addition to the above provisions with respect to
the Series B Preferred Stock, such Series B Preferred Stock shall be subject to,
and entitled to the benefits of, the provisions set forth in the Corporation's
Certificate of Incorporation with respect to the Corporation's Preferred Stock
generally.

15. Notices. All notices required or permitted to be given by the
Corporation with respect to the Series B Preferred Stock shall be in writing,
and if delivered by first class United States mail, postage prepaid, to the
holders of the Series B Preferred Stock at their last addresses as they shall
appear on the books of the Corporation, shall be conclusively presumed to have
been duly given, whether or not the stockholder actually receives such notice;
provided, however, that failure to duly give such notice by mail, or any defect
in such notice, to the holders of any stock designated for redemption, shall not
affect the validity of the proceedings for the redemption of any other shares of
Series B Preferred Stock.

FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series B issue of Preferred Stock
and fixing the number, limited powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics thereof shall, upon the
effective date of said series, be deemed to be included in and be a part of the
Articles of Incorporation of the Corporation pursuant to the provisions of the
General Corporation Law of the State of Delaware.

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<PAGE>

The effective time and date of the series herein certified shall be the
date such Certificate of Designation is filed with the Delaware Secretary of
State.

Dated: ______________, 2000 MINDARROW SYSTEMS, INC.

-----------------------------
Tom Blakeley, President

-----------------------------
Eric McAfee, Secretary

<PAGE>

EXHIBIT 4.6

CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES C PREFERRED STOCK
OF
MINDARROW SYSTEMS, INC.

It is hereby certified that:

1. The name of the corporation (hereinafter called the "Corporation") is:
MindArrow Systems, Inc.

3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating Series C Preferred Stock:

RESOLVED THAT:

1. Designations and Amounts. Three Million (3,000,000) shares of the
Corporation's authorized Preferred Stock are designated as Series C Preferred
Stock.

2. Definitions.

For the purposes of this Resolution the following definitions shall apply:

(a) "Board" shall mean the Board of Directors of the Corporation.

(b) "Common Stock" shall refer to the Corporation's common stock with
a par value of $.001 per share.

3. Dividends. The holder of each issued and outstanding share of Series C
Preferred Stock shall be entitled to receive dividends when and if declared by
the Board, out of funds legally available for such purpose. No dividends (other
than those payable solely in shares of Common Stock) may be declared or paid
with respect to shares of Common Stock during any fiscal year of the Corporation
until dividends in the aggregate amount of not less than $2.25 per share (the
"Series C Dividend Preference Rate") of Series C Preferred Stock (as adjusted as
provided herein) have been paid or declared and set aside with respect to the
Series C Preferred Stock during such fiscal year. If the Corporation shall (a)
pay a distribution in shares of Series C Preferred Stock, (b) subdivide its
outstanding shares of Series C Preferred Stock into a greater number of shares,
(c) combine its outstanding shares of Series C Preferred Stock into a smaller
number of shares, or (d) issue by reclassification of its shares of Series C
Preferred Stock any shares of Series C Preferred Stock, the Series C Dividend
Preference Rate shall be ratably adjusted to an amount equal to the Series C
Dividend Preference Rate in effect immediately prior to such action multiplied
by the number of shares of Series C Preferred Stock outstanding immediately
prior to such action divided by the number of shares of Series C Preferred Stock
outstanding immediately after such action.

4. Redemption. Shares of Series C Preferred Stock are not redeemable by
the Corporation.

5. Liquidation and Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, the holders of the issued and outstanding Series C Preferred Stock
shall be entitled to receive for each share of Series C Preferred Stock, before
any distribution of the assets of the Corporation shall be made to the holders
of any other capital stock, an amount per share equal to the Purchase Price (the
"Series C Liquidation Rate"), plus all accrued and unpaid dividends and
distributions declared thereon, without interest. If the Corporation shall (a)
pay a distribution in shares of Series C Preferred Stock, (b) subdivide its
outstanding shares of Series C Preferred Stock into a greater number of shares,
(c) combine its outstanding shares of Series B and Series C Preferred Stock into
a smaller number of shares, or (d) issue by reclassification of its shares of
Series C Preferred Stock any shares of Series C Preferred Stock, the Liquidation
Rate shall be ratably adjusted to an amount equal to the Series C Liquidation
Rate in effect immediately prior to such action multiplied by the number of
shares of Series C Preferred Stock outstanding immediately prior to such action
divided by the number of shares of Series C Preferred Stock outstanding
immediately after such action. After such payment shall have been made in full
to the holders of the issued and outstanding Series B and Series C Preferred
Stock, or funds necessary for such payment shall have been set aside in trust
for the account of the holders of the issued and outstanding Series C Preferred
Stock so as to be and continue to be available therefor, then the remaining
assets of the Corporation shall be divided and distributed ratably among the
holders of the Common Stock, the Corporations' Series B Preferred Stock (the
"Series B Preferred Stock"), if any, and the Series C Preferred Stock as if
such Preferred Stock had been converted to Common Stock on the date of such
distribution. If, upon such liquidation, dissolution, or winding up, the assets
of the Corporation distributable among the holders of the Series B and Series C
Preferred Stock shall be insufficient to permit the payment to them of said
amount, the entire assets shall be distributed ratably among the holders of the
Series B and Series C Preferred Stock in such a manner that the amount to be
distributed to each holder of Series B Preferred and Series C Preferred shall
equal the amount obtained by multiplying the entire assets and funds of the
corporation legally available for distribution hereunder by a fraction, the
numerator of which shall be the sum of the products obtained by multiplying the
number of shares of Series B Preferred and Series C Preferred then held by the
holder by the respective liquidation preference of each of such series of
Preferred Stock, and the denominator of which

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<PAGE>

shall be the sum of the products obtained by multiplying the respective
liquidation preference of each of such series of Preferred Stock. A
consolidation, merger or reorganization of the Corporation with or into another
corporation or entity in which the holders of the Corporation's outstanding
capital stock do not retain a majority of the voting power in the surviving
corporation immediately thereafter or (ii) a sale, conveyance or disposition of
all or substantially all of the Corporation's assets shall be regarded as a
"liquidation, dissolution, or winding up of the affairs of the Corporation"
within the meaning of this paragraph 5.

6. Conversion Rights.

(a) Optional Conversion; Conversion Rate; Conversion Price. Each
share of Series C Preferred Stock shall be convertible, at the option of the
holder thereof, into shares of Common Stock at any time after the issuance of
such share. The number of shares of Common Stock into which each share of
Series C Preferred Stock may be converted shall be determined by dividing $25.00
by a price, hereinafter referred to as the "Conversion Price," in effect for the
Series C Preferred Stock at the time of the conversion. The Conversion Price
per share of Series C Preferred Stock initially shall be $25.00, subject to
adjustment as provided.

(b) Automatic Conversion. Each share of Series C Preferred Stock
shall automatically be converted into fully paid and nonassessable shares of
Common Stock of the Corporation at the Conversion Price then in effect for the
Series C Preferred Stock (subject to adjustment as provided below) upon the
earlier to occur of:

(i) the effective date of a firm commitment, underwritten public
offering of Common Stock pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), other than a
registration under Rule 145 of the Securities Act (or any successor thereto) or
to any employee benefit plan of the Corporation, generating aggregate proceeds
to the Company of at least Twenty Five Million Dollars ($25,000,000) (before
deducting underwriters' discounts and all expenses relating to the offering),
and an offering price (prior to underwriters' discounts and expenses) of not
less than Forty Dollars ($40.00) per share, appropriately adjusted for stock
dividends, stock splits, stock combinations, recapitalizations,
reclassifications, exchanges and the like ("Initial Public Offering"), provided,
however, that such automatic conversion shall not be deemed to have occurred in
the event that the Initial Public Offering does not close; or

(ii) the date on which the holders of two-thirds (2/3) of the
then outstanding shares of Series C Preferred Stock consent in writing to such
conversion.

(c) Conversion Mechanics. The holder of any shares of Series C
Preferred Stock may exercise the conversion rights as to such shares or any part
thereof by delivering to the Corporation during regular business hours, at the
office of any transfer agent of the Corporation, or at the principal office of
the Corporation or at such other place as may be designated by the Corporation,
the certificate or certificates for the shares to be converted, duly endorsed
for transfer to the Corporation (if required by it), accompanied by written
notice stating that the holder elects to convert such shares. Except as set
forth above, conversion shall be deemed to have been effected on the date when
such delivery is made, and such date is referred to herein as the "Conversion
Date." As promptly as practicable thereafter the Corporation shall issue and
deliver to or upon the written order of such holder, at such office or other
place designated by the Corporation, a certificate or certificates for the
number of full shares of Common Stock to which such holder is entitled and a
check for cash with respect to any fractional interest in a share of Common
Stock as provided below. The holder shall be

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<PAGE>

deemed to have become a shareholder of record for the Common Stock on the
applicable Conversion Date unless the transfer books of the Corporation are
closed on the date, in which event such holder shall be deemed to have become a
shareholder of record for the Common Stock on the next succeeding date on which
the transfer books are open. Upon conversion of only a portion of the number of
shares of Series C Preferred Stock, as the case may be, represented by a
certificate surrendered for conversion, the Corporation shall issue and deliver
to or upon the written order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new certificate for the number
of shares of Series C Preferred Stock representing the unconverted portion of
the certificate so surrendered.

(d) No Fractional Shares. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series C Preferred Stock. If
more than one share of Series C Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series C Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series C Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional interest
equal to the fair market value of such fractional interest as determined in good
faith by the Corporation's Board of Directors.

(e) Taxes. The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion pursuant hereto of Series C Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the Series C Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Corporation the
amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.

(f) Share Reserve. The Corporation shall at all times reserve and
keep available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of the Series C Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all Series C
Preferred Stock from time to time outstanding. The Corporation shall from time
to time (subject to obtaining necessary director and shareholder approval, which
the Corporation shall use its best efforts to promptly obtain), in accordance
with the laws of the State of Delaware, promptly increase the authorized amount
of its Common Stock if at any time the authorized number of shares of its Common
Stock remaining unissued shall not be sufficient to permit the conversion of all
of the shares of Series C Preferred Stock at the time outstanding.

(g) Registration or Listing. If any shares of Common Stock to be
reserved for the purpose of conversion of shares of Series C Preferred Stock
require registration or listing with, or approval of, any governmental
authority, stock exchange, quotation system or other regulatory body under any
federal or state law or regulation or otherwise, before such shares may be
validly issued or delivered upon conversion and traded or quoted on an exchange
or quotation system on which other shares of Common Stock are then listed or
quoted, the Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration, listing or approval, as the case may be.

(h) Status Upon Issuance. All shares of Common Stock which may be
issued upon conversion of the shares of Preferred Stock will upon issuance by
the Corporation be

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validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by the Corporation with respect to the issuance thereof.

7. Adjustments.

(a) Adjustments to Conversion Prices for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the Corporation
shall at any time declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common Stock for
no consideration, or shall subdivide the outstanding Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or in the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the Conversion Price for the Series C Stock in
effect immediately prior to each such stock dividend, combination or subdivision
shall be proportionately increased or decreased, as appropriate, effective at
the close of business on the date of each such stock dividend, combination or
subdivision, as the case may be. In the event that the Corporation shall
declare or pay, without consideration, any dividend on the Common Stock payable
in any right to acquire Common Stock for no consideration then the Corporation
shall be deemed to have made a dividend payable in Common Stock in an amount of
shares equal to the maximum number of shares issuable upon exercise of such
rights to acquire Common Stock.

(b) Adjustments for Capital Reorganizations and Reclassifications.
In case of any capital reorganization (other than in connection with a merger or
other reorganization in which the Corporation is not the continuing or surviving
entity) or any reclassification of the Common Stock of the Corporation, the
Series C Preferred Stock shall thereafter be convertible into the number of
shares of stock or other securities or property to which a holder of the number
of shares of Common Stock of the Corporation deliverable upon conversion of the
shares of Series C Preferred Stock immediately prior to each such reorganization
or recapitalization would have been entitled upon such reorganization, or
reclassification; and, in any such case, appropriate adjustment (as determined
by the Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of Series C Preferred Stock, to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as reasonably may be, in
relation to any share of stock or other property thereafter deliverable upon the
conversion.

(i) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend, or any
other distribution, payable otherwise than in cash; or

(ii) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase any
shares of stock of any class or to receive any other rights; or

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<PAGE>

corporation or conveyance of all or substantially all of the assets of the
Corporation to another corporation; or

(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;

then, and in any such case, the Corporation shall cause to be mailed to the
transfer agent for Series C Preferred Stock, and to the holders of record of the
outstanding Series C Preferred Stock, at least ten (10) days prior to the date
hereinafter specified, a notice stating the date on which (x) a record is to be
taken for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.

(iii) in case of the issuance by the Corporation in any manner
of any rights to subscribe for or to purchase shares of Common Stock, or any
options for the purchase of shares of Common Stock or stock convertible into
Common Stock, all shares of Common Stock or stock convertible into Common Stock
to which the holders of such rights or options shall be entitled to subscribe
for or purchase pursuant to such rights or options shall be deemed "outstanding"
as of the date of the offering of such rights or the granting of such options,
as the case may be, and the minimum aggregate consideration named in such rights
or options for the shares of Common Stock or stock convertible into Common Stock
covered thereby, plus the consideration, if any, received by the Corporation for
such rights or options, shall be deemed to

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<PAGE>

be the "consideration per share" received by the Corporation (as of the date of
the offering of such rights or the granting of such options, as the case may be)
for the issuance of such shares.

(iv) in case of the issuance or issuances by the Corporation in
any manner of any obligations or of any shares of stock of the Corporation that
shall be convertible into or exchangeable for Common Stock, all shares of Common
Stock issuable upon the conversion or exchange of such obligations or shares
shall be deemed issued as of the date such obligations or shares are issued, and
the amount of the "consideration per share" received by the Corporation for such
additional shares of Common Stock shall be deemed to be the total of (X) the
amount of consideration received by the Corporation upon the issuance of such
obligations or shares, as the case may be, plus (Y) the minimum aggregate
consideration, if any, other than such obligations or shares, receivable by the
Corporation upon such conversion or exchange, except in adjustment of dividends.

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<PAGE>

by the Board of Directors issued as consideration in connection with mergers,
acquisitions or other business combinations.

(f) Definition of Equity Securities. For purposes of this
Certificate of Designation, "Equity Securities" shall mean any securities having
voting rights in the election of the Board of Directors not contingent upon
default, or any securities evidencing an ownership interest in the Company, or
any securities convertible into or exercisable for any shares of the foregoing,
or any agreement or commitment to issue any of the foregoing.

(g) Protection of Conversion Rights. The Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
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, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 5 and in the taking of all such action as may
be necessary or appropriate in order to protect the conversion rights of the
holders of the Series C Preferred Stock against impairment.

8. Voting Rights. Holders of shares of Series C Preferred Stock shall be
entitled to vote on all matters submitted to a vote of the stockholders of the
Company. Each share of Series C Preferred Stock shall entitle the holder to
that number of votes equal to the number of shares of Common Stock into which
such share of Series C Preferred Stock is convertible as of the record date
established for the vote of the stockholders of the Company. Fractional votes
will not, however, be permitted, and any fractional voting rights resulting from
the above formula (after aggregating all shares of Common Stock into which
shares of Series C Preferred Stock held by each holder could be converted) shall
be rounded to the nearest whole number (with one-half being rounded upward).
Except with respect to the seat on the Board of Directors allocated to the
shares of Series C Preferred Stock as described below or as required by law, the
Series C Preferred Stock will vote together with the Common Stock and not as a
separate class.

9. Board Seat. The Board of Directors shall consist of three (3) up to
seven (7) members. The holders of Series B Preferred Stock, voting together as
a single class, shall be entitled to designate one (1) member of the Board of
Directors. The holders of the Series C Preferred Stock, voting together as a
single class, shall be entitled to designate two (2) members of the Board of
Directors. The remaining four (4) directors shall be designated by the holders
of the Common Stock, the Series B Preferred Stock and the Series C Preferred
Stock voting together as a single class.

10. No Preemptive Rights. No holder of the Series C Preferred Stock shall
be entitled, as of right, to purchase or subscribe for any part of the unissued
capital stock of the Corporation or of any capital stock of the Corporation to
be issued by reason of any increase of the authorized capital stock of the
Corporation, or to purchase or subscribe for any bonds, certificates of
indebtedness, debentures or other securities convertible into or carrying
options or warrants to purchase stock or other securities of the Corporation or
to purchase or subscribe for any stock of the Corporation purchased by the
Corporation or by its nominee or nominees, or to have any other preemptive
rights now or hereafter defined by the laws of the State of Delaware.

11. Protective Covenants. So long as shares of Series C Preferred Stock
remain outstanding and for such further period as may be required by law, the
Company will not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority

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<PAGE>

of the then outstanding Series C Preferred Stock voting separately as a class
(i) sell, convey or otherwise dispose of all or substantially all of assets of
the Company, merge the Company with or consolidate the Company into another
entity, or engage in any other form of corporate reorganization or
recapitalization that would require the vote of the Company's shareholders under
applicable law; (ii) increase the number of authorized shares of Series C
Preferred Stock (except as a result of a stock split or combination); (iii)
effect an exchange, reclassification or cancellation of all or a part of the
shares of Series C Preferred Stock (except as a result of a stock split or
combination); (iv) effect an exchange, or create a right of exchange, of all or
part of the shares of another class into shares of Series C Preferred Stock; (v)
alter or change the rights, preferences, privileges and restrictions of the
Series C Preferred Stock; (vi) authorize or issue shares of any class of stock
having any rights, preferences or privileges superior to any such right,
preference or privilege of the Series C Preferred Stock; (vii) authorize or
issue shares of stock of any class or any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of the Company having any rights, preferences or
privileges superior to any right, preference or privilege of the Series C
Preferred Stock; or (viii) reclassify any other outstanding shares of stock into
shares having any right, preference or privilege superior to any such right,
preference, privilege or priority of the Series C Preferred Stock.

12. Notices of Record Date. In the event that the Company shall propose at
any time (i) to declare any dividend or distribution upon the Common Stock other
than distributions to shareholders in connection with the repurchase of shares
of former employees or consultants to which at least a majority of the holders
of Series C Preferred Stock have consented, (ii) to offer for subscription to
the holders of any class or series of its capital stock any additional shares of
stock of any class or series or any other rights, (iii) to effect any
reclassification or recapitalization or (iv) to merge or consolidate with or
into any other corporation, or sell, lease or convey all or substantially all
its property or business, or to liquidate, dissolve or wind up; then the Company
will send to the holders of the Series C Preferred Stock, at least ten (10)
days' prior written notice of the date on which a record shall be taken for such
dividend, distribution or subscription rights and on which such event shall take
place.

13. No Implied Limitations. Except as otherwise provided by the express
provisions of this Certificate of Designation of Series C Preferred Stock,
nothing herein shall limit, by inference or otherwise, the discretionary right
of the Board to classify and reclassify and issue any shares of Preferred Stock
and to fix or alter all terms thereof to the full extent provided in the
Certificate of Incorporation of the Corporation.

14. General Provisions. In addition to the above provisions with respect
to the Series C Preferred Stock, such Series C Preferred Stock shall be subject
to, and entitled to the benefits of, the provisions set forth in the
Corporation's Certificate of Incorporation with respect to the Corporation's
Preferred Stock generally.

15. Notices. All notices required or permitted to be given by the
Corporation with respect to the Series C Preferred Stock shall be in writing,
and if delivered by first class United States mail, postage prepaid, to the
holders of the Series C Preferred Stock at their last addresses as they shall
appear on the books of the Corporation, shall be conclusively presumed to have
been duly given, whether or not the stockholder actually receives such notice;
provided, however, that failure to duly give such notice by mail, or any defect
in such notice, to the holders of any stock designated for redemption, shall not
affect the validity of the proceedings for the redemption of any other shares of
Series C Preferred Stock.

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FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series C issue of Preferred Stock
and fixing the number, limited powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics thereof shall, upon the
effective date of said series, be deemed to be included in and be a part of the
Articles of Incorporation of the Corporation pursuant to the provisions of the
General Corporation Law of the State of Delaware.

The effective time and date of the series herein certified shall be the
date such Certificate of Designation is filed with the Delaware Secretary of
State.

Dated: ______________, 2000 MINDARROW SYSTEMS, INC.

----------------------------------------
Tom Blakeley, President

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Eric McAfee, Corporate Secretary

<PAGE>

EXHIBIT 10.11

Sublease Agreement Between
Berg McAfee Companies and eCommercial.com, Inc.

1. Parties: This Sublease (the "Sublease"), is entered into as of this 1st
day of September, 1999, (the "Effective Date") between Berg McAfee Companies and
eCommercial.com, Inc., hereinafter called respectively Sublessor and Sublessee.

2. Premises: Sublessor hereby subleases to Sublessee, and Sublessee subleases
from Sublessor certain premises with appurtenances, situated in the City of
Cupertino, County of Santa Clara, State of California, more particularly
described as follows:

Approximately 3,267 rentable square feet of office space commonly known and
designated as 10600 North De Anza Boulevard, Suite 250, Cupertino, California,
located on the second floor of a larger 21,880 square foot, 3-story office
building ("Building"), including covered and surface parking on a non-exclusive
basis.

3. Rental Provisions: Sublessee hereby agrees and assumes all lease terms and
conditions set forth in that certain lease agreement between Berg McAfee
Companies and Sobrato Investment Partnership (the "Lease") dated September 1,
1999, attached hereto as Exhibit A.
---------

In Witness Whereof, Sublessor and Sublessee have executed this Sublease on
the day and year first above written.

Sublessor: Berg McAfee Companies Sublessee: eCommercial.com, Inc.

By:__________________ By:___________________

Its:__________________ Its:___________________

<PAGE>

EXHIBIT 23.1

We have issued our report dated October 25, 1999 (except for the second
paragraph of Note H-1, as to which the date is November 5, 1999 and the third
paragraph of Note H-1, as to which the date is March 24, 2000), accompanying
the financial statements of MindArrow Systems, Inc. contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."

Grant Thornton LLP

Reno, Nevada

March 31, 2000