SNOWBALL COM INC, S-1/A, 2000-03-10

SNOWBALL COM INC
S-1/A, 2000-03-10
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE>

As filed with the Securities and Exchange Commission on March 10, 2000

Registration No. 333-93487
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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Amendment No. 3 to
FORM S-1
REGISTRATION STATEMENT
Under The Securities Act of 1933
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SNOWBALL.COM, INC.
(Exact name of Registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
Delaware 7375 94-3316902
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) Identification no.)

250 Executive Park Boulevard,
Suite 4000
San Francisco, CA 94134
(415) 508-2000
</TABLE>
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
James R. Tolonen
Chief Financial Officer
Snowball.com, Inc.
250 Executive Park Boulevard, Suite 4000
San Francisco, CA 94134
(415) 508-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:

<TABLE>
<S> <C>
Laird H. Simons III, Esq. John T. Sheridan, Esq.
Robert B. Dellenbach, Esq. Anthony Kikuta, Esq.
Darren L. Nunn, Esq. WILSON SONSINI GOODRICH & ROSATI
William L. Hughes, Esq. Professional Corporation
FENWICK & WEST LLP 650 Page Mill Road
275 Battery Street Palo Alto, California 94304
San Francisco, California 94111 (650) 493-9300
(415) 875-2300
</TABLE>
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
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If 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, as amended (the "Securities Act"), please check the following box. [_]

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

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
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 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion. Dated March 10, 2000.

6,250,000 Shares

[SNOWBALL LOGO APPEARS HERE]

Common Stock

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This is an initial public offering of shares of common stock of Snowball.com,
Inc. All of the 6,250,000 shares of common stock are being sold by Snowball.

Prior to this offering, there has been no public market for the common stock.
Snowball anticipates that the initial public offering price will be between
$10.00 and $12.00 per share. Snowball has applied for quotation of the common
stock on the Nasdaq National Market under the symbol "SNOW".

See "Risk Factors" beginning on page 7 to read about risks you should
consider before buying shares of the common stock.

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

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<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to Snowball.......................... $ $
</TABLE>

To the extent that the underwriters sell more than 6,250,000 shares of common
stock, the underwriters have the option to purchase up to an additional
937,500 shares from Snowball at the initial public offering price less the
underwriting discount.

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The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.

Goldman, Sachs & Co.

Chase H&Q

Robertson Stephens

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Prospectus dated , 2000.
<PAGE>

[The Snowball logo is displayed on the top left corner of the inside front
cover, with the phrase "We are i" under the logo. The logos of the four
Snowball networks, and a short description of each network, are staggered
vertically down the right side of the page. The ChickClick network logo is at
the top of the page, with the phrase "Girl Sites That Don't Fake It" to the
right of the logo. The IGN network logo is beneath the ChickClick logo, with
the phrase "Entertainment & Games Network" to the left of the logo. The
InsideGuide network logo is beneath the IGN logo, with the phrase "For Students
By Students" to the right of the logo. The PowerStudents network logo is
beneath the InsideGuide logo, with the phrase "Maximize Your Student
Experience" to the left of the logo.]
<PAGE>

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our consolidated financial statements and the notes to those
statements appearing elsewhere in this prospectus. Unless otherwise indicated,
all information contained in this prospectus assumes no exercise by the
underwriters of their option to purchase additional shares of our common stock
in the offering, reflects a three-for-two stock split of our common stock
completed in October 1999, and reflects the conversion of all outstanding
shares of preferred stock into common stock upon completion of this offering.

Snowball.com, Inc.

Snowball operates a network of destination web sites that offer content,
community and commerce to the Internet generation, or Generation i. We view
Generation i as individuals between the ages of 13 and 30 who consider the
Internet to be an integral part of their daily lives. The United States Census
Bureau estimates that there were 67.9 million individuals in this age group in
1999, and those individuals between the ages of 15 and 24 had an aggregate mean
income of $302.4 billion in 1998. We serve this group by providing its members
with current content, relevant services, a forum for interacting with one
another and carefully selected merchandise.

In addition to creating original content, we continuously work to expand the
breadth and depth of our content offerings by selectively adding affiliated web
sites to our network. Our network and affiliate business model enables us to
add content and traffic to our network rapidly and cost-effectively, while
keeping the content fresh and, we believe, compatible with the evolving tastes
of Generation i. To attract and retain affiliates, we provide an integrated
package of sales and marketing services, technical support and audience
development opportunities. As of December 31, 1999, we were affiliated with
more than 150 web sites and over 100 partner college destinations organized
under four networks, each targeting a specific segment of Generation i:

. ChickClick, which provides content, community and commerce features to
Generation i women;

. IGN, which provides information and entertainment to Generation i men;

. InsideGuide, which offers student-generated information concerning
individual colleges; and

. PowerStudents, which provides students at all levels with information
concerning college admissions, jobs and careers.

Our networks attract a large and segmented audience by providing extensive
information on a variety of narrowly focused subjects. By offering targeted
access to a large audience with attractive demographic characteristics, we are
able to generate marketing and advertising revenue in a variety of forms. These
include promotions and sponsorships, fees for special placement of
advertisements on our web sites (slotting) and lead-generation, and sales of
various forms of banner, button and textlink advertising. We also generate
merchandising revenue from the sale of carefully selected items within our
online store, ChickShops.

According to Media Metrix, our networks attracted over 5.9 million unique
visitors in January 2000, making us one of the 30 highest-trafficked
properties, or networks of affiliated web sites, on the Internet and, we
believe, one of the leading online destinations for Generation i. Additionally,
based on the same Media Metrix data, visitors spent more time per day during
that period on our network than on all but 20 other properties among the top 50
properties. As of January 31, 2000, we had over three million registered users.

3
<PAGE>

The Snowball Strategy

Our goal is to be the preeminent network of content, community and commerce
sites on the Internet by, for and about Generation i, by:

. Building and developing our existing networks, while selectively adding
new networks;

. Continuing to leverage our network and affiliate business model to
achieve cost-effective and viral growth of content and traffic;

. Offering a range of value-added services to attract, retain and develop
affiliated web sites;

. Promoting affinity and community across all networks and affiliates to
increase the amount of time that visitors spend on our Networks;

. Being the premier partner for marketing, advertising and commerce
directed at Generation i; and

. Pursuing strategic alliances and acquisitions that increase content,
traffic and revenue opportunities.

Corporate Information

From our inception in January 1997 through December 1998, we operated as a
division of Imagine Media, Inc., a California corporation. We were incorporated
as an independent company in Delaware in January 1999 as Affiliation, Inc. and
changed our name to Affiliation Networks, Inc. in February 1999. We then
changed our name to Snowball.com, Inc. in September 1999. References in this
prospectus to "Snowball," "we," "our" and "us" collectively refer to
Snowball.com, Inc., a Delaware corporation, and its predecessors and
subsidiaries, and not to the underwriters. Our principal executive offices are
located at 250 Executive Park Boulevard, Suite 4000, San Francisco, California
94134 and our telephone number is (415) 508-2000. Our World Wide Web address is
"www.snowball.com." The information on our web site is not part of this
prospectus.

4
<PAGE>

The Offering

<TABLE>
<C> <S>
Common stock offered by Snowball................ 6,250,000 shares

Common stock to be outstanding after the
offering....................................... 37,245,442 shares

Use of proceeds................................. To promote our brand, expand
sales and marketing, repay
any debt that may be incurred
under our credit facility and
for working capital and
general corporate purposes,
including network expansion
and content development,
relocation of our offices and
possible acquisitions of
affiliates. See "Use of
Proceeds."

Proposed Nasdaq National Market symbol.......... "SNOW"
</TABLE>

The number of shares of common stock to be outstanding after the offering
includes:

. 5,585,547 shares outstanding as of December 31, 1999; and

. 25,409,895 shares of common stock to be issued upon the automatic
conversion of all outstanding shares of preferred stock upon completion
of this offering.

The shares of common stock to be outstanding exclude:

. 10,252,737 shares of common stock reserved for issuance under our stock
option plans and a stock option agreement, including 5,500,000 shares of
common stock available for future issuance under our 2000 Equity
Incentive Plan and 2000 Employee Stock Purchase Plan, each adopted in
February 2000, of which 2,358,368 shares at a weighted-average exercise
price of $2.02 per share were subject to outstanding options as of
December 31, 1999;

. 322,688 shares of common stock issuable upon exercise of outstanding
warrants and conversion of the shares of preferred stock underlying
those warrants as of December 31, 1999 at a weighted-average exercise
price of $7.84 per share; and

. 150,000 shares of Series C preferred stock issued in January 2000.

5
<PAGE>

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

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Consolidated Statements of Operations Data:
Revenue........................................... $ 927 $ 3,256 $ 6,674
Cost of revenue................................... 171 1,322 4,316
------- ------- --------
Gross margin...................................... 756 1,934 2,358
Total operating expenses.......................... 2,035 5,594 37,565
------- ------- --------
Loss from operations.............................. (1,279) (3,660) (35,207)
Interest and other income, net.................... -- -- 385
------- ------- --------
Net loss.......................................... $(1,279) $(3,660) $(34,822)
======= ======= ========
Basic and diluted net loss per share.............. $(186.69)
========
Shares used in per share calculation.............. 187
========
Pro forma basic and diluted net loss per share
(unaudited)...................................... $ (1.93)
========
Shares used in pro forma per share calculation
(unaudited)...................................... 18,022
========
</TABLE>

See Note 1 of our Notes to Consolidated Financial Statements for a
description of the method that we used to compute our basic and diluted net
loss per share.

The following table presents a summary of our consolidated balance sheet data
as of December 31, 1999:

. on an actual basis;

. on a pro forma basis to reflect the automatic conversion of all shares
of preferred stock into common stock immediately prior to the closing of
this offering and the issuance of 150,000 shares of Series C preferred
stock in January 2000 at $10.00 per share; and

. on a pro forma as adjusted basis to reflect our receipt of the estimated
net proceeds from the sale of 6,250,000 shares of common stock in this
offering at an assumed initial public offering price of $11.00 per
share, after deducting the estimated underwriting discount and estimated
offering expenses payable by us. See "Capitalization."

<TABLE>
<CAPTION>
December 31, 1999
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
investments.................................... $33,489 $34,989 $ 97,627
Working capital................................. 28,263 29,763 92,401
Total assets.................................... 46,718 48,218 110,856
Long-term obligations, less current portion..... 2,036 2,036 2,036
Stockholders' equity............................ 34,661 36,161 98,799
</TABLE>

6
<PAGE>

RISK FACTORS

You should carefully consider the risks and uncertainties described below and
the other information in this prospectus before deciding whether to invest in
shares of our common stock. The risks and uncertainties described below are not
the only risks we face. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may impair our business operations.
If any of the following risks actually occurs, our business, our financial
condition and the results of our operations could be seriously harmed, the
trading price of our common stock could decline and you might lose all or part
of your investment.

Risks Related to Our Business

Our business model is unproven and may fail.

We have a limited operating history upon which you can evaluate our business
model and prospects and the merits of investing in our stock. If our business
model proves to be unsuccessful, the trading price of our stock will fall.

Our IGN, ChickClick and PowerStudents networks began operating as divisions
of Imagine Media in March 1997, February 1998 and August 1998, respectively. We
were incorporated in January 1999, and Imagine Media contributed the IGN,
ChickClick and PowerStudents assets to us in February 1999. We launched our
InsideGuide network in September 1999. Accordingly, our prospects and the
merits of investing in our stock must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving
markets such as Internet content and services. In particular, we are
implementing an evolving and unpredictable business model. Our business model
is unproven and may fail, which could harm our business and diminish the value
of your investment. See "Business -- The Snowball Strategy" for more
information about our business model.

Our quarterly revenue and operating results may fluctuate in future periods and
we may fail to meet expectations, which may reduce the trading price of our
common stock.

We cannot forecast our revenue and operating results with precision,
particularly because our products and services are relatively new and our
prospects uncertain. If revenue in a particular period does not meet
expectations, it is likely that we will be unable to adjust our level of
expenditures significantly for the period. If our operating results fail to
meet expectations, the trading price of our common stock would decline.

We believe that period-to-period comparisons are not meaningful and are not
indicative of future performance. We anticipate that the results of our
operations will fluctuate significantly in the future as a result of a variety
of factors, including the long sales cycle we face selling advertising and
promotions, seasonal trends in Internet usage, advertising placements and e-
commerce and other factors discussed in this section. As a result, it is likely
that in some future quarters or years our results of operations will fall below
the expectations of securities analysts or investors, which would cause the
trading price of our common stock to decline.

We have a history of losses and expect to incur substantial net losses for the
foreseeable future.

We have incurred net losses since the formation of our business in January
1997. At December 31, 1999, we had an accumulated deficit of approximately
$39.8 million. We plan to increase our operating expenses significantly to
expand our affiliate base, develop additional networks, expand our sales and
marketing operations, hire more salespersons, increase our marketing and
promotional activities, develop and upgrade our technology and purchase
equipment for our operations and network infrastructure. We also may incur
costs relating to the acquisition of

7
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content, other businesses or technologies. We may not generate sufficient
revenue to offset these expenditures. As a result, we expect to incur
significant operating losses on a quarterly basis for the foreseeable future,
and may never be profitable. Even if we do achieve profitability, we might not
be able to sustain profitability on a quarterly or annual basis in the future.

If we fail to maintain our relationships with affiliates, or incorporate new
affiliates into our networks on a timely basis, our revenue will decline.

We derive revenue primarily from advertisers who pay us to advertise on our
networks because our networks attract a large number of visitors. We rely upon
our affiliates to generate a significant portion of the content that attracts
visitors to our networks. If we lose these affiliates and cannot replace them
with affiliates having comparable traffic patterns and user demographics, or if
we fail to add new affiliates to our networks on a timely basis, we will lose
revenue.

We could lose an affiliate if it were to:

. terminate or fail to renew its affiliate agreement with us;

. be acquired by or otherwise form a relationship with one of our
competitors;

. demand from us a greater portion of revenue derived from advertisements
placed on its web sites; or

. seek to require us to make payments for access to its web sites.

We lost 46 affiliates in 1999. Twenty-nine of these losses resulted from the
expiration and nonrenewal of affiliate agreements. Seventeen losses resulted
from the early termination of affiliate agreements--13 by mutual consent, two
because we acquired the affiliate, one because the affiliate was acquired by a
third party and one because the affiliate breached the agreement. The loss of
these affiliates did not have a significant impact on our revenue because
during the same period we entered into agreements with 102 new affiliates and
renewed agreements with 44 existing affiliates. We cannot assure you, however,
that we will not lose a major affiliate in the near future, which could cause
our revenue to decline.

We also must continue to identify potential new affiliates to ensure that we
keep pace with the changing interests, styles, trends and preferences of
Generation i. Web sites targeting Generation i might not continue to emerge at
their current pace or at all. Moreover, we may be unable to identify potential
new affiliates as they emerge or to negotiate affiliate agreements with
potential new affiliates on a timely basis. In addition, we will likely face
increasing competition for the content and services provided by possible
affiliates. If we fail to continue to identify and enter agreements with
potential new affiliates on a timely basis, our networks may lose their
relevance to Generation i, we will lose advertising and promotional
opportunities and our revenue will decline.

If our IGN network is unsuccessful, our revenue will decline substantially.

We rely upon IGN for a substantial portion of our traffic and advertising
revenue. IGN is a network of web sites that provide information and
entertainment to Generation i men. IGN accounted

8
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for approximately 70% of our consolidated page views in January 2000,
approximately 13% of our registered users as of January 31, 2000 and a
substantial portion of our revenue for the year ended December 31, 1999. If we
are unable to anticipate changes in the interests, styles, trends or
preferences of the audience targeted by IGN, if we are unable to maintain our
relationship with affiliates of IGN or incorporate new affiliates into the IGN
network on a timely basis or if IGN otherwise loses traffic, our ability to
generate advertising revenue would be impeded to an even greater extent than if
any of those events occurred with respect to any of our other networks.

If our advertising and marketing arrangements are terminated or are not
renewed, our revenue will decline.

To date, we have derived a substantial portion of our revenue from a small
number of advertising and marketing customers. We expect that this will
continue during the early stages of our development and may continue
indefinitely. If our arrangements with these customers are terminated or are
not renewed, our revenue will decline.

In addition, many of our advertising and marketing customers enter into
agreements with us that have a term of less than six months. As a result, our
customers could cancel these agreements, change their advertising expenditures
or buy advertising from our competitors on relatively short notice and without
penalty. Because we expect to derive a large portion of our future revenue from
advertising and marketing arrangements, these short-term agreements expose us
to competitive pressures and potentially severe fluctuations in our financial
results.

If we fail to perform in accordance with the terms of our advertising
agreements, we will lose revenue.

Our advertising agreements typically provide for minimum performance levels,
such as click-throughs by web users or impressions. If we fail to perform in
accordance with these terms, we typically have to provide free advertising to
the customer until the minimum level is met, causing us to lose revenue. In
addition, we occasionally guarantee the availability of advertising space in
connection with promotion arrangements and content agreements and agree with
certain advertisers that we will not accept advertising from any other customer
within a particular subject matter. If we cannot fulfill the guarantees we make
to our customers, or if we lose potential customers whose advertisements,
sponsorships and promotions conflict with those of other customers, we will
lose revenue.

If we do not continue to attract and retain users we may not be able to compete
successfully for advertisers, which would cause our revenue to decline.

We currently derive substantially all of our revenue from advertisers who pay
us to advertise on our networks, and our business model depends in part on
increasing the amount of this revenue. The market for advertising revenue is
highly competitive. We must continue to attract and retain users to compete
successfully for advertising revenue. If we fail to attract and retain more
users, our revenue will decline.

Many of our current competitors, as well as a number of potential new
competitors, have significantly greater editorial, financial, technical,
marketing, sales and other resources than we do. Our competitors may develop
content and service offerings that are superior to ours or achieve greater
market acceptance than ours. Moreover, if our content and service offerings
fail to achieve success in the short term, we could suffer an insurmountable
loss in market share and brand acceptance. See "Business--Competition" for more
detailed information about our competitors.

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<PAGE>

Technical problems with either our internal or our outsourced computer and
communications systems could interrupt our service, resulting in decreased
customer satisfaction, the possible loss of users and advertisers and a decline
in revenue.

Our operations depend on our ability to maintain our computer systems and
equipment in effective working order. Our web sites must accommodate a high
volume of traffic and deliver frequently updated information. Any sustained or
repeated system failure or interruption would reduce the attractiveness of our
web sites to customers and advertisers and could cause us to lose users and
advertisers to our competitors. This would cause our revenue to decline. In
addition, interruptions in our systems could result from the failure of our
telecommunications providers to provide the necessary data communications
capacity in the time frame we require. Unanticipated problems affecting our
systems have caused from time to time in the past, and could cause in the
future, slower response times and interruptions in our services.

Our web sites reside on computer systems located in the San Francisco Bay
area and in Columbia, South Carolina. Fire, earthquakes, hurricanes, power
loss, water damage, telecommunications failures, vandalism and other malicious
acts, and similar unexpected adverse events, may damage our computer systems
and interrupt service. Our computer system's continuing and uninterrupted
performance is critical to our success. Our insurance policies may not
adequately compensate us for any losses that may occur due to any failures or
interruptions in our systems.

If we lose key personnel or are unable to hire additional qualified personnel,
or if our management team is unable to perform effectively, we will not be able
to implement our business strategy or operate our business effectively.

Our success depends upon the continued services of our senior management and
other key personnel, many of whom would be difficult to replace. The loss of
any of these individuals would adversely affect our ability to implement our
business strategy and to operate our business effectively. In particular, the
services of Mark Jung, our chief executive officer, would be difficult to
replace. None of our officers or key employees is bound by an employment
agreement, nor do we have "key person" life insurance policies covering any of
these individuals.

Our success also depends upon our ability to continue to attract, retain and
motivate skilled employees. Competition for employees in our industry is
intense, especially in the San Francisco Bay area. We believe that there are
only a limited number of persons with the requisite skills to serve in many key
positions and it is becoming increasingly difficult to hire, retain and
motivate these persons. We have in the past experienced, and we expect to
continue to experience, difficulty in hiring and retaining skilled employees
with appropriate qualifications. Competitors and others have in the past
attempted, and may in the future attempt, to recruit our employees. We believe
that we will incur increasing salaries, benefits and recruiting expenses
because of the difficulty in hiring and retaining employees.

Finally, our success depends on the ability of our management to perform
effectively, both individually and as a group. Our management team has been
working together for less than one year. Moreover, James Tolonen, who was hired
as our Chief Operating Officer and Chief Financial Officer in October 1999, and
certain other members of our management team have only recently joined us. If
our management is unable to operate effectively in their respective roles or as
a team, we will not be able to implement our business strategy or operate our
business effectively.

Our failure to manage growth effectively could result in our inability to
operate our business effectively.

We have rapidly and significantly expanded our operations and anticipate that
further expansion will be required to address potential market opportunities.
If we fail to manage this expansion

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<PAGE>

effectively, we will be unable to operate our business effectively. During the
year ended December 31, 1999, our business grew from 44 employees to 260
employees. This rapid growth has placed, and we expect it to continue to place,
a significant strain on our management, operational and financial resources. As
part of this growth, we will have to implement new operational and financial
systems, procedures and controls.

Our prospects for obtaining additional financing, if required, are uncertain
and failure to obtain needed financing would limit our operations and might
cause our business to fail.

Our operating history is too brief for us to know with certainty whether our
cash reserves and any cash flows from operations will be sufficient to finance
our anticipated growth. We may need to raise additional funds if our estimates
of revenue or our working capital and/or capital expenditure requirements
change or prove inaccurate, if we are required to respond to unforeseen
technological or marketing hurdles or if we choose to take advantage of
unanticipated opportunities. If adequate funds are not available to satisfy
either short- or long-term capital requirements, we might be required to limit
our operations significantly and our business might fail. Additional financing
might not be available when required. Our future capital requirements are
dependent upon many factors, including:

. the rate at which we expand our sales and marketing operations;

. the amount and timing of fees paid to affiliates;

. the extent to which we expand our content and service offerings;

. the extent to which we develop and upgrade our technology and data
network infrastructure; and

. the response of competitors to our content and service offerings.

Additional financings could disadvantage our existing stockholders and
purchasers in this offering.

If additional funds are raised through the issuance of equity securities, the
percentage ownership of our then current stockholders would be reduced and the
value of their investments might decline. In addition, any new securities
issued might have rights, preferences or privileges senior to those securities
held by our stockholders. If we raise additional funds through the issuance of
debt, we might become subject to restrictive covenants.

If we are unable to identify or successfully integrate potential acquisitions
and investments, we may not grow as planned, our expenses may increase and our
management's attention may be diverted from the operation of our business.

Since our incorporation, we have acquired three businesses and the selected
assets of two other businesses and our growth strategy includes acquiring or
making investments in complementary businesses, products, services or
technologies in the future. If we are unable to identify suitable acquisition
or investment candidates we will not grow as planned. Even if we do identify
suitable candidates, we might not be able to make acquisitions or investments
on commercially acceptable terms and on a timely basis. If we buy a business,
we could have difficulty in assimilating that company's personnel, operations,
products, services or technologies into ours.

We may have to litigate to protect our intellectual property rights, or to
defend claims that we have infringed the rights of others, which could subject
us to significant liability and be time consuming and expensive.

Our success depends significantly upon our copyrights, trademarks, service
marks, trade secrets, technology and other intellectual property rights. The
steps we have taken to protect our

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intellectual property may not be adequate and third parties may infringe or
misappropriate our intellectual property. If this occurs, we may have to
litigate to protect our intellectual property rights. These difficulties could
disrupt our ongoing business, increase our expenses and distract our
management's attention from the operation of our business.

We have not applied for the registration of all of our trademarks and service
marks, and effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which our content, services
and products are made available online. If we were prevented from using our
trademarks, we would need to reimplement our web sites and rebuild our brand
identity with our customers, users and affiliates. This would increase our
operating expenses substantially.

Companies frequently resort to litigation regarding intellectual property
rights. From time to time, we have received, and we may in the future receive,
notices of claims of infringement of other parties' proprietary rights. We may
have to litigate to defend claims that we have infringed the intellectual
properly rights of others. Any claims of this type could subject us to
significant liability, be time-consuming and expensive, divert management's
attention, require the change of our trademarks and the alteration of content,
require us to redesign our web sites or services or require us to pay damages
or enter into royalty or licensing agreements. These royalty or licensing
agreements, if required, might not be available on acceptable terms or at all.
If a successful claim of infringement were made against us and we could not
develop non-infringing intellectual property or license the infringed or
similar intellectual property on a timely and cost-effective basis, we might be
unable to continue operating our business as planned. See "Business--
Proprietary Rights and Licensing" for more information about our intellectual
property.

We have adopted anti-takeover defenses that could delay or prevent an
acquisition of our company, even an acquisition that would be beneficial to our
stockholders.

After this offering, our board of directors will have the authority to issue
up to 5,000,000 shares of preferred stock. Issuance of the preferred stock
would make it more difficult for a third party to acquire a majority of our
outstanding voting stock, even if doing so would be beneficial to our
stockholders. Without any further vote or action on the part of the
stockholders, the board of directors will have the authority to determine the
price, rights, preferences, privileges and restrictions of the preferred stock.
This preferred stock, if issued, might have conversion rights and other
preferences that work to the disadvantage of the holders of common stock.

Our certificate of incorporation, bylaws and equity compensation plans
include provisions that may deter an unsolicited offer to purchase Snowball.
These provisions, coupled with the provisions of the Delaware General
Corporation Law, may delay or impede a merger, tender offer or proxy contest
involving Snowball. Furthermore, our board of directors will be divided into
three classes, only one of which will be elected each year. Directors will only
be removable by the affirmative vote of at least 66 2/3% of all classes of
voting stock. These factors may further delay or prevent a change of control of
Snowball and may be detrimental to our stockholders. See "Description of
Capital Stock--Anti-takeover Provisions of Our Certificate of Incorporation,
Bylaws and Delaware Law."

Risks Related to Our Industry

Since our revenue is derived primarily from selling advertisements, our revenue
might decline and we might not grow if advertisers do not continue or increase
their usage of the Internet as an advertising medium.

In the past, we have derived, and we expect to continue to derive in the
future, substantially all of our revenue from selling advertisements. However,
the prospects for continued demand and market acceptance for Internet marketing
solutions are uncertain. If advertisers do not continue or

12
<PAGE>

increase their usage of the Internet, our revenue might decline or we might not
grow. Most advertising agencies and potential advertisers, particularly local
advertisers, have only limited experience advertising on the Internet and may
not devote a significant portion of their advertising expenditures to Internet
advertising. Moreover, advertisers that have traditionally relied on other
advertising media may not advertise on the Internet. In addition, advertising
on the Internet is at a much earlier stage of development in international
markets than it is in the United States and may not fully develop in these
markets.

As the Internet evolves, advertisers may find Internet advertising to be a
less attractive or effective means of promoting their products and services
relative to traditional methods of advertising and may not continue to allocate
funds for Internet advertising. Many historical predictions by industry
analysts and others concerning the growth of the Internet as a commercial
medium have overstated the growth of the Internet and should not be relied
upon. This growth may not occur or may occur more slowly than estimated. In
addition, if a large number of Internet users use filter software programs that
limit or remove advertising from the user's monitor, advertisers may choose not
to advertise on the Internet. Moreover, there are no widely accepted standards
for the measurement of the effectiveness of Internet advertising, and standards
may not develop sufficiently to support Internet advertising as a significant
advertising medium.

Our ability to implement our business strategy and our ultimate success depend
on continued growth in the use of the Internet and the ability of the Internet
infrastructure to support this growth.

Our business strategy depends on continued growth in the use of the Internet
and increasing the number of users who visit our networks. A decrease in the
growth of web usage, particularly usage by Generation i, would impede our
ability to implement our business strategy and our ultimate success.

If the Internet continues to experience significant growth in the number of
users, frequency of use and amount of data transmitted, the Internet
infrastructure might not be able to support the demands placed on it or the
performance or reliability of the Internet might be adversely affected. Web
sites have experienced interruptions in service as a result of outages and
other delays occurring throughout the Internet network infrastructure. If these
outages or delays occur frequently in the future, Internet usage, as well as
the usage of our web sites, could grow more slowly than expected or decline.
Security and privacy concerns may also slow growth. Because our revenues
ultimately depend upon Internet usage generally as well as on our web sites,
our business may suffer as a result of retarded or declining growth.

We might have to expend significant capital or other resources to protect our
networks from unauthorized access, computer viruses and other disruptive
problems.

Internet and online service providers have in the past experienced, and may
in the future experience, interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. We might be required to expend significant capital or
other resources to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Nevertheless, security measures
that we implement might be circumvented. Eliminating computer viruses and
alleviating other security problems may also require interruptions, delays or
cessation of service to users accessing web pages that deliver our content and
services. In addition, a party who circumvents our security measures could
misappropriate proprietary information or cause interruptions in our
operations.

We may be sued regarding privacy concerns, subjecting us to significant
liability and expense.

If third parties were able to penetrate our network security or otherwise
misappropriate our users' personal information or credit card information, we
could be subject to significant liability and

13
<PAGE>

expense. We may be liable for claims based on unauthorized purchases with
credit card information, impersonation or other similar fraud claims. Claims
could also be based on other misuses of personal information, such as
unauthorized marketing purposes. These claims could result in costly
litigation.

The Federal Trade Commission and state agencies have been investigating
various Internet companies regarding their use of personal information. In
1998, the United States Congress enacted the Children's Online Privacy
Protection Act of 1998. We depend upon collecting personal information from our
customers and the regulations promulgated under this act have made it more
difficult for us to collect personal information from some of our customers. We
could incur additional expenses if new regulations regarding the use of
personal information are introduced or if our privacy practices are
investigated. Furthermore, the European Union recently adopted a directive
addressing data privacy that may limit the collection and use of information
regarding Internet users. This directive and regulations enacted by other
countries may limit our ability to target advertising or to collect and use
information internationally.

Information displayed on and communication through our networks could expose us
to significant liability and expense.

We face possible liability for defamation, negligence, copyright, patent or
trademark infringement and other claims, such as product or service liability,
based on the nature and content of the materials published on or downloaded
from our web sites. These types of claims have been brought, sometimes
successfully, against Internet companies and print publications in the past,
and the potential liability associated with these claims is significant. We
could also be subjected to claims based upon the online content that is
accessible from our web sites through links to other web sites or through
content and materials that may be posted in chat rooms or bulletin boards. We
do not verify the accuracy of the information supplied by third-party content
providers, including affiliates. We also offer email services which may subject
us to potential risks, such as liabilities or claims resulting from unsolicited
email, lost or misdirected messages, illegal or fraudulent use of email or
interruptions or delays in email service. The law in these areas is unclear.
Accordingly, we are unable to predict the potential extent of our liability.
Our insurance may not cover potential claims of this type, or may not be
adequate to indemnify us for all liability that may be imposed.

Changes in regulation of domain names may result in the loss or change of our
domain names, a reduction in brand awareness among our customers and a
diminished ability to attract advertisers and generate revenue.

We hold various domain names relating to our networks and brands. In the
United States, the National Science Foundation has appointed a limited number
of entities as the current exclusive registrars for the ".com," ".net" and
".org" generic top level domains. We expect future changes in the United States
to include a transition from the current system to a system controlled by a
non-profit corporation and the creation of additional top level domains.
Requirements for holding domain names also are expected to be affected. These
changes may result in the loss or change of our domain names, a reduction in
brand awareness among our customers and a diminished ability to attract
advertisers and generate revenue.

Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear.
Therefore, we may be unable to prevent third parties from acquiring domain
names that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights. In addition, we may lose our domain
names to third parties with trademarks or other proprietary rights in those
names or similar names.

14
<PAGE>

Future regulation of the Internet may slow its growth, resulting in decreased
demand for our services and increased costs of doing business.

Although we are subject to regulations applicable to businesses generally,
few laws or regulations exist that specifically regulate communications and
commerce over the Internet. We expect more stringent laws and regulations
relating to the Internet to be enacted due to the increasing popularity and use
of the Internet and other online services. Future regulation of the Internet
may slow its growth, resulting in decreased demand for our services and
increased costs of doing business.

New and existing laws and regulations are likely to address a variety of
issues, including:

. user privacy and expression;

. taxation and pricing;

. the rights and safety of children;

. intellectual property; and

. information security.

Currently we may be subject to Sections 5 and 12 of the Federal Trade
Commission Act, which regulate advertising in all media, including the
Internet, and require advertisers to have substantiation for advertising claims
before disseminating advertisements. The Federal Trade Commission recently
brought several actions charging deceptive advertising via the Internet, and is
actively seeking new cases involving advertising via the Internet.

We also may be subject to the provisions of the recently enacted
Communications Decency Act which, among other things, imposes substantial
monetary fines and/or criminal penalties on anyone who distributes or displays
certain prohibited material over the Internet or knowingly permits a
telecommunications device under its control to be used for this purpose.

In addition, several telecommunications companies and local telephone
carriers have petitioned the Federal Communications Commission to regulate
Internet service providers and online service providers in a manner similar to
long distance telephone carriers and to impose access fees. If this were to
occur, the cost of communicating on the Internet could increase substantially,
potentially decreasing the use of the Internet.

Finally, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. Any new legislation or regulation, 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 increase our costs of doing
business, discourage Internet communications and reduce demand for our
services.

We may be subject to significant liability for products sold through our web
sites.

We introduced ChickShops, our first e-commerce initiative, in December 1999
and plan to develop a range of e-commerce activities. Consumers may sue us if
any of the products sold through our web sites are defective, fail to perform
properly or injure the user. Liability claims resulting from our sale of
products could require us to spend significant time and money in litigation or
to pay significant damages.

15
<PAGE>

Risks Related to this Offering

We expect to experience volatility in our stock price, which could negatively
affect your investment.

Our common stock has never been sold in a public market and an active trading
market for our stock may not develop or be sustained. If you purchase shares of
our common stock in this offering, you will pay a price that was not
established in a competitive market. Rather, you will pay a price that we
negotiated with the representatives of the underwriters. The price of our
common stock that will prevail in the market after this offering may be higher
or lower than the price you pay. See "Underwriting." The trading price of our
common stock is likely to be highly volatile in response to a number of
factors, such as:

. actual or anticipated variations in our quarterly results of operations;

. the addition or loss of affiliates;

. changes in the market valuations of other Internet content and service
companies;

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

. changes in financial estimates or recommendations by securities
analysts; and

. additions or departures of key personnel.

In addition, broad market and industry factors may materially and adversely
affect the market price of our common stock, regardless of our operating
performance. The Nasdaq National Market, and the market for Internet and
technology companies in particular, has experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the
operating performance of these companies. Further, the trading prices of the
stocks of many Internet and technology companies are at or near historical
highs and reflect price-earnings ratios substantially above those in other
industries. If these trading prices and price earnings ratios are not sustained
or if our stock does not trade at the same levels as other Internet or
Internet-related company stock your investment will suffer.

Class action litigation resulting from volatility of the trading price of our
common stock would likely result in substantial costs and a diversion of
management's attention and resources.

Volatility in the trading price of our common stock could result in
securities class action litigation. Any litigation would likely result in
substantial costs and a diversion of management's attention and resources.

We may apply the proceeds of this offering to uses that do not increase our
operating results or the value of your investment.

We will have broad discretion in how we use the proceeds from this offering,
and we may spend these proceeds in ways that do not increase our operating
results or the value of your investment. You will not have the opportunity to
evaluate the economic, financial or other information on which we base our
decisions regarding how to use the proceeds from this offering. See "Use of
Proceeds" for more detailed information about how we intend to use the proceeds
of this offering.

Pending any of these uses, we plan to invest the proceeds of this offering in
short-term, investment-grade, interest-bearing securities. These investments
may not yield a favorable return.

16
<PAGE>

Should our stockholders sell a substantial number of shares of common stock in
the public market, the price of our common stock could fall.

Our current stockholders hold a substantial number of shares which they will
be able to sell in the public market in the near future. Sales of a substantial
number of shares after this offering could reduce the market price of our
common stock. Even the perception that our current stockholders might sell
shares of common stock could depress the trading price of the common stock.
These sales, and the possibility of these sales, could make it more difficult
for us to sell equity or equity-related securities in the future at a time and
price that we deem appropriate. See "Shares Available for Future Sale."

Holders of 25,559,895 shares of our common stock, which will represent
approximately 68% of our outstanding stock after completion of this offering,
have the right to require us to register their shares of common stock with the
Securities and Exchange Commission. In addition, after this offering, we intend
to register all shares of our common stock that we may issue under our stock
option plans and employee stock purchase plan. Once we register these shares,
they can be freely sold in the public market upon issuance, in some instances
subject to the lock-up agreements described above. If these holders cause a
large number of securities to be sold in the public market, the sales could
reduce the trading price of our common stock. These sales also could impede our
ability to raise needed capital.

Our officers and directors and their affiliates will exercise significant
control over us, which could disadvantage other stockholders.

Upon completion of this offering, our executive officers and directors and
their affiliates together will own approximately 63% of our outstanding common
stock. Christopher Anderson, the chairman of our board of directors, will own
approximately 41% of our outstanding common stock alone. As a result, these
stockholders will exercise significant control over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of control could
disadvantage other stockholders with interests different from those of our
officers, directors and their affiliates. For example our officers, directors
and their affiliates could delay or prevent someone from acquiring or merging
with us even if the transaction would benefit other stockholders. See
"Principal Stockholders."

Investors will experience immediate and substantial dilution in the book value
of their investment.

The initial public offering price of our common stock will be substantially
higher than the net tangible book value per share of our common stock
immediately after this offering. Therefore, if you purchase our common stock in
this offering, you will incur an immediate dilution of $8.45 in net tangible
book value per share from the price you paid, based on an assumed initial
public offering price of $11.00 per share. The exercise of outstanding options
and warrants may result in further dilution. See "Dilution."

17
<PAGE>

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are not historical
facts but rather are based on current expectations, estimates and projections
about our industry, our beliefs and our assumptions. All statements, other than
statements of historical fact, included in this prospectus, regarding our
strategy, future operations, financial position, estimated revenue, projected
costs, prospects, plans and objectives of management are forward-looking
statements. Words such as "may," "will," "should," "anticipates," "projects,"
"predicts," "expects," "intends," "plans," "believes," "seeks" and "estimates,"
and variations of these words and similar expressions, are intended to identify
forward-looking statements, although not all forward-looking statements contain
these identifying words. These statements are only predictions and are subject
to risks, uncertainties and other factors, many of which are beyond our
control, are difficult to predict and could cause actual results to differ
materially from those expressed or forecasted in the forward-looking
statements. These risks and uncertainties include those described in "Risk
Factors" and elsewhere in this prospectus.

Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus. Although we believe that the expectations reflected in the forward-
looking statements are reasonable, we cannot guarantee future results, levels
of activity, performance or achievements. Except as required by law, we
undertake no obligation to update any forward-looking statement after the date
of this prospectus, whether as a result of new information, future events or
otherwise, or to conform these statements to actual results.

18
<PAGE>

USE OF PROCEEDS

The net proceeds to us from the sale of the shares of common stock in this
offering are estimated to be $62,637,500, after deducting the estimated
underwriting discount and estimated offering expenses payable by us. If the
underwriters' over-allotment option is exercised in full, we estimate that net
proceeds will be $72,228,125. We presently intend to use approximately 25% of
the net proceeds from this offering to advertise and promote our brands, 25% to
expand our sales and marketing workforce and 5% to repay any debt that may be
incurred under our credit facility. The balance of the net proceeds of this
offering will be used for working capital and general corporate purposes,
including network expansion and content development, relocation of our offices
and possible acquisitions of affiliates. Pending such uses, we will invest the
net proceeds of this offering in short-term, interest-bearing, investment-grade
securities.

We believe opportunities may exist to expand our business through
acquisitions of other businesses and technologies, and we may use a portion of
the proceeds for this purpose. We are not currently a party to any contracts or
letters of intent with respect to any acquisitions for which we will use the
net proceeds from this offering. We cannot assure you that any of our expansion
plans will be realized or, if realized, will prove profitable.

DIVIDEND POLICY

We have never declared or paid dividends on our capital stock and do not
anticipate declaring or paying cash dividends in the foreseeable future.
Payments of future dividends, if any, will be at the discretion of our board of
directors after taking into account various factors, including our financial
condition, operating results, current and anticipated cash needs and plans for
expansion.

19
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1999:

. on an actual basis;

. on a pro forma basis to reflect the automatic conversion of all
outstanding shares of preferred stock into common stock immediately
prior to the closing of this offering and the sale of 150,000 shares of
Series C preferred stock in January 2000 at $10.00 per share; and

. on a pro forma as adjusted basis to reflect our receipt of the estimated
net proceeds from the sale of 6,250,000 shares of common stock in this
offering at an assumed initial public offering price of $11.00 per share
after deducting the estimated underwriting discount and estimated
offering expenses payable by us.

<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except per
share data)
<S> <C> <C> <C>
Long-term obligations, less current portion.... $ 2,036 $ 2,036 $ 2,036
-------- -------- --------
Stockholders' equity:
Convertible preferred stock, $0.001 par
value, actual: 20,000 shares authorized,
18,066 shares outstanding; pro forma and pro
forma as adjusted: 5,000 shares authorized,
no shares outstanding....................... 18 -- --
Common stock, $0.001 par value, actual:
37,500 shares authorized, 5,586 shares
outstanding; pro forma: 100,000 shares
authorized, 31,145 shares outstanding; pro
forma as adjusted: 100,000 shares
authorized, 37,395 shares outstanding....... 6 31 37
Additional paid-in capital................... 88,662 90,155 152,787
Notes receivable from stockholders........... (1,301) (1,301) (1,301)
Deferred stock compensation.................. (10,868) (10,868) (10,868)
Prepaid marketing and distribution rights.... (2,095) (2,095) (2,095)
Accumulated deficit.......................... (39,761) (39,761) (39,761)
-------- -------- --------
Total stockholders' equity................. 34,661 36,161 98,799
-------- -------- --------
Total capitalization....................... $ 36,697 $ 38,197 $100,835
======== ======== ========
</TABLE>

The common stock information in the table above excludes the following
shares:

. 2,358,368 shares issuable upon exercise of outstanding options at a
weighted-average exercise price of $2.02 per share as of December 31,
1999;

. 322,688 shares issuable upon exercise and conversion of outstanding
warrants at a weighted-average exercise price of $7.84 per share as of
December 31, 1999; and

. 7,894,369 shares available for future issuance under our stock plans,
including 5,500,000 shares of common stock available for future issuance
under our 2000 Equity Incentive Plan and 2000 Employee Stock Purchase
Plan, each adopted in February 2000, as of December 31, 1999.

Please read this capitalization table together with the sections of this
prospectus entitled "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
with the consolidated financial statements and related notes beginning on page
F-1.

20
<PAGE>

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the initial public offering price per share of
our common stock and the pro forma as adjusted net tangible book value per
share of our common stock immediately after completion of this offering.

Investors participating in this offering will incur immediate, substantial
dilution. Our pro forma net tangible book value as of December 31, 1999 was
$32.8 million or $1.05 per share of common stock. Pro forma net tangible book
value per share represents total tangible assets less total liabilities,
divided by the total number of shares of common stock outstanding as of
December 31, 1999 after giving effect to the conversion of all outstanding
shares of preferred stock into 25,409,895 shares of common stock and the sale
of 150,000 shares of Series C preferred stock in January 2000 at $10 per share.
After giving effect to the issuance and sale of 6,250,000 shares of common
stock in this offering at an assumed initial public offering price of
$11.00 per share and after deducting the estimated underwriting discount and
estimated offering expenses payable by us, our pro forma as adjusted net
tangible book value as of December 31, 1999 would have been $95.4 million, or
$2.55 per share of common stock. This represents an immediate increase in pro
forma net tangible book value of $1.50 per share to existing stockholders and
an immediate dilution of $8.45 per share to new investors. The following table
illustrates this dilution on a per share basis:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $11.00
Pro forma net tangible book value per share as of December 31,
1999.......................................................... $1.05
Increase per share attributable to this offering............... 1.50
-----
Pro forma as adjusted net tangible book value per share after
this offering................................................... 2.55
------
Dilution per share to new investors.............................. $ 8.45
======
</TABLE>

The following table summarizes on a pro forma as adjusted basis, as of
December 31, 1999, after giving effect to the offering at an assumed initial
public offering price of $11.00 per share and the sale of 150,000 shares of
Series C preferred stock in January 2000 at $10 per share, the difference
between the existing stockholders and the purchasers of shares of common stock
in this offering with respect to the number of shares of common stock purchased
from us, the total consideration paid and the average price paid per share:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ -------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 31,145,442 83.3% $ 71,148,000 50.9% $ 2.28
New investors ................ 6,250,000 16.7 68,750,000 49.1 11.00
---------- ----- ------------ -----
Total....................... 37,395,442 100.0% $139,898,000 100.0%
========== ===== ============ =====
</TABLE>

In the preceding tables, the shares of common stock outstanding exclude:

. 2,358,368 shares issuable upon exercise of outstanding options at a
weighted-average exercise price of $2.02 per share as of December 31,
1999;

. 322,688 shares issuable upon exercise of outstanding warrants for
preferred stock at a weighted-average exercise price of $7.84 per share
as of December 31, 1999 and conversion of the preferred stock into
common stock; and

21
<PAGE>

If the outstanding options were to be exercised in full for cash, the pro
forma net tangible book value per share after the offering would be $2.52, the
increase per share attributable to new investors would be $1.40, and the
dilution per share to new investors would be $8.48. See "Capitalization,"
"Management--Employee Benefit Plans," "Description of Capital Stock" and
Notes 7 and 10 of our Notes to Consolidated Financial Statements.

22
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
related notes included elsewhere in this prospectus. The consolidated statement
of operations data set forth below for the three years in the period ended
December 31, 1999 and the balance sheet data as of December 31, 1998 and 1999
have been derived from our audited financial statements and those of our
predecessor division of Imagine Media, Inc. included elsewhere in this
prospectus, which have been audited by Ernst & Young LLP, independent auditors.
The consolidated balance sheet data as of December 31, 1997 has been derived
from audited financial statements of our predecessor division not included in
this prospectus. The historical results are not necessarily indicative of
results to be expected for any future period.

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
(in thousands, except
per share data)
<S> <C> <C> <C>
Consolidated Statements of Operations Data:
Revenue........................................... $ 927 $ 3,256 $ 6,674
Cost of revenue................................... 171 1,322 4,316
------- ------- --------
Gross margin..................................... 756 1,934 2,358
Operating expenses:
Production and content........................... 628 1,599 6,610
Engineering and development...................... 65 329 5,084
Sales and marketing.............................. 836 2,592 20,393
General and administrative....................... 506 1,074 3,486
Stock-based compensation......................... -- -- 1,521
Amortization of goodwill and intangible assets... -- -- 471
------- ------- --------
Total operating expenses...................... 2,035 5,594 37,565
------- ------- --------
Loss from operations.............................. (1,279) (3,660) (35,207)
Interest and other income, net.................... -- -- 385
------- ------- --------
Net loss.......................................... $(1,279) $(3,660) $(34,822)
======= ======= ========
Basic and diluted net loss per share.............. $(186.69)
========
Shares used in per share calculation.............. 187
========
Pro forma basic and diluted net loss per share
(unaudited)...................................... $ (1.93)
========
Shares used in pro forma per share calculation
(unaudited)...................................... 18,022
========
<CAPTION>
December 31,
--------------------------
1997 1998 1999
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
investments...................................... $ -- $ -- $ 33,489
Working capital................................... 474 669 28,263
Total assets...................................... 763 1,161 46,718
Long-term debt, less current portion.............. -- -- 2,036
Stockholders' / division equity................... 502 762 34,661
</TABLE>

See Note 1 of our Notes to Consolidated Financial Statements for a
description of the method that we used to compute our basic and diluted net
loss per share.

23
<PAGE>

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

The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our consolidated financial statements and related notes
appearing elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
Actual results may differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including, but not limited
to, those under "Risk Factors" and elsewhere in this prospectus.

Overview

From our inception in January 1997 through December 1998, we operated as an
independent division of Imagine Media, Inc. During this period, we focused our
operating activities primarily on the creation of our IGN, ChickClick and
PowerStudents networks, the development of relationships with affiliates to
expand our content and community offerings and the generation of revenue from
advertising sales. Separate financial statements were maintained for the period
prior to our incorporation as a separate entity in January 1999.

In February 1999, we raised $3.3 million of initial capital, part of which
was paid by a promissory note for $2.0 million, which has been paid in full.
Imagine Media contributed the IGN, ChickClick and PowerStudents assets and
related intellectual property to us, and we hired approximately 40 Imagine
Media employees. During the summer and early fall of 1999, we raised
approximately $30 million of additional capital (including equipment financing
of $2.0 million) and began an aggressive expansion program, adding new
employees to develop additional content and web sites, to recruit more third-
party web sites into our networks and to expand our sales and marketing staff.
In December 1999, we raised $33.8 million of additional capital to continue
financing our expansion.

In addition to the creation of our own web site content, our relationships
with our affiliates are an important part of our business model. By adding new
affiliates to our networks, we are able to gain new content and to increase the
consolidated page views of our networks rapidly. We typically enter into
agreements with affiliates for periods of between six months and five years
under which we offer affiliates revenue opportunities and a package of
integrated marketing services and support in exchange for the integration of
their site into our network and the use of their site for advertising,
promotions and sponsorships. Typically, we pay affiliates a portion of the
revenue generated from advertising, promotions and sponsorships run on their
pages. During 1999, we acquired the assets of several affiliates. We anticipate
that we may acquire additional affiliates and selected assets of affiliates in
the future. See Note 5 of our Notes to Consolidated Financial Statements.

Our operating activities to date have been focused on developing the quality
of our content and services; expanding our audience and the usage of our
services; establishing relationships with our advertisers, users and
affiliates; building sales momentum and marketing our network and Snowball
brands; developing our computer software and hardware infrastructure;
recruiting personnel; and raising capital.

To date, we have derived revenue principally from short-term contracts for
banner advertisements, buttons and textlinks. Under these contracts, we
guarantee advertisers a minimum number of "impressions," or that a minimum
number of users will view their advertisements, for which we receive a fixed
fee. Advertising revenue is recognized at the lesser of the ratio of
impressions delivered over total guaranteed impressions or the straight-line
basis over the term of the contract, provided that we do not have any
significant remaining obligations and collection of the resulting receivable is
probable. To the extent that minimum guaranteed impression levels or other

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obligations are not met, we defer recognition of the corresponding revenue
until guaranteed levels are achieved.

Revenue also includes fees from sponsorship, slotting and other marketing
programs under contracts in which we commit to provide customers with
promotional opportunities in addition to traditional banner advertising. These
agreements typically provide for the delivery of advertising impressions on our
web sites, exclusive placement on our networks, special content and promotional
offers, the design and development of customized sites to enhance the
promotional objectives of the advertiser and a fixed fee plus incremental
payments for traffic driven to the advertiser's site. The portion of this
revenue related to the delivery of impressions is recognized in the period in
which the advertisement is displayed, provided that no significant obligations
remain and collection of the resulting receivable is probable, at the lesser of
the ratio of impressions delivered over total guaranteed impressions or the
straight-line basis over the term of the contract. The portion of any up-front
nonrefundable fee specified in the contract related to the up-front design work
is also recognized at the lesser of the ratio of impressions delivered over
total guaranteed impressions or the straight-line basis over the term of the
contract. We anticipate that revenue from sponsorship, slotting and other
marketing programs will represent an increasing percentage of our total revenue
in the future.

In December 1999, we introduced an online store through which we sell
carefully selected products that are pertinent to the content contained on web
sites within our ChickClick network. We recognize revenue from the sale of
these products when a product is delivered.

Revenue has increased each year since our inception, although we have never
been profitable. We cannot assure you that our revenue will continue to grow or
that we will ever achieve or maintain profitability. As of December 31, 1999,
we had an accumulated deficit of $39.8 million. We anticipate that we will
incur additional operating losses at least through the fourth quarter of 2000.

Results of Operations

Revenue

Our revenue of $6.7 million for the year ended December 31, 1999 increased
over revenue of $3.3 million recorded for the year ended December 31, 1998 and
revenue of $0.9 million recorded for the year ended December 31, 1997. The
increases in revenue reflect increases in advertising sold, due to both the
expansion of our sales force and marketing efforts, as well as to increases in
our available inventory of internal and affiliated page views. One customer
accounted for over 10% of revenue in 1997. No customer accounted for over 10%
of revenue for 1998 or 1999. Snowball derives the significant majority of its
revenues from operations in the United States.

Cost of Revenue

Cost of revenue consists primarily of expenses related to hosting web sites,
the costs and license fees of content and community tools and the portion of
revenue owed to affiliates for advertisements placed on their web sites. These
costs can vary depending upon a variety of factors, primarily the mix of
advertisements and marketing programs placed on our web sites compared to those
placed on affiliate web sites. These costs can also vary from period to period
as we acquire an affiliate or selected sites from an affiliate or as we expand
the portion of our total sites that are represented by affiliates versus those
that we own and operate directly. For example, after we acquire an affiliate,
our cost of revenue will typically decrease because we no longer have to pay
that affiliate the portion of revenue that otherwise would have been owed to
the affiliate for advertisements placed on its site.

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Cost of revenue of $4.3 million for the year ended December 31, 1999
increased over the cost of revenue of $1.3 million recorded for the year ended
December 31, 1998 and cost of revenue of $0.2 million recorded for the year
ended December 31, 1997. These increases reflect the increased hosting costs of
our expanding web site operations, expansion of our community tools, as well as
increases in costs owed to affiliates for increases in revenue from
advertisements placed on their web sites.

Operating Expenses

We categorize operating expenses into production and content, sales and
marketing, engineering and development, general and administrative, stock-based
compensation and amortization of intangible assets.

Production and Content. Production and content expenses consist primarily of
payroll and related expenses for editorial, artistic and production staff;
payments to freelance writers and artists; and telecommunications and computer-
related expenses for the creation of content for our web sites. These expenses
can vary from period to period as we acquire an affiliate or selected sites
from an affiliate or as we expand the portion of our total sites that are
represented by affiliates versus those that we own and operate directly. For
example, after we acquire an affiliate, our production and content expenses
typically increase because we incur costs for additional staff, services and
equipment associated with operating the new business.

Production and content expenses of $6.6 million for the year ended December
31, 1999 increased over expenses of $1.6 million recorded for the year ended
December 31, 1998 and expenses of $0.6 million recorded for the year ended
December 31, 1997. These increases reflect salary and related costs associated
with increases in personnel and freelance writers and artists for the creation
and production of additional content for our web sites.

Engineering and Development. Engineering and development expenses consist
primarily of personnel and related costs, consultant and outside contractor
costs, and software and hardware maintenance costs for our development and
programming efforts, including internal information services costs. To date,
all engineering and development expenses have been expensed as incurred.

Engineering and development expenses of $5.1 million for the year ended
December 31, 1999 increased over expenses of $0.3 million recorded for the year
ended December 31, 1998 and expenses of $65,000 recorded for the year ended
December 31, 1997. These increases resulted primarily from increases in salary
and related costs, consultant fees and related costs and recruiting fees
associated with expanding our development and programming efforts.

Sales and Marketing. Sales and marketing expenses consist primarily of
personnel and related costs for our direct sales force, affiliate development
group and marketing staff. In addition, these expenses include the costs of
marketing programs such as advertisements, trade shows, promotional activities
and media events.

Sales and marketing expenses of $20.4 million for the year ended December 31,
1999 increased over expenses of $2.6 million recorded for the year ended
December 31, 1998 and expenses of $0.8 million recorded for the year ended
December 31, 1997. These increases reflect increases in salary and related
costs for expansion of our sales, affiliate development and marketing
personnel, as well as increases in our advertising, marketing and branding
expenses.

General and Administrative. General and administrative expenses consist
primarily of personnel and related costs for corporate functions including
accounting and finance, human resources, facilities and legal.

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General and administrative expenses of $3.5 million for the year ended
December 31, 1999 increased over expenses of $1.1 million recorded for the year
ended December 31, 1998 and expenses of $0.5 million recorded for the year
ended December 31, 1997. These increases resulted primarily from increases in
salary and related costs associated with expansion of our accounting and
finance, human resources and other administrative efforts, as well as from
increased use of outside consulting services.

Stock-based Compensation. Stock-based compensation represents the aggregate
differences, at the dates of grant, between the respective exercise prices of
stock options and issuance prices of common and preferred stock and the deemed
fair values of the underlying stock. Stock-based compensation is amortized
using the graded amortization method over the vesting period of the related
options, which is generally four years. Through December 31, 1999, we recorded
stock-based compensation of $1.5 million. This amount relates to the following
cost and expense categories (in thousands): cost of revenue $7, production and
content $407, engineering and development $263, sales and marketing $777, and
general and administrative $67. The total unamortized deferred stock-based
compensation recorded through December 31, 1999 is $10.9 million. This amount
will be amortized as follows: $6.2 million for the year ending December 31,
2000; $2.9 million for the year ending December 31, 2001; $1.4 million for the
year ending December 31, 2002; and $0.4 million for the year ending
December 31, 2003. Subsequent terminations of stock and option holders may
reduce future stock-based compensation. We did not grant any shares of our
common stock prior to our incorporation in January 1999.

Amortization of Goodwill and Intangible Assets. Amortization of goodwill and
intangible assets represents the non-cash charges for the expensing, over the
anticipated useful life, of intangible assets and goodwill.

Amortization of goodwill and intangible assets was $0.5 million for the year
ended December 31, 1999. $1.8 million of goodwill and intangible assets arose
from the acquisition of Extreme Interactive Media and $1.7 million arose from
the acquisition of Ameritrack and various web site assets that we purchased
during 1999. See Note 5 of our Notes to Consolidated Financial Statements. As
of December 31, 1999, goodwill and intangible assets of $3.4 million remained
to be amortized. These assets are being amortized over a two- or three-year
life with amortization expense of approximately $0.6 million per quarter
through the third quarter of 2001 and $0.3 million per quarter thereafter
through the fourth quarter of 2002.

Interest and Other Income, Net

Interest and other income, net, of $0.4 million for the year ended December
31, 1999 consisted primarily of interest received from the proceeds of equity
financings completed during the year.

Provision for Income Taxes

No provision for federal and state income taxes was recorded through December
31, 1999 as we incurred net operating losses from inception through that date.
As of December 31, 1999, we had approximately $31.8 million of federal net
operating loss carry forwards which expire on various dates through 2019. Due
to the uncertainty regarding the ultimate use of the net operating loss carry
forwards, we have not recorded any benefit for losses and a valuation allowance
has been recorded for the entire amount of the net deferred tax asset. In
addition, certain future changes in our share ownership, as defined in the Tax
Reform Act of 1986, may further restrict our ability to use our net operating
loss carry forwards.

The net losses incurred for the years ended December 31, 1997 and 1998 are
attributable to our operations as a division of Imagine Media and were included
in the income tax returns filed by Imagine Media. Because the Company will not
receive any benefit for its historical

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operating losses incurred through December 31, 1998, no income tax benefit has
been reflected for those periods.

Liquidity and Capital Resources

During 1997 and 1998, we financed our operations through contributions from
Imagine Media. Since our incorporation in January 1999, we have financed our
operations primarily through private placements of preferred stock and
borrowings under equipment lease lines and a credit facility. Cash, cash
equivalents and short-term investments were $33.5 million at December 31, 1999.

We raised $65.2 million in equity financing during 1999. During that period,
we used $26.9 million in operating activities, and $5.6 million in acquiring
property and equipment.

In April and October 1999, we entered into lease lines of credit for $5.0
million. These credit facilities have terms of three years and bear interest at
the rate of 7.5% per annum. In connection with these credit facilities, we
issued warrants to the lessors to purchase 31,595 shares of our common stock at
$3.165 per share and 21,097 shares of our common stock at $7.11 per share.
These credit facilities do not include any financial covenants.

In November 1999, we entered into a term loan agreement for up to an
aggregate of $15.2 million. In connection with this loan agreement, we issued
promissory notes, which bear interest at the rate of 11.0% per annum, and
warrants to purchase 270,000 shares of our common stock at an exercise price of
$8.44 per share. In December 1999, $12.0 million of the loan was repaid and the
note holders cancelled $3.0 million of indebtedness under the notes in exchange
for shares of our Series C preferred stock at $10.00 per share. Any outstanding
balance under the notes will become due upon consummation of this offering. The
note holders maintain a first position lien on all of our assets, excluding
fixed assets. The loan agreement does not include any financial covenants.

During 1999, we entered into several leases for our San Francisco
headquarters and our sales offices, with terms ranging from month-to-month to
three years. In connection with these short-term leases, we will make payments
of approximately $350,000 in the year ending December 31, 2000. In November
1999, we entered into a lease for our new executive offices in Brisbane,
California, which expires in 2012. In connection with the lease, we will make
payments of $1.8 million in 2000, $4.4 million per year through 2004 and a
total of $29.2 million thereafter until the expiration of the lease. In
connection with this lease, we obtained a letter of credit for $4.4 million as
a deposit for the facilities. See Note 9 of our Notes to Consolidated Financial
Statements for more information on our lease commitments.

Our capital requirements depend on numerous factors, including market
acceptance of our services, the resources we allocate to developing our
networks, our marketing and selling capabilities and our brand. We have
experienced substantial increases in our expenditures since our inception
consistent with the growth in our operations and personnel, and we anticipate
that our expenditures will continue to increase significantly for the
foreseeable future. A significant percentage of the capital raised in this
offering will be expensed over the next two years to advertise and promote our
brands and to expand our sales and marketing workforce. We estimate that
approximately 40% to 50% of the proceeds of this offering will be expensed
during the current fiscal year.

We will continue to evaluate possible acquisitions of, or investments in,
complementary businesses, technologies, services or products. We believe that
our available cash, cash equivalents and short-term investments and cash flows
from operations, combined with the net proceeds from this offering, will be
sufficient to meet our anticipated needs for working capital and capital
expenditures for at least the next 12 months. We may need to raise additional
funds, however, to fund expansion, including significant increases in personnel
and office facilities, to develop new or

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enhance existing services or products, to respond to competitive pressures or
to acquire or invest in complementary businesses, technologies, services or
products. In addition, to meet our long term liquidity needs, we may need to
raise additional funds, establish additional credit facilities or seek other
financing arrangements. Additional funding may not be available on favorable
terms, on a timely basis or at all.

Year 2000

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer
programs or hardware that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. Prior to January 1,
2000, many people were concerned that this could result in system failures or
miscalculations, causing disruptions of operations for any company using such
computer programs or hardware, including, among other things, a temporary
inability to process transactions, send invoices or engage in normal business
activities. Most reports to date indicate that computer systems are functioning
normally and that compliance and remediation work accomplished before the end
of 1999 was effective to prevent any problems. Computer experts have warned,
however, that there still may be residual consequences. We cannot assure you
that Year 2000 problems will not disrupt our service and thereby result in a
decrease in revenue, an increase in allocation of resources to address Year
2000 problems or an increase in litigation costs.

We designed our internal systems as well as our software, hardware and
network architecture to be Year 2000 compliant, and we believe, based on our
initial reports, that these systems are Year 2000 compliant. We have not
incurred any significant expenses, and we do not anticipate that the total
costs associated with Year 2000 remediation efforts, including both expenses
incurred and any to be incurred in the future, will be material. Furthermore,
we have not experienced any significant problems to date relating to the Year
2000 compliance of our major suppliers. It is impossible to determine with
complete certainty, however, that all Year 2000 problems that may affect us
have been identified or corrected. The number of devices that could be affected
and the interactions among these devices are simply too numerous. In addition,
no one can accurately predict how many Year 2000 problem-related failures will
occur or the severity, duration or financial consequences of these perhaps
inevitable failures. Should these failures occur, we might experience, among
other difficulties, operational inconveniences and inefficiencies that may
divert management's time and attention from ordinary business activities. Based
on our initial assessment of our Year 2000 readiness, we do not anticipate
being required to implement any material aspects of a contingency plan to
address Year 2000 readiness of our critical operations.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivatives and Hedging
Activities," or SFAS 133, as amended by SFAS 137, which establishes accounting
and reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. Because we
do not currently hold any derivative instruments and do not currently engage in
hedging activities, we expect that the adoption of SFAS 133, as amended, will
not have a material effect on our financial position or results of operations.
We will be required to implement SFAS 133, as amended, for fiscal year 2001.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, or SAB 101. SAB 101 summarizes certain areas of
the Staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. We believe that our current
revenue recognition principles comply with SAB 101.

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Disclosures about Market Risk

Our exposure to market risk is limited to interest income sensitivity, which
is affected by changes in the general level of interest rates in the United
States, particularly since the majority of our investments are in short-term
debt securities issued by corporations or divisions of the United States
government. We place our investments with high quality issuers and limit the
amount of credit exposure to any one issuer. Due to the nature of our short-
term investments, we believe that we are not subject to any material market
risk exposure.

We do not have any foreign currency hedging or other derivative financial
instruments as of December 31, 1999.

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BUSINESS

Snowball is an Internet media company that operates a network of destination
web sites providing content, community and commerce to Generation i. We serve
this group by providing its members with current content, relevant services
such as email and instant messaging, a forum for interacting with one another
and carefully selected merchandise. In addition to creating original content,
we continuously work to expand the breadth and depth of our content offerings
by selectively adding affiliated web sites to our network. We had more than 150
affiliated web sites and over 100 partner college destinations as of December
31, 1999. This network and affiliate business model allows us to build our
traffic and brand rapidly and efficiently. To attract and retain affiliates, we
provide an integrated package of sales and marketing services, technical
support and audience development opportunities.

We organize both our own web sites and affiliated web sites around networks
that target different segments of the Generation i audience. Currently, our
networks are:

. ChickClick, which provides content, community and commerce features to
Generation i women;

. IGN, which provides information and entertainment to Generation i men;

. PowerStudents, which provides students at all levels with information
concerning college admissions, jobs and careers; and

. InsideGuide, which offers student-generated information concerning
individual colleges.

By offering targeted access to a large and growing audience with attractive
demographic characteristics, we are able to generate marketing and advertising
revenue in a variety of forms. These include promotions and sponsorships with
negotiated financial terms, slotting and lead-generation fees from merchants
that seek preferential placement on our sites and in our online store, and
sales of various forms of banner, button and textlink advertising, both
traditional and contextual. We also generate merchandising revenue from the
sale of carefully selected items within our online store, ChickShops.

Based upon the number of unique visitors who visited our web sites, Media
Metrix reported that we were the 29th highest-trafficked property on the
Internet in January 2000. Moreover, Media Metrix reported that these visitors
spent more time per day on our networks during that period than on all but 20
other properties among the top 50 properties.

Industry Background

The Internet has emerged as an important new medium for communication and
commerce, providing companies with an effective channel for marketing and
selling their products and services. International Data Corporation, or IDC,
estimates that consumer e-commerce in the United States will grow from $12.4
billion in 1998 to $75.0 billion in 2003, representing a compound annual growth
rate of 43%. Because the Internet enables companies to attract specific
demographic groups to their web sites by offering focused content, services and
products, it can be an effective medium for advertisers seeking targeted access
to these groups. Furthermore, as customers interact with a company's web site,
the company can gather valuable information on consumer preferences and buying
patterns, thereby allowing advertisers and marketers to segment their audience
further and increase the effectiveness of their spending. Jupiter
Communications LLC estimates that spending on Internet advertising in the
United States will grow from $2.1 billion in 1998 to $11.5 billion in 2003.

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Consistent with this growth in Internet commerce and advertising, Internet
content is growing at a rapid pace. A primary impetus behind the proliferation
of content and the growing number of web sites has been the increasing use of
the Internet for creating, sharing and searching for relevant information. IDC
estimates that the number of web sites will grow from 925 million in 1998 to
13.1 billion in 2003. Online communities are also growing rapidly as new user
groups migrate from traditional media onto the Internet. IDC estimates that the
number of Internet users in the United States will grow from approximately 63
million in 1998 to approximately 177 million by the end of 2003.

While older online users are generally accustomed to traditional media and
adapt to the Internet gradually, many individuals within the Generation i age
group have grown up using the Internet and view it as a primary source for
information and medium for communication. According to the United States Census
Bureau, individuals in this age group represented approximately 25% of the U.S.
population in 1999. We believe that advertisers target this age group because
its members have a large aggregate mean income and because advertisers
anticipate a high lifetime return on their advertising dollars.

Generation i is a large Internet audience that we believe desires community,
entertainment and content focused on their particular needs. Because this
generation is accustomed to numerous cable television channels and a wealth of
entertainment choices, we believe its members expect a wide range of
specialized content that is available on demand. In the context of the
Internet, this translates into demand for web sites containing extensive
information on a variety of specialized subjects. Major web sites offering
standard content and services often fail to reach Generation i because these
sites generally:

. are designed to appeal to a broad audience and therefore do not provide
an environment focused on the specific programming and service needs and
buying habits of Generation i;

. do not comprehensively address issues important to Generation i, such as
peer, parental and school-related pressures, or issues revolving around
friendship, sexuality and relationships;

. do not provide a targeted forum for members of Generation i to express
and share their views with one another; and

. do not provide the kind of interactivity and services that we believe
this group seeks, such as communication with their peers through instant
messaging, chat and email, as well as news, online games and
personalized home pages.

While the number of web sites that serve Generation i with targeted content
and community features continues to grow, these sites tend to be small,
independent sites in the early stages of commercial development, and the
individuals who operate these sites tend to have limited financial resources
and managerial experience. As a result, it is difficult for any one of these
sites to attract consistent traffic and premier advertisers. Furthermore,
because this group of web sites is large and fragmented, advertisers generally
have been unable to reach Generation i effectively through these individual
sites. We believe that companies must advertise and promote their products and
services in the context of demographically appropriate content rather than
through traditional broad-based advertising to market more effectively to
Generation i. Accordingly, we believe there is a need for a recognized online
destination consisting of an integrated network of content, community and
commerce targeting Generation i.

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The Snowball Solution

Snowball is a network of destination web sites providing fresh, up-to-date
content created by, for and about Generation i. In addition to offering
creative and current content, each of our networks provides an interactive
community for users who share similar interests and passions, such as video
games, college life or shopping. We believe this integrated package of content,
community and commerce has helped to make us one of the most popular networks
on the Internet. As a result, we believe we provide a compelling opportunity to
our affiliates and potential affiliates as well as a large, targeted audience
for advertisers.

We focus on Generation i

We provide content, community and commerce features focused on Generation i.
To address the multiple audiences and tastes of Generation i, we have developed
a network of company-owned web sites complemented by linked, third-party
affiliate web sites that provide additional content. We have organized these
sites within the overall Snowball network around individual networks targeting
specific groups within Generation i: ChickClick provides content, community and
commerce for Generation i women; IGN provides information and entertainment for
Generation i men; InsideGuide develops individual web sites and guides for
specific colleges; and PowerStudents provides high school, college and graduate
students with information on careers, college admissions and jobs. The
affiliate sites associated with these networks contribute to the amount of
information available to users on our networks and also extend the reach of the
networks to a broader audience. The content created by our editorial staff, our
affiliates and the network users is edited and organized into networks to
create a strong and consistent voice directed at Generation i.

We also seek to promote the community participation of Generation i by
encouraging members of this group to communicate with one another and with our
network editors through message boards, chat sessions, instant messaging and
email. The interactive features of our networks are designed to further enhance
the online experience, to encourage frequent visits to our web sites and to
lengthen the time users spend on our networks. For example, users can create
personalized home pages that feature, among other things, targeted content,
news feeds, horoscopes and information about television, movies and the
weather. Users also have access to special features such as calendars, diaries,
classifieds and trading services. Moreover, we have our own e-commerce
boutique, ChickShops, which is accessible from many pages on the ChickClick
network and offers hip fashion merchandise for young women. Collectively, the
content, community and commerce features of our networks are designed to
satisfy the many and varied interests of our multiple Generation i audiences.

We provide significant benefits to advertisers

Our network model of destination web sites attracts a large and segmented
audience by providing extensive information on a variety of narrowly focused
subjects. This allows advertisers and marketers to gain wide access to the
Generation i audience as well as to target narrow segments of this audience.
Additionally, the increased segmentation allows us to provide contextually
linked advertising and commerce opportunities to a variety of merchants that
want to advertise and gain preferential placement on our web sites and within
our online stores. For example, we provide EBWorld.com, a leading online game
store, with an integrated sponsorship package that includes preferential
placement on our IGN network, promotion to users within our game newsletters,
email marketing and targeted banner advertisements. In addition, we plan to
open stores across all of our networks that will offer products to our users
while providing a storefront that will attract promotional opportunities for
other merchants or advertisers targeting the hard to reach demographic sub-
groups of Generation i.

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Our model benefits us and our affiliates

Our network and affiliate business model allows us to benefit from the fresh
content and traffic of affiliated sites without the up-front costs and risks
associated with developing content for the rapidly changing tastes of
Generation i. Many members of this generation are prolific producers of content
and have a dynamic interest in sharing with the community. As a result, many of
our users create content web sites and contact us to become part of our
network. Our users also generate a stream of affiliation opportunities by
referring us to other popular web sites. A selective screening process allows
our editorial staff to identify affiliate content partners that appeal to the
changing tastes of Generation i. This enables us to add content and traffic to
our network while keeping the content fresh and, we believe, compatible with
the evolving tastes of Generation i. To attract and retain identified
affiliates, we offer them a package of integrated marketing services and
support. Affiliates who join our networks often experience immediate growth in
users and advertising revenue. Our network development strategy reinforces each
network's brand identity, attracts users to our owned web sites, refers these
users to affiliate sites and leads to viral growth as users of the network
share their interests and opinions with others.

The Snowball Strategy

Our goal is to be the preeminent network of content, community and commerce
sites on the Internet by, for and about Generation i, by:

. Building and developing our existing networks, while selectively adding
new networks. We will continue to develop our four existing networks by
increasing the depth of content, services and product offerings arranged
around the appropriate focus of each network. In addition, we intend to
add new networks to appeal specifically to additional segments of
Generation i. We intend to build each network's brand through online,
offline and affiliate marketing programs with the goal of making each
network the dominant destination within its targeted content segment. By
expanding our existing networks and increasing the number of networks
within the Snowball family, we intend to broaden our appeal to the
members of Generation i and to be the leading destination on the
Internet for this demographic group.

. Continuing to leverage our network and affiliate business model to
achieve cost-effective and viral growth of content and traffic. We will
continue proactively to identify sites that meet our criteria for target
demographics, quality of content and strategic fit with existing
networks. By expanding our networks, we intend to keep our existing
users engaged with extensive, up-to-date content while quickly and
efficiently attracting new users. In cases where affiliate web sites do
not exist around relevant content areas, we will selectively offer our
services to help incubate web sites that provide the appropriate
content. We believe our affiliate-driven network growth model and our
reliance on word-of-mouth publicity within our targeted demographic
group will allow us to build our traffic and brand rapidly and
efficiently.

. Offering a range of value-added services to attract, retain and develop
affiliated web sites. We intend to continue to attract and retain select
affiliates by identifying small and developing web sites early and by
offering them a mutually beneficial agreement to increase their
marketing capabilities and to expand their reach. To maximize affiliate
retention, we have developed an integrated affiliate loyalty program
that includes education and community tools and other support services.
Additionally, we will continue to solicit and respond to affiliate and
user feedback to refine the services we provide to affiliates. These
services will assist us in incubating new web sites and networks to
supplement our content and service offerings.

34
<PAGE>

. Promoting affinity and community across all networks and affiliates to
increase the amount of time that users spend on our networks. We intend
to continue to develop the community tools and services we provide to
increase the time that users spend on our sites, as well as increase the
frequency of their visits. We will continue to incorporate services into
our networks that appeal to Generation i, such as free email, instant
messaging, chat rooms, bulletin boards, personalized home pages and
polling, to keep them actively engaged in both content and
communication.

. Being the premier partner for marketing, advertising and commerce
directed at Generation i. By creating a set of branded networks that
focus on a variety of discrete subjects, and by remaining a premier
online destination for Generation i, we intend to offer potential
advertisers and vendors valuable opportunities to reach targeted
segments of Generation i. By providing advertising banners, buttons,
textlinks, promotions and sponsorships of specific categories and
slotting opportunities, we can offer customized marketing programs for
companies wanting to address this market. Additionally, we will continue
to develop opportunities for merchants to sell selected merchandise
through our own online stores.

. Pursuing strategic alliances and acquisitions that increase content,
traffic and revenue opportunities. We intend to selectively develop
strategic alliances to incorporate relevant content on our networks, to
derive additional traffic from the resulting co-branding effects and to
drive new methods of revenue generation. For example, we have entered
into a strategic relationship with New Line Media that will provide us
with offline marketing promotions in their products. In selecting our
partners, we will strive to ensure the integrity of our own brand
identities with Generation i. Additionally, where strategically
appropriate, we intend to acquire selected web sites and affiliates that
complement our existing networks. For example, we recently acquired High
School Alumni, a former affiliate that provides various services to
alumni of registered high schools.

Networks

Snowball is currently comprised of the following four networks of web sites:

[LOGO OF CHICKCLICK]
ChickClick is a destination for forward-thinking young women
seeking community, commerce and "life tools." The ChickClick
network consists of three channels that offer progressive
features representing the interests of three groups within the
female Generation i demographic. MissClick targets teenage girls
between the ages of 13 and 17, EstroClick targets women between
the ages of 18 and 26, and MamaClick targets Generation i
mothers. ChickClick offers content on relevant subjects such as
relationships, entertainment, style, news, sports, work and travel.
ChickClick's community features include personalized homepages, Chickmail, chat
rooms, message boards and auctions. In addition, ChickClick recently launched
ChickShops, an e-commerce area that offers online shoppers a specialty boutique
experience.

Together with its affiliated websites, ChickClick had approximately 34
million consolidated page views in January 2000 and over 800,000 registered
users as of January 31, 2000. According to the U.S. Census Bureau, women
between the ages of 13 and 30 numbered 33.5 million in 1999. Media Metrix
estimates that 14.5 million women between the ages of 12 and 34 used the
Internet in January 2000.

35
<PAGE>

The following table provides a brief description of ChickClick's affiliates
as of December 31, 1999:

<TABLE>
<CAPTION>
Web Site URL Description
- --------------------------------------------------------
<C> <C> <S>
Beatboxbetty beatboxbetty.com show business
news and reviews
BoHos flypaperpress.com BoHos comic site
Bust bust.com voice of the new
girl
Cherrysucker cherrysucker.com user-submitted
fiction
Crafty Lady getcrafty.com making art from
everyday life
Disgruntled disgruntledhousewife.com modern living
Housewife and intersex
relationships
Fametracker fametracker.com celebrity
almanac
Fashion Icon fashion-icon.com fashion news
Girlie Style girliestlye.com pertinent
female-driven
content
Greasergrrls greasergrrls.com women motor
enthusiasts
Grrlgamer grrlgamer.com news and reviews
from a girl's
point of view
Hellfire hellfire.com progressive
creative writing
Hipmama hipmama.com content and
advice for hip
moms
Hissyfit hissyfit.com political and
social essays
Lookenpeepers gmetropolis.com creative and
funny
information
</TABLE>
<TABLE>
<CAPTION>
Web Site URL Description
--------------------------------------------------
<C> <C> <S>
Maxi maximag.com empowerment and
information
Mighty Big TV mightybigtv.com popular TV shows
MissGirl missgirl.com teen advice and
issues
Out of order annie.newdream.net political and
social essays
Pencilbox pencilboxmag.com resource for
college women
Pop!sicle lickpopsicle.com political,
social and
comical essays
Razzberry razzberry.com teen community
Riotgrrl riotgrrl.com irreverant sassy
content
Rockrgrl rockrgrl.com women musicians
Smile and smileandactnice.com progressive
Act Nice women's content
Spacegirl spacegirl.org societal
commentary
Squiffy Ether ethernaut.com/zine irreverent
Jag fiction
Swanky swanky.com progressive
online community
Teengrrl teengrrl.com alternative teen
community
Wench wench.com feminism,
politics and
culture
Wired Woman wiredwoman.com women and
technology
Womengamers womengamers.com gaming for the
educated woman
</TABLE>

[LOGO OF IGN.COM]
IGN is a network of web sites focusing on games and entertainment
for Generation i men. IGN provides current editorial coverage of
games, science fiction, movies and television. IGN targets three
distinct interest groups through the following channels: IGN
Games, IGN Sci-Fi and IGN for Men. IGN Games provides reviews and
previews of games for personal computers and other video games;
IGN Sci-Fi provides editorial content on science fiction, movies,
television, books and toys; and IGN for Men offers content focusing on the
lifestyles of young men. IGN offers numerous features and services to keep its
users engaged, including free email, instant messaging, contests and
promotions, weather, horoscopes and search capabilities. IGN also offers slots
within branded commerce areas to partners seeking to sell products and services
online.

Together with its affiliated web sites, IGN had more than 198 million
consolidated page views in January 2000 and approximately 400,000 registered
users as of January 31, 2000. In July 1999, we acquired a popular former
affiliate, The Vault, which had approximately nine million consolidated page
views in January 2000. According to Media Metrix, males between the ages of 12
and 34 accounted for approximately 25% of all Internet users in the United
States in January 2000. Media Metrix estimates that approximately 12% of all 12
to 34 year old males on the Internet and approximately 19% of all 12 to 17 year
old males on the Internet visited our IGN network in January 2000.

36
<PAGE>

The following table provides a brief description of IGN's affiliates as of
December 31, 1999:

<TABLE>
<CAPTION>
Web Site URL Description
- -----------------------------------------------------------
<C> <C> <S>
3Dportal 3dportal.com coverage of 3D
games
Allprowrestling.com allprowrestling.com independent
wrestling
Anime Links animelinks.com links to anime
sites
Anime News animenewsnetwork.com Anime news
Network
Arrgh arrgh.demon.co.uk early video
games
CheatElite cheat-elite.com multi-platform
cheats and codes
CheatersGuild cheaters-guild.com cheats and codes
ComicFan comicfanmag.com comic portal
Coming Attractions corona.bc.ca coming
attractions and
reviews of
movies
Coming Soon comingsoon.net movie trailers
Daily Dementia dailydementia.com interviews with
game industry
specialists
Daily Radar dailyradar.com entertainment
and games
Dark Horizons darkhorizons.com film and TV
coverage
DC Mania dcmania.com Sega Dreamcast
coverage
DC Swirl dcswirl.com Sega Dreamcast
news and reviews
Desktop Starships desktopstarships.com sci-fi desktop
downloads
DiabloII.net diabloii.net Information on
the Diablo game
DMG Ice dmgice.com Gameboy
information
Doctor Dreamcast doctordreamcast.com Sega Dreamcast
news and reviews
Drew's script-o-rama.com movie and TV
Script-O-Rama scripts
Dukeworld dukeworld.com information on
Duke Nukem
EAGB gameboy.s-one.net.sg/ Gameboy user
information
Echostation echostation.com Star Wars
e-reality e-reality.com network of top
game specific
sites
Evergreen milpool.com The Simpsons
Terrace
EX ex.org Anime and Manga
FGN Online fgnonline.com news on the game
industry
Fusion Gaming fusion-gaming.com gaming forums
Futurama nnyc.com Futurama
Archive (animated show)
GameFAQS gamefaqs.com answers to
questions about
video games
Gamers Depot gamersdepot.com game hardware
reviews
GameSages gamesages.com codes for games
Gaming Age gaming-age.com game industry
news
</TABLE>
<TABLE>
<CAPTION>
Web Site URL Description
- -----------------------------------------------------------
<C> <C> <S>
Halflife.net halflife.net information,
news and
previews on
Halflife
IndyJones.net indyjones.net coverage on new
Indiana Jones
game
JediKnight.Net jediknight.net Star Wars
related games
LucasGames lucasgames.com coverage of all
LucasArts games
MacGameNews macgamenews.com Macintosh games
Magic Box come.to/magicbox console and
Japanese games
MeccaWorld meccaworld.com PC games
MovieBloopers moviebloopers.com movie bloopers
Moviefan Online moviefanonline.com movie news and
reviews
MovieSounds moviesounds.com movie sounds
Mr. Cranky mrcranky.com honest movie
reviews
Mr. Hats mrhatshellhole.com South Park
Hellhole
MTGnews.com mtgnews.com Magic: The
Gathering
N64 Shooters n64shooters.com reviews of
Nintendo 64
shooting games
N64-Cheats n64-cheats.com Nintendo 64
cheats and codes
NextGen Online next-generation.com new video games
Nintendo nintendoexpress.com Nintendo systems
Express
Nintendojo nintendojo.com Nintendo 64 news
and reviews
NintendojoFR nintendojofr.com French coverage
of Nintendo 64
Nintendorks nintendorks.com Nintendo 64 news
and reviews
Oh! The Humanity ohthehumanity.com coverage of bad
movies
Only Toons onlytoons.com cartoon news and
reviews
PC Accelerator pcxl.com action,
adventure and
sports games for
PCs
PC Gamer Online pcgamer.com gaming
information
PC Gameworld pcgameworld.com free demos
Playstation 2 Unicom psx2unicom.com Playstation 2
news and
information
Playstation vidgames.com Playstation
Galleria news, previews
and strategies
Pokegym pokegym.thedojo.com Pokemon
information
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
Web Site URL Description
- ----------------------------------------------------
<C> <C> <S>
Pokemon411 pokemon411.com Pokemon
information
PokemonAdobe pokemonadobe.com everything
Pokemon
PSM psmonline.com unbiased
Playstation
coverage
PSX Nation psxnation.com Playstation
news, early
previews and
reviews
PSX2.com psx2.com Playstation 2
news
PSXNetwork psxnetwork.com Playstation
updates, news
and interviews
PSXtreme psxtreme.com Playstation
information
Psycomic psycomic.com comic book news
and information
RareNet rarenet.com coverage of rare
games
RivaZone rivazone.com 3D games and
hardware
Rogue Spear rsdatabase. comprehensive
Database gamenation.com Rogue Spear site
Scream-Trilogy scream-trilogy.com news and
information on
film trilogy
Segadojo segadojo.com Sega gaming
news, reviews,
cheats
SF Site analogsf.com printed sci-fi
site
SMG Fan smgfan.com Sarah Michelle
Gellar fan site
Spider-Man Hype spidermanhype.com news and
information on
upcoming
Spiderman
film(s)
Stay Tooned staytooned.com animated
entertainment
news
</TABLE>

<TABLE>
<CAPTION>
Web Site URL Description
- -----------------------------------------------------
<C> <C> <S>
Stomp Tokyo stomptokyo.com video reviews
Video Review
Stomped stomped.com gaming industry
information
Supercars supercars.net photos and
information
about powerful
cars
The Astounding bmonster.com B movies
B Monster
The Casual Otaku casualotaku.com Anime
The Digital Bits thedigitalbits.com DVD information
The Dojo thedojo.com Magic: The
Gathering
The Great RPG rpg-archive.com role playing
Archive game archive
The One Ring theonering.com J.R.R. Tolkien
The Turnbuckle theturnbuckle.com professional
wresting
TheForce.net jedicouncil.net Star Wars
Total RPG totalrpg.com role playing
game reviews
Total Video Games totalvideogames.com games
Yakfaces Realm yakface.com Star Wars
memorabilia
Zelda HQ zhq.com comprehensive
Zelda site
</TABLE>

PowerStudents provides students with targeted content, commerce
and community features through three channels: High School,
College and Jobs. PowerStudents provides editorial content on
academics, college admissions, entertainment and student life.
Community features and services include free email, instant
messaging, contests, weather, television listings, classifieds,
polls, forums, student diaries and expert Q&A.
[LOGO OF POWER STUDENTS.COM]

Together with its affiliated web sites, PowerStudents had approximately 42
million consolidated page views in January 2000 and approximately two million
registered users as of January 31, 2000. High School Alumni, one of our owned
sites within the PowerStudents network, accounted for approximately 30 million
consolidated page views in January 2000 and approximately 1.8 million
registered users as of the same date. According to eMarketer, 11.1 million
individuals in the United States between the ages of 13 and 17 currently use
the Internet. eMarketer also estimates that online spending by this group will
increase from $160 million in 1999 to $1.4 billion in 2002.

38
<PAGE>

The following table provides a brief description of PowerStudents' affiliates
as of December 31, 1999:

<TABLE>
<CAPTION>
Web Site URL Description
- -----------------------------------------------------------
<C> <C> <S>
4Tests.com 4tests.com practice exams
Back To College back2college.com resources for
reentry students
BrainLapse.com brainlapse.com games and movies
Bschool.com bschool.com business school
resources
CampusCareerCenter campuscareercenter.com information on
jobs
CampusTours campustours.com college campus
tours
CollegeGate.com collegegate.com editing for
admissions
essays
College Recruiter collegerecruiter.com jobs and
internships
CollegeTownUSA collegetownusa.com online college
community
CollegeView collegeview.com college
information and
virtual tours
CollegeXpress collegexpress.com information for
college bound
students
FastAid fastaid.com scholarships and
financial aid
Fishnet: jayi.com college guide
The College Guide
FreSch freschinfo.com scholarship
information
GoCollege gocollege.com information on
college,
scholarships and
tests
</TABLE>
<TABLE>
<CAPTION>
Web Site URL Description
- -----------------------------------------------------------
<C> <C> <S>
GradView gradview.com graduate school
resources
GreekCentral greekcentral.com fraternity and
sorority life
InternshipPrograms.com internshipprogram.com internships
Interview Feedback interviewfeedback.com interviews
The Job Resource thejobresource.com college career
center
MBAjob mbajob.com MBA job searches
MBA ZoNe mbazone.com MBA resources
Oilzine oilzine.com British humour
Planet Papers planetpapers.com essays and
creative writing
Quintessential quintcareers.com career and job
Careers hunting
RealCollegelife.com realcollegelife.com college life
RealWorld rwuniversity.com real world
University advice
Study 24/7 study24/7.com college
notetaking
SuperCollege supercollege.com information on
admissions and
financial aid
TestTutor testtutor.com standardized
test preparation
Versity versity.com college
notetaking
</TABLE>

[LOGO OF INSIDEGUIDE.COM]
InsideGuide is a national network of online college sites
created by students for students. InsideGuide offers an
insider's perspective on college life. Each site provides
students at a particular college with an independent forum for
expressing their opinions and sharing information relevant to
the community, such as classes, sports, activity groups and
entertainment. InsideGuide was launched in September 1999 and as
of December 31, 1999 offered guides centered around more than 100 individual
schools, including University of California at Berkeley, Harvard University,
Northwestern University and University of Pennsylvania.

Together with its affiliated web sites, InsideGuide had nearly nine million
consolidated page views in January 2000. According to Jupiter Communications,
as of January 1999, 10.6 million college students in the United States used the
Internet and online spending by this group will increase from $890 million in
1999 to $2.5 billion in 2002.

39
<PAGE>

Networks Under Development

We are continually expanding the content, community and commerce services
offered by our networks and evaluating opportunities for the development of new
networks to keep pace with the expanding interests of Generation i. For
example, our acquisition of High School Alumni in September 1999 will allow
each of our networks to offer its users a classmate finder tool. As of December
31, 1999, High School Alumni included over 20,000 high schools throughout the
United States. This site enables an alumnus of a registered high school to
register, update his or her information and search for an old classmate. This
database can then be used for personal communication as well as for organizing
and sponsoring group alumni activities such as reunions and fund-raising. High
School Alumni had approximately 22 million consolidated page views in January
2000 and over 1.8 million registered users, as of January 31, 2000. Due to its
strong following and potential, we are currently evaluating options to
establish this site as a separate network during the year 2000.

Affiliate Agreements

Our standard affiliate agreement provides for an initial term of two years
and renews at our option for three consecutive one-year terms. As of January 1,
2000, 52 of our affiliates were parties to affiliate agreements with an initial
term of one year, 98 were parties to agreements with an initial term of two
years, two were parties to agreements with an initial term of three years and
two were parties to agreements with an initial term of five years. The average
duration of our current affiliate agreements is 3.4 years and the average term
remaining on these agreements is 2.8 years.

We enter into affiliate agreements with new affiliates on a rolling basis.
Accordingly, our affiliate agreements do not generally terminate at or around
the same time. Approximately 20% of our affiliate agreements will expire within
the next twelve months.

Content

We believe that the large number of Generation i users who visit our networks
do so for the compelling content contained on the web sites that make up each
network. This content is derived from two sources: our in-house editorial staff
and our affiliates. As of December 31, 1999, our in-house editorial staff
consisted of 50 professional writers, and we had more than 150 affiliate
contributors. We view the development of new content as an interactive process
and encourage our users to offer suggestions for new subject areas. Once we
identify a new subject area, we typically hire an in-house editor to develop
content and to work with our affiliate development department to identify
potential affiliates.

Our affiliate model distinguishes us from many other Internet media
companies. This model allows us to recruit independent web sites to supplement
and broaden our in-house editorial content. Our affiliate agreements generally
require affiliates to display the logo of one or more of our networks and give
us the exclusive right to sell advertising on the affiliated site in exchange
for a percentage of the advertising revenue. In addition, our agreements
generally provide for joint development of e-commerce opportunities. We believe
that this model enhances our content, increases our audience reach, builds
advertising inventory and expands our distribution at a cost to us that is
lower than would be achievable through the development of in-house editorial
content alone.

We also believe that the affiliate model enables us to adapt quickly to
emerging Internet and media trends with reduced incremental costs. For example,
when Sega released its new Dreamcast game system in September 1999, we
recruited four Dreamcast-related web sites within one month. Because our
typical affiliate agreement requires us to pay affiliates only a portion of the
revenue that we earn from the affiliate's site, the new Dreamcast affiliates
expanded our editorial coverage of the

40
<PAGE>

Dreamcast subject area and added new inventory for advertising sales without
significantly increasing our expenses.

We invest in marketing and technical services to increase the value of
affiliate relationships. Our affiliate relations specialists work with our
affiliate content partners to promote their sites, build their traffic and
improve the technical performance of the sites.

Revenue Sources

Our business model is designed to provide for multiple revenue streams. Our
principal sources of revenue will be (1) advertising and sponsorships and (2)
e-commerce and merchandising. For the years ended December 31, 1997, 1998 and
1999, advertising and sponsorship revenue represented approximately 100% of our
revenue.

Advertising and sponsorships

Our strategy is focused in part on generating a majority of our advertising
revenue from sponsors and merchants seeking an integrated and cost-effective
means to reach Generation i on the Internet. Our sponsorship arrangements are
designed to achieve broad marketing objectives such as brand promotion, brand
awareness, product introductions and online research. To help sponsors achieve
these goals, we develop individually tailored sponsorship programs that may
include any combination of advertising banners, buttons, textlinks, promotions,
sponsorships of specific categories and direct merchandise slotting
opportunities. We also develop content to support the marketing initiatives of
advertisers. In addition, sponsors may communicate with their customers on our
message boards and through chats, and may gain insights into their customers'
preferences and buying habits through polls and special events. Sponsorships
allow us to cater to the specific goals of advertisers in the areas of
impressions, product research, market research, new product launches, list
development, product information, repositioning, new account openings, lead
generation and transactions. Our sponsorship agreements provide for revenue
independent from page views as the measure of value and generally have terms of
up to one year.

We also generate revenue by selling select placement of advertisements on our
web sites to merchants interested in targeting Generation i, such as
EBWorld.com, edu.com and Gloss.com. These arrangements provide merchants with
exclusive placement on our networks, exposure through banner advertising,
special content and promotional offers in exchange for which we collect a fixed
fee plus incremental payments for visitors forwarded to the advertiser's site.
In addition to helping merchants retain customers, these retailing
opportunities can be used to identify valuable purchasing trends, which in turn
can be used in future advertising and commerce and to develop additional
targeted content.

We derive a portion of our advertising revenue from banner advertisements,
buttons and textlinks that are displayed on pages throughout our networks. From
each of these, viewers can hyperlink directly to the advertiser's own web site,
thus providing the advertiser the opportunity to interact directly with an
interested customer. Under these contracts, we guarantee advertisers a minimum
number of impressions for which we receive a fixed fee.

During the year ended December 31, 1999, our five largest customers accounted
for 19% of our consolidated revenue. If we were to lose any one of these
customers, our revenue would decline.

E-commerce and merchandising

We have recently begun to generate e-commerce revenue by selling carefully
selected products. We intend to develop e-commerce stores across all of our
networks. In December 1999, we began merchandising directly to our users
through the launch of ChickShops within our ChickClick network.

41
<PAGE>

ChickShops offers more than 75 products, including clothes and accessories, and
was designed to offer online users the experience of shopping in a specialty
clothing boutique similar to those found in cities like New York or San
Francisco. Online orders are taken 24 hours a day, seven days per week and
products are shipped generally within 48 hours of placement of most orders. All
product orders and fulfillment are currently handled by ShopNow.com.

Sales

As of December 31, 1999, we had a direct sales organization of 32 sales
professionals. Our sales team consults regularly with advertisers and agencies
on design and placement of advertisements, sponsorships and promotions across
our networks. We also have a group of sales professionals who concentrate
primarily on strategic sponsorships and promotions, seeking to establish
relationships with senior level executives and to develop multi-million dollar
partnership packages linking our users with the partner's brand. As of December
31, 1999, this group consisted of 12 individuals.

We also had 25 sales support, market research and advertising operations
staff who focus on market research and provide advertisers with information and
expertise that will help them market their products and services more
effectively to Generation i. We regularly conduct surveys concerning purchasing
patterns, attitudes and brand preferences of Generation i.

We have sales offices in New York City, San Francisco and Los Angeles.

Corporate Marketing

As of December 31, 1999, we had 15 professionals in our corporate marketing
group who are complemented by marketing professionals within our four networks.
Through the efforts of these professionals, we pursue a variety of marketing
initiatives designed to build brand awareness for Snowball and its individual
networks among both the advertising community and members of Generation i. To
date, these marketing activities have included advertising in online and
offline media, attending trade shows, sponsoring events and engaging in ongoing
media relations campaigns.

We target potential advertising customers in a variety of online and offline
media, including newspapers such as The New York Times, The Wall Street
Journal, USA Today and over 200 college newspapers; print magazines such as
Advertising Age, Adweek, Wired, Industry Standard and Business 2.0; outdoor
locations such as commuter rail lines and bus tails; and online sites such as
Adage.com, Adweek.com, ClickZ and Channel 7.

Network marketing activities focus on increasing traffic to our networks and
the number of our registered users. We have engaged in major event
sponsorships, such as ChickClick's title sponsorship of the 1999 Lilith Fair
and IGN's sponsorship of Sega Dreamcast's 1999 Assault Tour. We have also
entered into a strategic relationship with New Line Cinema that will provide us
with offline marketing promotions in their products. In addition, all networks
have aggressively launched promotions and contests to increase user
registration and have entered into service agreements with Microsoft offering
free category-specific newsletters via MSN Hotmail.

We engage in an ongoing media relations campaigns with business and financial
contacts and key industry analysts. Our public relations efforts are a key
component of our overall marketing and brand awareness strategy. We plan to
continue to develop a media outreach program based on market research that we
organize and conduct with third parties. Each individual network also manages
public relations activities targeted to the consumer press to encourage
publicity on new channels, affiliates, services and partners. The primary
purpose of our public relations activities is to

42
<PAGE>

increase our share of each network's target audience and increase overall
visibility of the Snowball networks.

Technology

Our web site hosting infrastructure is co-located at our headquarters in San
Francisco and at Exodus Communications' Internet Data Center in Santa Clara,
California. Exodus is responsible for providing us with a high-speed, scalable,
fault-tolerant Internet connection, clean power and physical security. Packaged
software enables full text search, bulk email delivery, web serving and traffic
analysis. We developed our membership, personalization, advertising delivery
and community software using standard application servers and Oracle database
systems. Our advertising selection and management system is DoubleClick's
NetGravity. We have developed traffic analysis software to compute industry-
standard and advanced metrics. We also host a small number of our affiliates on
our servers. Our editorial infrastructure is located at our headquarters in San
Francisco. We developed our editorial and publishing software by using
Informix. We have started to migrate our editorial and publishing processes to
the same platform that we use for our dynamic services. Both our hosting and
editorial switched local area networks are fault-tolerant, scalable and
economical.

With respect to disaster recovery, all of our non-derivable data is presently
replicated between a storage array at our headquarters in San Francisco and a
storage array at Exodus Communications. We are currently studying the
advisability of locating a disaster recovery data center in New York City. Our
network operations center consists of monitoring software that is monitored by
our staff at all times.

Competition

The market for Internet users and online advertisers is highly fragmented,
rapidly changing and characterized by thousands of competitors. With no
substantial barriers to entry, we believe that the number of Internet companies
relying on web-based advertising revenue will increase greatly in the future.
Companies or sites that are primarily focused on targeting Generation i online
include MTV.com, Warner Bros. Online (Entertaindome), iTurf Inc. and Alloy
Online, Inc. In addition to these direct competitors, we will likely face
competition in the future from:

. developers of web directories;

. search engine providers;

. content sites;

. commercial online services;

. sites maintained by Internet service providers; and

. other entities that establish a community on the Internet by developing
their own or purchasing one of our competitors.

We also could face competition in the future from traditional media
companies, a number of which, including Time Warner, Disney, CBS and NBC, have
recently combined with, made acquisitions of or investments in significant
Internet companies. Finally, we compete with traditional forms of media, such
as newspapers, magazines, radio and television, for advertisers and advertising
revenue.

Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical and marketing resources,
greater name recognition and larger existing customer bases than we do. These
competitors are able to undertake more extensive marketing campaigns for their
brands and services, adopt more aggressive advertising pricing policies and

43
<PAGE>

make more attractive offers to potential employees, distribution partners,
commerce companies, advertisers and third-party content providers. Further,
these competitors may develop communities that are equal or superior to ours or
that achieve greater market acceptance than ours. In addition, many of our
current advertising customers and strategic partners also have established
collaborative relationships with certain of our competitors or potential
competitors and other frequently visited web sites. Accordingly, we cannot
assure you that:

. we will be able to sustain our traffic levels or retain our advertising
customers;

. competitors will not experience greater growth in traffic as a result of
strategic collaborative relationships that make their web sites more
attractive to advertisers; or

. our affiliates and strategic partners will not sever or renew their
agreements with us.

We believe that the primary competitive factors in attracting and retaining
users are:

. quality of content and services;

. brand recognition;

. user affinity and loyalty;

. demographic focus;

. variety of value-added services; and

. critical mass.

We believe that the principal competitive factors in attracting and retaining
online advertisers are:

. the amount of traffic on a web site;

. brand recognition;

. the demographic characteristics of a site's users;

. the ability to offer targeted audiences;

. the average duration of user visits; and

. cost-effectiveness.

We cannot assure you that we will be able to compete successfully against our
current or future competitors. Competitive pressures faced by us may have a
material adverse effect on our business, our financial condition and the
results of our operations.

Proprietary Rights and Licensing

We regard our copyrights, trademarks, service marks, trade secrets,
technology and other intellectual property rights as important to our success.
In particular, we rely upon our domain names and trademarks to increase brand
awareness among our users and advertisers. We have registered approximately 300
domain names, including all names currently in use across our networks.
"Snowball," "ChickClick," "IGN," "PowerStudents" and "InsideGuide" are
trademarks of ours. Our trademarks will remain in effect indefinitely, but only
to the extent that we continue to use them in commerce. We have not applied for
the registration of all of our trademarks and service marks and may not be
successful in obtaining the trademarks and service marks that we have applied
for. We have not applied for any patents.

To protect our intellectual property rights, we rely on a combination of
copyright and trademark laws, trade secret protection, confidentiality
agreements with employees and third parties and

44
<PAGE>

protective contractual provisions. Prior to entering into discussions with
potential content providers and affiliates regarding our business and
technologies, we generally require that they enter into nondisclosure
agreements with us. If these discussions result in a license or other business
relationship, we also generally require that the agreement setting forth each
parties' rights and obligations include provisions for the protection of our
intellectual property rights. Licensees of these rights may take or fail to
take actions that would diminish the value of our rights or reputation.

Despite our efforts to protect our proprietary rights, unauthorized parties
may copy aspects of our products or services or obtain and use information that
we regard as proprietary. The laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States.
We do not currently have any patents or patent applications pending in any
foreign country. In addition, others may be able independently to develop
substantially equivalent intellectual property. If we do not effectively
protect our intellectual property, our business could suffer.

Employees

As of December 31, 1999, we had a total of 260 full-time employees, including
102 in sales and marketing, 35 in engineering, 100 in production and content
and 23 in administration and finance. Other than as described in "Management--
Employment Arrangements, Termination of Employment Arrangements and Change of
Control Arrangements," none of these individuals is bound by an employment
agreement. None of our employees is represented by a collective bargaining
agreement, nor have we experienced any work stoppage. We consider our relations
with our employees to be good.

Facilities

Our principal editorial, sales, marketing, research, development and
administrative office occupies approximately 26,000 square feet in San
Francisco, California, under a month-to-month lease. In addition, we also lease
sales and service offices in Los Angeles and New York City. We recently entered
into a long-term lease for approximately 180,000 square feet to be divided
among three buildings in Brisbane, California. We intend to relocate and expand
our principal offices to this site next year. This lease will expire with
respect to approximately 55,000 square feet, 61,000 square feet and 66,000
square feet 10 years, 11 years and 12 years, respectively, after we take
occupancy. We believe that this proposed new facility will be adequate for our
needs for the foreseeable future.

Legal Proceedings

We are not a party to any material legal proceedings.

Financial Information about Geographic Areas

See Note 1 of our Notes to Consolidated Financial Statements.

45
<PAGE>

MANAGEMENT

Directors, Executive Officers and Significant Employees

The following table presents information regarding our directors, executive
officers and significant employees as of March 9, 2000.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mark A. Jung............... 38 President, Chief Executive Officer and Director
James R. Tolonen........... 50 Chief Financial Officer, Chief Operating Officer and Director
Richard D. Boyce........... 37 President of the Networks
Sandra Cavanah............. 40 Vice President, Affiliate Marketing
Janette S. Chock........... 33 Vice President, Controller and Chief Accounting Officer
Teresa M. Crummett......... 39 Vice President, Corporate Marketing and Product Management
Kenneth H. Keller.......... 43 Vice President, Engineering
Kathleen Z. Layendecker.... 38 Vice President, Affiliate Development
Elizabeth G. Murphy........ 41 Vice President, Sales and Marketing
Christopher Anderson....... 43 Chairman of the Board and Director
Richard A. LeFurgy......... 43 Director
Michael Orsak.............. 39 Director
Robert H. Reid............. 34 Director
</TABLE>

Mark A. Jung has served as our President and Chief Executive Officer since
February 1999 and as a director since our incorporation in January 1999. Prior
to joining us, from July 1997 to January 1999, he served as an independent
industry consultant to various companies. From February 1992 to July 1997, he
co-founded and served as Chief Executive Officer, a director and, from February
1996 to July 1997, Chairman of Worldtalk Communications Corporation, an
Internet security company. Mr. Jung holds a Bachelor of Science degree in
electrical engineering from Princeton University and a Master of Business
Administration from Stanford University.

James R. Tolonen has served as our Chief Financial Officer and Chief
Operating Officer since October 1999, and as a director since November 1999.
Prior to joining us, Mr. Tolonen was on sabbatical from November 1998 to
October 1999, during which time he served intermittently as an advisor and
board member to several private companies. From August 1996 to October 1998, he
served as a director of Cybermedia, Inc., a software product service and
support company, and as its President and Chief Operating Officer from May 1998
to October 1998. From June 1989 to April 1998, he served as Senior Vice
President and Chief Financial Officer of Novell, Inc., a computer network and
software company. Mr. Tolonen holds a Bachelor of Science degree in mechanical
engineering and a Master of Business Administration from the University of
Michigan. Mr. Tolonen is also a certified public accountant.

Richard D. Boyce has served as our President of the Networks since March
2000. Prior to joining to us, in September 1994, he co-founded HotWired, Inc.
(now known as Wired Digital), an Internet media company and, as of June 1999, a
wholly-owned subsidiary of Lycos, Inc., an Internet media company, and from
September 1994 to February 2000, he served in a number positions, including
most recently as its Senior Vice President of Advertising Sales and Commerce.
Mr. Boyce holds a Bachelor of Arts degree in communications from Washington
State University.

Sandra Cavanah has served as our Vice President, Affiliate Marketing since
June 1999. Ms. Cavanah shares responsibility for affiliate related matters with
Ms. Layendecker, focusing primarily on affiliate marketing. From February 1999
to June 1999, she served as our Co-Director of Affiliate Marketing and
Development, and from January 1999 to February 1999, she served as a consultant
to us. Prior to joining us, from December 1997 to February 1999, she served as
Chief

46
<PAGE>

Financial Officer of Genstar Capital, L.L.C., a private-equity investment firm.
From April 1995 to November 1997, she served as an analyst at Robertson
Stephens & Co., an investment banking firm, and from December 1993 to March
1995, she served as a consultant to Pacific Telesis Group, a holding company
whose subsidiaries are communication services companies. Ms. Cavanah holds a
Bachelor of Science degree in business administration from the University of
California at Berkeley and a Master of Business Administration from Harvard
University.

Janette S. Chock has served as our Vice President, Controller and Chief
Accounting Officer since October 1999. From February 1999 to October 1999, she
served as our Controller, and from January 1999 to February 1999, she served as
a consultant to us. Prior to joining us, from August 1998 to January 1999, she
served as Controller of Fujitsu Personal Systems, Inc., a mobile computer
hardware company. Ms. Chock was between occupations from July 1996 to October
1996. From October 1996 to July 1998, she served as Controller of Diffusion,
Inc., a corporate information delivery software company, and from November 1993
to July 1996, she served as Controller of Worldtalk Communications Corporation,
an Internet security company. Ms. Chock holds a Bachelor of Science degree in
business administration from the University of California at Berkeley. Ms.
Chock is also a certified public accountant.

Teresa M. Crummett has served as our Vice President, Corporate Marketing and
Product Management since March 1999. From January 1999 to March 1999, she
served as a consultant to us. Prior to joining us, from August 1997 to December
1998, she was a self-employed business consultant. She served as a Director of
Corporate Marketing at CyberCash, Inc., an electronic commerce company, from
January 1996 to August 1997. From July 1995 to December 1996, Ms. Crummett
again worked as a self-employed business consultant. From April 1994 to June
1995, she served as Vice President, Direct Marketing of Interactive Network,
Inc., an interactive television company, and from December 1993 to March 1994,
she served as a business consultant to Time Warner, a worldwide media company.
From March 1992 to November 1993, Ms. Crummett served as Director of Marketing
of Walt Disney Company, a diversified worldwide entertainment company. Ms.
Crummett holds a Bachelor of Arts degree in government from Harvard University
and a Master of Business Administration from Stanford University.

Kenneth H. Keller has served as our Vice President, Engineering since March
1999. From January 1999 to March 1999, he served as a consultant to us. Prior
to joining us, from May 1996 to December 1998, he was a self-employed business
consultant, entrepreneur and investor. From April 1995 to April 1996, he served
as Director of Development of Excite, Inc., an Internet media company. From
January 1995 to April 1995, Mr. Keller was between occupations. Mr. Keller
holds a Bachelor of Science degree in mathematics from Carnegie Mellon
University and a Master of Science degree and Ph.D. in computer science from
the University of California at Berkeley.

Kathleen Z. Layendecker has served as our Vice President, Affiliate
Development since June 1999. Ms. Layendecker shares responsibility for
affiliate related matters with Ms. Cavanah, focusing primarily on affiliate
development. From February 1999 to June 1999, she served as our Co-Director of
Affiliate Marketing and Development, and from January 1999 to February 1999,
she served as a consultant to us. Prior to joining us, from June 1998 to
January 1999, Ms. Layendecker was between occupations. From January 1997 to
June 1998, she served as an analyst for Bodri Capital Management, Inc., an
investment company, and from August 1996 to January 1997, as a consultant to
Bodri Capital Management. From May 1995 to August 1996, Ms. Layendecker was on
maternity leave. From October 1993 to May 1995, she served as Director of
Finance and Administration of Valentis Corp., a biotechnology company.
Ms. Layendecker holds a Bachelor of Arts degree in English from Stanford
University and a Master of Business Administration from the Yale School of
Management.

Elizabeth G. Murphy has served as our Vice President, Sales and Marketing
since March 1999. Prior to joining us, from April 1992 to March 1999, she was
employed by U.S. News and World

47
<PAGE>

Report, a publishing company, most recently as Vice President, Associate
Publisher. Ms. Murphy holds a Bachelor of Science degree in zoology from the
University of Michigan.

Christopher Anderson has served as our Chairman of the Board and a director
since our incorporation in January 1999. He founded Imagine Media, Inc., an
Internet media company, and has served as its President and as one of its
directors since October 1993. He has also served as Chairman of the Board of
Future Network plc, an Internet media company, since May 1998. Mr. Anderson
holds a Bachelor of Arts degree in politics, philosophy and economics from
Oxford University.

Richard A. LeFurgy has served as a director since April 1999. He has been a
member of Walden Media, L.L.C., the general partner of the Walden Media &
Information Technology Fund, L.P., a venture capital firm, since August 1999.
He served as a consultant to the Walden Media & Information Technology Fund,
L.P. from October 1998 to August 1999. From June 1995 to October 1998, he
served as Senior Vice President, Advertising Sales of Starwave Corporation, an
Internet media company, and from June 1978 to May 1995, he served as Executive
Vice President, Senior Partner and a director at NW Ayer & Partners, an
advertising agency. Mr. LeFurgy holds a Bachelor of Science degree in
advertising from Syracuse University.

Michael Orsak has served as a director since May 1999. He is a founder of
Worldview Technology Partners, a venture capital firm, and has been a general
partner since September 1996. From January 1990 to September 1996, he served as
a co-manager of a fund of JAFCO America Ventures, a venture capital firm. Mr.
Orsak holds a Bachelor of Arts degree in economics and a Master of Business
Administration from Stanford University.

Robert H. Reid has served as a director since March 1999. He is a founder of
Listen.com, Inc., an Internet music company, and has served as its President
and Chief Executive Officer since February 1998. From January 1997 to December
1998, he was an associate of 21st Century Internet Venture Partners, a venture
capital firm. He authored a book from April 1996 to December 1996, and from
December 1994 to April 1996 he served as a Business Development Manager at
Silicon Graphics, Inc., a high-performance computer company. Mr. Reid holds a
Bachelor of Arts degree in international relations and a Master of Arts degree
in international policy studies from Stanford University and a Master of
Business Administration from Harvard University.

Each of our executive officers will serve in his or her office until he or
she resigns or is removed from office.

Board of Directors and Committees

We currently have six directors. We intend to amend our certificate of
incorporation immediately following the closing of this offering. The amended
certificate of incorporation will divide our board of directors into three
classes: Class I, whose term will expire at the annual meeting of stockholders
to be held in 2001, Class II, whose term will expire at the annual meeting of
stockholders to be held in 2002, and Class III, whose term will expire at the
annual meeting of stockholders to be held in 2003. At each annual meeting of
stockholders after the initial classification, the successors to directors
whose terms have expired will be elected to serve from the time of election and
qualification until the third annual meeting following election.

In addition, we have amended our bylaws, with an effective date immediately
following this offering, to provide that the authorized number of directors may
be changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the total number of directors.

48
<PAGE>

This classification of the board of directors may have the effect of delaying
or preventing changes in our control or management. See "Description of Capital
Stock--Anti-Takeover Provisions of the Certificate of Incorporation, Bylaws and
Delaware Law." There are no family relationships among any of our directors,
officers or key employees.

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

Compensation Committee. The current members of our compensation committee are
Messrs. Anderson and Orsak. The compensation committee reviews and makes
recommendations to our board concerning salaries and incentive compensation for
our officers and employees. The compensation committee also administers our
1999 Equity Incentive Plan, 2000 Equity Incentive Plan and 2000 Employee Stock
Purchase Plan.

Audit Committee. The current members of our audit committee are Messrs.
LeFurgy, Orsak and Reid. Our audit committee reviews and monitors our financial
statements and accounting practices, makes recommendations to our board
regarding the selection of independent auditors and reviews the results and
scope of the audit and other services provided by our independent auditors.

Compensation Committee Interlocks and Insider Participation

Before June 1999, our board of directors did not have a compensation
committee and all compensation decisions were made by the full board of
directors. In June 1999, we formed a compensation committee consisting of
Richard LeFurgy, Michael Orsak and Mark Jung. Mr. Jung served as our President
and Chief Executive Officer while he was a member of the compensation
committee. In December 1999, we replaced the membership of our compensation
committee with our current compensation committee membership. No interlocking
relationship exists between our board of directors or compensation committee
and the board of directors or compensation committee of any other company, nor
has an interlocking relationship existed in the past. Mr. Jung has not
participated in discussions by our board of directors or the compensation
committee with respect to his compensation. None of our executive officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of our board
of directors.

Preferred Stock Financings. In February 1999, Christopher Anderson, our
Chairman of the Board and one of our directors, and Mark Jung, our President
and Chief Executive Officer and one of our directors, purchased 12,857,143 and
989,011 shares, respectively, of Series A preferred stock at $0.2333 per share
in February 1999. In May 1999, Richard LeFurgy, one of our directors, purchased
35,545 shares of Series B-1 preferred stock at $4.22 per share, and in October
1999, the James R. Tolonen and Ginger Tolonen Family Trust dated 9/26/96 and
the James R. Tolonen Grantor Retained Annuity Trust purchased 120,000 and
30,000 shares, respectively, of Series B-1 preferred stock at $4.22 per share.
In addition, entities associated with Worldview Technology Partners and Walden
Media & Information Technology Fund, L.P., purchased 1,540,284 and 1,220,378
shares, respectively, of Series B-1 preferred stock at $4.22 per share in May
1999. In December 1999, these same individuals and entities purchased shares of
Series C preferred stock at $10.00 per share in the following amounts: 700,000
shares by Mr. Anderson; 50,000 shares by Mr. Jung and 10,000 by the Jung-
Murdock Children's Trust U/A 11/23/93, Susan Murdock TTEE, a trust for the
benefit of Mr. Jung's children; 3,400 shares by Mr LeFurgy; 117,800 shares by
entities associated with Walden Media & Information Technology Fund, L.P.; and
148,700 shares by entities associated with Worldview Technology Partners.
Michael Orsak, one of our directors, is a general partner of Worldview
Technology Partners and Richard LeFurgy is a member of Walden Media, L.L.C.,
the general partner of Walden Media & Information Technology Fund, L.P., and
each may be deemed to own beneficially the shares held by the entities with
whom they are associated.

49
<PAGE>

Loan to Christopher Anderson. In February 1999, we loaned an aggregate of
$2.0 million to Mr. Anderson, our Chairman of the Board and one of our
directors, in connection with his purchase of 12,857,143 shares of our Series A
preferred stock. The loan was secured by a full recourse promissory note and a
stock pledge agreement. The note accrued interest at a rate of 4.57% per year
and was due and payable with respect to $1.0 million of principal, plus
interest, on or before March 1, 1999 and with respect to the remaining $1.0
million of principal, and any remaining interest, on or before April 1, 1999.
The note has been repaid in full.

Sale of Common Stock and Loan to Mark Jung. In February 1999, we loaned an
aggregate of $92,300 to Mark Jung, our President and Chief Executive Officer
and one of our directors, in connection with his purchase of 1,978,021 shares
of our common stock at $0.04667 per share. The loan is secured by a full
recourse promissory note and a stock pledge agreement. The note accrues
interest at a rate of 4.64% per year, payable annually, and is due and payable
on or before February 1, 2003. We are forgiving the principal and accrued
interest ratably over a 48-month period that began on December 1998. In the
event that Mr. Jung's employment with us is terminated for any reason, then all
remaining unpaid principal and interest will become due and payable within 90
days after termination, unless we agree to a longer period.

Sale of Preferred Stock and Loan to Trusts Associated with James Tolonen. In
October 1999, we loaned an aggregate of $333,000 to the James R. Tolonen and
Ginger Tolonen Family Trust dated 9/26/96 in connection with its purchase of
120,000 shares of our Series B-1 preferred stock at $4.22 per share. The loan
is secured by a full recourse promissory note and a stock pledge agreement. The
note accrues interest at a rate of 5.86% per year, payable annually, and is due
and payable in full on or before October 20, 2003. We will forgive the
principal and accrued interest ratably over a 48-month period that began in
October 1999. At this time, the James R. Tolonen 1999 Grantor Retained Annuity
Trust also purchased 30,000 shares of our Series B-1 preferred stock.

Sale of Common Stock and Loan to James Tolonen. In November 1999, we loaned
an aggregate of $600,000 to Mr. Tolonen, our Chief Financial Officer and Chief
Operating Officer and one of our directors, in connection with his purchase of
350,000 shares of our common stock at $2.00 per share. The loan is secured by a
full recourse promissory note and a stock pledge agreement. The note accrues
interest at a rate of 6.08% per year, payable annually, and is due and payable
in full on or before November 30, 2003. At this time, Mr. Tolonen purchased
another 50,000 shares of our common stock pursuant to an option exercise.

The promissory notes for Mr. Jung and the trust associated with Mr. Tolonen
provide that all remaining unpaid principal and interest will become due and
payable if the borrower's position as a director or officer is terminated.

Director Compensation

Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable expenses in attending board
and board committee meetings.

Each eligible director who is not our employee and who is or becomes a member
of our board on or after the effective date of the registration statement, of
which this prospectus forms a part, will be granted an option to purchase
20,000 shares of common stock under our 2000 Equity Incentive Plan, unless that
director has previously received an option grant in that amount before the
effective date. Immediately following each annual meeting of our stockholders,
each eligible director will automatically be granted an additional option to
purchase 5,000 shares under the plan if the director has served continuously as
a member of the board for at least one year. The options will have ten-year
terms and will terminate three months following the date the director ceases to
be one of our directors or consultants, 12 months if the termination is due to
death or disability, or one month if

50
<PAGE>

the termination is for cause. All options granted under the plan will vest over
four years from the date of grant, with 25% of the shares vesting on the first
anniversary of the date of grant and the remainder vesting ratably over a 36-
month period thereafter.

Executive Compensation

The following table presents compensation information for 1999 with regard to
compensation paid to or accrued for our chief executive officer and each of our
four other most highly compensated executive officers. None of our officers was
compensated in 1998. The restricted stock value is calculated based upon a
$0.04667 per share purchase price and assumes that the estimated fair market
value on the date of grant is equal to the assumed initial public offering
price of $11.00 per share. On December 31, 1999, Mr. Jung held 1,978,021 shares
of our common stock pursuant to a restricted stock award of $21,665,917 subject
to our right to repurchase these shares upon termination of his employment. Our
repurchase right expires ratably over a 48-month period that began in December
1998. If declared by the board, dividends will be paid on Mr. Jung's restricted
stock.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term Compensation
Awards
----------------------
Annual
Compensation
---------------- Securities
Name and Principal Restricted Underlying All Other
Positions Salary Bonus Stock Award Options Compensation
------------------ -------- ------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Mark A. Jung.............. $230,770 $ -- $21,665,917 -- $20,000
President and Chief
Executive Officer
Elizabeth G. Murphy....... 160,000 59,250 -- 300,000 --
Vice President, Sales and
Marketing
Kenneth H. Keller......... 148,077 -- -- 450,000 38,000
Vice President,
Engineering
Teresa M. Crummett........ 119,616 22,500 -- 198,000 48,500
Vice President, Corporate
Marketing and Product
Management
Janette S. Chock.......... 123,462 -- -- 147,500 5,000
Vice President,
Controller and Chief
Accounting Officer
</TABLE>

The amounts listed in the column captioned "All Other Compensation" represent
payments made on our behalf by Imagine Media in January and February 1999.
James Tolonen, our Chief Financial Officer and Chief Operating Officer, was
hired in October 1999 and, had he been employed for the entire year, would have
earned a salary of $225,000. Mr. Tolonen was granted two options to purchase an
aggregate of 600,000 shares of common stock and trusts associated with Mr.
Tolonen purchased an aggregate of 150,000 shares of Series B-1 preferred stock.

Option Grants in 1999

The following table presents the grants of stock options under our 1999
Equity Incentive Plan during 1999 to our chief executive officer, our chief
financial officer and each of our four other most highly compensated executive
officers in 1999.

Options granted under the 1999 Equity Incentive Plan are either incentive
stock options or nonqualified stock options and generally become exercisable
with respect to 25% of the shares subject to the option on the first
anniversary of the date of grant and with respect to an additional 2.0833% of
these shares each month thereafter, subject to acceleration in some instances
upon certain changes in our control. Stock option grants in excess of 25,000
shares are generally immediately exercisable and subject to acceleration in
some instances upon certain changes in our

51
<PAGE>

control or termination by us in certain circumstances. We have a right to
repurchase these shares upon termination of the optionee's employment with us.
This right generally lapses as to 25% of the shares subject to the option on
the first anniversary of the date of grant and as to 2.083% of the shares each
month thereafter. Options expire ten years from the date of grant. Options were
granted at an exercise price equal to the fair market value of our common
stock, as determined by our board on the date of grant. As of December 31,
1999, we had granted to our employees options to purchase a total of 3,907,437
shares of common stock under the 1999 Equity Incentive Plan and an additional
550,000 shares of common stock outside the plan.

The 5% and 10% assumed annual rates of stock price appreciation are required
by the rules of the Securities and Exchange Commission and do not represent our
estimate or projection of future common stock prices. The potential realizable
values at 5% and 10% appreciation are calculated by assuming that the estimated
fair market value on the date of grant, based upon an assumed initial public
offering price of $11.00 per share, appreciates at the indicated rate for the
entire term of the option and that the option is exercised at the exercise
price and sold on the last day of its term at the appreciated price.

<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Potential Realizable Value
Percent of at Assumed Annual Rates
Number of Total of Stock Price
Securities Options Appreciation
Underlying Granted to Exercise for Option Term
Options Employees Price Expiration --------------------------
Name Granted in 1999 Per Share Date 5% 10%
---- ---------- ---------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Jung............ -- --% $ -- -- $ -- $ --
Elizabeth G. Murphy..... 300,000 4.78 0.04667 3/15/09 5,361,351 8,545,349
Kenneth H. Keller....... 450,000 7.17 0.04667 3/15/09 8,042,027 12,818,024
Teresa M. Crummett...... 198,000 3.16 0.04667 3/15/09 3,538,492 5,639,930
Janette S. Chock........ 99,000 1.58 0.04667 2/24/09 1,769,246 2,819,965
13,500 0.22 0.04667 3/15/09 241,261 384,541
35,000 0.56 2.00 10/4/09 557,124 928,591
James R. Tolonen........ 600,000 9.56 2.00 10/20/09 9,550,705 15,918,700
</TABLE>

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<PAGE>

Aggregated Option Exercises in 1999 and Values at December 31, 1999

The following table presents the number of shares acquired and the value
realized upon exercise of stock options for the year ended December 31, 1999
and the number of shares of common stock subject to "exercisable" and
"unexercisable" stock options held as of December 31, 1999 by our chief
executive officer, chief financial officer and each of our four other most
highly compensated executive officers. All options were granted under our 1999
Equity Incentive Plan. Each of these options was immediately exercisable upon
grant, but is subject to our right to repurchase the option shares at the
exercise price upon termination of the optionee's employment. Our right to
repurchase the shares lapses either (1) as to 25% of the shares subject to the
option on the first anniversary of the date of grant and the remainder ratably
over a 36-month period thereafter or (2) as to 12.5% of the shares subject to
the option on the six month anniversary of the date of grant and the remainder
ratably over a 42-month period thereafter. In the table below, the heading
"exercisable" refers to shares as to which our right of repurchase has lapsed.
The heading "unexercisable" refers to shares that we still have the right to
repurchase upon termination of the optionee's employment. Also presented are
values of "in-the-money" options, which represent the positive difference
between the exercise price of each outstanding stock option and an assumed
initial public offering price of $11.00 per share.

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at In-the-Money Options at
Shares December 31, 1999 December 31, 1999
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Jung............ -- $ -- -- -- $ -- $ --
Elizabeth G. Murphy..... -- -- -- 300,000 -- 3,285,999
Kenneth H. Keller....... -- -- 126,250 323,750 1,382,858 3,546,141
Teresa M. Crummett...... -- -- 45,375 152,625 497,007 1,671,752
Janette S. Chock........ -- -- 23,156 124,344 253,635 1,293,614
James R. Tolonen........ -- -- 25,000 575,000 225,000 5,175,000
</TABLE>

Benefit Plans

1999 Equity Incentive Plan

As of December 31, 1999, options to purchase 2,158,368 shares of common stock
were outstanding under the 1999 Equity Incentive Plan and 2,394,369 shares of
common stock remained available for issuance upon the exercise of options that
may be granted in the future. The options that were outstanding as of that date
had a weighted average exercise price of $2.03 per share. This plan will
terminate upon this offering and no options will be granted under this plan
after this offering. However, termination will not affect any outstanding
options, all of which will remain outstanding until exercise or until they
terminate or expire by their terms. Options granted under this plan are subject
to terms substantially similar to those described below with respect to options
granted under the 2000 Equity Incentive Plan.

2000 Equity Incentive Plan

On February 22, 2000, the Board adopted the 2000 Equity Incentive Plan and
reserved 5,000,000 shares of common stock to be issued under this plan. On each
January 1, beginning in 2001, the aggregate number of shares reserved for
issuance under this plan will increase automatically by a number of shares
equal to 5% of our outstanding shares of capital stock on December 31 of the
preceding year, provided that no more than 30,000,000 shares shall be issued as
incentive stock options.

53
<PAGE>

The following shares will be available for grant and issuance under the
equity incentive plan:

. shares under the 2000 Equity Incentive Plan not issued or subject to
outstanding grants on the date of this prospectus;

. shares that are subject to issuance upon exercise of an option granted
under the equity incentive plan that cease to be subject to the option
for any reason other than exercise of the option including by the
expiration of the option or the option's becoming unexercisable for any
reason without having been exercised in full;

. shares that have been issued upon the exercise of an option granted
under the equity incentive plan that are subsequently forfeited, or
repurchased by us at the original purchase price;

. shares that are subject to an award granted pursuant to a restricted
stock purchase agreement under the equity incentive plan that are
subsequently forfeited, or repurchased by us at the original issue
price; or

. shares that are subject to stock bonuses granted under the equity
incentive plan that terminate without shares being issued.

This plan will become effective on the consummation of this offering and will
terminate on February 21, 2010, unless it is terminated earlier by our board.
The plan authorizes the award of options, restricted stock awards and stock
bonuses. No person will be eligible to receive more than 1,500,000 shares in
any calendar year under the plan other than a new employee. A new employee will
be eligible to receive no more than 3,000,000 shares in the calendar year in
which the employee commences employment.

The plan will be administered by our compensation committee, all of the
members of which are "non-employee directors" under applicable federal
securities laws and "outside directors" as defined under applicable federal tax
laws. The compensation committee will have the authority to construe and
interpret the plan, grant awards and make all other determinations necessary or
advisable for the administration of the plan. Also, non-employee directors are
entitled to receive automatic annual grants of options to purchase shares of
our common stock, as described under "Management--Director Compensation."

The plan will provide for the grant of both incentive stock options that
qualify under Section 422 of the Internal Revenue Code and nonqualified stock
options. Incentive stock options may be granted only to our employees or
employees of our parent or subsidiary, if any. All awards other than incentive
stock options may be granted to employees, officers, directors, consultants,
independent contractors and advisors of ours or our parent or subsidiary, if
any, provided that, in the case of the consultants, independent contractors and
advisors, they render bona fide services not in connection with the offer and
sale of securities in a capital-raising transaction. The exercise price of
incentive stock options must be at least equal to the fair market value of our
common stock on the date of grant. The exercise price of incentive stock
options granted to 10% stockholders must be at least equal to 110% of that
value. The exercise price of non-qualified stock options must be at least equal
to 85% of the fair market value of our common stock on the date of grant.

Options may be exercisable only as they vest or may be immediately
exercisable with the shares issued subject to our right of repurchase that
lapses as the shares vest. In general, options and the shares issued pursuant
to immediately exercisable options will vest over a four-year period. The
maximum term of options granted under the plan is ten years.

Awards granted under the plan may not be transferred in any manner other than
by will or by the laws of descent and distribution. They may be exercised
during the lifetime of the optionee only by the optionee. The compensation
committee could determine otherwise and provide for these

54
<PAGE>

provisions in the award agreement, but only with respect to awards that are not
incentive stock options. Options granted under the plan generally may be
exercised for a period of time after the termination of the optionee's service
to us or to our parent or subsidiary, if any. Options will generally terminate
one month after termination of employment for cause.

The purchase price for restricted stock will be determined by our
compensation committee. Stock bonuses may be issued for past services or may be
awarded upon the completion of certain services or performance goals.

If we are dissolved or liquidated or have a "change in control" transaction,
outstanding awards may be assumed or substituted by the successor corporation,
if any. In the discretion of the compensation committee, the vesting of these
awards may accelerate upon one of these transactions.

2000 Employee Stock Purchase Plan

On February 22, 2000, the board adopted the 2000 Employee Stock Purchase Plan
and reserved 500,000 shares of common stock under this plan. The plan will
become effective on the first business day on which price quotations for our
common stock are available on the Nasdaq National Market. On each January 1,
beginning in 2001, the aggregate number of shares reserved for issuance under
this plan will increase automatically by a number of shares equal to 1% of our
outstanding shares on December 31 of the preceding year. The aggregate number
of shares reserved for issuance under the plan may not exceed 5,000,000 shares.
The plan will be administered by our compensation committee, which will have
the authority to construe and interpret the plan.

Employees generally will be eligible to participate in the plan if:

. they are employed before the beginning of an offering period;

. they are customarily employed by us, or our parent or any subsidiaries
that we designate, for more than 20 hours per week and more than five
months in a calendar year; and

. are not, and would not become as a result of being granted an option
under the plan, 5% stockholders of us or our designated parent or
subsidiaries.

Under the plan, eligible employees will be permitted to acquire shares of our
common stock through payroll deductions. Eligible employees may select a rate
of payroll deduction between 1% and 10% of their compensation, subject to
maximum purchase limitations. Participation in the plan will end automatically
upon termination of employment for any reason.

Each offering period under the plan will be for two years and will consist of
four six-month purchase periods. The first offering period is expected to begin
on the first business day on which price quotations for our common stock are
available on the Nasdaq National Market. Additional offering periods and
purchase periods will begin on May 1 and November 1 of each year. Because the
first day on which price quotations for our common stock may be available on
the Nasdaq National Market may not be May 1 or November 1, the length of the
first offering period will be more than two years, and the length of the first
purchase period may be more than six months.

The plan will provide that, in the event of our proposed dissolution or
liquidation, each offering period that commenced prior to the closing of the
proposed event will continue for the duration of the offering period, provided
that the compensation committee may fix a different date for termination of the
plan. The purchase price for our common stock purchased under the plan is 85%
of the lesser of the fair market value of our common stock on the first or last
day of the applicable offering period. The compensation committee will have the
power to change the offering dates, purchase dates and

55
<PAGE>

duration of offering periods or purchase periods without stockholder approval,
if the change is announced prior to the relevant offering period, or prior to
such other time period as is specified by the compensation committee.

The plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code. Rights granted under the plan will
not be transferable by a participant other than by will or the laws of descent
and distribution.

The plan will terminate in February 21, 2010, unless it is terminated earlier
under its terms. The board will have the authority to amend, terminate or
extend the term of the plan, except that no action may adversely affect any
outstanding options previously granted under the plan. Except for the automatic
annual increase of shares described above, stockholder approval is required to
increase the number of shares that may be issued or to change the terms of
eligibility under the plan. The board may make amendments to the plan as it
determines to be advisable if the financial accounting treatment for the plan
is different from the financial accounting treatment in effect on the date the
plan was adopted by the board.

401(k) Plan

We sponsor a defined contribution plan intended to qualify under Section 401
of the Internal Revenue Code, or a 401(k) plan. Employees are generally
eligible to participate and may enter the plan as of the first day of the month
coinciding with or next following the date on which the employee met the
requirements. Participants may make pre-tax contributions to the plan of up to
20% of their eligible earnings, subject to a statutorily prescribed annual
limit. Each participant is fully vested in his or her contributions and the
investment earnings. Contributions to the plan by the participants or by us,
and the income earned on these contributions, are generally not taxable to the
participants until withdrawn. Participant and company contributions are held in
trust as required by law. Individual participants may direct the trustee to
invest their accounts in authorized investment alternatives.

Employment Arrangements, Termination of Employment Arrangements
and Change of Control Arrangements

Mark Jung's offer letter, dated February 1, 1999, provides for an initial
annual salary of $250,000 commencing on February 1, 1999. Pursuant to the offer
letter, Mr. Jung purchased 1,978,021 shares of our common stock at $0.04667 per
share. The shares purchased by him are subject to our right to repurchase these
shares upon termination of his employment. Our right to repurchase his shares
at the original price upon his termination lapses ratably over a 48-month
period that began in December 1998. The repurchase right will expire as to half
of the shares of common stock subject to repurchase if Mr. Jung is terminated
by us without cause or if he terminates his employment under some
circumstances. In connection with this stock purchase, we agreed to loan Mr.
Jung the entire purchase price. See "Management--Compensation Committee
Interlocks and Insider Participation."

James Tolonen's offer letter, dated October 18, 1999, provides for an initial
annual salary of $225,000 commencing on October 1, 1999. Pursuant to the offer
letter, the James R. Tolonen and Ginger Tolonen Family Trust dated 9/26/96 and
the James R. Tolonen Grantor Retained Annuity Trust purchased 120,000 and
30,000 shares, respectively, of our Series B-1 preferred stock at a purchase
price of $4.22 per share. In connection with this stock purchase, we loaned the
James R. Tolonen and Ginger Tolonen Family Trust dated 9/26/96 $333,000,
pursuant to a full recourse promissory note representing part of the purchase
price for its shares. The principal amount of the loan is due on October 20,
2003 or earlier in the event of Mr. Tolonen's termination for cause or if he
terminates his employment under some circumstances, and bears interest at the
rate of 5.86% per

56
<PAGE>

year. Mr. Tolonen's offer letter provides that the note and any accrued
interest will be forgiven in full if he is terminated without cause or if he
terminates his employment under some circumstances. See "Management--
Compensation Committee Interlocks and Insider Participation." Pursuant to the
offer letter, Mr. Tolonen was granted options to purchase 600,000 shares of our
common stock at an exercise price of $2.00 per share, of which 50,000 shares
were granted under the 1999 Equity Incentive Plan and 550,000 shares were
granted outside the 1999 Equity Incentive Plan, which upon exercise will be
subject to our right to repurchase all of the shares of common stock for which
our repurchase right has not lapsed upon termination of his employment. In
November 1999, he exercised options to purchase 400,000 shares of our common
stock at an exercise price of $2.00 per share. Our right to repurchase these
shares lapses ratably over a 48-month period that began in October 1999. In
addition, our repurchase right lapses as to 75,000 shares of common stock if
Mr. Tolonen is terminated by us without cause or if he terminates his
employment under some circumstances, unless termination happens 60 days before,
or within one year after, we are acquired or merge with another company, in
which case our right to repurchase these shares lapses as to 150,000 shares.

Janette Chock's offer letter, dated January 18, 1999, provides for an initial
annual salary of $120,000 commencing on February 1, 1999. Pursuant to the offer
letter, Ms. Chock purchased 99,000 shares of our common stock at an exercise
price of $0.04667 per share under the 1999 Equity Incentive Plan. Upon
termination of her employment, we have the right to repurchase at the exercise
price all of the shares of common stock for which our repurchase right has not
lapsed. Our right to repurchase her shares at the original price upon
termination lapsed as to 12,375 shares on August 1, 1999 and lapses as to
approximately 2,062 shares each month thereafter.

Teresa Crummett's offer letter, dated March 15, 1999, provides for an initial
annual salary of $140,000 commencing on March 15, 1999, and an incentive bonus
of up to $7,500 per quarter commencing in the quarter ended June 30, 1999.
Pursuant to the offer letter, Ms. Crummett purchased 198,000 shares of our
common stock at an exercise price of $0.04667 per share under the 1999 Equity
Incentive Plan. Upon termination of her employment, we have the right to
repurchase at the exercise price all of the shares of common stock for which
our repurchase right has not lapsed. Our right to repurchase her shares lapsed
as to 24,750 shares on July 1, 1999 and lapses as to 4,125 shares each month
thereafter.

Kenneth Keller's offer letter, dated March 15, 1999, provides for an initial
annual salary of $175,000 commencing on March 15, 1999. Pursuant to the offer
letter, Mr. Keller purchased 450,000 shares of our common stock at an exercise
price of $0.04667 per share under the 1999 Equity Incentive Plan. Upon
termination of his employment, we have the right to repurchase at the exercise
price all of the shares of common stock for which our repurchase right has not
lapsed. Our right to repurchase his shares lapsed as to 28,125 shares on March
22, 1999 and lapses as to approximately 9,375 shares each month thereafter. The
repurchase right will expire as to 112,500 shares of the common stock subject
to repurchase if Mr. Keller is terminated by us without cause or if he
terminates his employment under some circumstances.

Elizabeth Murphy's offer letter, dated March 4, 1999, provides for an initial
annual salary of $200,000 commencing on March 17, 1999 and an incentive bonus
of up to $75,000, of which $36,500 is guaranteed in the first year of her
employment. In addition, her offer letter provides that we will pay her
$100,000 if she is terminated by us without cause, or if she terminates her
employment under some circumstances. Pursuant to the offer letter, Ms. Murphy
purchased 300,000 shares of our common stock, of which 75,000 shares will vest
on March 15, 2000 and the remainder will vest ratably over a 36-month period
thereafter, at an exercise price of $0.04667 per share under the 1999 Equity
Incentive Plan. Upon termination of her employment, we have the right to
repurchase at the exercise price all of the shares of common stock for which
our repurchase right has not lapsed. Our repurchase right will expire as to
75,000 shares of the common stock subject to

57
<PAGE>

repurchase if Ms. Murphy is terminated by us without cause or if she terminates
her employment under some circumstances.

Unless otherwise stated above, if we merge with or are acquired by another
company and the surviving company does not assume the employment contracts
between our executive officers and us, our executive officers may terminate
their employment at their own election and our repurchase right will expire as
to 25% of the number of shares purchased pursuant to the offer letter.

Limitation of Liability and Indemnification

Our amended and restated certificate of incorporation to be filed upon the
closing of this offering includes a provision that eliminates the personal
liability of our directors for monetary damages resulting from breach of
fiduciary duty as a director, except liability for:

. any breach of the director's duty of loyalty to us or our stockholders;

. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. unlawful dividends and stock repurchases or redemptions under section
174 of the Delaware General Corporation Law; or

. any transaction from which the director derived an improper personal
benefit.

These provisions are permitted under Delaware law.

Our bylaws, as amended, provide that:

. we must indemnify our directors and executive officers to the fullest
extent permitted by Delaware law or any other applicable law, subject to
very limited exceptions;

. we may indemnify our other employees and agents to the same extent that
we indemnify our directors and executive officers, unless otherwise
required by law, our certificate of incorporation, our bylaws or
agreements; and

. we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to very limited exceptions.

Prior to the completion of this offering, we intend to enter into
indemnification agreements with each of our current directors and executive
officers to give them additional contractual assurances regarding the scope of
the indemnification provided in our certificate of incorporation and bylaws and
to provide additional procedural protections. Presently, there is no pending
litigation or proceeding involving any of our directors, executive officers or
employees for which indemnification is sought, nor are we aware of any
threatened litigation that may result in claims for indemnification.

We have liability insurance for our directors and officers and intend to
obtain a rider to extend that coverage for public securities matters.

58
<PAGE>

RELATED PARTY TRANSACTIONS

Other than the employment agreements described in "Management," and the
transactions described below, since we were formed there has not been nor is
there currently proposed, any transaction or series of similar transactions to
which we were or will be a party:

. in which the amount involved exceeds or will exceed $60,000, and

. in which any director, executive officer, holder of more than 5% of our
common stock or any member of their immediate family had or will have a
direct or indirect material interest.

Sales of Securities

Christopher Anderson. On February 1, 1999, we sold 12,857,143 shares our
Series A preferred stock to Christopher Anderson, our Chairman of the Board and
a director, at a purchase price of $0.2333 per share. On December 20, 1999, we
sold 700,000 shares of Series C preferred stock to Mr. Anderson at a purchase
price of $10.00 per share. Mr. Anderson is the President and a director of
Imagine Media.

Imagine Media. On February 1, 1999, we issued to Imagine Media 989,011
shares of Series A preferred stock and 7,500,000 shares of Series B preferred
stock in exchange for certain of its assets. In connection with this issuance
of Series B preferred stock, we entered into a Services and Support Agreement
with Imagine Media dated as of January 1999. This agreement was intended to
assist us in our organizational and start-up phases by providing support
services to us and by permitting us to occupy space in Imagine Media's
premises. The agreement terminated on October 1, 1999. Imagine Media's shares
of Series B preferred stock were converted to 414,691 shares of Series B-1
preferred stock on May 11, 1999 for no additional consideration. On June 14,
1999, we sold 260,664 shares of Series B-1 preferred stock to Imagine Media at
a purchase price of $4.22 per share. On December 20, 1999, we sold 100,000
shares of Series C preferred stock to Imagine Media at a purchase price of
$10.00 per share.

Mark Jung. On February 1, 1999, we sold 989,011 shares our Series A
preferred stock to Mark Jung, our President and Chief Executive Officer and one
of our directors, at a purchase price of $0.2333 per share. Mr. Jung also
purchased 1,978,021 shares of common stock from us at a purchase price of
$0.04667 per share on February 1, 1999. On December 20, 1999, we sold 50,000
and 10,000 shares of Series C preferred stock to Mr. Jung and the Jung-Murdock
Children's Trust U/A 11/23/93 at a purchase price of $10.00 per share.

Michael Orsak. On May 11, 1999, we sold an aggregate of 1,540,284 shares of
Series B-1 preferred stock to entities associated with Worldview Technology
Partners at a purchase price of $4.22 per share. On December 20, 1999, we sold
148,700 shares of Series C preferred stock to entities associated with
Worldview Technology Partners at a purchase price of $10.00 per share.
Mr. Orsak, one of our directors, is a general partner of Worldview Technology
Partners and its affiliated entities.

Richard LeFurgy. On April 23, 1999, we sold 108,000 shares of common stock
to Richard LeFurgy, one of our directors, at a purchase price of $0.0467 per
share. Mr. LeFurgy also purchased 35,545 shares of Series B-1 preferred stock
from us at a purchase price of $4.22 per share on May 11, 1999. On December 20,
1999, he purchased 3,400 shares of our Series C preferred stock at a purchase
price of $10.00 per share.

On May 11, 1999, we sold an aggregate of 1,220,378 shares of Series B-1
preferred stock to entities associated with the Walden Media & Information
Technology Fund at a purchase price of $4.22 per share. On December 20, 1999,
we sold 117,800 shares of Series C preferred stock to entities associated with
the Walden Media & Information Technology Fund at a purchase price of

59
<PAGE>

$10.00 per share. Mr. LeFurgy is a member of Walden Media, L.L.C., the general
partner of the Walden Media & Information Technology Fund and its affiliated
entities.

Kenneth Keller. On March 15, 1999, we sold 150,000 shares of Series A
preferred stock to Kenneth Keller, our Vice President, Engineering, at a
purchase price of $0.2333 per share. On December 20, 1999, we sold 14,500
shares of Series C preferred stock to Mr. Keller at a purchase price of $10.00
per share.

Trusts Associated with James Tolonen. On October 22, 1999, we sold 120,000
and 30,000 shares of Series B-1 preferred stock to the James R. Tolonen and
Ginger Tolonen Family Trust dated 9/26/96 and the James R. Tolonen Grantor
Retained Annuity Trust, respectively, at a purchase price of $4.22 per share.
Mr. Tolonen, our Chief Financial Officer and Chief Operating Officer and one of
our directors, is a trustee of both these trusts.

Indemnification

We have entered into an indemnification agreement with Richard LeFurgy. Under
that agreement, we will indemnify Mr. LeFurgy for liabilities incurred by him
in connection with the possible recruitment of employees or consultants from a
particular company.

We intend to enter into indemnification agreements with each of our executive
officers and directors. Those indemnification agreements will require us to
indemnify our officers and directors to the fullest extent permitted by
Delaware law. See "Description of Capital Stock--Indemnification of Directors
and Executive Officers and Limitation of Liability."

Registration Rights

Holders of our preferred stock are entitled to registration rights with
respect to the shares of common stock that they will hold following this
offering. See "Description of Capital Stock--Registration Rights."

Loans to and other Arrangements with Officers and Directors

Loan to Christopher Anderson. We loaned $2.0 million to Christopher
Anderson, our Chairman of the Board and one of our directors, in connection
with his purchase of shares of our Series A preferred stock.

Loan to Mark Jung. We loaned $92,300 to Mark Jung, our President and Chief
Executive Officer, in connection with his purchase of our common stock.

Loan to James Tolonen. We loaned $600,000 to James Tolonen, our Chief
Financial Officer, Chief Operating Officer and director, in connection with his
purchase of 350,000 shares of our common stock.

Loan to Trust Associated with James Tolonen. We loaned $333,000 to the James
R. Tolonen and Ginger Tolonen Family Trust dated 9/26/96 in connection with its
purchase of our Series B-1 preferred stock.

Please refer to "Management--Compensation Committee Interlocks and Insider
Participation" for a description of the loans to Messrs. Anderson, Jung and
Tolonen and the trust associated with Mr. Tolonen, and "Management--Employment
Arrangements, Termination of Employment Arrangements and Change of Control
Arrangements" for a description of stock option grants to officers and
directors.

We believe that all transactions between us and our officers, directors,
principal stockholders and other affiliates have been and will be on terms no
less favorable to us than could be obtained from unaffiliated third parties.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table presents information as to the beneficial ownership of
our common stock as of December 31, 1999 and as adjusted to reflect the sale of
the common stock in this offering by

. each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;

. each of our directors;

. each executive officer listed in the Summary Compensation Table above;
and

. all directors and executive officers as a group.

<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
------------------------
Number of Shares Prior to After the
Name of Beneficial Owner Beneficially Owned Offering Offering
------------------------ ------------------ ---------- ----------
<S> <C> <C> <C>
Christopher Anderson(1)................................. 15,321,509 49.2% 41.0%
Mark A. Jung(2)......................................... 3,027,032 9.7 8.1
Imagine Media, Inc.(3)
150 North Hill Drive
Brisbane, California 94005............................. 1,764,366 5.7 4.7
Michael Orsak(4)
Worldview Technology Partners entities
435 Tasso Street, Suite 120
Palo Alto, California 94301............................ 1,688,984 5.4 4.5
Weiss Peck & Greer Venture Partners entities(5)
555 California Street, Suite 3130
San Francisco, California 94104
Attn: Christopher J. Schaepe........................... 1,688,983 5.4 4.5
Richard A. LeFurgy(6)
Walden Media & Information Technology Fund, L.P.
entities
750 Battery St., 7th Floor
San Francisco, California 94111........................ 1,485,123 4.8 4.0
James R. Tolonen(7)..................................... 750,000 2.4 2.0
Kenneth H. Keller(8).................................... 574,504 1.8 1.5
Elizabeth G. Murphy(9).................................. 300,000 * *
Teresa M. Crummett(10).................................. 198,000 * *
Robert H. Reid(11)...................................... 150,000 * *
Janette S. Chock(12).................................... 147,500 * *
All 12 directors and executive officers as a group(13).. 23,442,652 75.4% 62.9%
</TABLE>
- --------
* Less than 1% of the outstanding shares of common stock.

(1) Based on information provided to us by Mr. Anderson and Imagine Media,
Inc. indicating that Mr. Anderson has sole voting and dispositive power
with respect to 13,557,143 shares and shares voting and dispositive power
with respect to 1,764,366 shares held by Imagine Media, Inc. described in
footnote 3. Mr. Anderson disclaims beneficial ownership with respect to
the shares held by Imagine Media, Inc.

(2) Includes 10,000 shares of common stock held by the Jung-Murdock Children's
Trust U/A 11/23/93, Susan Murdock TTEE. Mr. Jung disclaims beneficial
ownership with respect to the shares held by the Jung-Murdock Children's
Trust. Includes 1,401,098 shares of common stock subject to our repurchase
right within 60 days of December 31, 1999.

(3) Mr. Anderson, one of our directors, is the President and a director of
Imagine Media, Inc. Based on information provided to us by Mr. Anderson
and Imagine Media, Inc., Mr. Anderson shares voting and dispositive power
with respect to the shares held by Imagine Media, Inc. Mr. Anderson
disclaims beneficial ownership with respect to the shares held by Imagine
Media, Inc.

(4) Represents 1,252,425 shares held by Worldview Technology Partners II,
L.P., 383,395 shares held by Worldview Technology International II, L.P.
and 53,164 shares held by Worldview Strategic Partners II, L.P. Mr. Orsak
is a general partner of the Worldview Technology Partner entities. Mr.
Orsak disclaims beneficial ownership of shares held by the Worldview
Technology Partner entities except to the extent of his pecuniary interest
in this venture capital firm.

(5) Represents 1,163,600 shares held by Weiss, Peck & Greer Venture Associates
V, L.L.C., 11,829 shares held by Weiss, Peck & Greer Venture Associates V-
A, L.L.C., 253,687 shares held by Weiss, Peck & Greer Venture Associates V

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<PAGE>

Cayman, L.P. and 259,867 shares held by Discovery Ventures III, LLC.
Christopher J. Schaepe is a managing member of WPG VC Fund Adviser II,
L.L.C., the fund investment advisory member of Weiss, Peck & Greer Venture
Associates V, L.L.C. and Weiss, Peck & Greer Venture Associates V-A,
L.L.C., and the fund investment advisory partner of Weiss, Peck & Greer
Venture Associates V Cayman, L.P. Mr. Schaepe shares voting and
dispositive power with respect to the shares held by Weiss, Peck & Greer
Venture Associates V, L.L.C., Weiss, Peck & Greer Venture Associates V-A,
L.L.C. and Weiss, Peck & Greer Venture Associates V Cayman, L.P. Based on
information provided to us by Weiss, Peck & Greer, L.L.C., Weiss, Peck &
Greer, L.L.C. is a member of Discovery III Management, LLC, the fund
investment advisory member of Discovery Ventures III, LLC, and is a class
A non-managing member of WPG VC Fund Adviser II, L.L.C. Weiss, Peck &
Greer, L.L.C. and Mr. Schaepe disclaim beneficial ownership with respect
to the shares held by Weiss, Peck & Greer Venture Associates V, L.L.C.,
Weiss, Peck & Greer Venture Associates V-A, L.L.C., Weiss, Peck & Greer
Venture Associates V Cayman, L.P. and Discovery Ventures III, LLC, except
to the extent of their pecuniary interests in these entities.

(6) Includes 26,007 shares held by Infotech Ventures Ltd., 26,007 shares held
by Walden EDB Partners, L.P., 11,848 shares held by Walden Japan Partners,
L.P. and 1,274,316 shares held by Walden Media & Information Technology
Fund, L.P. Mr. LeFurgy, one of our directors, is a member of Walden Media,
L.L.C., the general partner of Walden Media & Information Technology Fund,
L.P., and an affiliate of Walden Japan Partners, L.P., Walden EDB
Partners, L.P. and Infotech Partners Ltd. Mr. LeFurgy disclaims beneficial
ownership of the shares held by Walden Media & Technology Fund, L.P.,
Walden Japan Partners, L.P., Walden EDB Partners, L.P. and Infotech
Partners Ltd., except to the extent of his proportionate ownership
therein. Includes 85,500 shares of common stock subject to our repurchase
right within 60 days of December 31, 1999.

(7) Includes 120,000 shares of common stock held by the James R. Tolonen and
Ginger Tolonen Family Trust dated 9/26/96, Ginger and James Tolonen
trustees, and 30,000 shares of common stock held by James R. Tolonen,
trustee of the James R. Tolonen 1999 Grantor Retained Annuity Trust.
Includes 550,000 shares of common stock subject to our repurchase right
within 60 days of December 31, 1999, 200,000 shares of which are issuable
upon exercise of options exercisable within 60 days of December 31, 1999.

(8) Includes 20,000 shares held by the Shane M. Keller 1990 Trust and 20,000
shares held by the Samantha J. Keller 1991 Trust. Includes 323,750 shares
of common stock subject to our repurchase right within 60 days of December
31, 1999.

(9) Includes 300,000 shares of common stock subject to our repurchase right
within 60 days of December 31, 1999, of which 15,000 shares are held by
C.J. Allan Murphy, as custodian for Charles James Murphy under UTMA and
15,000 shares are held by C.J. Allan Murphy, as custodian for Parker
Elisabeth Murphy under UTMA.

(10) Includes 144,375 shares of common stock subject to our repurchase right
within 60 days of December 31, 1999.

(11) Includes 115,625 shares of common stock subject to our repurchase right
within 60 days of December 31, 1999.

(12) Includes 119,656 shares of common stock subject to our repurchase right
within 60 days of December 31, 1999.

(13) Includes 3,040,004 shares of common stock subject to our repurchase right
within 60 days of December 31, 1999 and 200,000 shares of common stock
issuable upon exercise of options exercisable within 60 days of
December 31, 1999.

The percentage of shares beneficially owned prior to the offering is based on
31,145,442 shares of common stock outstanding as of December 31, 1999 after
giving effect to the issuance of 150,000 shares of Series C preferred stock in
January 2000, assuming that all outstanding preferred stock has been converted
into common stock. The percentage of shares beneficially owned after this
offering is based on a denominator that includes the 6,250,000 shares of common
stock being offered but does not include the shares which are subject to the
underwriters' over-allotment option. Percentage ownership figures after the
offering do not include shares that may be purchased by each person in this
offering.

Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless indicated above, the persons and entities named
in the table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where applicable.
Shares of common stock subject to options and warrants that are currently
exercisable or exercisable within 60 days of December 31, 1999 are deemed to be
outstanding and to be beneficially owned by the person holding the options or
warrants for the purpose of computing the percentage ownership of that person
but are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. Unless indicated above, the address for each
listed stockholder is c/o Snowball.com, Inc., 250 Executive Park Boulevard,
Suite 4000, San Francisco, California 94134.

62
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Immediately following the closing of this offering, our authorized capital
stock will consist of 100,000,000 shares of common stock, $0.001 par value per
share, and 5,000,000 shares of preferred stock, $0.001 par value per share. As
of December 31, 1999, and assuming the conversion of all outstanding preferred
stock into common stock upon the closing of this offering, there were
outstanding 30,995,442 shares of common stock held of record by approximately
110 stockholders, options to purchase 2,358,368 shares of common stock and
warrants to purchase 322,688 shares of common stock.

We are incorporated in the state of Delaware. Following the closing of this
offering, we intend to amend and restate our certificate of incorporation. Our
amended and restated certificate of incorporation, restated bylaws and
investors' rights agreement, described below, are included as exhibits to the
registration statement of which this prospectus forms a part.

Common Stock

Status. Each outstanding share of common stock is, and all shares of common
stock to be outstanding upon completion of this offering will be, fully paid
and nonassessable.

Dividend Rights. Subject to preferences that may apply to shares of preferred
stock outstanding at the time, the holders of outstanding shares of common
stock are entitled to receive dividends out of assets legally available at the
times and in the amounts that our board may from time to time determine.

Voting Rights. Each common stockholder is entitled to one vote for each share
of common stock held on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election.

No preemptive or similar rights. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.

Right to receive liquidation distributions. Upon a liquidation, dissolution
or winding-up of Snowball, the assets legally available for distribution to
stockholders would be distributable ratably among the holders of the common
stock and any participating preferred stock outstanding at that time after
payment of liquidation preferences, if any, on any outstanding preferred stock
and payment of other claims of creditors.

Preferred Stock

Upon the closing of this offering, the outstanding shares of preferred stock,
including 150,000 shares of Series C preferred stock issued in January 2000,
will be converted into 25,559,895 shares of common stock. See note 8 of our
Notes to Consolidated Financial Statements for a description of this preferred
stock.

Following this offering, we will be authorized, subject to the limits imposed
by Delaware law, to issue preferred stock in one or more series, to establish
from time to time the number of shares to be included in each series and to fix
the rights, preferences and privileges of the shares of each wholly unissued
series and any of its qualifications, limitations or restrictions. The board
can also increase or decrease the number of shares of any series, but not below
the number of shares of that series then outstanding, without any further vote
or action by the stockholders.

The board may authorize the issuance of preferred stock with voting,
dividend, liquidation or conversion rights that could adversely affect the
voting power or other rights of the holders of the

63
<PAGE>

common stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could,
among other things, have the effect of delaying, deferring or preventing a
change in control of Snowball and might adversely affect the market price of
the common stock and the voting and other rights of the holders of common
stock. We have no current plan to issue any shares of preferred stock.

Warrants

As of December 31, 1999, we had outstanding the following warrants to
purchase our stock:

<TABLE>
<CAPTION>
Total number
of shares Exercise
subject to price
Type of stock Warrants per share Expiration date
-------------------------- ------------ --------- -------------------------
<C> <C> <C> <S>
Series B-1 preferred stock 154,804 $8.44 November 8, 2002

Series B-1 preferred stock 115,192 8.44 180 days following this
offering

Series B-1 preferred stock 31,595 3.165 Upon consummation of this
offering

Series B-1 preferred stock 21,097 7.11 Upon consummation of this
offering
</TABLE>

After the closing of this offering, the warrants that survive the
consummation of the offering will become exercisable for a like number of
shares of common stock.

Registration Rights

The holders of approximately 25,559,895 shares of common stock will have the
right to require us to register their shares with the Securities and Exchange
Commission so that those shares may be publicly resold or to include their
shares in any registration statement we file.

Right to demand registration

At any time more than six months after this offering, these stockholders can
request that we file a registration statement so they can publicly sell their
shares. The underwriters of any underwritten offering will have the right to
limit the number of shares to be so included in a registration statement.

Who may make a demand. The holders of at least 30% of the shares with
registration rights have the right to demand that we file a registration
statement on a form other than Form S-3 covering at least a majority of the
shares with registration rights (or a lesser amount if the offering price
exceeds $10,000,000 (net of underwriting discounts and commissions)). If we are
eligible to file a registration statement on Form S-3, the holders with the
registration rights above also have the right to demand that we file a
registration statement on Form S-3, so long as the amount of securities to be
sold in that registration exceeds $10,000,000.

Number of times holders can make demands. We will not be required to file
more than two registration statements on a form other than Form S-3. If we are
eligible to file a registration statement on Form S-3, we are not required to
file more than two registration statements during any 12-month period.

Postponement. We may postpone the filing of a registration statement for up
to 90 days once in a 12-month period if we determine that the filing would be
seriously detrimental to us or our stockholders.

64
<PAGE>

Piggyback registration rights

If we register any securities for public sale, the stockholders with
registration rights above, as well as the holders of any shares issued upon
exercise of outstanding warrants to purchase 269,996 shares of our Series B-1
preferred stock, will have the right to include their shares in the
registration statement. The underwriters of any underwritten offering will have
the right to limit the number of shares to be so included in a registration
statement.

Expenses of registration

We will pay all of the expenses (other than underwriting discounts and
commissions) relating to any demand or piggyback registration. However, we will
not pay for any expenses of any demand registration if the request is
subsequently withdrawn by the holders of a majority of the shares having
registration rights, subject to very limited exceptions.

Expiration of registration rights

The registration rights described above will expire five years after this
offering is completed. The registration rights will terminate earlier with
respect to a particular stockholder if that holder can resell all of its
securities in a 90-day period under Rule 144 of the Securities Act.

Anti-Takeover Provisions of our Certificate of Incorporation, Bylaws and
Delaware Law

The provisions of Delaware law, our amended and restated certificate of
incorporation to be filed upon the closing of this offering, and our bylaws, as
amended, described below may have the effect of delaying, deferring or
discouraging another person from acquiring control of our company.

Delaware Law

We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents certain
Delaware corporations from engaging, under limited circumstances, in a
"business combination," with an "interested stockholder" for a period of three
years following the date the person became an interested stockholder unless:

. the board approves either the business combination or the transaction
that resulted in the stockholder becoming an interested director prior
to the date the "interested stockholder" attained that status;

. upon the closing of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or

. on or subsequent to the date, the business combination is approved by
the board and authorized at an annual or special meeting of stockholders
by at least two-thirds of the outstanding voting stock that is not owned
by the interested stockholder.

A "business combination" generally includes a merger, asset or stock sale or
other transaction resulting in a financial benefit to the interested
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to
determination of interested stockholder status did own, 15% or more of a
corporation's voting stock.

A Delaware corporation may "opt out" of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.

65
<PAGE>

However, we have not "opted out" of this provision. Section 203 could prohibit
or delay mergers or other takeover or change-in-control attempts and,
accordingly, might discourage attempts to acquire us.

Charter and Bylaw Provisions

Our amended and restated certificate of incorporation to be filed upon the
closing of this offering will provide for a classified board divided into three
classes. The directors in each class will serve for a three-year term, with our
stockholders electing one class each year. The affirmative vote of at least 66
2/3% of all classes of voting stock is required to remove any director. For
more information on the classification of our board, please see "Management--
Board of Directors and Committees." This system of electing and removing
directors may tend to discourage a third party from making a tender offer or
otherwise attempting to obtain control of us, because it generally makes it
more difficult for stockholders to replace a majority of the directors.

Our bylaws, as amended, provide that any action required or permitted to be
taken by our stockholders at an annual meeting or a special meeting of the
stockholders may be taken only if it is properly brought before the meeting.
Our stockholders may not take any action by written consent. Our certificate of
incorporation, as we intend to amend it, provides that our board of directors
may issue preferred stock with voting or other rights without stockholder
action. Our bylaws and amended and restated certificate of incorporation to be
filed upon the closing of this offering, provide that special meetings of the
stockholders may only be called by our board, the chairman of our board, our
chief executive officer or our president.

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

Indemnification of Directors and Executive Officers and Limitation of Liability

Our amended and restated certificate of incorporation to be filed upon the
closing of this offering, limits the liability of directors to the fullest
extent permitted by Delaware law. In addition, our certificate of incorporation
and bylaws provide that we will indemnify our directors and officers to the
fullest extent permitted by Delaware law. We intend to enter into separate
indemnification agreements with our directors and executive officers that
provide them indemnification protection in the event the certificate of
incorporation is subsequently amended.

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

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C. The address of our transfer agent and registrar is
85 Challenger Road, Ridgefield Park, New Jersey 07660.

Listing

We have applied for our common stock to be quoted on the Nasdaq National
Market under the trading symbol "SNOW".

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<PAGE>

SHARES AVAILABLE FOR FUTURE SALE

Sales of substantial amounts of our common stock, including shares issued
upon exercise of outstanding warrants or options, in the public market after
this offering could adversely affect market prices prevailing from time to time
and could impair our ability to raise capital through the sale of our equity
securities. As described below, no shares currently outstanding will be
available for sale immediately after this offering due to limited contractual
restrictions on resale. Sales of substantial amounts of our common stock in the
public market after these restrictions lapse or are released could adversely
affect the prevailing market price and our ability to raise equity capital in
the future.

Upon completion of this offering, based on shares outstanding as of December
31, 1999 and giving effect to the issuance of 150,000 shares of Series C
preferred stock in January 2000, we will have outstanding 37,395,442 shares of
common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants. Of these shares, the shares
sold in this offering plus any shares issued upon exercise of the underwriters'
over-allotment option will be freely tradable without restriction under the
Securities Act unless purchased by our "affiliates," as that term is defined in
Rule 144 under the Securities Act. In general, affiliates include officers,
directors and 10% stockholders. The remaining shares will become eligible for
public sale as follows:

<TABLE>
<CAPTION>
Number of
Shares Date
--------- ----
<C> <S>
21,182,467 After 180 days from the date of this prospectus, the 180 day lock-
up terminates and these shares are saleable under Rule 144 (subject
in some cases to volume limitations) or Rule 144(k)
1,654,464 After 180 days from the date of this prospectus, the 180 day lock-
up is released and these shares are saleable under Rule 701
(subject in some cases to a right of repurchase)
8,308,511 After 180 days from the date of this prospectus, restricted
securities that are held for less than one year and are not yet
saleable under Rule 144
</TABLE>

Lock-Up Agreements

All of our officers and directors and substantially all of our stockholders
have signed lock-up agreements under which they have agreed not to sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
common stock or any securities convertible into or exercisable or exchangeable
for shares of common stock without the prior written consent of Goldman, Sachs
& Co. for a period of 180 days after the date of this prospectus.

Goldman, Sachs & Co. may choose to release some of these shares from these
restrictions prior to the expiration of this 180-day period, though it has no
current intention to do so.

Rule 144

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

. 1% of the number of shares of common stock then outstanding, which will
equal approximately 373,954 shares immediately after this offering; or

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

67
<PAGE>

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

Rule 144(k)

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

Rule 701

Any of our employees, officers, directors or consultants who purchased his or
her shares under a written compensatory plan or contract may be entitled to
sell his or her shares in reliance on Rule 701. Rule 701 permits affiliates to
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirements of Rule 144. Rule 701 further provides that non-affiliates
may sell these shares in reliance on Rule 144 without having to comply with the
holding period, public information, volume limitation or notice provisions of
Rule 144. All holders of Rule 701 shares are required to wait until 90 days
after the date of this prospectus before selling those shares. However, all
shares issued under Rule 701 are subject to lock-up agreements and will only
become eligible for sale when the 180-day lock-up agreements expire.

Registration Rights

Upon completion of this offering and assuming all warrants to purchase shares
of Series B-1 preferred stock are exercised, the holders of 25,882,583 shares
of common stock, or their transferees, will be entitled to certain rights with
respect to the registration of those shares under the Securities Act. For a
discussion of these rights please see "Description of Capital Stock--
Registration Rights." After these shares are registered, they will be freely
tradable without restriction under the Securities Act.

Stock Options

As of December 31, 1999, options to purchase 2,358,368 shares of common stock
were issued and outstanding. Upon the expiration of the lock-up agreements
described above, at least 941,585 shares of common stock will be subject to
vested options, based on options outstanding as of December 31, 1999.
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering shares of common stock reserved for issuance
under our stock option and employee stock purchase plans. This registration
statement is expected to be filed and become effective as soon as practicable
after the effective date of this offering. Accordingly, shares registered under
this registration statement will, subject to vesting provisions and Rule 144
volume limitation manner of sale, notice and public information requirements
applicable to our affiliates, be available for sale in the open market
immediately after the 180-day lock-up agreements expire.

Warrants

As of December 31, 1999, we had outstanding warrants to purchase 322,688
shares of common stock. When these warrants are exercised and the exercise
price is paid in cash, the shares must be held for one year before they can be
sold under Rule 144. However, each of these warrants contains "net exercise
provisions." These provisions allow a holder to exercise the warrant for a
lesser number of shares of common stock in lieu of paying cash. The number of
shares that would be issued in this case would be based upon the market price
of the common stock at the time of the net exercise. If the warrant had been
held for at least one year, the shares of common stock could be publicly sold
under Rule 144. After the lock-up agreements described above expire, these
warrants will have expired or have been exercised.

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<PAGE>

UNDERWRITING

Snowball and the underwriters for the offering named below have entered into
an underwriting agreement with respect to the shares being offered. Subject to
certain conditions set forth in the underwriting agreement, each underwriter
has severally agreed to purchase the number of shares indicated in the
following table. Goldman, Sachs & Co., Chase Securities, Inc. and FleetBoston
Robertson Stephens Inc. are the representatives of the underwriters.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co. ..............................................
Chase Securities, Inc. ............................................
FleetBoston Robertson Stephens Inc.................................

----
Total............................................................
====
</TABLE>

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 937,500
shares from Snowball to cover such sales. They may exercise that option for 30
days. If any shares are purchased under this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.

The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Snowball. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

<TABLE>
<CAPTION>
Paid by Snowball
-------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share............................................. $ $
Total................................................. $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share
from the initial public offering price. If all of the shares are not sold at
the initial public offering price, the representatives may change the offering
price and the other selling terms.

Snowball and its officers, directors and substantially all of its
securityholders have agreed with the underwriters not to dispose of or hedge
any of their common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, except
with the prior written consent of Goldman, Sachs & Co. See "Shares Available
for Future Sale" for a discussion of certain transfer restrictions.

69
<PAGE>

Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Snowball and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be Snowball's historical performance, estimates of Snowball's
business potential and earnings prospects, an assessment of Snowball's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.

We have applied to have our common stock listed on the Nasdaq National Market
under the symbol "SNOW".

In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short-sale covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

A prospectus in electronic format will be made available on the web sites
maintained by one or more underwriters. The underwriters may agree to allocate
a number of shares to underwriters for sale to their online brokerage account
holders. Internet distributions will be allocated by the lead managers to
underwriters that may make Internet distributions on the same basis as other
distributions.

The underwriters do not expect sales to discretionary accounts to exceed nine
percent of the total number of shares offered.

At our request, the underwriters have reserved up to 549,400 shares of common
stock for sale at the initial public offering price to directors, officers,
friends and family members of employees, and other friends of Snowball, through
a directed share program. The number of shares of common stock available for
sale to the general public in the public offering will be reduced to the extent
these persons purchase these reserved shares. There can be no assurance that
any of the reserved shares will be so purchased. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
basis as other shares offered hereby.

Snowball estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$ .

Snowball has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

70
<PAGE>

LEGAL MATTERS

Fenwick & West LLP, Palo Alto, California, will pass upon the validity of the
issuance of the shares of common stock offered by this prospectus. Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California,
will pass upon certain legal matters in connection with this offering for the
underwriters. An investment fund associated with Fenwick & West LLP owns 12,948
shares of our common stock.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and 1999, and for each of the three
years in the period ended December 31, 1999, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.

J.W. Hunt and Company, LLP, independent auditors, have audited the financial
statements of Ameritrack, Inc. (a development stage company) at August 31, 1999
and for the period from the commencement of operations on or about August 14,
1998 through August 31, 1998, as set forth in their report. We have included
the financial statements of Ameritrack, Inc. (a development stage company) in
the prospectus and elsewhere in the registration statement in reliance on J.W.
Hunt and Company, LLP's report, given on their authority as experts in
accounting and auditing.

Hamilton & Associates, Inc., independent auditors, have audited the financial
statements of Extreme Interactive Media, Inc. as of December 31, 1998 and
September 30, 1999, and for the year ended December 31, 1998 and the nine
months ended September 30, 1999 as set forth in their report. We have included
the financial statements of Extreme Interactive Media, Inc. in the prospectus
and elsewhere in the registration statement in reliance on Hamilton &
Associates, Inc.'s report, given on their authority as experts in accounting
and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common
stock. This prospectus does not contain all of the information set forth in the
registration statement and the exhibits to the registration statement. For
further information with respect to us and our common stock, we refer you to
the registration statement and the exhibits filed as a part of the registration
statement. Statements contained in this prospectus concerning the contents of
any contract or any other document are not necessarily complete. If a contract
or document has been filed as an exhibit to the registration statement, we
refer you to the copy of the contract or document that has been filed. Each
statement in this prospectus relating to a contract or document filed as an
exhibit is qualified in all respects by the filed exhibit. The registration
statement, including exhibits, may be inspected without charge at the
Securities and Exchange Commission's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of all or any part of it may be
obtained from that office after payment of fees prescribed by the Securities
and Exchange Commission. The public may obtain information on the operation of
the Public Reference Room by calling 1-800-732-0330. The Securities and
Exchange Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission at
http://www.sec.gov.

71
<PAGE>

Snowball.com, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Snowball.com, Inc. Consolidated Financial Statements: Page
<S> <C>
Report of Ernst & Young LLP, Independent Auditors...................... F-2
Consolidated Balance Sheets............................................ F-3
Consolidated Statements of Operations.................................. F-4
Consolidated Statement of Stockholders'/Division Equity................ F-5
Consolidated Statements of Cash Flows.................................. F-6
Notes to Consolidated Financial Statements............................. F-7

Ameritrack, Inc. (a development stage company) Financial Statements:

Independent Auditors' Report........................................... F-24
Balance Sheet.......................................................... F-25
Statement of Income and Expense........................................ F-26
Statement of Changes in Stockholders' Equity........................... F-27
Statement of Cash Flows................................................ F-28
Notes to Financial Statements.......................................... F-29

Extreme Interactive Media, Inc. Financial Statements:

Independent Auditors' Report........................................... F-31
Balance Sheets......................................................... F-32
Statements of Operations and Accumulated Deficit....................... F-33
Statements of Cash Flows............................................... F-34
Notes to Financial Statements.......................................... F-35

Unaudited Pro Forma Condensed Combined Financial Information:

Unaudited Pro Forma Condensed Combined Financial Information........... F-37
Pro Forma Condensed Combined Statement of Operations................... F-38
Notes to the Unaudited Pro Forma Condensed Combined Financial
Information........................................................... F-39
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Snowball.com, Inc.

We have audited the accompanying consolidated balance sheets of Snowball.com,
Inc. and its predecessor division of Imagine Media, Inc. at December 31, 1998
and 1999, and the related consolidated statements of operations,
stockholders'/division equity, and cash flows for each of the three years in
the period ended December 31, 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 audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Snowball.com, Inc. and its predecessor division of Imagine Media, Inc. at
December 31, 1998 and 1999, and the results of operations and cash flows of
Snowball.com, Inc. and its predecessor division of Imagine Media, Inc. for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP
Palo Alto, California
January 28, 2000

F-2
<PAGE>

Snowball.com, Inc.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

<TABLE>
<CAPTION>
Pro forma
Stockholders'
December 31, Equity at
----------------- December 31,
1998(1) 1999(2) 1999
------- -------- -------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................... $ -- $ 25,489
Short-term investments....................... -- 8,000
Accounts receivable, less allowance of $99
and $528 at December 31, 1998 and 1999,
respectively................................ 920 2,560
Prepaid expenses and other current assets.... 148 2,235
------- --------
Total current assets....................... 1,068 38,284
Goodwill and intangible assets, net........... -- 3,355
Fixed assets, net............................. 93 4,368
Other assets.................................. -- 711
------- --------
Total assets............................... $ 1,161 $ 46,718
======= ========
Liabilities and stockholders'/division equity
Current liabilities:
Accounts payable............................. $ 301 $ 4,757
Accrued liabilities.......................... 50 3,081
Deferred revenue............................. 48 702
Notes payable................................ -- 250
Current portion of term loan ................ -- 150
Current equipment financing obligations...... -- 1,081
------- --------
Total current liabilities.................. 399 10,021
Long-term equipment financing obligations..... -- 2,036
Commitments
Stockholders'/division equity:
Convertible preferred stock, $0.001 par
value, issuable in series: no shares
authorized at December 31, 1998;
20,000,000 shares authorized at December
31, 1999, 18,066,269 shares issued and
outstanding (5,000,000 shares authorized,
no shares outstanding pro forma)............ -- 18 $ --
Common stock, $0.001 par value: no shares
authorized at December 31, 1998; 37,500,000
shares authorized at December 31, 1999,
5,585,547 shares issued and outstanding
(100,000,000 shares authorized and
30,995,442 shares issued and outstanding
pro forma).................................. -- 6 31
Net contribution from Imagine
Media/Additional paid-in capital............ 5,701 88,662 88,655
Notes receivable from stockholders........... -- (1,301) (1,301)
Deferred stock compensation.................. -- (10,868) (10,868)
Prepaid marketing and distribution rights.... -- (2,095) (2,095)
Accumulated/division deficit................. (4,939) (39,761) (39,761)
------- -------- --------
Total stockholders'/division equity........ 762 34,661 $ 34,661
------- -------- ========
Total liabilities and stockholders'/division
equity....................................... $ 1,161 $ 46,718
======= ========
</TABLE>
- --------
(1) Through December 31, 1998, our activities were included in the operations
of Imagine Media, Inc. Our financial statements for these periods have been
prepared on a carve-out basis.
(2) From January 1999, we have operated as a separate legal entity.

See accompanying notes.

F-3
<PAGE>

Snowball.com, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1997(1) 1998(1) 1999(2)
------- ------- ---------
<S> <C> <C> <C>
Revenue.......................................... $ 927 $ 3,256 $ 6,674
Cost of revenue.................................. 171 1,322 4,316
------- ------- ---------
Gross margin..................................... 756 1,934 2,358
Operating expenses:
Production and content......................... 628 1,599 6,610
Engineering and development.................... 65 329 5,084
Sales and marketing............................ 836 2,592 20,393
General and administrative..................... 506 1,074 3,486
Stock-based compensation(3).................... -- -- 1,521
Amortization of goodwill and intangible
assets........................................ -- -- 471
------- ------- ---------
Total operating expenses..................... 2,035 5,594 37,565
------- ------- ---------
Loss from operations............................. (1,279) (3,660) (35,207)
Interest income, net............................. -- -- 265
Other income..................................... -- -- 120
------- ------- ---------
Net loss......................................... $(1,279) $(3,660) $ (34,822)
======= ======= =========
Basic and diluted net loss per share............. $ (186.69)
=========
Shares used in per share calculation............. 187
=========
Pro forma basic and diluted net loss per share
(unaudited)..................................... $ (1.93)
=========
Shares used in pro forma per share calculation
(unaudited)..................................... 18,022
=========
</TABLE>
- --------
(1) Through December 31, 1998, our activities were included in the operations
of Imagine Media, Inc. Our financial statements for these periods have been
prepared on a carve-out basis.

(2)From January 1999, we have operated as a separate legal entity.

(3)Stock-based compensation relates to the following in 1999:

<TABLE>
<S> <C>
Cost of revenue......................................................... $ 7
Production and content.................................................. 407
Engineering and development............................................. 263
Sales and marketing..................................................... 777
General and administrative.............................................. 67
------
Total................................................................. $1,521
======
</TABLE>

See accompanying notes.

F-4
<PAGE>

Snowball.com, Inc.

CONSOLIDATED STATEMENT OF STOCKHOLDERS'/DIVISION EQUITY
(in thousands, except share and per share data)

<TABLE>
<CAPTION>
Prepaid
Convertible Net Contribution Notes Marketing
Preferred Stock Common Stock From Imagine Receivable Deferred and Accumulated/
----------------- ---------------- Media/Additional From Stock Distribution Division
Shares Amount Shares Amount Paid-In Capital Stockholders Compensation Rights Deficit
---------- ------ --------- ------ ---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1997............ -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ --
Net and
comprehensive
loss for the
period.......... -- -- -- -- -- -- -- -- (1,279)
Contribution
from Imagine
Media........... -- -- -- -- 1,781 -- -- -- --
--------------------------------------------------------------------------------------------------------
Balance at
December 31,
1997............ -- -- -- -- 1,781 -- -- -- (1,279)
Net and
comprehensive
loss for the
period.......... -- -- -- -- -- -- -- -- (3,660)
Contribution
from Imagine
Media........... -- -- -- -- 3,920 -- -- -- --
--------------------------------------------------------------------------------------------------------
Balance at
December 31,
1998............ -- -- -- -- 5,701 -- -- -- (4,939)
Issuance of
common stock to
founders and
employees for
cash and notes
receivable...... -- -- 3,812,297 4 377 (302) -- -- --
Issuance of
Series A
preferred stock
at $0.35 per
share for cash,
notes receivable
and assets
transferred from
Imagine Media... 9,990,111 10 -- -- 3,257 (2,000) -- -- --
Issuance of
Series B and B-1
preferred stock
for cash and
assets
transferred from
Imagine Media at
$6.33 per
share........... 4,028,437 4 -- -- 23,746 -- -- -- --
Issuance of
Series B-1
preferred stock
at $6.33 per
share to
strategic
partner and
officer for cash
and marketing
rights.......... 668,721 1 -- -- 6,571 -- -- (2,339) --
Issuance of
common stock to
employees upon
exercise of
stock options,
net of
repurchases..... -- -- 1,668,250 2 1,107 (1,044) -- -- --
Issuance of
warrants to
purchase Series
B-1 preferred
stock in
connection with
lease financing
and term loan... -- -- -- -- 948 -- -- -- --
Issuance of
Series C
preferred stock
at $10.00 per
share for cash
and conversion
of $3.0 million
term loan....... 3,379,000 3 -- -- 33,786 -- -- -- --
Payments
received on
promissory
notes........... -- -- -- -- -- 2,045 -- -- --
Issuance of
common stock in
connection with
Ameritrack and
Extreme
Interactive
Media
acquisitions.... -- -- 105,000 -- 780 -- -- -- --
Deferred
compensation.... -- -- -- -- 12,389 -- (12,389) -- --
Amortization of
deferred
compensation and
prepaid
marketing and
distribution
rights.......... -- -- -- -- -- -- 1,521 244 --
Net and
comprehensive
loss for the
period.......... -- -- -- -- -- -- -- -- (34,822)
--------------------------------------------------------------------------------------------------------
Balance at
December 31,
1999............ 18,066,269 $ 18 5,585,547 $ 6 $88,662 $(1,301) $(10,868) $(2,095) $(39,761)
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
<CAPTION>
Total
Stockholders'/
Division
Equity
--------------
<S> <C>
Balance at
January 1,
1997............ $ --
Net and
comprehensive
loss for the
period.......... (1,279)
Contribution
from Imagine
Media........... 1,781
--------------------------------------------------------------------------------------------------------
Balance at
December 31,
1997............ 502
Net and
comprehensive
loss for the
period.......... (3,660)
Contribution
from Imagine
Media........... 3,920
--------------------------------------------------------------------------------------------------------
Balance at
December 31,
1998............ 762
Issuance of
common stock to
founders and
employees for
cash and notes
receivable...... 79
Issuance of
Series A
preferred stock
at $0.35 per
share for cash,
notes receivable
and assets
transferred from
Imagine Media... 1,267
Issuance of
Series B and B-1
preferred stock
for cash and
assets
transferred from
Imagine Media at
$6.33 per
share........... 23,750
Issuance of
Series B-1
preferred stock
at $6.33 per
share to
strategic
partner and
officer for cash
and marketing
rights.......... 4,233
Issuance of
common stock to
employees upon
exercise of
stock options,
net of
repurchases..... 65
Issuance of
warrants to
purchase Series
B-1 preferred
stock in
connection with
lease financing
and term loan... 948
Issuance of
Series C
preferred stock
at $10.00 per
share for cash
and conversion
of $3.0 million
term loan....... 33,789
Payments
received on
promissory
notes........... 2,045
Issuance of
common stock in
connection with
Ameritrack and
Extreme
Interactive
Media
acquisitions.... 780
Deferred
compensation.... --
Amortization of
deferred
compensation and
prepaid
marketing and
distribution
rights.......... 1,765
Net and
comprehensive
loss for the
period.......... (34,822)
--------------------------------------------------------------------------------------------------------
Balance at
December 31,
1999............ $ 34,661
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes.

F-5
<PAGE>

Snowball.com, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997(1) 1998(1) 1999(2)
------- ------- --------
<S> <C> <C> <C>
Operating activities
Net loss.......................................... $(1,279) $(3,660) $(34,822)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................... 20 40 1,769
Stock-based compensation......................... -- -- 1,521
Other noncash expenses........................... -- -- 948
Changes in assets and liabilities:
Accounts receivable............................. (653) (272) (1,640)
Prepaid expenses and other assets............... (82) (61) (2,798)
Accounts payable and accrued liabilities........ 250 102 7,487
Deferred revenue................................ 11 37 654
------- ------- --------
Net cash used in operating activities.......... (1,733) (3,814) (26,881)
------- ------- --------
Investing activities
Purchases of short-term investments............... -- -- (8,000)
Purchases of intangible assets.................... -- -- (2,550)
Purchases of fixed assets......................... (48) (106) (5,575)
------- ------- --------
Net cash used in investing activities.......... (48) (106) (16,125)
------- ------- --------
Financing activities
Proceeds from equipment financing obligations..... -- -- 3,117
Proceeds from issuance of common and preferred
stock............................................ -- -- 62,228
Proceeds from borrowings under term loan.......... -- -- 15,150
Payment of borrowings under term loan............. -- -- (12,000)
Contributions from Imagine Media.................. 1,781 3,920 --
------- ------- --------
Net cash provided by financing activities...... 1,781 3,920 68,495
------- ------- --------
Net increase in cash and cash equivalents......... -- -- 25,489
Cash and cash equivalents at beginning of
period........................................... -- -- --
------- ------- --------
Cash and cash equivalents at end of period........ $ -- $ -- $ 25,489
======= ======= ========
Schedule of noncash investing and financing
activities
Conversion of term loan debt to Series C
preferred stock.................................. $ -- $ -- $ 3,000
======= ======= ========
Common and preferred stock issued for goodwill
and intangible assets and prepaid marketing and
distribution rights.............................. $ -- $ -- $ 3,119
======= ======= ========
Common stock issued for notes receivable.......... $ -- $ -- $ 3,346
======= ======= ========
Deferred stock compensation ...................... $ -- $ -- $ 12,389
======= ======= ========
</TABLE>
- --------
(1) Through December 31, 1998, our activities were included in the operations
of Imagine Media, Inc. Our financial statements for these periods have been
prepared on a carve-out basis.

(2) From January 1999, we have operated as a separate legal entity.

See accompanying notes.

F-6
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Company and Summary of Significant Accounting Policies

Description of Company

Snowball.com, Inc. ("Snowball") was incorporated as Affiliation, Inc. in the
state of Delaware on January 6, 1999, and commenced operations as a separate
legal entity at that time. From its inception in January 1997 through January
5, 1999, Snowball operated as a division of Imagine Media, Inc. ("Imagine
Media"). Snowball is an Internet media company that operates a network of
destination web sites providing content, community and commerce to the Internet
generation, or Generation i. Snowball views Generation i as individuals between
the ages of 13 and 30 who consider the Internet to be an integral part of their
daily lives. Snowball serves the members of this community by providing them
with opinionated, current content, relevant services such as email and instant
messaging, a forum for interacting with one another and carefully selected
merchandise within its online store. Snowball provides its advertisers with
targeted access to Generation i and supplies its content partners with an
integrated package of marketing services and audience-development
opportunities.

Snowball has sustained net losses and negative cash flows from operations
since inception. Snowball's ability to meet obligations in the ordinary course
of business is dependent upon its ability to establish profitable operations
and raise additional financing through public or private equity financings,
collaborative or other arrangements with corporate sources, or other sources of
financing. In the year ended December 31, 1999, Snowball has received financing
of approximately $65 million through the issuance of common stock and Series A,
B1 and C convertible preferred stock (see Notes 6 and 7). Management believes
that these funds will be sufficient to enable Snowball to meet planned
expenditures through at least December 31, 2000. If anticipated operating
results are not achieved, management intends to delay or reduce expenditures so
as not to require additional financial resources, if these resources are not
available on terms acceptable to Snowball.

The divisional statements of operations for each of the two years in the
period ended December 31, 1998 include all revenue and expenses directly
attributable to Snowball, including a corporate allocation of the costs of
facilities, salaries, and employee benefits based on relative headcount.
Additionally, incremental corporate administration, finance, and management
costs have been allocated to Snowball (see Note 4).

All of the allocations reflected in 1997 and 1998 in the financial statements
are based on assumptions that management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs that would have resulted if Snowball had been operated
on a stand-alone basis in 1997 and 1998. From incorporation on January 6, 1999
through September 30, 1999, there was a service and support agreement in place
between Snowball and Imagine Media which specified the terms of certain
services to be provided by Imagine Media. Under that agreement, Imagine Media
provided certain management, personnel and technology and information services
support and rental space in return for cash payments based upon divisional
allocations and the actual costs of providing such services. The agreement
terminated on October 1, 1999 and Snowball is currently discussing its renewal.

Principles of Consolidation

The consolidated financial statements include the accounts of Snowball and
its wholly-owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.

F-7
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Basis of Presentation

The accompanying financial statements include the operations of Snowball as
part of Imagine Media (on a carved-out basis as discussed below) from its
inception as a division of Imagine Media in January 1997 through December 31,
1998 (the "divisional statements") and as a separate legal entity from its
incorporation on January 6, 1999. The balance sheet at December 31, 1998
represents the assets, liabilities, and divisional equity of Snowball as a part
of Imagine Media and at December 31, 1999, represents the balance sheet of
Snowball as a separate legal entity. The divisional financial statements have
been derived from the historical books and records of Imagine Media. The
balance sheet at December 31, 1998 includes all assets and liabilities
specifically identifiable and directly attributable to Snowball, which are
derived from historical cost information of Imagine Media. Imagine Media's
corporate accounting systems were not designed to track cash receipts and
payments and liabilities on a division-specific basis.

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 disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reported period. Actual results
could differ materially from those estimates.

Certain Risks and Concentrations

Snowball has a limited operating history and its prospects are subject to the
risks, expenses, and difficulties frequently encountered by companies in their
early stages of development, particularly companies in new and rapidly evolving
markets such as Internet services. These risks include the failure to develop
and extend online service brands, the rejection of services by Web consumers,
vendors, and/or advertisers, the inability of Snowball to maintain and increase
the level of traffic to the Snowball networks from online services, as well as
other risks and uncertainties. In the event that Snowball does not successfully
implement its business plan, certain assets may not be recoverable.

Snowball's revenue is principally derived from the sale of online
advertising, the market for which is highly competitive and rapidly changing.
Significant changes in the industry or changes in customer buying behavior
could adversely affect operating results.

For the years ended December 31, 1997, 1998, and 1999, revenue from
Snowball's five largest advertisers accounted for approximately 36%, 31%, and
19%, respectively, of total revenue. One customer accounted for over 10% of
revenue in 1997. No customer accounted for over 10% of revenue for 1998 or
1999. Snowball generally does not require collateral and maintains allowances
for potential credit losses. These losses have been immaterial to date.

Revenue Recognition

Revenue is derived principally from short-term advertising contracts in which
Snowball guarantees a minimum number of impressions (a view of an advertisement
by a consumer), for a fixed fee. Advertising revenue is recognized at the
lesser of the ratio of impressions delivered over total guaranteed impressions
or the straight-line basis over the term of the contract, if specified,
provided that Snowball does not have any significant remaining obligations and
collection of the

F-8
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

resulting receivable is probable. To the extent that minimum guaranteed
impression levels or other obligations are not being met, Snowball defers
recognition of the corresponding revenue until guaranteed levels are being
achieved.

Revenue also includes sponsorship revenue under contracts in which Snowball
commits to provide sponsors with a variety of promotional opportunities in
addition to traditional banner advertising. Typically, sponsorship agreements
provide for the delivery of impressions on Snowball's Web sites through banner,
button or text link advertising, exclusive placement on Snowball's Web sites,
the licensing of trademarks and other copyrighted material and the design and
development of customized Web sites designed to enhance the promotional
objective of the sponsor. The portion of sponsorship revenue related to the
delivery of impressions is recognized in the period in which the advertisement
is displayed, provided that no significant obligations remain and the
collection of the resulting receivable is probable, at the lesser of the ratio
of impressions delivered over total guaranteed impressions or the straight-line
basis over the term of the contract. The portion of any up-front nonrefundable
fee specified in the contract related to the up-front customized design work
and the licensing of trademarks and other copyrighted material is also
recognized at the lesser of the ratio of impressions delivered over total
guaranteed impressions or the straight-line basis over the term of the
contract. Revenue from sales of product through Snowball's online store was
insignificant through December 31, 1999.

Snowball has not recognized any revenue related to the nonmonetary exchange
of advertising for advertising as such exchanges were not objectively
determinable based on the criteria set forth in Accounting Principles Board
Opinion No. 29, "Accounting for Nonmonetary Transactions."

Advertising Expenses

Advertising is expensed as incurred. The costs of producing advertising are
incurred and expensed during production. The costs of communicating advertising
are incurred and expensed as the advertisement is broadcast in accordance with
Statement of Position No. 93-7 "Reporting on Advertising Costs." Advertising
expenses were not significant for the years ended December 31, 1997 and 1998,
and were approximately $7,954,000 for the year ended December 31, 1999.

Cash Equivalents and Short-term Investments

Snowball considers all highly liquid investments with an original maturity
from the date of purchase of three months or less to be cash equivalents. As of
December 31, 1999, cash equivalents and short-term investments consist
primarily of investments in money market funds, certificates of deposit and
corporate commercial paper. To date, Snowball has not experienced losses on any
of its investments. Through December 31, 1998, Snowball's net cash requirements
were funded by Imagine Media.

Fixed Assets

Fixed assets are presented at cost less accumulated depreciation.
Depreciation and amortization of fixed assets is computed using the straight-
line method over the estimated useful lives of the assets (two to five years).

F-9
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Goodwill and Intangible Assets

Goodwill and intangible assets consist of the excess of purchase price paid
over identified tangible net assets and trademarks. Goodwill and intangible
assets are amortized using the straight-line method over the period of expected
benefit, generally three years. Management assesses the recoverability of
goodwill and intangible assets by determining whether the amortization of the
unamortized balance over its remaining life can be recovered through forecasted
cash flows. If undiscounted forecasted cash flows indicate that the unamortized
amounts will not be recovered, an adjustment will be made to reduce the net
amounts to an amount consistent with forecasted future cash flows discounted at
Snowball's incremental borrowing rate. Cash flow forecasts are based on trends
of historical performance and management's estimate of future performance,
giving consideration to existing and anticipated competitive and economic
conditions. Snowball has not identified any such impairment losses.

Fair Value of Financial Instruments

The carrying amounts of Snowball's financial instruments, including cash and
cash equivalents, short-term investments, accounts receivable, accounts
payable, and accrued liabilities approximate fair value because of their short
maturities. The carrying amounts of Snowball's capital lease obligations, notes
payable and term loan approximate the fair value of these instruments based
upon management's best estimate of interest rates that would be available for
similar debt obligations at December 31, 1999.

Net Loss Per Share

Basic net loss per share and diluted net loss per share is presented in
conformity with the Financial Accounting Standards Board's ("FASB") Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
Pursuant to Securities and Exchange Commission ("SEC") Accounting Bulletin No.
98, common stock and convertible preferred stock issued or granted for nominal
consideration prior to the anticipated effective date of the initial public
offering must be included in the calculation of basic and diluted net loss per
share as if they had been outstanding for all periods presented. To date,
Snowball has not had any issuances or grants for nominal consideration.

F-10
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In accordance with SFAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock
outstanding during the period, less the weighted-average number of shares of
common stock issued to founders, investors, and employees that are subject to
repurchase as these shares must be returned to Snowball if specified conditions
are not met. Pro forma basic and diluted net loss per share, as presented in
the statements of operations, has been computed as described above and also
gives effect, under SEC guidance, to the conversion of the convertible
preferred stock (using the if-converted method) from the original date of
issuance. Snowball commenced operations as a separate legal entity in
January 1999 and issued common stock in February 1999. Accordingly, historical
earnings per share have been presented only for the year ended December 31,
1999. The following table presents the calculation of basic and diluted and pro
forma basic and diluted net loss per share (in thousands, except share and per
share data):

<TABLE>
<CAPTION>
Year ended
December 31,
1999
------------
<S> <C>
Net loss....................................................... $ (34,822)
===========
Basic and diluted:
Weighted-average shares of common stock outstanding.......... 4,134,882
Less: weighted-average shares subject to repurchase.......... (3,948,354)
-----------
Weighted-average shares used in computing basic and diluted
net loss per share.......................................... 186,528
===========
Basic and diluted net loss per share........................... $ (186.69)
===========
Pro forma:
Shares used above............................................ 186,528
Pro forma adjustment to reflect weighted effect of assumed
conversion of convertible preferred stock (unaudited)....... 17,835,566
-----------
Shares used in computing pro forma basic and diluted net loss
per share (unaudited)....................................... 18,022,094
===========
Pro forma basic and diluted net loss per share (unaudited)..... $ (1.93)
===========
</TABLE>

Snowball has excluded all convertible preferred stock, warrants for
convertible preferred stock, outstanding stock options and shares subject to
repurchase from the calculation of diluted loss per share because all these
securities are antidilutive for all periods presented. If the offering
contemplated by this prospectus is consummated, all of the convertible
preferred stock outstanding will automatically be converted into common stock.
Unaudited pro forma stockholders' equity at December 31, 1999, as adjusted for
the assumed conversion of convertible preferred stock based on the shares of
convertible preferred stock outstanding at December 31, 1999, is disclosed on
the balance sheet.

F-11
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The total number of shares excluded from the calculation of diluted net loss
per share was as follows (on an as-converted-to-common basis as of December 31,
1999):

<TABLE>
<CAPTION>
Total
Shares
----------
<S> <C>
Common stock, subject to repurchase............................... 6,567,429
Preferred stock................................................... 25,409,895
Common stock options outstanding.................................. 2,358,368
Warrants to purchase preferred stock.............................. 322,688
</TABLE>

Income Taxes

Through December 31, 1998, Snowball was not a separate taxable entity for
federal, state, or local income tax purposes, and its operations were included
in the tax returns of Imagine Media.

Since incorporation, Snowball has recognized income taxes under the liability
method. Deferred income taxes are recognized for differences between the
financial statement and tax basis of assets and liabilities at enacted
statutory tax rates in effect for the years in which the differences are
expected to reverse. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. In
addition, valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.

Stock-Based Compensation

As permitted by the FASB Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), Snowball accounts for
employee stock-based compensation in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"),
and related interpretations in accounting for its stock-based compensation
plans. Under APB 25, when the exercise price of Snowball's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation expense is recognized. Stock compensation related to non-
employees is based on the fair value of the related stock or options in
accordance with SFAS 123 and its interpretations.

Comprehensive Loss

Snowball has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting
comprehensive loss and its components in the financial statements. To date,
Snowball's comprehensive loss has equaled its net loss.

Segment Information

In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information,"
which established standards for reporting information about operating segments
in annual financial statements. Snowball identifies its operating segments
based on business activities, management responsibility, and geographical
location. Currently, Snowball has organized its operations into a single
operating segment, the development of programming content material for
distribution on the Internet. Snowball derives the significant majority of its
revenues from operations in the United States.

F-12
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Recent Accounting Pronouncements

In February 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
establishes the accounting for costs of software products developed or
purchased for internal use, including when these costs should be capitalized.
The adoption of this pronouncement did not materially impact Snowball's results
of operations for the year ended December 31, 1999.

In April 1998, AcSEC issued Statement of Position No. 98-5, "Reporting on the
Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires that the costs of
start-up activities, including organizational costs, be expensed as incurred.
The adoption of this pronouncement did not materially impact Snowball's results
of operations for the year ended December 31, 1999.

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133, as amended by SFAS 137, requires Snowball to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through the Statement of Operations. If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative are either offset against the change in fair value
of assets, liabilities, or firm commitments through the Statement of Operations
or recognized in other comprehensive income until the hedged item is recognized
in the Statement of Operations. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings. SFAS 133, as
amended, is effective for years beginning after June 15, 2000. Snowball does
not currently hold any derivatives and does not expect this pronouncement to
materially impact the results of its operations.

On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain areas of
the Staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. Snowball believes that its current
revenue recognition principles comply with SAB 101.

2. Cash and Cash Equivalents

Cash, cash equivalents, and short-term investments consist of the following
(in thousands):

<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Cash and cash equivalents:
Cash.......................................................... $ 818
Money market funds............................................ 15,976
Corporate commercial paper.................................... 3,979
Certificate of deposit........................................ 4,716
-------
25,489
-------
Short-term investments:
Certificate of deposit........................................ 1,000
Municipal bonds............................................... 7,000
-------
8,000
-------
Cash, cash equivalents, and short-term
investments.................................................... $33,489
=======
</TABLE>

F-13
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Through December 31, 1999, the difference between the fair value and the
amortized cost of available-for-sale securities was not significant; therefore,
no unrealized gains or losses have been recorded in stockholders' equity. At
December 31, 1999, the contractual maturity of Snowball's short-term
investments was one year or less.

3. Balance Sheet Detail

<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
---- -------
(in
thousands)
<S> <C> <C>
Fixed assets:
Computers and equipment..................................... $153 $ 3,762
Furniture and fixtures...................................... -- 602
Software.................................................... -- 1,364
---- -------
153 5,728
Less accumulated depreciation and amortization.............. (60) (1,360)
---- -------
$ 93 $ 4,368
==== =======
Accrued liabilities:
Accrued compensation........................................ $ 50 $ 957
Accrued legal and accounting................................ -- 502
Accrued marketing and advertising........................... -- 47
Other accrued expenses...................................... -- 1,575
---- -------
$ 50 $ 3,081
==== =======
</TABLE>

4. Related Party Transactions

Funding Prior to Incorporation

Through December 31, 1998, Snowball utilized Imagine Media's centralized cash
management services and processes related to receivables, payables, payroll,
and other activities. Through December 31, 1998, Snowball's net cash
requirements were funded by Imagine Media. Net financing provided by Imagine
Media to Snowball in 1997 and 1998 was approximately $1,781,000 and $3,920,000,
respectively, including funding related to expenditures for operations and
investing activities and corporate services provided, as described below. There
were no intercompany transfers and no amounts were paid to Imagine Media by
Snowball in repayment of the financing during these periods and through the
incorporation of Snowball. These amounts were included in division equity.
Amounts financed by Imagine Media did not bear interest.

Corporate Services

In accordance with the Staff Accounting Bulletin No. 55, prior to the
incorporation of Snowball, allocations have been reflected in these financial
statements for 1997 and 1998. These expenses include corporate communications,
management compensation and benefits administration, payroll, accounts payable,
income tax compliance, and other administration and finance overhead.
Allocations and charges were based on either a direct cost pass-through for
incremental corporate administration, finance and management costs and a
percentage allocation of costs for other services provided based on factors
such as headcount and relative expenditure levels. Such

F-14
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

allocations and charges totaled approximately $718,000, $1,851,000, and
$757,000 for the years ended December 31, 1997, 1998 and 1999, respectively.

Management believes that the basis used for allocating corporate services is
reasonable. However, the terms of these transactions may differ from those that
would have resulted from transactions among unrelated parties.

Asset Contribution

Among the assets transferred to Snowball from Imagine Media, upon the
incorporation of Snowball on January 6, 1999, were a number of cohosting and
technology agreements to which Imagine Media was a party, revenue from
advertising agreements involving Snowball and ownership rights in patent
applications. The assets transferred from Imagine Media have been recorded at
historical cost. No liabilities were transferred to Snowball, except for those
directly resulting from the assets transferred.

The Chairman of Snowball's board of directors is a principal stockholder and
the Chief Executive Officer of Imagine Media. Accordingly, Imagine Media is
considered a related party for the period subsequent to incorporation. As of
December 31, 1999, Imagine Media owns approximately 5.6% of the outstanding
voting shares of Snowball.

5. Business and Asset Acquisitions

Ameritrack, Inc.

On September 28, 1999, Snowball acquired all of the outstanding stock of
Ameritrack, Inc., an Internet content provider doing business as High School
Alumni, in exchange for approximately $1,000,000 in cash and 30,000 shares of
common stock valued at $180,000. The cost of the acquisition was allocated to
the assets and liabilities assumed based upon their estimated fair values as
follows:

<TABLE>
<S> <C>
Working capital (deficit)....................................... $ (3,381)
Equipment....................................................... 21,060
Goodwill and purchased intangibles.............................. 1,162,321
----------
$1,180,000
==========
</TABLE>

The financial results of Ameritrack, Inc. were insignificant and, therefore,
no pro forma information reflecting the acquisition has been presented.

Asset Purchase

In July 1999, Snowball entered into an asset purchase agreement with Vault
Networks, an Internet content producer, under which Snowball acquired certain
intangible rights such as trademarks, intellectual property rights, certain
registered Internet locations, and a small amount of computer hardware. The
total purchase price for these assets was $550,000 in cash. This purchase price
has been included within goodwill and purchased intangibles.

F-15
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Extreme Interactive Media, Inc.

On December 17, 1999, Snowball completed the acquisition of Extreme
Interactive Media, Inc. ("Extreme"), an Internet community site. Snowball
acquired all of the outstanding capital stock of Extreme in exchange for 75,000
shares of Snowball common stock, valued at $600,000, $1.0 million in cash and
$250,000 in unsecured promissory notes. The purchase price may be increased by
up to $3.5 million of additional cash consideration based upon the attainment
of certain economic milestones by Extreme.

The cost of the acquisition was allocated to the assets and liabilities
assumed based upon their estimated fair values as follows:

<TABLE>
<S> <C>
Working capital.................................................. $ 1,885
Equipment........................................................ 27,361
Goodwill and purchased intangibles............................... 1,820,754
----------
$1,850,000
==========
</TABLE>

6. Term Loan

In November 1999, Snowball entered into a term loan agreement for up to $15.2
million. In connection with this loan agreement, Snowball issued a promissory
note, which bears interest at the rate of 11.0% per annum, and warrants to
purchase 180,000 shares of Series B-1 preferred stock. In November and December
of 1999, Snowball drew down $15.2 million under the term loan. On December 20,
1999, $3.0 million of this loan was converted into Series C preferred stock. An
additional $12.0 million was repaid in cash raised through the Series C
preferred stock issuance. At December 31, 1999, $150,000 remained payable under
the term loan. The note holder maintains a first position lien on all of
Snowball's assets, excluding fixed assets.

7. Stockholders' Equity

Convertible Preferred Stock

<TABLE>
<CAPTION>
Shares issued and
Shares outstanding at
authorized December 31, 1999
---------- -----------------
<S> <C> <C>
Series A........................................ 9,990,111 9,990,111
Series B-1...................................... 4,912,285 4,697,158
Series C........................................ 4,500,000 3,379,000
Undesignated.................................... 597,604 --
---------- ----------
Total convertible preferred stock............. 20,000,000 18,066,269
========== ==========
</TABLE>

Holders of Snowball's preferred stock are entitled to one vote for each share
of common stock into which the preferred stock is convertible. Holders of
Snowball's preferred stock are also entitled to vote separately as a class with
regard to customary protective provisions.

The holders of Series A, B-1 and C preferred stock are entitled to annual
noncumulative dividends per share of $0.028, $0.51 and $0.80, respectively,
when and if declared by the board of directors. Under the terms of certain
financing arrangements, Snowball is prohibited from declaring or paying any
dividends on its capital stock. In the event of any voluntary or involuntary
liquidation of Snowball,

F-16
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Series C stockholders are entitled to a liquidation preference of $10.00 per
share, plus any declared but unpaid dividends. After payment of the Series C
preference, Series A and B-1 stockholders are entitled to a liquidation
preference of $0.35 and $6.33 per share, respectively, plus any declared but
unpaid dividends, all in preference to the holders of the common stock. After
payment to the Series A, B-1 and C stockholders of these preferential amounts
in the event of a liquidation, the holders of the Series B-1 and C preferred
stock and the holders of the common stock will receive any and all remaining
assets of Snowball. However, the rights of the holders of Series B-1 and C
preferred stock terminates when the aggregate per share distribution to such
holders exceeds $0.70 and $12.66 per share, respectively.

The holders of Series A, B-1 and C preferred stock have the right at any time
to convert their shares into common stock. Each share of Series A and B-1
preferred stock is convertible into 1.5 shares of common stock. Each share of
Series C preferred stock is convertible into 1 share of common stock. Each
share of preferred stock will be automatically converted into common stock upon
the closing of the issuance of shares following the effectiveness of a
registration statement under the Securities Act of 1933, pursuant to a firm
commitment public offering of Snowball's common stock with aggregate proceeds
in excess of $20,000,000.

In January 2000, Snowball issued 150,000 shares of Series C preferred stock
at $10 per share.

Warrants

In April 1999 and October 1999 Snowball issued warrants to purchase 21,063
and 14,064 shares of Series B-1 preferred stock (52,692 shares of common stock
as converted) in connection with lease financing. In accordance with SFAS 123,
Snowball valued the warrants using the Black-Scholes option pricing model at
$2.48 and $6.03 per share respectively. The following assumptions were used in
the option pricing model: stock price of $4.22 and $10.00, exercise price of
$3.165 and $7.11, option term of five years, risk-free rate of interest of 6%,
50% volatility, and a dividend yield of 0%. The cost of the warrants
(approximately $206,000) is being expensed as additional interest expense over
the three-year life of the lease arrangement.

In November 1999, Snowball issued a series of warrants to purchase 180,000
shares of Series B-1 preferred stock (269,996 shares of common stock as
converted), in connection with entering into a term loan agreement. In
accordance with SFAS 123, Snowball valued the warrants using the Black-Scholes
option pricing model at $2.40-$3.01 per share. The following assumptions were
used in the option pricing model: stock price of $8.00, exercise price of
$8.44, option term of 2 to 3 years, risk free rate of interest of 6%, 50%
volatility and a dividend yield of 0%. The cost of the warrants (approximately
$742,000) is being expensed as additional interest over the one year life of
the debt agreement.

Notes Receivable from Stockholders

In February 1999, Snowball loaned an aggregate of $2,000,000 to its Chairman,
secured by a full recourse promissory note and a stock pledge agreement, in
connection with his purchase of 8,571,429 shares of Series A preferred stock at
$0.35 per share. The note accrued interest at a rate of 4.57% per year and was
due and payable with respect to $1,000,000 of principal, plus interest, on or
before March 1, 1999 and with respect to the remaining $1,000,000 of principal,
and any remaining interest, on or before April 1, 1999. The note has been
repaid in full.

F-17
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In February 1999, Snowball loaned an aggregate of $92,300 to an officer,
secured by a full recourse promissory note and a stock pledge agreement, in
connection with his purchase of 1,978,021 shares of common stock at $0.05 per
share. The note accrues interest at a rate of 4.64% per year, payable annually,
and the principal amount of the note is due and payable on or before February
1, 2003. Snowball is forgiving the principal and accrued interest at a rate of
$1,667 per month. In the event that the officer's employment is terminated for
any reason, then all remaining unpaid principal and interest will become due
and payable within 90 days after termination, unless Snowball agrees to a
longer period.

In March 1999, Snowball loaned an aggregate of $7,000 to one of its
directors, secured by a full recourse promissory note and a stock pledge
agreement, in connection with his purchase of 150,000 shares of common stock at
$0.05 per share. The note accrues interest at a rate of 4.67% per year, payable
annually, and is due and payable in full on or before March 11, 2001.

In October and November 1999, Snowball loaned an aggregate of $933,000 to an
officer secured by full recourse promissory notes and stock pledge agreements
in connection with his purchase of 100,000 shares of Series B-1 preferred stock
at $6.33 per share and the exercise of options for a total of 350,000 shares of
common stock at $2.00 per share. The notes accrue interest at 5.86% and 6.08%,
payable annually, and are due and payable on October 20, 2003 and November 20,
2003, respectively. The promissory note of $333,000 attributable to the
purchase of Series B-1 preferred stock is being forgiven at the rate of $6,938
per month.

In addition, the Company has issued full recourse promissory notes to
employees.

Common Stock

Outside of the Company's 1999 Equity Incentive Plan, Snowball issued shares
of common stock to founders and employees. Generally, these shares were sold
pursuant to restricted stock purchase or option agreements containing
provisions established by the board of directors. These provisions give
Snowball the right to repurchase the shares at the original sales price. The
rights generally expire at the rate of 25% of the shares after one year and
2.0833% per month thereafter or ratably over four years. A total of 2,614,272
shares or shares underlying options were granted in 1999 and, at December 31,
1999, 1,855,652 of these shares issued outside of the 1999 Equity Incentive
Plan remained subject to repurchase.

As of December 31, 1999 shares of common stock reserved for future issuance
consisted of the following:

<TABLE>
<S> <C>
Stock options..................................................... 4,552,737
Series B-1 warrants (assuming conversion)......................... 322,688
Series A, B-1 and C convertible preferred stock................... 25,409,895
----------
30,285,320
==========
</TABLE>

Equity Incentive Plan

In February 1999, the board of directors approved the 1999 Equity Incentive
Plan (the "Plan"). Under the Plan, Snowball reserved 7,815,812 shares for
issuance to eligible participants. The Plan provides for option grants at an
option price no less than 85% of the fair market value of the stock

F-18
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

subject to the option on the date the option is granted. The options must vest
at a rate of at least 20% per year over five years from the date the option was
granted. However, in the case of options granted to officers, directors, or
consultants, the options may vest at any time established by Snowball. All
options under the Plan expire ten years after their grant. The Plan also
provides for restricted stock awards. The purchase price of restricted stock
under these awards can not be less than 85% of the fair market value of the
stock on the date the award is made or at the time the purchase is consummated.
At December 31, 1999, 4,711,777 shares of stock issued under these awards
remained subject to repurchase.

Aggregate activity under the Plan is summarized as follows:

<TABLE>
<CAPTION>
Options outstanding
-------------------------------------
Shares Weighted-
available Number of Price per average
for grant shares share exercise price
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Authorized February
1999.................... 7,815,812 -- -- --
Restricted stock
granted................. (1,815,525) -- -- --
Options granted.......... (3,907,437) 3,907,437 $0.05-8.00 $1.28
Options canceled......... 301,519 (301,519) $0.05-2.00 $0.76
Options exercised........ -- (1,447,550) $0.05-3.00 $0.28
---------- ----------
Balance at December 31,
1999.................... 2,394,369 2,158,368 $0.05-8.00 $2.03
========== ==========
</TABLE>

The following table summarizes information regarding options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Weighted-
Number Weighted average
outstanding average remaining
and exercise contractual
Exercise Prices exercisable price age (years)
--------------- ----------- -------- -----------
<S> <C> <C> <C>
$0.05....................................... 495,267 $0.05 9.22
0.67....................................... 459,000 0.67 9.55
1.33....................................... 318,300 1.33 9.65
2.00....................................... 277,101 2.00 9.47
3.00....................................... 261,250 3.00 9.87
4.50....................................... 142,200 4.50 9.94
8.00....................................... 205,250 8.00 9.97
---------
2,158,368 $2.03 9.58
=========
</TABLE>

Stock-Based Compensation

In 1999, Snowball recorded deferred compensation expense of approximately
$12.0 million representing the difference between the exercise prices and the
deemed fair values of Snowball's common stock on the dates these shares and
stock options were granted. In October 1999 Snowball sold and issued 100,000
shares of Series B-1 preferred stock to an officer for $633,000 in cash.
Snowball has recorded compensation expense of approximately $417,000,
representing the difference between the price at which the stock was granted
and the deemed fair value of Snowball's common stock on the date the stock was
granted. The total deferred stock compensation of $12.4 million is included as
a reduction to stockholders' equity and is being amortized by charges to
operations on a graded vesting method over four years. Snowball recorded
amortization of deferred

F-19
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

compensation expense of approximately $1.5 million for the year ended December
31, 1999. At December 31, 1999, Snowball had a total of $10.9 million remaining
to be amortized over the corresponding vesting period of each respective
option, generally four years. In October 1999, Snowball issued 560,822 shares
of Series B-1 preferred stock in connection with a commercial transaction.
Snowball recorded approximately $2.3 million in prepaid marketing and
distribution rights representing the difference between the purchase price and
the deemed fair value of the shares at that date. The rights are being
amortized using the straight-line method over two years.

The remaining deferred stock compensation at December 31, 1999 will be
amortized as follows: $6.2 million for the year ending December 31, 2000, $2.9
million for the year ending December 31, 2001, $1.4 million for the year ending
December 31, 2002 and $0.4 million for the year ending December 31, 2003.
Subsequent terminations of stock and option holders may reduce future stock-
based compensation.

Snowball has elected to follow APB 25 and related interpretations in
accounting for its employee stock-based compensation plans. Because the
exercise price of Snowball's employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is generally
recognized. Pro forma information regarding net loss has been determined as if
Snowball had accounted for its employee stock options under the fair value
method prescribed by SFAS 123. The resulting effect on pro forma net loss
disclosed is not likely to be representative of the effects on net loss on a
pro forma basis in future years, due to additional grants and years of vesting
in subsequent years. The fair value of each option granted through December 31,
1999 was estimated on the date of grant using the minimum value method with the
following weighted-average assumptions:

<TABLE>
<S> <C>
Dividend yield...................................................... 0
Risk-free interest rate............................................. 6%
Volatility factor................................................... 50%
Expected life....................................................... 4 years
Weighted-average fair value of options granted...................... $ 0.585
</TABLE>

For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to pro forma expense over the options' vesting period, and
results in a pro forma net loss of approximately $34,927,000 for the year ended
December 31, 1999 and pro forma basic and diluted net loss per share of
$(187.25).

Stock Split

On October 12, 1999, Snowball effected a three-for-two stock split of its
common stock. All share and per share information included in these financial
statements has been retroactively adjusted to reflect this stock split.
Snowball also changed the conversion rate of its Series A and B-1 preferred
stock. Preferred Series A and B-1 will convert at a rate of 1.5 shares of
common stock for each share of preferred stock.

8. Provision for Income Taxes

As of December 31, 1999, Snowball had federal net operating loss
carryforwards of approximately $31,800,000. The net operating loss
carryforwards will expire at various dates through 2019 if not utilized.
Utilization of the net operating loss and tax credit carryforwards may be
subject to substantial annual limitations due to the ownership change
limitations provided by the Internal Revenue Code of

F-20
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1986, as amended, and similar state provisions. The annual limitation may
result in the expiration of net operating loss and tax credit carryforwards
before utilization.

The net losses incurred for the years ended December 31, 1997 and 1998 are
attributable to the operations of the Company as a division of Imagine Media
and were included in the income tax returns filed by Imagine Media. Because the
Company will not receive any benefit for its historical operating losses
incurred through December 31, 1998, no income tax benefit has been reflected
for those periods.

Snowball has provided a full valuation allowance against its deferred tax
assets based on its history of losses.

Significant components of net deferred tax assets at December 31, 1999
consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Net operating loss carryforward................................. $ 12,700
Other........................................................... 500
--------
Total deferred tax assets....................................... 13,200

Valuation allowance............................................. (13,200)
--------
Net deferred tax assets......................................... $ --
========
</TABLE>

9. Commitments

At December 31, 1999, Snowball's aggregate commitments under noncancelable
lease arrangements for office space and computer equipment were as follows:

<TABLE>
<CAPTION>
Capital Operating
leases leases
------- ---------
(in thousands)
<S> <C> <C>
Year ending December 31,
2000.................................................... $ 1,266 $ 2,169
2001.................................................... 1,266 4,399
2002.................................................... 903 4,399
2003.................................................... -- 4,399
2004.................................................... -- 4,399
Thereafter.............................................. -- 29,219
------- -------
Total minimum payments required........................... 3,435 $48,984
=======
Less amount representing interest......................... (318)
-------
Present value of future payments.......................... 3,117
Less current portion...................................... (1,081)
-------
Long-term portion......................................... $ 2,036
=======
</TABLE>

The cost of assets under capital lease arrangements was $3,413,000 at
December 31, 1999 (none at December 31, 1998) and the related accumulated
depreciation was $573,000 at December 31, 1999 (none at December 31, 1998).

F-21
<PAGE>

Snowball.com, Inc.
and its predecessor division of Imagine Media, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Rent expense, principally for leased office space under operating lease
commitments, was approximately $514,000 for the year ended December 31, 1999
(approximately $73,000 and $176,000 for the years ended December 31, 1997 and
1998, respectively). Snowball has issued a letter of credit for approximately
$4,399,000 in conjunction with the operating lease.

10. Subsequent Events (unaudited)

Snowball anticipates that it will record additional deferred compensation
expense of approximately $1.4 million relating to the difference between the
exercise price and the deemed fair value of options awarded at prices between
$8.50 and $9.35 per share in January and February of 2000.

In February 2000, Snowball drew down $12 million under its term loan.

Acquisition

On February 16, 2000, Snowball signed an asset purchase agreement to acquire
all of the assets of one of its affiliates, an Internet content provider, in
exchange for approximately $4.8 million in cash (of which $500,000 will be
placed in escrow to secure certain obligations). The financial results of this
entity were insignificant and, therefore, no pro forma information reflecting
this proposed acquisition has been presented.

2000 Equity Incentive Plan

On February 22, 2000, the board of directors adopted the 2000 Equity
Incentive Plan and reserved 5,000,000 shares of common stock to be issued under
this plan. On each January 1, beginning in 2001, the aggregate number of shares
reserved for issuance under this plan will increase automatically by a number
of shares equal to 5% of the outstanding shares of capital stock on December 31
of the preceding year.

2000 Employee Stock Purchase Plan

On February 22, 2000, the board of directors adopted the 2000 Employee Stock
Purchase Plan and reserved 500,000 shares of common stock under this plan. The
plan will become effective on the first business day on which price quotations
for Snowball common stock are available on the Nasdaq National Market. On each
January 1, beginning in 2001, the aggregate number of shares reserved for
issuance under this plan will increase automatically by a number of shares
equal to 1% of the outstanding shares on December 31 of the preceding year. The
aggregate number of shares reserved for issuance under the plan may not exceed
5,000,000 shares.

F-22
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Ameritrack, Inc.
Columbia, South Carolina

We have audited the accompanying balance sheet of Ameritrack, Inc. (a
development stage company) as of August 31, 1999 and the related statement of
income and expense, changes in stockholders' equity and cash flows from the
commencement of operations on or about August 14, 1998 through August 31, 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 financial position of Ameritrack, Inc. (a
development stage company) as of August 31, 1999, and the results of its
operations and cash flows from the commencement of operations on or about
August 14, 1998 through August 31, 1999, in conformity with generally accepted
accounting principles.

/s/ J. W. Hunt and Company, L.L.P.

Columbia, South Carolina
October 8, 1999

F-23
<PAGE>

AMERITRACK, INC.
(a development stage company)

BALANCE SHEET

<TABLE>
<CAPTION>
August 31, 1999
---------------
<S> <C>
Assets
Current assets:
Cash......................................................... $ 5,075
Accounts receivable.......................................... 2,111
---------
Total current assets....................................... 7,186
Equipment--at cost, less accumulated depreciation of $2,162.... 21,060
---------
Total assets............................................... $ 28,246
=========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable............................................. $ 8,480
Loans from stockholders...................................... 2,087
---------
Total current liabilities.................................. 10,567

Stockholders' equity:
Common stock, no par value; 1,000,000 shares authorized,
580,100 shares issued and outstanding....................... 174,025
Additional paid in capital...................................
Deficit accumulated during the development stage............. (156,346)
---------
Total stockholders' equity................................. 17,679
---------
Total liabilities and stockholders' equity................. $ 28,246
=========
</TABLE>

See accompanying notes.

F-24
<PAGE>

AMERITRACK, INC.
(a development stage company)

STATEMENT OF INCOME AND EXPENSE

From the commencement of operations
on or about August 14, 1998 through August 31, 1999

<TABLE>
<S> <C>
Revenues:
Advertising income................................................ $ 8,349
Other income...................................................... 514
---------
Total income.................................................... 8,863
Expenses:
Operating expenses................................................ 17,761
Research and development costs.................................... 147,448
---------
Total expenses.................................................. 165,209
---------
Net loss............................................................ $(156,346)
=========
</TABLE>

See accompanying notes.

F-25
<PAGE>

AMERITRACK, INC.
(a development stage company)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

From the commencement of operations
on or about August 14, 1998 through August 31, 1999

<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Number of Development
Shares Common Stock Stage Total
--------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Common stock issued pursuant to:
Sales of stock:
August 14, 1998................ 5,000 $ 1,500 $ -- $ 1,500
February 23, 1999.............. 5,000 1,500 -- 1,500
April 19, 1999................. 5,000 1,500 -- 1,500
May 28, 1999................... 55,000 16,500 -- 16,500
June 16, 1999.................. 8,350 2,500 -- 2,500
July 6, 1999................... 16,750 5,025 -- 5,025
Stock-based compensation:
Initial issue.................. 325,000 97,500 -- 97,500
June 14, 1999.................. 160,000 48,000 -- 48,000
Net loss......................... -- -- (156,346) (156,346)
------- -------- --------- ---------
Ending balance................... 580,100 $174,025 $(156,346) $ 17,679
======= ======== ========= =========
</TABLE>

See accompanying notes.

F-26
<PAGE>

AMERITRACK, INC.
(a development stage company)

STATEMENT OF CASH FLOWS

From the commencement of operations
on or about August 14, 1998 through August 31, 1999

<TABLE>
<S> <C>
Operating activities
Net Loss .......................................................... $(156,346)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation expense............................................. 2,162
Increase in accounts receivable.................................. (2,111)
Increase in accounts payable..................................... 6,880
Stock-based compensation......................................... 145,500
---------
Net cash used by operating activities.............................. (3,915)
---------

Investing activities
Purchase of equipment.............................................. (21,621)

Financing activities
Proceeds from loans from stockholders.............................. 2,510
Repayment of loans from stockholders............................... (424)
Proceeds from issuance of stock.................................... 28,525
---------
Net cash provided by financing activities.......................... 30,611
---------
Net increase in cash............................................... 5,075
Cash at beginning of period........................................ --
---------
Cash at end of period.............................................. $ 5,075
=========
</TABLE>

See accompanying notes.

F-27
<PAGE>

AMERITRACK, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Nature of Operations

Ameritrack, Inc. (the "Company") was formed to develop an Internet web site
that would provide information to assist individuals in locating high school
classmates and provide web site development assistance. The web site is
available internationally.

Advertising

The Company expenses advertising costs as they are incurred. Advertising
expenses totaled $517 for the period.

Equipment and Depreciation

Computer equipment is valued at cost. Maintenance and repairs are charged to
expenses as incurred. Depreciation is computed on the straight-line method,
based on an estimated useful life of five years.

Income Taxes

The financial statements do not include a provision for income taxes because
the Company made an S Corporation election for federal and state income tax
purposes. The Company's earnings will be included in the stockholders' personal
income tax returns.

Research and Development Costs

Research and development costs related to both future and present web site
development are charged to expenses as incurred.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that directly affect the results of reported assets, liabilities,
revenue and expenses. Actual results may differ from those estimates.

2. Development Stage Operations

The Company was incorporated and began operations in mid August 1998.
Initially, there was one stockholder. Operations through August 31, 1999 were
devoted primarily to development of the web site, raising capital,
investigating other means of obtaining financing and administrative functions.
As of August 31, 1999, the Company had ten stockholders who acquired stock
through purchase and by providing services to the Company. The basis for
valuing the shares issued for services was determined by reference to the cash
price for the shares acquired by purchase.

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

F-28
<PAGE>

AMERITRACK, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS--(Continued)

3. Related Party Transactions

During the period, two stockholders advanced operating funds to the Company.
These loans were of a short-term nature and were noninterest bearing. The
highest amount outstanding during the period was $2,262.

4. Subsequent Events

Subsequent to August 31, 1999, the Company signed a letter of intent to sell
all of its outstanding stock for cash and shares of stock in Snowball.com,
Inc., unrelated privately held company. This sale closed on September 28, 1999
with 25% of the cash and 50% of stock being held in escrow pending the
completion of this audit and certain other matters.

The Company was assisted in negotiating this sale by an investment banking
firm. This firm agreed to take its fee for services by acquiring a stock
warrant entitling it to acquire 30,532 shares in the Company. This warrant was
exercised subsequent to August 31, 1999. Upon this exercise, the Company's S
Corporation status was automatically revoked and the Company became a
C Corporation.

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

F-29
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
of Extreme Interactive Media, Inc.

We have audited the accompanying balance sheets of Extreme Interactive Media,
Inc. (an Oklahoma "S" corporation) as of December 31, 1998 and September 30,
1999, and the related statements of operations and accumulated deficit, and
cash flows for the periods then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Extreme Interactive Media,
Inc. as of December 31, 1998 and September 30, 1999, and the results of its
operations and its cash flows for the periods then ended, in conformity with
generally accepted accounting principles.

/s/ Hamilton & Associates, Inc.
Oklahoma City, Oklahoma
December 9, 1999

F-30
<PAGE>

EXTREME INTERACTIVE MEDIA, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents......................... $217,798 $ 20,032
Notes receivable.................................. 50,000 --
Accounts receivable............................... 31,675 75,856
Prepaid expenses.................................. 2,760 1,885
-------- --------
Total current assets............................ 302,233 97,773
Property and equipment:
Computer equipment................................ 56,682 70,441
Furniture......................................... 1,622 1,401
-------- --------
58,304 71,842
Less: accumulated depreciation.................... (3,288) (15,358)
-------- --------
Net property and equipment...................... 55,016 56,484
-------- --------
Other assets:
Intangible assets................................. 263,472 269,089
Organization cost................................. 458 383
Deposit........................................... 1,885 1,885
-------- --------
Total other assets.............................. 265,815 271,357
-------- --------
Total assets.................................. $623,064 $425,614
======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable.................................. $ 20,165 $ 7,284
Other accrued taxes............................... 2,820 --
-------- --------
Total current liabilities....................... 22,985 7,284
Stockholders' equity:
Common stock, $.10 par value, 500,000 shares
authorized, 100,000 shares issued................ 10,000 10,000
Paid in capital in excess of par.................. 759,000 759,000
Accumulated deficit............................... (168,921) (350,670)
-------- --------
Total stockholders' equity...................... 600,079 418,330
Total liabilities and stockholders' equity.... $623,064 $425,614
======== ========
</TABLE>

See accompanying notes and auditor's report.

F-31
<PAGE>

EXTREME INTERACTIVE MEDIA, INC.

STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
Revenue:
Advertising income................................. $ -- $ 143,565
Other income....................................... 34,147 14,566
--------- ---------
Total revenue.................................... 34,147 158,131
--------- ---------
Operating expenses:
Amortization....................................... 7,570 14,458
Depreciation....................................... 3,288 12,071
Salaries........................................... 82,077 153,917
Professional services.............................. 32,175 48,258
Payroll taxes...................................... 10,513 12,677
Media.............................................. 9,792 1,260
Legal and accounting............................... 25,269 13,351
Rent............................................... 7,323 14,645
Office............................................. 2,994 12,293
Telephone.......................................... 3,052 13,438
Travel............................................. 8,351 6,972
Other.............................................. 14,752 26,867
Promotional........................................ -- 14,120
--------- ---------
Total operating expenses......................... 207,156 344,327
--------- ---------
Loss from operations................................. (173,009) (186,196)
Interest Income...................................... 4,088 4,447
--------- ---------
Net loss............................................. $(168,921) $(181,749)
Accumulated deficit, beginning of the period......... -- (168,921)
--------- ---------
Accumulated deficit, end of the period............... $(168,921) $(350,670)
========= =========
</TABLE>

See accompanying notes and auditor's report.

F-32
<PAGE>

EXTREME INTERACTIVE MEDIA, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1998 1999
------------ -------------
Cash flows from operating activities:
<S> <C> <C>
Net loss............................................ $(168,921) $(181,749)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation...................................... 3,288 12,070
Amortization...................................... 7,570 14,458
(Increase) decrease in:
Accounts receivable............................... (31,675) (44,181)
Notes receivable.................................. (50,000) 50,000
Prepaid expenses.................................. (2,760) 875
Other assets...................................... (273,385) (20,000)
Increase (decrease) in:
Accounts payable.................................. 20,165 (12,881)
Accrued taxes..................................... 2,820 (2,820)
--------- ---------
Net cash provided (used) by operating activities.... (492,898) (184,228)
Cash flows from investing activities:
Purchases of property and equipment............... (58,304) (13,538)
Cash flows from financing activities:
Increase from sale of stock....................... 769,000 --
--------- ---------
Net change in cash and cash equivalents............. 217,798 (197,766)
Cash and cash equivalents at beginning of period.... -- 217,798
--------- ---------
Cash and cash equivalents at end of period.......... $ 217,798 $ 20,032
========= =========
</TABLE>

See accompanying notes and auditor's report.

F-33
<PAGE>

EXTREME INTERACTIVE MEDIA, INC.

NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Property and Equipment

The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. Depreciation is computed on the declining balance
or straight-line method for financial reporting purposes and on the modified
accelerated cost recovery system method for income tax purposes. Depreciation
expense for the period ended September 30, 1999 was $12,071 and $3,288 for the
year ended December 31, 1998.

Income Taxes

Extreme Interactive Media, Inc., (the "Company"), with the consent of its
shareholders, has elected to be taxed as an S Corporation under Section 1372 of
the Internal Revenue Code, which provides that, in lieu of corporate income
taxes, the stockholders are taxed on their proportionate share of the Company
taxable income.

Cash Equivalents

For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit, and all highly liquid debt instruments with
original maturities of three months or less.

Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management must make estimates based on future events
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities as of the date of the financial statements,
and revenue and expenses during the reporting period. Actual results could
differ from these estimates.

Intangible Assets

Intangible assets associated with the purchase of websites and organizational
costs are being amortized on the straight-line method over a period of five to
15 years. Amortization expense for the period ended September 30, 1999, was
$14,458 and $7,570 for the year ended December 31, 1998.

2. Accumulated Depreciation

Accumulated depreciation and net book value of property and equipment is as
follows:

<TABLE>
<CAPTION>
September 30,
1999 December 31, 1998
----------------- -----------------
Amount Net Basis Amount Net Basis
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Computer equipment......................... $70,441 $55,389 $56,682 $53,475
Furniture and fixtures..................... 1,401 1,095 1,622 1,541
------- ------- ------- -------
$71,842 $56,484 $58,304 $55,016
======= ======= ======= =======
</TABLE>

3. Compensated Absences

Employees of the Company are entitled to paid vacation, paid sick days and
personal days off, depending on job classification, length of service, and
other factors. The Company does not account for the amount of compensation for
future absences and the amount would be immaterial, and

F-34
<PAGE>

EXTREME INTERACTIVE MEDIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

accordingly, no liability has been recorded in the accompanying financial
statements. The Company's policy is to recognize the costs of compensated
absences when actually paid to employees.

4. RELATED PARTY TRANSACTIONS

The Company paid legal fees of $6,653 (December 31, 1998 $23,895) to a law
firm in which two of its stockholders are partners.

The Company paid rent of $1,250 (December 31, 1998 $725) to a company owned
by one of its stockholders.

Extreme Interactive Media, Inc. paid accounting fees of $2,525 to a firm that
is owned by one of its stockholders.

F-35
<PAGE>

Snowball.com, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information
gives effect to the acquisition of Extreme Interactive Media, Inc. using the
purchase accounting method, based on allocations of the purchase price. The
historical information has been derived from the respective historical
financial information of Snowball and Extreme Interactive Media and should be
read in conjunction with their financial statements and the related notes
included in this prospectus.

The unaudited pro forma condensed combined statement of operations combines
Snowball's and Extreme Interactive Media's historical statements of operations
and gives effect to the acquisition, including the amortization of goodwill and
other intangible assets resulting from the acquisition, as if the acquisition
occurred on January 1, 1999.

The total purchase price of Extreme Interactive Media has been allocated to
assets and liabilities based on management's estimates of their fair values
with the excess cost over the net assets acquired allocated to goodwill and
other intangible assets.

The unaudited pro forma condensed combined financial information is presented
for illustrative purposes only and is not necessarily indicative of the
operating results or financial position that would actually occur if the
acquisition had been consummated as of the date indicated, nor is it
necessarily indicative of the future operating results or financial position of
the combined company. The pro forma adjustments are based on the information
available at the time of the filing of this prospectus.

F-36
<PAGE>

Snowball.com, Inc.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(unaudited)
(in thousands except per share data)
For the year ended December 31, 1999(1)

<TABLE>
<CAPTION>
Extreme
Interactive
Media, Inc.
to
Snowball.com, December 17, Pro Forma Pro Forma
Inc. 1999 Adjustments Combined
------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenue.......................................... $ 6,674 $ 203 $ -- $ 6,877
Cost of revenue.................................. 4,316 -- -- 4,316
-------- ----- ----- --------
Gross margin..................................... 2,358 203 -- 2,561
Operating expenses
Production and content.......................... 6,610 -- -- 6,610
Engineering and develop-
ment........................................... 5,084 -- -- 5,084
Sales and marketing............................. 20,393 24 -- 20,417
General and administrative...................... 3,486 442 -- 3,928
Stock-based compensation........................ 1,521 -- -- 1,521
Amortization of goodwill and
intangible assets.............................. 471 4 358 (A) 833
-------- ----- ----- --------
Total operating expenses....................... 37,565 470 358 38,393
-------- ----- ----- --------
Loss from operations............................. (35,207) (267) (358) (35,832)
Interest income, net............................. 265 13 -- 278
Other income..................................... 120 (49) -- 71
-------- ----- ----- --------
Net loss......................................... $(34,822) $(303) $(358) $(35,483)
======== ===== ===== ========
Basic and diluted net loss
per share (B)................................... $(186.69) $(135.43)
======== ========
Shares used in per share
calculation..................................... 187 75 262
======== ===== ========
Pro forma basic and diluted net loss
per share (B)(unaudited)........................ $ (1.93) $ (1.96)
======== ========
Shares used in pro forma per share calculation
(unaudited)..................................... 18,022 75 18,097
======== ===== ========
</TABLE>
- --------
(1) Extreme Interactive Media's results are for the period from January 1, 1999
through the date of acquisition (December 17, 1999).

See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.

F-37
<PAGE>

Snowball.com, Inc.

NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION

The total estimated purchase price of the transaction has been allocated to
assets and liabilities based on management's estimate of their fair values with
the excess cost over the net assets acquired allocated to goodwill and other
intangible assets.

The adjustments to the unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1999, assumes the merger occurred as
of January 1, 1999, and are as follows:

(A) To reflect the amortization of goodwill and other intangible assets
resulting from the merger. The goodwill and other intangible assets are
being amortized over periods of approximately three years. Based upon the
nature of Extreme Interactive Media's operations, management does not
anticipate that any significant value will be attributed to purchased in-
process research and development.

(B) Pro forma basic and diluted net loss per share has been adjusted to
reflect the issuance of 75,000 shares of Snowball common stock, as if the
shares had been outstanding for the entire period presented.

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

F-38
<PAGE>

[The image of a hip, adolescent girl is displayed on the top half of the
inside back cover, with the phrase "Who am i?" positioned at the top of the
page. Beneath the image of the girl are the statements "i am the internet
generation," "i am a vast community" and " And, i am here." Displayed
horizontally beneath these statements are the logos of the four Snowball
networks. Beneath the network logos is the Snowball logo, with the phrase "We
are i" under the logo.]

<PAGE>

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

No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Cautionary Note on Forward-Looking Statements............................ 18
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 21
Selected Consolidated Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 31
Management............................................................... 46
Related Party Transactions............................................... 59
Principal Stockholders................................................... 61
Description of Capital Stock............................................. 63
Shares Available for Future Sale......................................... 67
Underwriting............................................................. 69
Legal Matters............................................................ 71
Experts.................................................................. 71
Where You Can Find Additional Information................................ 71
Index to Financial Statements............................................ F-1
</TABLE>

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

Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealer's obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or
subscription.

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

6,250,000 Shares

Snowball.com, Inc.

Common Stock

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

[SNOWBALL.COM LOGO]

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

Goldman, Sachs & Co.

Chase H&Q

Robertson Stephens

Representatives of the Underwriters

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses to be paid by the
Registrant in connection with the sale of the shares of common stock being
registered hereby. All amounts are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market filing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 22,770
NASD filing fee.................................................. 9,125
Nasdaq National Market filing fee................................ 95,000
Accounting fees and expenses..................................... 300,000
Legal fees and expenses.......................................... 400,000
Road show expenses............................................... 35,000
Printing and engraving expenses.................................. 250,000
Blue sky fees and expenses....................................... 10,000
Transfer agent and registrar fees and expenses................... 10,000
Miscellaneous.................................................... 168,105
----------
Total...................................................... $1,300,000
==========
</TABLE>

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty as
a director, except for liability:

. for any breach of the director's duty of loyalty to the Registrant or
its stockholders;

. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. under section 174 of the Delaware General Corporation Law (regarding
unlawful dividends and stock purchases); or

. for any transaction from which the director derived an improper personal
benefit.

As permitted by the Delaware General Corporation Law, the Registrant's Bylaws
provide that:

. the Registrant is required to indemnify its directors and officers to
the fullest extent permitted by the Delaware General Corporation Law,
subject to certain very limited exceptions;

. the Registrant may indemnify its other employees and agents as set forth
in the Delaware General Corporation Law;

. the Registrant is required to advance expenses, as incurred, to its
directors and officers in connection with a legal proceeding to the
fullest extent permitted by the Delaware General Corporation Law,
subject to certain very limited exceptions; and

. the rights conferred in the Bylaws are not exclusive.

II-1
<PAGE>

The Registrant intends to enter into Indemnity Agreements with each of its
current directors and executive officers to give such directors and executive
officers additional contractual assurances regarding the scope of the
indemnification set forth in the Registrant's Certificate of Incorporation and
to provide additional procedural protections. At present, there is no pending
litigation or proceeding involving a director, officer or employee of the
Registrant regarding which indemnification is sought, nor is the Registrant
aware of any threatened litigation that may result in claims for
indemnification.

Reference is also made to Section 8 of the Underwriting Agreement, which
provides for the indemnification of officers, directors and controlling persons
of the Registrant against certain liabilities. The indemnification provision in
the Registrant's Certificate of Incorporation, Bylaws and the Indemnity
Agreements entered into between the Registrant and each of its directors and
executive officers may be sufficiently broad to permit indemnification of the
Registrant's directors and executive officers for liabilities arising under the
Securities Act.

The Registrant maintains directors' and officers' liability insurance and
expects to obtain a rider to such coverage for securities matters.

See also the undertakings set out in response to Item 17.

Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:

<TABLE>
<CAPTION>
Exhibit Document Number
---------------- ------
<S> <C>
Form of Underwriting Agreement...................................... 1.01
Registrant's Amended and Restated Certificate of Incorporation...... 3.01
Registrant's Restated Bylaws........................................ 3.03
Amended and Restated Investor Rights Agreement, dated as of December
20, 1999........................................................... 4.02
Form of Indemnity Agreement......................................... 10.01
</TABLE>

Item 15. Recent Sales of Unregistered Securities.

1. Through December 31, 1999, we issued and sold an aggregate of
3,613,075 shares of our common stock to employees, consultants, directors,
and other service providers at prices ranging from $0.0467 to $8.00 per
share under direct issuances or exercises of options granted under our 1999
Equity Incentive Plan or exercises of options granted outside of our
1999 Equity Incentive Plan. All shares purchased under our 1999 Equity
Incentive Plan are subject to our right to repurchase such shares at their
original exercise price. The repurchase feature generally expires for 25%
of the shares after the first year of service and then expires ratably over
the next 36 months. All sales of common stock made pursuant to the exercise
of stock options were made in reliance on Section 4(2) of the Securities
Act and/or on Rule 701 or Rule 506 promulgated under the Securities Act.
Aggregate sales made in reliance on Rule 701 did not exceed either 15% of
our outstanding securities or 15% of our total assets.

2. On February 1, 1999, we issued and sold 1,978,021 shares of our common
stock to our President and Chief Executive Officer, Mark Jung, for a
purchase price of $92,307.67. This sale was made in reliance on Section
4(2) of the Securities Act and/or Rule 506 promulgated under the Securities
Act and was made without general solicitation or advertising. Mr. Jung is
an accredited investor and has access to all relevant information to
evaluate the investment and represented to us that the shares were being
acquired for investment.

3. On February 1, 1999, we issued and sold an aggregate of 989,011 shares
of our Series A preferred stock to certain of our officers and directors
and Imagine Media for an

II-2
<PAGE>

aggregate purchase price of $3,230,770 plus certain assets of Imagine
Media. On March 15, 1999, we issued and sold an additional 100,000 shares
of our Series A preferred stock to one of our officers for a purchase price
of $35,000. Collectively, these shares are convertible into 14,985,165
shares of our common stock. Both sales were made in reliance on Section
4(2) of the Securities Act and/or Rule 506 promulgated under the Securities
Act and were made without general solicitation or advertising. Each
purchaser is a sophisticated investor and had access to all relevant
information necessary to evaluate the investment and represented to us that
the shares were being acquired for investment.

4. On February 1, 1999, we issued and sold an aggregate of 5,000,000
shares of Series B preferred stock to Imagine Media in exchange for certain
assets of that company. These shares were converted into 276,461 shares of
Series B-1 preferred stock on May 11, 1999 for no additional consideration.
The Series B-1 shares are convertible into 414,691 shares of our common
stock. This sale was made in reliance on Section 4(2) of the Securities Act
and/or Rule 506 promulgated under the Securities Act and was made without
general solicitation or advertising. Imagine Media is an accredited
investor and had access to all relevant information necessary to evaluate
the investment and represented to us that the shares were being acquired
for investment.

5. On April 30, 1999, we issued warrants to purchase 21,063 shares of our
Series B-1 preferred stock to Comdisco in connection with a Master Lease
Agreement between Comdisco and us. These warrants were issued to Comdisco
in consideration for the leases under the Master Lease Agreement and have
an exercise price of $4.75 per share.These shares are convertible into
31,595 shares of our common stock. This sale was made in reliance on
Section 4(2) of the Securities Act and/or Rule 506 promulgated under the
Securities Act and was made without general solicitation or advertising.
Comdisco is an accredited investor and had access to all relevant
information necessary to evaluate the investment and represented to us that
the shares were being acquired for investment.

6. On May 11, 1999, we issued and sold an aggregate of 3,530,806 shares
of our Series B-1 preferred stock to private investors and one of our
directors for an aggregate purchase price of $22,350,002. On June 14, 1999,
we issued and sold an additional 221,170 shares of Series B-1 preferred
stock to private investors for an aggregate purchase price of $1,400,007.
On the 20th and 22nd of October 1999, we issued and sold an additional
100,000 shares and 7,899 shares of Series B-1 preferred stock to trusts
associated with one of our directors and a private investor for an
aggregate purchase price of $683,000. Collectively, these shares are
convertible into 5,789,807 shares of our common stock. All sales were made
in reliance on Section 4(2) of the Securities Act and/or Rule 506
promulgated under the Securities Act and were made without general
solicitation or advertising. Each purchaser is an accredited investor and
had access to all relevant information necessary to evaluate the investment
and represented to us that the shares were being acquired for investment.

7. On July 9, 1999, we issued 57,500 shares of our common stock to
certain former members of Vault Networks in connection with their
employment by Snowball. These shares represent 86,250 shares of our common
stock after adjustment for the 3-for-2 stock split of our common stock.
These sales were made in reliance on Section 4(2) of the Securities Act
and/or Rule 504 promulgated under the Securities Act and were made without
general solicitation or advertising. Each purchaser represented to us that
the shares were being acquired without an intent to distribute. We
disclosed to each purchaser that the shares were not registered under the
Securities Act and could not be resold unless registered under or exempt
from the registration requirements of the Securities Act.

8. On September 28, 1999, we issued 30,000 shares of our common stock to
certain stockholders of AmeriTrack in exchange for their shares of that
company. These shares

II-3
<PAGE>

represent 45,000 shares of our common stock after adjustment for the 3-for-
2 stock split of our common stock. These sales were made in reliance on
Section 4(2) of the Securities Act and/or Rule 504 promulgated under the
Securities Act and were made without general solicitation or advertising.
Each purchaser represented to us that the shares were being acquired
without an intent to distribute. We disclosed to each purchaser that the
shares were not registered under the Securities Act and could not be resold
unless registered under or exempt from the registration requirements of the
Securities Act.

9. On October 31, 1999, we issued warrants to purchase 14,064 shares of
our Series B-1 preferred stock to Comdisco in connection with a Master
Lease Agreement between Comdisco and us. These warrants were issued to
Comdisco in consideration for additional leases under the Master Lease
Agreement and have an exercise price of $10.67 per share. These shares are
convertible into 21,097 shares of our common stock. This sale was made in
reliance on Section 4(2) of the Securities Act and/or Rule 506 promulgated
under the Securities Act and was made without general solicitation or
advertising. Comdisco is an accredited investor and had access to all
relevant information necessary to evaluate the investment and represented
to us that the shares were being acquired for investment.

10. On October 15, 1999, we issued and sold 560,822 shares of Series B-1
preferred stock to New Line New Media in connection with a commercial
transaction, for an aggregate purchase price of $3,550,000. These shares
are convertible into 841,233 shares of our common stock. This sale was made
in reliance on Section 4(2) of the Securities Act and/or Rule 506
promulgated under the Securities Act and was made without general
solicitation or advertising. New Line New Media is an accredited investor
and had access to all relevant information necessary to evaluate the
investment and represented to us that the shares were being acquired for
investment.

11. On November 8, 1999, we issued warrants to purchase 180,000 shares of
Series B-1 preferred stock to several creditors in connection with a Loan
and Security Agreement between Sand Hill Capital and us. These warrants
were issued to each of these creditors in consideration for the payment of
$1.00 and have an exercise price of $12.66 per share. These shares are
convertible into 269,996 shares of our common stock. These sales were made
in reliance on Section 4(2) of the Securities Act and/or Rule 506
promulgated under the Securities Act and were made without general
solicitation or advertising. Each purchaser is an accredited investor and
had access to all relevant information necessary to evaluate the investment
and represented to us that the shares were being acquired for investment.

12. On December 17, 1999, we issued 75,000 shares of our common stock to
certain stockholders of Extreme Interactive Media in exchange for their
shares of that company. These sales were made in reliance on Section 4(2)
of the Securities Act and/or Rule 504 promulgated under the Securities Act
and were made without general solicitation or advertising. Each purchaser
represented to us that the shares were being acquired without an intent to
distribute. We disclosed to each purchaser that the shares were not
registered under the Securities Act and could not be resold unless
registered under or exempt from the registration requirements of the
Securities Act.

13. On December 20, 1999, we sold an aggregate of 3,529,000 shares of our
Series C preferred stock, of which 3,379,000 shares were issued on December
20, 1999 and 150,000 shares were issued on January 5, 2000, to private
investors for an aggregate purchase price of approximately $32.3 million in
cash and $3.0 million in debt conversion. Collectively, these shares are
convertible into 3,529,000 shares of our common stock. These sales were
made in reliance on Section 4(2) of the Securities Act and/or Rule 506
promulgated under the Securities Act and were made without general
solicitation or advertising. Each purchaser is an accredited investor and
had access to all relevant information necessary to evaluate the investment
and represented to us that the shares were being acquired for investment.

II-4
<PAGE>

Shares of our Preferred Stock may be converted to Common Stock by any holder
of these shares at any time upon surrender of the certificates representing
such shares and written notice to us. Shares of any series of our Preferred
Stock automatically convert to Common Stock, if a majority of the shares of
that series elects to convert. All shares of our Preferred Stock will convert
to Common Stock upon completion of this offering.

Item 16. Exhibits and Financial Statement Schedules.

(a) The following exhibits are filed herewith:

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.01* Form of Underwriting Agreement.
2.01* Stock Exchange Agreement among Registrant, Ameritrack, Inc. and the
security holders of Ameritrack, Inc., dated as of September 28, 1999.
2.02* Stock Purchase and Exchange Agreement among Registrant, Extreme
Interactive Media, Inc. and all of the security holders of Extreme
Interactive Media, Inc., dated as of December 17, 1999.
3.01* Registrant's Amended and Restated Certificate of Incorporation.
3.02* Registrant's Amended and Restated Certificate of Incorporation (to be
filed immediately after the closing of this offering).
3.03* Registrant's Bylaws.
3.04* Registrant's Restated Bylaws (adopted February 22, 2000 with an
effective date immediately following this offering).
4.01 Form of Specimen Certificate for Registrant's common stock.
4.02* Amended and Restated Investor Rights Agreement, dated as of December
20, 1999.
5.01 Opinion of Fenwick & West LLP regarding legality of the securities
being registered.
10.01* Form of Indemnity Agreement between Registrant and each of its
directors and executive officers.
10.02* 1999 Equity Incentive Plan and related agreements.
10.03* 2000 Equity Incentive Plan and forms of stock option agreements and
stock option exercise agreements.
10.04* 2000 Employee Stock Purchase Plan and forms of related agreements.
10.05* Adoption Agreement for Pan American Life Insurance Standardized 401(k)
Profit Sharing Plan and Trust dated April 1, 1999, and related
agreements.
10.06* Offer Letter dated February 1, 1999 from Registrant to Mark A. Jung.
10.07* Offer Letter dated January 18, 1999 from Registrant to Janette S.
Chock.
10.08* Offer Letter dated March 4, 1999 from Registrant to Elizabeth G.
Murphy.
10.09* Offer Letter dated March 15, 1999 from Registrant to Teresa M.
Crummett.
10.10* Offer Letter dated March 15, 1999 from Registrant to Kenneth H.
Keller.
10.11* Offer Letter dated October 18, 1999 from Registrant to James R.
Tolonen.
10.12* Secured Promissory Note between Registrant and Mark A. Jung, dated as
of February 1, 1999.
10.13* Secured Promissory Note between Registrant and Christopher Anderson,
dated as of February 1, 1999.
10.14* Secured Promissory Note between Registrant and James R. Tolonen and
Ginger Tolonen Family Trust dated 9/26/96, dated as of October 20,
1999.
10.15* Secured Promissory Note between Registrant and James R. Tolonen, dated
as of November 30, 1999.
10.16* Series A Preferred Stock and Series B Preferred Stock Purchase
Agreement, dated as of January 7, 1999.
10.17* Services and Support Agreement between Registrant and Imagine Media,
Inc., dated as of January 7, 1999.
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.18* Brisbane Technology Park Lease dated November 29, 1999, between
Registrant and GAL-Brisbane, L.P.
10.19* Sublease Agreement dated as of May 1, 1999, between Registrant and
Imagine Media, Inc.
10.20* Loan and Security Agreement dated November 8, 1999, between Registrant
and Sand Hill Capital II, L.P.
10.21* Indemnity Agreement dated as of June 1, 1999, between Registrant and
Richard LeFurgy.
10.22+* Desktop.com Letter Agreement dated as of December 29, 1999 between the
Registrant and Desktop.com, Inc.
10.23+* eCommerce and Content Agreement dated as of January 1, 2000 between
the Registrant and EBWorld.com, Inc.
10.24+* eCommerce Agreement dated as of October 15, 1999 between the
Registrant and edu.com, inc.
10.25+* Content Agreement dated as of September 29, 1999 between the
Registrant and Gloss.com, Inc.
10.26+* eCommerce Agreement dated as of December 23, 1999 between the
Registrant and Kabang.com, Inc.
10.27+* Services and Promotion Agreement dated as of December 22, 1999 between
the Registrant and Riffage.com, Inc.
10.28+* Services and Promotion Agreement dated as of December 22, 1999 between
the Registrant and X-drive, Inc.
10.29+* Webcourier Provider Agreement dated as of November 29, 1999 between
the Registrant and Microsoft Corporation.
10.30+* Webcourier Provider Agreement dated as of October 28, 1999 between the
Registrant and Microsoft Corporation.
10.31+* Webcourier Provider Agreement dated as of October 25, 1999 between the
Registrant and Microsoft Corporation.
10.32+ eCommerce Agreement dated as of February 1, 2000 between the
Registrant and drugstore.com, inc.
10.33+ eCommerce Agreement dated as of February 29, 2000 between the
Registrant and JobDirect.com.
21.01* Subsidiaries of Registrant.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP, independent auditors.
23.03 Consent of Hamilton & Associates, Inc., independent auditors.
23.04 Consent of J.W. Hunt and Company LLP, independent auditors.
24.01* Power of Attorney.
27.01* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Portions of this exhibit have been omitted pursuant to an application for
confidential treatment.

(b) Financial statement schedules are omitted because the information called
for is not required or is shown either in the financial statements or the
notes thereto.

Item 17. Undertakings.

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

II-6
<PAGE>

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

The undersigned Registrant hereby undertakes that:

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

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

II-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment to Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of San Francisco, State
of California, on this 9th day of March, 2000.

SNOWBALL.COM, INC.

/s/ James R. Tolonen
By: _________________________________
James R. Tolonen
Chief Financial Officer and Chief
Operating Officer

POWER OF ATTORNEY

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

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

<S> <C> <C>
* President, Chief Executive March 9, 2000
______________________________________ Officer and a director
Mark A. Jung (Principal Executive
Officer)

/s/ James R. Tolonen Chief Financial Officer and March 9, 2000
______________________________________ Chief Operating Officer
James R. Tolonen (Principal Financial
Officer)

* Controller and Chief March 9, 2000
______________________________________ Accounting Officer
Janette S. Chock (Principal Accounting
Officer)

* Director March 9, 2000
______________________________________
Christopher Anderson

* Director March 9, 2000
______________________________________
Richard A. LeFurgy

* Director March 9, 2000
______________________________________
Michael Orsak

* Director March 9, 2000
______________________________________
Robert H. Reid

/s/ James R. Tolonen
*By: _________________________________
James R. Tolonen
Attorney-in-Fact
</TABLE>

II-8
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
4.01 Form of Specimen Certificate for Registrant's common stock.
Opinion of Fenwick & West LLP regarding legality of the securities
5.01 being registered.
10.32+ eCommerce Agreement dated as of February 1, 2000 between the
Registrant and drugstore.com, inc.
10.33+ eCommerce Agreement dated as of February 29, 2000 between the
Registrant and JobDirect.com.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP, independent auditors.
23.03 Consent of Hamilton & Associates, Inc., independent auditors.
23.04 Consent of J.W. Hunt and Company LLP, independent auditors.
</TABLE>
- --------

+ Portions of this exhibit have been omitted pursuant to an application for
confidential treatment.

<PAGE>

EXHIBIT 4.01
<TABLE>
<CAPTION>
<S>
COMMON SHARES COMMON SHARES

NUMBER SHARES
SNO

[Snowball.com, Inc. Logo]
snowball.com, inc.

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CUSIP 83335R 10 2

<S> <C>
This Certifies that SEE REVERSE FOR CERTAIN
DEFINITIONS

is the record holder of

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.001 PER SHARE, OF

snowball.com, inc.

transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid unless countersigned and registered by the Transfer Agent and the
Registrar.

In Witness Whereof, the Corporation has caused this Certificate to be executed and attested to by the manual or facsimile facsimile
signatures of its duly authorized officers, under a facsimile of its corporate seal to be affixed hereto.

Dated:

[corporate seal]

SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER

AUTHORIZED SIGNATURE
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
snowball.com, inc.

Upon request the Corporation will furnish any holder of shares of Common Stock of the Corporation, without charge, with a full
statement of the powers, designations, preferences, and relative participating, optional or other special rights of any class or
series of capital stock of capital stock of the Corporation, and the qualifications, limitations or restrictions of such preferences
and/or rights.

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

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

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 ZIP CODE, OF ASSIGNEE)

____________________________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________________ Shares
of the Common 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 ____________________________________________

In presence of

X ________________________________________________ X _____________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed

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

</TABLE>

<PAGE>

EXHIBIT 5.01

[LETTERHEAD OF FENWICK & WEST LLP]

March 9, 2000

Snowball.com, Inc.
250 Executive Park Blvd., Suite 400
San Francisco, CA 94134
Ladies and Gentlemen:

At your request, we have examined the Registration Statement on Form S-1
(Registration Number 333-93487) (the "Registration Statement") filed by you with
the Securities and Exchange Commission (the "Commission") on December 23, 1999,
as subsequently amended, in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of up to 7,187,500 shares of
your Common Stock (the "Shares").

In rendering this opinion, we have examined the following:

(1) the Registration Statement, together with the Exhibits filed as a part
thereof;

(2) the prospectuses prepared in connection with the Registration
Statement;

(3) your registration statement on Form 8-A (File Number 000-29121) filed
with the Commission on January 25, 2000;

(4) the minutes of meetings and actions by written consent of the
stockholders and boards of directors that are contained in your minute
books that are in our possession;

(5) the stock records for you that you have provided to us including a
statement provided by you as to the number of your issued and
outstanding shares of capital stock and a list prepared by you of
holders of options and warrants for your capital stock (and of any
rights to purchase your capital stock); and

(6) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing certain factual and other
representations.

In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to originals and completeness of all
documents submitted to us as copies, the legal capacity of all natural persons
executing the same, the lack of any undisclosed termination, modification,
waiver or amendment to any document reviewed by us and the due authorization,
execution and delivery of all
<PAGE>

March 9, 2000
Page 2

documents where due authorization, execution and delivery are prerequisites to
the effectiveness thereof.

For the purposes of this opinion, we have relied as to matters of fact
solely upon our examination of the documents referred to above and have assumed
their current accuracy and completeness.

We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the effect of the laws of any jurisdiction
other than the existing laws of the United States of America, the State of
California and the State of Delaware.

In connection with our opinion expressed below, we have assumed that, at or
prior to the time of the delivery of any of the Shares, the Registration
Statement will have been declared effective under the Securities Act of 1933, as
amended, and will not have been modified or rescinded, that the offer issuance
and sale of the Shares by you will be registered under the Registration
Statement, and that there will not have occurred any change in law affecting the
validity or enforceability of the Shares.

Based upon the foregoing, it is our opinion that the Shares to be issued
and sold by you, when issued and sold in accordance in the manner referred to in
the prospectus prepared in connection with the Registration Statement, will be
validly issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the prospectus prepared in connection therewith and any
amendments thereto.

This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof.

Very truly yours,
/s/ Fenwick & West LLP

<PAGE>

Exhibit 10.32

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS DOCUMENT

**Confidential treatment has been requested with respect to the information
contained within the "[**]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and Exchange
Commission.

eCommerce Agreement
between
snowball.com, Inc. and drugstore.com, inc.

This eCommerce Agreement (this "Agreement") is made as of February 1, 2000
(the "Effective Date"), by and between Snowball.com, Inc., a Delaware
corporation with principal offices at 250 Executive Park Boulevard, Suite 4000,
San Francisco, CA 94134 ("Snowball"), and drugstore.com, inc., a Delaware
corporation with principal offices at 13290 SE Eastgate Way, Bellevue, WA 98005
on behalf of itself and its wholly-owned subsidiaries ("drugstore.com").

Background

Snowball owns and operates a network of World Wide Web sites, including the
sites located at IGN.com, ChickClick.com, InsideGuide.com and Powerstudents.com
(collectively, the "Snowball Hub Sites"). The Snowball Hub Sites connect to a
network of affiliate sites (the "Affiliates"). The Snowball Hub Sites and the
Snowball Affiliates are collectively referred to in this Agreement as the
"Snowball Network."

drugstore.com offers health, pharmacy, personal care, beauty and wellness
information and products through its World Wide Web site located at
www.drugstore.com (the "drugstore.com Site").

drugstore.com desires to be the exclusive health, pharmacy, personal care,
and wellness e-commerce partner on the Snowball Network, and to make certain
content and services provided by drugstore.com available to users of the
Snowball Network. drugstore.com also desires to have links established from
sites in the Snowball Network to the drugstore.com Site, to co-brand certain
areas and activities on the Snowball Network, and to obtain certain promotional
services from Snowball. drugstore.com further desires to convert Snowball
Network users into buyers on the drugstore.com Site.

Snowball has agreed to develop and maintain co-branded health, pharmacy,
personal care, beauty (except as specifically provided otherwise herein), and
wellness e-commerce stores ("Commerce Pages") to be integrated into each of the
Snowball Hub Sites. The Commerce Pages will be marketed with a series of links
and promotional efforts with the intention of generating commerce on the
drugstore.com Site.

Now Therefore, the parties agree as follows:

1. Exclusivity. Subject to the terms and conditions of this Agreement,
-----------
Snowball will identify drugstore.com as Snowball's "exclusive health, pharmacy,
personal care, and wellness e-commerce partner" on the Snowball Network. During
the term of this Agreement, Snowball will not (and, to the extent that Snowball
has the right to do so, will cause its Affiliates to not) carry any advertising
or promotional placements (including without limitation buttons, banners, and
navigation bars) or send emails or other communications to users of the Snowball
Network with

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respect to the parties listed on Exhibit A (the "drugstore.com Competitors").
---------
Exhibit A may be amended during the term of this Agreement with the mutual
- ---------
written consent of the parties. Notwithstanding the foregoing, nothing in this
Agreement will be deemed to restrict Snowball or its Affiliates from accepting
banner advertisements from any health, pharmacy, personal care, or wellness
retailer or information provider, including, without limitation, any
drugstore.com Competitor, as long as such banner advertisements in the aggregate
are no greater than [**] of the average number of impressions
served during the prior [**]. Nothing in this Agreement will be
deemed to restrict Snowball or Affiliates from accepting advertising from any
health, pharmacy, personal care, or wellness manufacturer that is not a
drugstore.com Competitor. Nor shall Snowball be deemed to be in breach of the
Agreement if, after the Effective Date, any party with which Snowball has an
agreement to sell products through the Snowball Network commences selling
health, pharmacy, personal care, or wellness products; provided that Snowball
shall be bound by the provisions of exclusivity for promotions stated in this
Section 1 with respect to such party. In addition, drugstore.com acknowledges
that Snowball may incorporate or link to Web and other auction or shopping
facilities or functionalities and that the sale of health, pharmacy, personal
care, or wellness products through such facilities or functionalities will not
be deemed a breach of Snowball's obligations under this section; provided that
such incorporation or link shall not violate any of the provisions of
exclusivity for promotion stated in this Section 1.

2. Promotion and e-Commerce. Subject to the terms and conditions of this
------------------------
Agreement:

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

(a) New Registrations. Snowball will make available to each user
-----------------
registering with the Snowball Network the opportunity to register for the
drugstore.com Site. Within thirty (30) days of the Effective Date of this
Agreement, drugstore.com shall specify whether the registration opportunity will
be an "opt out" registration or an "opt in" registration. For purposes of this
paragraph, "opt out" registration means an automatic functionality for dual
registration of the user on both the Snowball Network and on the drugstore.com
Site unless the user opts, using an offered functional indicator, not to
register with the drugstore.com Site. For the purposes of this paragraph, "opt
in" registration means a functionality that permits users to affirmatively opt
to register with the drugstore.com Site at the same time that the user registers
for the Snowball Network.

(b) Existing Registered Users. Snowball will send each Snowball
-------------------------
Network Hub Site user registered as of the Effective Date an email message
describing drugstore.com's various offers and services, as well as informing
them of the relationship between Snowball and drugstore.com under this
Agreement. The content of such email message shall be mutually agreed upon by
the parties, and will include a link enabling users to access the home page of
the drugstore.com Site. For the ChickClick.com and PowerStudents/InsideGuide.com
Snowball Hub Sites, a plain text email message will be sent. For the IGN.com
Snowball Hub Site a plain text and/or HTML based email message will be sent. The
email message may be the same or customized for each Snowball Hub Site upon
mutual agreement of the parties.

2
<PAGE>

(c) Termination of Registration Services. At any time, drugstore.com
------------------------------------
may elect to terminate its obligation to pay for, and Snowball's obligation to
provide, registration services pursuant to this Section 2.1, effective [**]
from the date on which drugstore.com provides written notice of
termination of such registration services.

2.2 "My Page" Integration.
--------------------

(a) New Users. Snowball will integrate content and/or links, the
---------
extent and placement of which Snowball shall determine with drugstore.com's
approval, which approval shall not be unreasonably withheld, from the
drugstore.com Site into Snowball's customizable "My Page" sections developed for
new users. Snowball will work with drugstore.com to find ways to provide custom
content and/or product offerings from the drugstore.com Site to Snowball Network
users.

(b) Existing Users. For existing registered Snowball Network users,
--------------
Snowball will include a drugstore.com listing in the "My Page" profile update
page, permitting users to choose to receive content and/or product offerings
from the drugstore.com Site.

2.3 Integrated Content. The parties will work together to integrate
------------------
drugstore.com branding and links into relevant health content pages on Snowball
Hub Sites, subject, in all cases, to Snowball's final editorial approval, which
approval shall not be unreasonably withheld. Snowball will work to ensure that
its editors are available to discuss such integration with drugstore.com
representatives within a reasonable time after execution of this Agreement.
Snowball will credit drugstore.com for any content that is integrated into a
Snowball Network site with "sponsored by" or a similar attribution and will
include an appropriate notice identifying drugstore.com's intellectual property
rights in such content. If Snowball, at its sole discretion, offers
drugstore.com an opportunity to integrate content into an Affiliate site, such
integration shall be pursuant to substantially the same terms as for integration
of content on Snowball Hub Sites.

2.4 Co-Branded Commerce Pages.
-------------------------

(a) Snowball and drugstore.com will work together to develop co-
branded health, pharmacy, personal care, and wellness stores ("Commerce Pages")
to be hosted and served by Snowball on each Snowball Hub Site when Snowball
implements e-commerce functionalities on each Snowball Hub Site. The Commerce
Pages will each include co-branded pages and will feature health, pharmacy,
personal care, beauty, subject to the limitations set forth in Section 2.4(c),
and wellness products that can be purchased in the drugstore.com Site.
drugstore.com will be solely responsible for pricing and fulfilling orders
placed with such Commerce Pages. drugstore.com acknowledges that the e-commerce
section of the PowerStudents.com Snowball Hub Site is not expected to launch
until [**] at the earliest and that the e-commerce section of the IGN Snowball
Hub Site is not expected to launch until [**] at the earliest.

(b) Snowball will work to develop custom content for the Commerce
Pages, which may include such items as Editor's Picks, Polls, and Message
Boards. Snowball editors

3
<PAGE>

shall determine the look and feel, content, and specific functionalities of the
Commerce Pages subject to the approval of drugstore.com, which approval will not
be unreasonably withheld. drugstore.com will be permitted to change and replace
products within the Commerce Pages on an "as needed" basis; provided that,
drugstore.com shall give Snowball seventy-two (72) hour notification of the need
for any such change; however, Snowball will be sensitive to specific situations
in which a twenty-four (24) hour response may be requested.

(c) With respect to the ChickClick.com Snowball Hub Site, in the
ChickShops storefront and the home pages of ChickClick.com and EstroClick.com,
drugstore.com shall not promote the sale or give-away of any Prestige Beauty
Products (as defined herein), shall not promote or link to any site whose
primary business is the promotion or sale of Prestige Beauty Products, and shall
not promote or link to any page on any site that primarily promotes and sells
Prestige Beauty Products; however, drugstore.com may promote the sale or give-
away of Prestige Beauty Products on any other area of the ChickClick.com
Snowball Hub Site and on any other portion of the Snowball Network. For
purposes of this Agreement, "Prestige Beauty Products" means color cosmetics and
treatment products typically marketed offline through high-end department stores
and boutiques, including but not limited to: (i) high-end department store
quality brands such as Estee Lauder, Lancome, Clinique, Prescriptives, Bobbi
Brown, Trish McEnvoy, and MAC; and (ii) boutique brands, such as Anna Sui,
Bloom, Dirty Girl, Get Fresh, Jacqua Girls, Nars, Philosophy, Stila, Tony and
Tina, and Zihr. For purposes of clarification, Prestige Beauty Products does
not include "mass marketed" brands, such as CoverGirl, Max Factor, Revlon,
Almay, L'Oreal, and United Colors of Benetton. At least one product featured by
drugstore.com in the ChickShops must be a non-beauty product, that is, a health,
pharmacy, personal care or wellness product.

2.5 Impressions and Links.
---------------------

(a) Delivery and Format. Snowball will deliver on Snowball Network
--------------------
pages the impressions and links set forth in the schedule in Exhibit D. For
---------
those impressions for which a set number of impressions are guaranteed to be
delivered in a month ("Guaranteed Impressions"), if for any month such number of
impressions is not delivered, then, subject to the following sentence, as
Snowball's sole obligation, and drugstore.com's sole and exclusive remedy,
Snowball will deliver any deficiency such that drugstore.com receives [**] by
the end of the term of this Agreement, and [**] by no later than ninety (90)
days following the termination or expiration of this Agreement. In the event
that Snowball has not delivered all Guaranteed Impressions by the end of the
ninety (90) day period, drugstore.com, as its sole and exclusive remedy, may, at
its discretion, extend the period for delivery for an additional thirty (30) day
period or terminate this Agreement and receive a pro rata refund pursuant to
Exhibit C of any Minimum Guaranteed Payments made; provided, that, in no event
- ---------
will drugstore.com's termination of this Agreement pursuant to the terms hereof
be deemed a termination for breach. All Portal and Navigation Bar Links (as
defined in Exhibit D) shall display the drugstore.com Mark or such other text or
---------
image as Snowball determines, subject to drugstore.com's reasonable approval,
and shall link to the drugstore.com Site or to the Commerce Pages. All other
links and impressions shall display the drugstore.com Mark or the

4
<PAGE>

Mark of a wholly-owned subsidiary of drugstore.com, and shall link to the
drugstore.com Site, the Commerce Pages, or the page of a wholly-owned subsidiary
of drugstore, subject to the limitations on linking and promotions set forth in
Section 2.4(c).

(b) Distribution Check Points. Within a reasonable time after the
-------------------------
Effective Date, the parties will mutually agree upon a set of reasonable monthly
checkpoints to be used to track the distribution of impressions.

(c) Distribution Review. The parties agree and acknowledge that the
--------------------
intent of this Agreement is to promote drugstore.com on the Snowball Network as
a whole. If after two (2) months following the Effective Date, the distribution
of impressions set forth in Exhibit D is not satisfactory to drugstore.com,
---------
drugstore.com may, upon reasonable written notice to Snowball, modify the
distribution of impressions. drugstore.com may request changes in the
distribution of impressions by impression target, type of impression, or
distribution across the Snowball Network. Snowball will make reasonable efforts
to implement the revised schedule; provided that, drugstore.com acknowledges
that inventory constraints may limit Snowball's ability to shift more than
fifteen percent (15%) of the total impressions in any given month; and provided
further that, Snowball will shift impressions only to the extent that the
revised schedule is commercially reasonable. On forty-eight (48) hour notice,
drugstore.com may require Snowball to shift all impressions away from an
Affiliate deemed, at drugstore.com's discretion, incompatible with the
drugstore.com marketing and advertising strategy. Snowball, in its reasonable
discretion, will shift such impressions to other Affiliates, the Snowball Hub
Sites, or some combination of Affiliates and Snowball Hub Sites.

2.6 Implementation Management
-------------------------

(a) Appointment of a Client Services Team. Snowball will assign a
-------------------------------------
Client Services Team, consisting of an Account Manager and a Coordinator, to
monitor and maximize use of drugstore.com's content and services by Snowball
Network users.

(b) Progress Review. On a periodic basis to be mutually agreed by
---------------
the parties, Snowball and drugstore.com will meet, in person, telephonically, or
by electronic means, to discuss progress in attaining the purposes of this
Agreement and to discuss concerns about the implementation of the Agreement.

3. Additional Marketing Opportunities.
----------------------------------

3.1 Snowball Promotions. Snowball will work to provide drugstore.com with
-------------------
a first right of negotiation for any significant Snowball on-line and off-line
marketing programs and promotional events that the parties mutually agree are
related to the drugstore.com demographic market for health, pharmacy, personal
care, and wellness products. Accordingly, Snowball will provide drugstore.com
with notice reasonable under the circumstances of such pending programs and
events. drugstore.com shall have thirty (30) days from receipt of such notice
to give Snowball notice of its intent to exercise its right of first
negotiation; provided that, if Snowball's participation in such programs and
events is conditioned on notice to a third-party that would require Snowball to
respond to that third party in a period of time such that the above-response

5
<PAGE>

period for drugstore.com would be unreasonable, Snowball shall require
drugstore.com to respond in such shorter period of time as would be reasonable
under such circumstances. If drugstore.com exercises its right under this
provision, the parties will negotiate in good faith to provide drugstore.com the
opportunity to participate in such programs and events.

3.2 Press Releases. Each party agrees to submit to the other all
--------------
publicity matters wherein such party's name or proprietary marks are mentioned
or language is used from which the connection to the other party or its names
therein may be inferred or implied. Each party further agrees not to publish or
use such publicity without prior written approval of the other party. Within
thirty (30) days of the Effective Date, the parties will distribute a mutually
agreeable press release announcing the relationship between Snowball and
drugstore.com.

3.3 Product Give-Aways. Snowball agrees to provide drugstore.com with an
------------------
opportunity, at times determined by Snowball, to include a sample product or
collateral material branded with the drugstore.com Mark and reasonably
acceptable to Snowball in [**] ChickShops purchase packages.

4. Compensation.
------------

4.1 Payment Terms. drugstore.com will pay to Snowball the amounts
-------------
specified in Exhibit C in accordance with that schedule and the terms and
---------
conditions set forth therein. Payments not made when due will bear interest at
the rate of [**] on the unpaid balance, or the highest
rate permitted by applicable laws, whichever is lower. Payments will be made in
U.S. Dollars.

4.2 Taxes. All amounts payable under this Agreement are exclusive of all
-----
sales, use, value-added, withholding, and other taxes and duties. drugstore.com
will pay all taxes and duties assessed in connection with this Agreement and its
performance by any authority within or outside of the U.S., except for taxes
payable on Snowball's net income. Snowball will be promptly reimbursed by
drugstore.com for any and all taxes or duties that Snowball may be required to
pay in connection with this Agreement or its performance.

4.3 Records and Audit Rights.
------------------------

(a) Snowball Audit Rights. drugstore.com will keep all records
---------------------
relating to all purchasing data relevant to this Agreement for a period of three
(3) years after such sale/impression record period. An independent auditor
selected by Snowball and reasonably acceptable to drugstore.com may, no more
than once per year and upon at least five (5) business days notice, inspect such
records during normal business hours. If, upon performing such audit, it is
determined that drugstore.com has underpaid Snowball by an amount greater than
five percent (5%) of the payments due Snowball in the period being audited,
drugstore.com will bear all reasonable expenses and costs of such audit in
addition to its obligation to make full payment under this section.

(b) drugstore.com Audit Rights. drugstore.com shall have the right to
--------------------------
audit Snowball's impressions records to ensure delivery of the Guaranteed
Impressions as specified

6
<PAGE>

herein. An independent auditor selected by drugstore.com and reasonably
acceptable to Snowball may, no more than twice per year and upon at least five
(5) business days notice, inspect such records during normal business hours at
Snowball's corporate office. If, upon performing such audit, it is determined
that Snowball has underdelivered its Guaranteed Impressions commitment for such
period by 30% or more, then as Snowball's sole obligation, and drugstore.com's
sole and exclusive remedy, Snowball will deliver any deficiency such that
drugstore.com receives all such Guaranteed Impressions for the audit period.

4.4 Reports. During the term of the Agreement, drugstore.com shall
-------
provide monthly reports to Snowball setting forth all click-through rates, the
number of New Customers (as defined herein), and the number of repeat purchases
made by New Customers from drugstore.com. Such reports shall be due no later
than thirty (30) days after the end of each month.

5. Licenses, Other Proprietary Rights and Related Matters.
-------------------------------------------------------

5.1 Content License. drugstore.com hereby grants to Snowball a limited,
---------------
royalty-free, nonexclusive, nontransferable license to copy, distribute, and
publicly display on the Snowball Network content from the drugstore.com Site,
and to sublicense such rights to Affiliates (under the same or more restrictive
terms and conditions as stated herein), solely to promote drugstore.com and the
drugstore.com Site and otherwise perform this Agreement. Snowball may reformat
and edit drugstore.com content for the purpose of incorporating such content
into the Snowball Network; provided that Snowball first secures drugstore.com's
express written approval for edits, which approval shall not be unreasonably
withheld.

5.2 drugstore.com Trademark License. Subject to the terms and conditions
-------------------------------
of this Agreement, drugstore.com hereby grants Snowball a limited, royalty-free,
nonexclusive, non-transferable, license, with the right to sublicense such
rights to Affiliates (under the same or more restrictive terms and conditions as
stated herein), to use the drugstore.com trademarks, service marks and logos
identified in Exhibit B ("drugstore.com Marks") solely in connection with the
---------
performance of Snowball's linking, promotional, and branding obligations under
this Agreement. drugstore.com, in its sole discretion from time to time, may
change the appearance and/or style of the drugstore.com Marks. Snowball hereby
acknowledges and agrees that: (a) the drugstore.com Marks are owned solely and
exclusively by drugstore.com; (b) except as set forth herein, Snowball has no
rights, title or interest in or to the drugstore.com Marks or to the goodwill
associated with the drugstore.com Marks; and (c) all use of the drugstore.com
Marks by Snowball shall inure to the benefit of drugstore.com. Snowball agrees
not to apply for registration of the drugstore.com Marks (or any mark
confusingly similar thereto) anywhere in the world. Snowball acknowledges and
agrees that the presentation and image of the drugstore.com Marks should be
uniform and consistent with respect to all services, activities and products
associated with the drugstore.com Marks. Accordingly, Snowball agrees to use
the drugstore.com Marks solely in the manner which drugstore.com shall specify
from time to time in drugstore.com's sole discretion. All usage by Snowball of
the drugstore.com Marks shall include the trademark or registered trademark
symbol and shall be in the following form, as appropriate: [drugstore.com
Mark](TM) or [drugstore.com Mark](R).

7
<PAGE>

5.3 Snowball Trademark License. Subject to the terms and conditions of
--------------------------
this Agreement, Snowball hereby grants drugstore.com a limited, royalty-free,
nonexclusive, non-transferable, non-sublicenseable license to use the Snowball
trademarks, service marks and logos identified in Exhibit B ("Snowball Marks")
---------
solely in connection with the linking, promotional, and branding activities
under this Agreement. Snowball, in its sole discretion from time to time, may
change the appearance and/or style of the Snowball Marks. drugstore.com hereby
acknowledges and agrees that: (a) the Snowball Marks are owned solely and
exclusively by Snowball; (b) except as set forth herein, drugstore.com has no
rights, title or interest in or to the Snowball Marks or to the goodwill
associated with the drugstore.com Marks; and (c) all use of the Snowball Marks
by drugstore.com shall inure to the benefit of Snowball. drugstore.com agrees
not to apply for registration of the Snowball Marks (or any mark confusingly
similar thereto) anywhere in the world. drugstore.com acknowledges and agrees
that the presentation and image of the Snowball Marks should be uniform and
consistent with respect to all services, activities and products associated with
the Snowball Marks. Accordingly, drugstore.com agrees to use the Snowball Marks
solely in the manner that Snowball shall specify from time to time in Snowball's
sole discretion. All usage by drugstore.com of the Snowball Marks shall include
the trademark or registered trademark symbol and shall be in the following form,
as appropriate: [Snowball Mark](TM) or [Snowball Mark](R).

5.4 Ownership. Snowball will retain all right, title and interest in and
---------
to the Snowball Network and to Snowball content. drugstore.com will retain all
right, title and interest in and to the drugstore.com Site, drugstore.com
products and drugstore.com content, subject to the express license granted
herein.

5.5 User Data.
---------

(a) Ownership. Subject to the restrictions in this section and any
---------
rights to use the applicable data granted under this Agreement, Snowball will
own Snowball Network user registration data, and drugstore.com will own
drugstore.com Site user registration data. The parties agree and acknowledge
that user registration data obtained during the simultaneous registration of the
user for both the Snowball Network and drugstore.com shall be owned separately
by each of the parties.

(b) Treatment of Individually Identifiable User Data. Both parties
------------------------------------------------
agree that they will not sell, disclose, transfer, or rent any registration data
("User Data") which identifies, or can be used to identify a specific individual
("Individually Identifiable User Data") to any third party or use any
Individually Identifiable User Data on behalf of any third party, without the
express permission of the applicable user specifically approving such use. Both
parties further agree that they will only use Individually Identifiable User
Data themselves in accordance with their respective terms of use and privacy
policies (as amended from time to time); provided that, drugstore.com's privacy
policy shall be at least as restrictive as the Snowball Network policy. In
those cases where permission for disclosure of Individually Identifiable User
Data has been obtained from the applicable user, both parties shall use all
reasonable efforts to implement an "opt out" feature on its own behalf, and
include and enforce through its agreements with third parties a requirement for
the inclusion of an "opt out" feature in all e-mail communications generated by,
or on behalf of, third party users of the Individually Identifiable User Data.

8
<PAGE>

(c) Aggregate Data. Notwithstanding the restrictions above, the
---------------
parties retain the right to use, sell, disclose, transfer, or rent any User Data
as long as such User Data is in an aggregate form that does not include any
Individually Identifiable User Data.

5.6 Control of Web Sites. Each party retains sole right and control over
--------------------
the programming, content (including without limitation placement thereof), and
conduct of transactions over its respective web sites. Each party, in its
discretion, periodically may redesign or modify the organization, content,
design, "look and feel," navigation, and features of its web site. Without
limiting the generality of the foregoing, Snowball shall have the right, upon
written notice, to reject any content provided by drugstore.com if such content
fails to comply with Snowball's reasonable requirements or is otherwise
inappropriate for the users of the Snowball Network. If Snowball intends to
eliminate, modify or otherwise redesign any area on the Snowball Hub Sites and
if Snowball determines in its reasonable discretion that such change will
materially affect drugstore.com's rights hereunder, Snowball shall notify
drugstore.com of such change and the parties will mutually agree upon a
reasonable alternative.

5.7 Site Information. drugstore.com will provide Snowball with any
----------------
information reasonably required to implement links from the Snowball Network to
the drugstore.com site. Each party will give the other party reasonable advance
notice in the event it changes its universal record locator (URL) for its site.

6. Confidential Information.
------------------------

6.1 Obligations. Each party ("Receiving Party") agrees to treat as
-----------
confidential all proprietary information disclosed to it by the other party
("Disclosing Party") including, but not limited to, marketing information,
customer data, any data described in Section 5.5 above, and the terms of this
Agreement ("Confidential Information"). Receiving Party agrees not to publish
or disclose the Disclosing Party's Confidential Information to others except to
those employees and subcontractors to whom disclosure is necessary in order to
carry out the purposes of this Agreement. All tangible materials embodying such
Confidential Information will remain the sole property of Disclosing Party and
will be delivered to Disclosing Party by Receiving Party upon Disclosing Party's
request. Receiving Party will inform all its employees and subcontractors who
receive Confidential Information of the confidential nature of such Confidential
Information and of their obligation to keep same confidential and not to use it
other than as permitted hereunder.

6.2 Exceptions. Neither party will have any obligation with respect to
----------
any Confidential Information which: (a) was rightfully known to Receiving Party
prior to receipt of such Confidential Information from Disclosing Party; (b) is
lawfully obtained by Receiving Party from a third party under no obligation of
confidentiality; (c) is or becomes generally known or available without any act
or failure to act by Receiving Party; or (d) is developed independently by
Receiving Party. The Receiving Party may disclose the Confidential Information
of the Disclosing Party if required by court order or by any other statutory or
regulatory requirement; provided that, the Receiving Party has given the
Disclosing Party reasonable notice of such order

9
<PAGE>

or requirement to allow the Disclosing Party to contest or limit the scope of
such required disclosure (including application for a protective order).

7. Term and Termination.
--------------------

7.1 Term. This Agreement will commence on the Effective Date and remain
----
in effect for [**], unless terminated earlier pursuant to this Section 7.
Commencing [**] prior to expiration of the Agreement, drugstore.com shall have a
period of [**] in which it may give written notice to Snowball of its desire to
renew this Agreement for [**] or as otherwise mutually agreed by the parties. In
the event that during that [**] notice period, drugstore.com provides such
notice, the parties shall negotiate in good faith to renew the Agreement,
subject to any changes to the terms and conditions required by one or more of
the parties, and for [**] after receipt of such notice, Snowball will not
negotiate with any drugstore.com Competitor to replace drugstore.com upon
termination of this Agreement. If during the [**] notice period drugstore.com
does not provide notice of its desire to renew, or if within the [**]
negotiation period the parties are unable to reach agreement on the renewal
terms, Snowball will be free to negotiate a replacement agreement with another
party.

7.2 Termination for Benchmark Performance Failure. Snowball Network users
---------------------------------------------
who visit the drugstore.com Site via a link from the Snowball Network or via a
link from an email message sent out by the Snowball Network and who purchase one
or more products from drugstore.com, and who have not previously made a purchase
from drugstore.com, shall be referred to herein as "New Customers." If at the
end of [**] from the Effective Date less than [**] Snowball Network users have
become New Customers, drugstore.com shall have the right to terminate the
Agreement on written notice to Snowball; provided that such notice is given
during the [**] period following the beginning of [**] after the Effective Date.

7.3 Termination for Breach or Insolvency. Either party may terminate this
------------------------------------
Agreement at any time prior to the expiration of its stated term in the event
that (a) the other party materially breaches any term or condition of this
Agreement and fails to cure such breach within [**] of written notice; or (b)
either party becomes the subject of a voluntary petition in bankruptcy or any
voluntary proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors; or (c) either party becomes the
subject of an involuntary petition in bankruptcy or any involuntary proceeding
relating to insolvency, receivership, liquidation, or composition for the
benefit of creditors, if such petition or proceeding is not dismissed within
[**] of filing.

7.4 Effect of Termination.
---------------------

(a) In the event of a termination by drugstore.com under Section
2.5(a) or 7.2, drugstore.com shall receive, pursuant to Exhibit C, a pro rata
----------
refund of any Minimum Guaranteed Payment and, except as specified in subsection
(b), shall have no further payment liability hereunder.

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<PAGE>

(b) drugstore.com's payment obligations accrued and payable as of the
date of termination, except those payment obligations disputed in good faith, as
well as the following provisions shall survive any termination of this
Agreement: Section 4.2 (Taxes), Section 5.4 (Ownership), Section 5.5 (User
Data), Section 5.6 (Control of Web Sites), Section 6 (Confidential
Information), Section 7.4 (Effect of Termination), Section 8 (Warranties and
Disclaimers), Section 9 (Limitation of Liability), Section 10 (Indemnification)
and Section 11 (General), with the exception of subsection 11.9.

(c) If Snowball is obligated to make good on undelivered Guaranteed
Impressions, the following provisions additionally shall survive termination for
the purpose of governing delivery of the underdelivered Guaranteed Impressions
until such time as the underdelivered Guaranteed Impressions have been
delivered: Section 2.5(a) (Impressions and Links), Section 3.2 (Press
Releases), Section 4.1 (Payment Terms), Section 4.3 (Records and Audit Rights),
Section 4.4 (Reports), Section 5.1 (Content License), Section 5.2 (drugstore.com
Trademark License), Section 5.7 (Site Information), and Section 11.9
(Consolidated URL Listing).

(d) Within five (5) business days after termination of this
Agreement, or after all of Snowball's obligations to make good on underdelivered
Guaranteed Impressions have been fulfilled, if any, all links, buttons, and
banners will be removed and disabled, and any Confidential Information or other
materials where the party's name or proprietary marks are mentioned or language
is used from which the connection of the other party or its names therein may be
inferred or implied.

8. Warranties and Disclaimers.
--------------------------

8.1 Warranties. Each party represents, warrants and covenants that it has
-----------
the power and authority to enter into and perform its obligations under this
Agreement.

8.2 Disclaimer. EXCEPT AS PROVIDED IN SECTION 8.1, EACH PARTY DISCLAIMS
-----------
ALL OTHER WARRANTIES, EITHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND NONINFRINGEMENT.

9. Limitation of Liability.
-----------------------

EXCEPT WITH RESPECT TO ITS OBLIGATIONS UNDER SECTION 10, NEITHER PARTY WILL
BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL, INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES, OR ANY LOSS OF REVENUE, PROFITS, OR DATA, ARISING IN
CONNECTION WITH THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL SNOWBALL'S AGGREGATE LIABILITY
HEREUNDER, UNDER ANY THEORY OF LAW, EXCEDE THE AMOUNTS ACTUALLY RECEIVED BY
SNOWBALL FROM DRUGSTORE.COM HEREUNDER IN THE [**] PERIOD IMMEDIATELY PRECEDING
THE EVENT WHICH GAVE RISE TO THE CLAIM FOR

11
<PAGE>

DAMAGES. IN NO EVENT WILL DRUGSTORE.COM'S AGGREGATE LIABILITY HEREUNDER, UNDER
ANY THEORY OF LAW, EXCEDE THE AMOUNTS ACTUALLY RECEIVED BY SNOWBALL FROM
DRUGSTORE.COM HEREUNDER PLUS ANY AMOUNTS ACCRUED AND PAYABLE BY DRUGSTORE.COM
HEREUNDER IN THE [**] PERIOD IMMEDIATELY PRECEDING THE EVENT WHICH GAVE RISE TO
THE CLAIM FOR DAMAGES.

10. Indemnification.
---------------

10.1 Snowball's Obligations. Snowball hereby agrees to defend, indemnify
----------------------
and hold harmless drugstore.com and its subsidiaries, and their directors,
officers, employees, and agents against any and all claims, actions, losses,
damages, costs, and expenses (including reasonable attorneys' fees) (any or all
of the foregoing hereinafter referred to as "Losses") to the extent they arise
out of or are based on, other than those claims described in Section 10.2: (i)
any claim related to the Snowball Network, including claims that such sites have
not been operated in compliance with applicable federal, state, or local laws of
the United States or that the Snowball Marks or content infringe the copyrights,
trademarks, service marks or any other proprietary right of any third party, or
(ii) any claim related to Snowball's acts or omissions with respect to any
customer. Snowball's obligations under this Section are hereby expressly
conditioned on the following: (a) drugstore.com provides Snowball with prompt
notice of any such claim; (b) drugstore.com permits Snowball to assume and
control the defense of such action, with counsel chosen by Snowball (who will be
reasonably acceptable to drugstore.com); and (c) drugstore.com provides Snowball
with any information or assistance requested by Snowball, at Snowball's expense.

10.2 drugstore.com's Obligations. drugstore.com hereby agrees to defend,
---------------------------
indemnify and hold harmless Snowball and its subsidiaries, and their directors,
officers, employees, and agents against any and all Losses to the extent they
arise out of or are based on, other than those claims described in Section 10.1:
(i) any claim related to the drugstore.com Site, including claims that such site
has not been operated in compliance with applicable federal, state, or local
laws of the United States or that the drugstore.com Marks or content infringe
the copyrights, trademarks, service marks or any other proprietary right of any
third party: (ii) any products made available by drugstore.com on any Health and
Wellness Store or the drugstore.com Site,; (iii) any content, information or
other material provided to Snowball by drugstore.com; or (iv) drugstore.com's
activities (or omissions) with respect to any customer. drugstore.com's
obligations under this Section are hereby expressly conditioned on the
following: (a) Snowball provides drugstore.com with prompt notice of any such
claim; (b) Snowball permits drugstore.com to assume and control the defense of
such action, with counsel chosen by drugstore.com (who will be reasonably
acceptable to Snowball); and (c) Snowball provides drugstore.com with any
information or assistance requested by drugstore.com, at drugstore.com's
expense.

11. General.
-------

11.1 Waivers/Modifications. Any waiver modification or amendment to any
---------------------
provision of this Agreement will be effective only if in writing and executed by
both parties. The waiver

12
<PAGE>

by either party of any default or breach of this Agreement will not constitute a
waiver of any other or subsequent default or breach.

11.2 Notices. All notices required to be given under this Agreement will
-------
be deemed given when delivered personally or sent by confirmed facsimile or U.S.
certified mail, return receipt requested, to the address shown in the preamble
above, or as may otherwise be specified by either party to the other in writing.

11.3 Severability. If any provision of this Agreement is found illegal or
------------
unenforceable, it will be enforced to the maximum extent permissible, and the
legality and enforceability of the other provisions of this Agreement will
remain in full force and effect.

11.4 Governing Law/Attorney's Fees. This Agreement will be governed by
-----------------------------
and construed in accordance with the laws of the State of California applicable
to agreements entered into, and to be performed entirely, within California
between California residents. In the event that any action or proceeding is
brought in connection with this Agreement, the prevailing party in such action
or proceeding shall be entitled to recover its costs and reasonable attorneys'
fees.

11.5 No Partnership. The relationship of the parties hereto is solely
--------------
that of independent contractors, and not partners, joint venturers or agents.
Neither party has any authority to bind the other in connection with this
Agreement.

11.6 Entire Agreement. This Agreement, including any exhibits attached
----------------
hereto, is the complete and exclusive agreement between the parties with respect
to the subject matter hereof, and supersedes and replaces any and all prior or
contemporaneous agreements regarding such subject matter.

11.7 Force Majeure. Neither party will be liable to the other party as a
-------------
result of its failure to perform any obligation or duty under this Agreement,
other than the obligation to pay money, to the extent that such failure is cause
by flood, war, riot, civil insurrection, labor or material shortages, failure of
contractors to perform their obligations, or other events that are not
reasonably foreseeable or are beyond the reasonable control of the party.

11.8 No Assignment. Neither party may assign this Agreement without the
-------------
other party's written consent except in the event of a reorganization, merger,
consolidation or sale of all or substantially all of its assets. Any assignment
in violation of this Section shall be null and void.

11.9 Consolidated URL Listing. drugstore.com hereby grants Snowball
------------------------
permission to include all of the URLs related to the pages served to health,
pharmacy, personal care, and wellness customers through the Snowball Network
together with other Snowball-related URLs in consolidated listings assembled by
third-party measurement companies, including but not limited to Media Metrix,
NetRatings or any similar measuring service selected by Snowball for measurement
of traffic on the Snowball Network. drugstore.com agrees that the rights
granted under this section are exclusive to Snowball and that drugstore.com will
not grant the same or similar rights to any other party.

13
<PAGE>

In Witness Whereof, the parties have entered into this Agreement as of the
Effective Date.

drugstore.com, inc. SNOWBALL.COM, INC.

By: /s/ Peter Neupert By: /s/ James R. Tolonen

Name: Peter Neupert Name: James R. Tolonen

Title: CEO Title: COO/CFO

14
<PAGE>

EXHIBIT A

drugstore.com COMPETITORS
-------------------------

(including Internet and non-Internet components of such companies):
- -------------------------------------------------------------------

[**]

15
<PAGE>

EXHIBIT B

MARKS

1. drugstore.com Marks
-------------------

2. Snowball Marks
--------------

16
<PAGE>

EXHIBIT C

PAYMENT

1. Minimum Guaranteed Payments. drugstore.com shall pay Snowball [**] in [**]
---------------------------
installments pursuant to the following schedule:

Payment Due Date Payment Amount

[**] [**]

Should production considerations delay the implementation of portions of
the program established under this Agreement, Snowball will work with
drugstore.com to modify the [**] payment schedule to reflect the elements of the
program that are "live" on the Snowball Network; provided that, the total paid
over [**] shall be equal to [**].

In the event that drugstore.com is entitled to a pro rata refund under this
Agreement of its Minimum Guaranteed Payments, such refund shall be [**] per
thousand Guaranteed Impressions not delivered during the relevant delivery
period.

2. Additional Payments. drugstore.com shall pay Snowball the additional
-------------------
amounts shown below. Such payments are due monthly no later than thirty days
after the end of each month.

(a) New Customers. For each New Customer [**] Customers, drugstore.com
-------------
agrees to pay a fee of [**]. (There is no fee for [**].

(b) Registration Fees. For each registrant who registers for the
------------------
drugstore.com during the Snowball Network registration process [**],
drugstore.com agrees to pay Snowball the following amounts:

Number of Registrants Amount Per Registrant

[**] [**]

17
<PAGE>

[**] [**]

If drugstore.com terminates registration services pursuant to Section 2.1,
payment shall be due from drugstore.com to Snowball for registrations for the
drugstore.com Site for the dates prior to, but not including, the effective date
of such termination.

18
<PAGE>

EXHIBIT D

IMPRESSIONS AND LINKS

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Impression/Link Number of Type of Distribution of Impressions Across the Snowball Network
Target Impressions/Links Impression/Link
- -----------------------------------------------------------------------------------------------------------------------------
ChickClick.com IGN.com Powerstudents.com/ Affiliates
InsideGuide.com
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commerce Pages [**] Guaranteed Banner Impressions [**] [**] [**] [**]
Impressions per month
- -----------------------------------------------------------------------------------------------------------------------------
Commerce Pages [**] Guaranteed Button Impressions [**] [**] [**] [**]
Impressions per month
- -----------------------------------------------------------------------------------------------------------------------------
drugstore.com Site [**] Guaranteed Banner or Button [**] [**] [**] [**]
or other site Impressions per month Impressions, at
owned by Snowball's option
drugstore.com
- -----------------------------------------------------------------------------------------------------------------------------
Commerce Pages or [**] per month Portal Link [**] [**] [**] [**]
drugstore.com Site
- -----------------------------------------------------------------------------------------------------------------------------
Commerce Pages or Impressions included Navigation Bar Link [**] [**] [**] [**]
drugstore.com Site in above Portal Link Impressions
totals
- -----------------------------------------------------------------------------------------------------------------------------
drugstore.com Site [**] Email Advertisement [**] [**] [**] [**]
Guaranteed Impressions
Impressions per month
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

In addition to the above listed impressions, Snowball shall issue a one-
time special e-mail blast to include a promotion of drugstore.com to the
Snowball Network users on, or reasonably near, the beginning of the seventh
month after the Effective Date. The content of such e-mail shall be developed by
Snowball, subject to drugstore.com's approval, which approval shall not be
unreasonably withheld.

Banner Impressions shall have an approximate configuration of at least 468
x 60 pixels.

A "Portal Link" means a link on Snowball's "Affiliate Commerce Portal,"
which is to appear on Snowball Affiliate site pages.

A "Navigation Bar Link" means a link incorporated into the navigation bar
on each Snowball Hub Site page that links each Snowball Hub Site page to the
Commerce Pages created for that Snowball Hub Site.

"Email Advertisement" impressions shall be delivered in the form of the
transmittal of a Snowball standard size advertisement within emails sent to
Snowball Network registered users as part of Snowball's email schedule, as
specified to Snowball Network users during registration.

<PAGE>

Exhibit 10.33

CONFIDENTIAL TREATMENT **Confidential treatment has been requested with
HAS BEEN REQUESTED FOR respect to the information contained within the
CERTAIN PORTIONS OF THIS "[**]" markings. Such marked portions have been
DOCUMENT omitted from this filing and have been filed
separately with the Securities and Exchange
Commission.

eCommerce Agreement
Between
Snowball.com and JobDirect.com

This eCommerce and Content Agreement (this "Agreement") is made as of
February 29, 2000 (the "Effective Date"), by and between Snowball.com, Inc., a
Delaware corporation with principal offices at 250 Executive Park Boulevard,
Suite 4000, San Francisco, CA 94134 ("Snowball") and JobDirect.com, Inc., a
Delaware corporation with principal offices at 201 Summer Street, Stamford, CT
06901 ("JobDirect").

Background

Snowball owns and operates four networks of interrelated web sites: the
"IGN Network," featuring editorial content about games, movies, tv, science
fiction, and entertainment issues for young men (the hub site for which is
located at www.ign.com), the "ChickClick Network," featuring editorial content
targeted at young women (the hub site for which is located at
www.ChickClick.com), the "Power Students Network," and the "Inside Guide
Network," two networks featuring content targeted at college students (the hub
sites for which are located at www.Powerstudents.com and www.InsideGuide.com).
The IGN, ChickClick, Power Students, and Inside Guide Networks are collectively
referred to in this Agreement as the "Snowball Network(s)." The Snowball Network
sites offer links to a number of affiliated sites that provide related content
(the "Snowball Affiliate Sites").

JobDirect provides content and services designed to help college students
and recent graduates find internships, part time jobs, and full time positions,
including a resume and job posting search engine that helps link job seekers
with JobDirect's list of hiring companies and organizations. JobDirect's content
and services are accessible through its World Wide Web site located at
www.JobDirect.com (the "JobDirect.com Site").

JobDirect wishes to be the exclusive job search/listings partner on the
Snowball Networks and to have links established from the Snowball Network hub
sites to the JobDirect.com Site. Snowball has agreed to establish those links
and co-branded pages on the Snowball Network hub sites and to jointly develop
with JobDirect and implement a co-branded career section available from each of
the Snowball Network hub sites (the "Career Center").

Now Therefore, the parties agree as follows:

1. Exclusivity. Subject to the terms and conditions of this Agreement,
-----------
Snowball will identify JobDirect as Snowball's exclusive provider of job
search/listings on all of the Snowball Networks, provided, however, that (1)
Snowball may continue meeting any contractual obligations to advertisers,
sponsors, partners, and
<PAGE>

affiliates that it has undertaken prior to the Effective Date, including
obligations to any job listings affiliates, for the term of any such contracts,
provided that Snowball has disclosed the terms and effective dates of any such
contractual obligations in writing to JobDirect.com prior to the Effective Date
of this Agreement and (2) that nothing in this Agreement will prevent Snowball
from accepting additional career related affiliates so long as those affiliates
are not among the entities listed on Schedule A attached hereto, or from placing
banner and button advertisements and sponsorships from competing career and job
listings sites on the Snowball Networks so long as the total number of monthly
impressions from any one such competing career and job listing sites for such
banner and button advertisements and sponsorships does not exceed [**] of the
total number of monthly impressions delivered for JobDirect.com. Said total is
defined as the aggregate of monthly banner impressions, button impressions and
portal link impressions delivered under the Agreement. No such competing button
or banner advertisements will appear in the co-branded Career Center. The
exclusivity obligation set forth in this section will not apply to Snowball
Affiliate Sites.

2. Promotion and eCommerce. Subject to the terms and conditions of this
-----------------------
Agreement, the parties will use commercially reasonable efforts to cooperate and
work together to bring each of the elements of the promotional program set forth
in this Section 2 on line on their respective web sites by March 15, 2000 (the
"Launch Date"). The parties acknowledge that despite their commercially
reasonable efforts, some elements of the program set forth in this Section 2 may
not be on line by the Launch Date, and agree that if both parties have used
commercially reasonable efforts to meet the Launch Date, it will not be a breach
of this Agreement that not every element is on line by the Launch Date. The
parties further agree that after the Launch Date the parties will continue to
use commercially reasonably efforts to bring each remaining element on line as
soon as practicable thereafter.

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

(a) New Registrations. Snowball will make available to each user
-----------------
who is no less than 20 years old registering with a Snowball Network the
simultaneous opportunity of an "opt out" registration for JobDirect.com. For
purposes of this paragraph, "opt out" registration means an automatic
functionality for dual registration of the user on both the Snowball Network and
on JobDirect.com unless the user opts, using an offered functional indicator,
not to register with JobDirect.com.

(b) Existing Registered Users. Within the first month after the
-------------------------
Career Section goes live on line, Snowball will send each Snowball Network user
who is no less than 20 years old and registered as of the Effective Date
(estimated at 900,000) an email message describing JobDirect.com's various
offers and services, as well as informing them of the relationship between
Snowball and JobDirect.com under this Agreement. Such email message will include
a link allowing users to add their email addresses to the JobDirect.com database
of Snowball Network users.

(c) Registrant: As used herein, a "Registrant" means any user of
----------
JobDirect.com who satisfies each of the following conditions: (i) user is not
less than 20 years of age, (ii) such user is not already a registered user with
JobDirect.com, (iii) such user accesses JobDirect.com through any link or
registration process on a Snowball Network site, as set forth in Section 2.1 (a)
and (b) above, and (iv) such user registers with JobDirect.com in a manner
consistent with JobDirect.com business practice, such registration to include
the user's name, address, email address, age, graduation date, school and
academic major.

<PAGE>

(d) Reporting. Snowball will provide to JobDirect a monthly report
---------
of all registration data for each Snowball Network user who registers in that
month with JobDirect through the "opt out" registration described above.

2.2 "My Page" Integration.
--------------------

(a) New Users. Snowball will integrate content and/or links, the
---------
extent and placement of which Snowball shall determine at its sole discretion,
from the Career Center into Snowball's customizable "My Page" sections developed
for new users. Snowball will work with JobDirect to find ways to provide custom
content from JobDirect to Snowball Network users through their customized "My
Page" sections.

(b) Existing Users. For existing registered Snowball Network users,
--------------
Snowball will include a JobDirect.com listing in the "My Page" profile update
page, permitting users to choose to receive content and/or links from the Career
Center on their custom "My Page" sections within Snowball.com.

2.3 Co-Branded Career Center. Snowball and JobDirect will work together
------------------------
to develop a co-branded Career Center to be hosted and served by Snowball and
linked from each of the Snowball Networks. The Career Center will be promoted
throughout the Snowball Networks by navigational links placed prominently in
each Snowball Network site, enabling users to access the Career Center through
each such link. JobDirect's job search engine will be prominently linked to each
page within the Career Center. The Career Center will include content to be
provided by both Snowball and JobDirect.com, including descriptions of the
various career, resume, and job posting services offered by JobDirect.com, and
will include links out from the Career Center to the JobDirect.com Site, through
which users will be able to access additional JobDirect content and services.
Snowball Network users accessing JobDirect.com through links from the Snowball
Networks will be followed throughout each session by a co-branded navigation bar
and frame. The look and feel, as well as the specific functionalities of the
Career Center, will be developed jointly by the parties and subject to the
agreement of both parties, which agreement will not be unreasonably withheld.
Subject to the limitations set forth in Section 1, Snowball will have sole
control over all advertising, banners, and other promotional placements
appearing in the co-branded Career Center and anywhere within the Snowball
Networks, and will retain all revenue generated from any such advertising,
banners, and other promotional placements. JobDirect.com agrees to continue
working with Snowball throughout the term of this Agreement to develop and
provide new and updated content and services for the Career Center. Pursuant to
this Section, JobDirect.com shall only be obligated to use commercially
reasonable efforts to provide (i) the job search application currently present
in the Jobdirect.com site, (ii) content, and (iii) advisory services.
JobDirect.com shall not be obligated to provide for or reimburse Snowball for
any third-party expenses relating to such development. Snowball will provide
JobDirect.com with statistics pertaining to the use of the "Career Poll" feature
of the Career Center.

2.4 Snowball Network Advertising, Links, and e-Mail Promotions.
----------------------------------------------------------

(a) Banner Impressions. Snowball will guarantee [**] banner
------------------
impressions promoting JobDirect.com on Snowball Network pages each month during

<PAGE>

the term of this Agreement, with such impressions to have a configuration of 468
x 60 pixels.

(b) Button Impressions. Snowball will guarantee [**] button
------------------
impressions promoting JobDirect.com on Snowball Network pages each month during
the term of this Agreement, with each such impression to have a configuration of
144 x 50 pixels or 120 x 60 pixels.

(c) Portal Link. During the term of this Agreement, Snowball will
-----------
provide a link to the Career Center on Snowball's "Affiliate Commerce Portal."
Snowball will use commercially reasonable efforts to encourage Snowball
affiliates to place on their Snowball Affiliate Sites (guaranteed to provide
[**] impressions per month).

(d) Navigation Bar Link Impressions. Snowball will incorporate a
-------------------------------
button or link promoting the Career Center into the navigation bar on Snowball
Network hub site pages (estimated to deliver [**] impressions per month).

(e) Snowball e-Mail Promotions. JobDirect.com will receive a
--------------------------
standard size (315 text based characters including the URL on ChickClick; 8
lines or less including the URL on PowerStudents; 30 to 50 words including the
URL on IGN.) advertisement in e-mails sent by Snowball each month to users
registered on the Snowball Network hub sites and Affiliates and through their
relationship with Hotmail, which Snowball will guarantee to deliver at least
[**] emails per month across all Snowball Network hub sites combined.

(f) Career Polls. Snowball will develop and promote a career-oriented
------------
opinion poll [**]. These career polls will focus on current events affecting
Snowball users. These career polls, which will be called "JobDirect.com Career
Polls," will appear within the Career Center. The polls will provide immediate
feedback after a vote has been submitted, allowing users to see where their
opinions fall within the greater community. The JobDirect.com logo will be
placed within the top area of each career poll.

(g) Sole Remedy for any Deficiency. For those impressions for which a
------------------------------
set number of impressions are guaranteed to be delivered each month ("Guaranteed
Impressions"), if in any given month that number of impressions is not
delivered, then Snowball's sole obligation and JobDirect.com's sole and
exclusive remedy will be for Snowball to deliver any deficiency by no later than
forty-five (45) days after this Agreement terminates in accordance with Section
9.1.

2.5 JobDirect Links to Snowball.com. JobDirect.com will include buttons
-------------------------------
and or links on its pages accessed through the Snowball Network enabling
visitors to the JobDirect.com Site who accessed that site through a link from a
Snowball Network site to link back to the page on the Snowball Network site from
which they accessed the JobDirect.com Site.

<PAGE>

3. Additional Marketing Opportunities.
----------------------------------

3.1 Snowball Promotions. During the term of this agreement, with respect to
-------------------
any proposed Snowball on-line and off-line career placement and job
search/listing related marketing programs and promotional events, Snowball will
provide JobDirect.com with a right of first negotiation such that (a)
JobDirect.com will be provided with reasonable advanced notice of its intent to
develop any such program or event (such notice not to be less than thirty (30)
days in advance of the introduction of such program or event and such notice to
be delivered to JobDirect.com prior to delivery of any such notice to any other
person or entity) and (b) Snowball will negotiate in good faith exclusively with
JobDirect.com for career placement and job search/listings participation in such
event for a period of 15 days following delivery of such notice to allow
JobDirect.com a reasonable opportunity to participate in such program or event
as the exclusive career placement and job search/listings service provider on
commercially reasonable terms.

3.2 JobDirect Promotions. During the term of this agreement, with respect
--------------------
to any proposed JobDirect on-line and off-line career related marketing programs
and promotional events, JobDirect.com will provide Snowball with reasonable
advance notice of its intent to develop any such program or event and will
negotiate in good faith with Snowball to allow Snowball an opportunity to
participate in such program or event in the same manner of services as provided
herein on commercially reasonable terms.

3.3 Snowball.com Press Releases. Snowball agrees to submit to JobDirect
---------------------------
all press releases, disclosures, filings, notices and other matters ("Publicity
Matters") wherein JobDirect.com's name or proprietary marks are mentioned, or
where language is used from which the relationship between Snowball and
JobDirect.com could be inferred, and further agrees not to publish or use any
such Publicity Matter without JobDirect.com's prior written consent. Subject to
the foregoing, within thirty (30) days of the Effective Date, Snowball will
distribute a press release announcing the relationship between Snowball and
JobDirect and not any other Snowball activities.

3.4 JobDirect.com Press Releases. JobDirect.com agrees to submit to
----------------------------
Snowball all Publicity Matters wherein Snowball's name or proprietary marks are
mentioned, or where language is used from which the relationship between
JobDirect.com and Snowball could be inferred, and further agrees not to publish
or use any such publicity without Snowball's prior written consent. Subject to
the foregoing, within thirty (30) days of the Effective Date, JobDirect will
distribute a press release announcing the relationship between JobDirect.com and
Snowball.

4. Organizational Support. Snowball will allocate resources and use
----------------------
commercially reasonable efforts to provide competent and effective
administrative and technical support to encourage Snowball Network users to
receive JobDirect.com content and services. Snowball will assign a dedicated
account team.
<PAGE>
Such account team will include at least one full time Snowball employee
(dedicated solely to the matters described herein), an account manager and
coordinator (one of which may be such full time employee). Such persons will (i)
monitor the viewing and use of JobDirect.com content and services through the
career center and links from Snowball Network Sites, and (ii) attend monthly
meetings and quarterly reviews, to be mutually scheduled by the parties, to
discuss the effectiveness of the relationship established by this Agreement.

5. Compensation.
------------

5.1 Participation Fee. JobDirect.com will pay Snowball a one-time, non-
-----------------
refundable participation fee of [**], which shall be due and payable as follows:
[**] after the Launch Date (as defined in Section 2), due and payable in [**]
installments payable on the dates and in the amounts set forth in the attached
Schedule B; and [**] period, due and payable in [**] monthly payments payable on
the dates and in the amounts set forth on the attached Schedule B. JobDirect.com
will not be obligated to pay the [**] fee for the [**] period if it properly
exercises its right to termination under Section 9.2. Payments will be made in
U.S. Dollars. Payments not made when due will bear interest at the rate of [**]
per month on the unpaid balance, or the highest rate permitted by applicable
laws, whichever is lower.

5.2 Qualified Registrant Bounty Fee. JobDirect.com will pay Snowball a
-------------------------------
new qualified registrant bounty fee, due and payable within thirty (30) days of
the [**] of the Launch Date, which shall be calculated as set forth in Exhibit
A. Payments will be made in U.S. Dollars. Payments not made when due will bear
interest at the rate of [**] per month on the unpaid balance, or the highest
rate permitted by applicable laws, whichever is lower.

5.3 Records and Audit Rights. JobDirect.com will keep records of all new
------------------------
registrants who register with JobDirect.com upon linking through to
JobDirect.com from the Career Center or any Snowball Network site for a period
of three (3) years after such registration. At Snowball's expense, an
independent certified public accountant selected by Snowball and reasonably
acceptable to JobDirect.com may, no more than twice per year and upon at least
twenty-four (24) hours notice, inspect such records during normal business
hours.

5.4 Reporting. During the term of this Agreement, JobDirect.com will,
---------
within ten (10) days of the end of each month, provide monthly reports to
Snowball setting forth all relevant data regarding the number of visitors who
(1) access JobDirect.com through links in the Career Center or on any Snowball
Network site, and (2) who "register with" JobDirect.com either through the "opt
out" registration procedure described in Section 2.1 of this Agreement or after
accessing JobDirect.com through any such links. For

** Confidential treatment has been requested with respect to the information
contained within the "[**]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and exchange
Commission.

<PAGE>

purposes of this agreement, a visitor will be deemed to have "registered with"
JobDirect.com if that person completes a JobDirect.com user profile, either
through the "opt out" registration or after linking from a Snowball Network
site, and provides JobDirect.com accurate data in the following categories
(the "Registration Data"):

Name:
Address:
e-mail:
Age:
Graduation Date:
Major:
School:

Snowball will provide JobDirect with monthly reports, verified, at
JobDirect.com's request, through an independent verification system mutually
acceptable to the parties (i.e., NetGravity), within ten (10) days of the end
of each month setting forth all relevant data regarding the number of visitors
to the Career Center, other data Snowball regularly collects concerning user
activity within the Career Center, and the number of users registering with
JobDirect.com through the "opt out" registration described in Section 2.1 of
this Agreement.

6. Licenses, Other Proprietary Rights and Related Matters. Subject to the
------------------------------------------------------
terms and conditions of this Agreement:

6.1 JobDirect.com Content License. JobDirect hereby grants to Snowball a
-----------------------------
nonexclusive, nontransferable license (without the right to sublicense) to copy
and publicly display on the Snowball Networks content provided by
JobDirect.com ("JobDirect.com Content") solely to promote JobDirect.com and
its site and otherwise perform this Agreement. Snowball may reformat the
JobDirect.com Content for the purpose of incorporating it into the Snowball
Network sites (but will not acquire any ownership of such reformatted
JobDirect.com Content). Snowball will not modify, use, copy or distribute the
JobDirect.com Content, except as expressly provided in this Agreement.
Snowball will at all times use the JobDirect.com Content in a manner that is
of the quality and standards approved by JobDirect.com. Snowball agrees that
it will not use the JobDirect.com Content in any manner which reflects
negatively on or adversely affects JobDirect.com. Snowball shall notify
JobDirect.com in writing of any observed failure to maintain the quality
associated with the JobDirect.com Content.

6.2 Snowball Trademark License. Snowball hereby grants JobDirect a
--------------------------
nonexclusive, revocable, worldwide license to use any Snowball trademarks,
service marks and logos that are provided to it by Snowball ("Snowball Marks")
solely in conjunction with the links, navigation bars, frames, and co-branded
environment described in this Agreement. Any use of the Snowball Marks must
comply with Snowball's approvals, requirements and any trademark guidelines
communicated by Snowball. Any such use will inure to Snowball's benefit.
Nothing contained in this Agreement gives JobDirect.com any right, title or
interest in the Snowball Marks or goodwill therein and thereto, except as
expressly provided in this section. JobDirect will not take any action
inconsistent with the Snowball's ownership rights. JobDirect will cease all
use and display of the Snowball Marks upon written notice from Snowball and,
in any event, upon termination of this Agreement.

6.3 JobDirect.com Trademark License. JobDirect hereby grants Snowball a
-------------------------------
nonexclusive, revocable, worldwide license to use JobDirect's trademarks,
service marks and logos that are provided to it by Snowball ("JobDirect.com
Marks") solely in conjunction
<PAGE>

with the links, navigation bars, frames, and co-branded environment described in
this Agreement. Any use of the JobDirect.com Marks must comply with
JobDirect.com's approvals, requirements and any trademark guidelines
communicated by JobDirect.com. Any such use and will inure to JobDirect's
benefit. Nothing contained in this Agreement gives Snowball any right, title or
interest in the JobDirect.com Marks or goodwill therein and thereto, except as
expressly provided in this section. Snowball will not take any action
inconsistent with JobDirect.com's ownership rights. Snowball will cease all use
and display of the JobDirect.com Marks upon written notice from JobDirect.com
and, in any event, upon termination of this Agreement. Snowball agrees that it
will not use the JobDirect.com Marks in a manner which reflects negatively on or
adversely affects JobDirect.com. Snowball shall notify JobDirect.com in writing
of any observed failure to maintain the quality associated with the
JobDirect.com Marks.

6.4 Ownership. Subject to the rights expressly granted in this Agreement,
---------
Snowball will retain all right, title and interest in and to the Snowball
Networks and (and all related sites), the Snowball Marks and any content created
by Snowball for display in the Career Center ("Snowball Property").
JobDirect.com will retain all right title and interest in and to the
JobDirect.com Site, the JobDirect.com Marks and the JobDirect.com Content, any
content created by JobDirect.com for display in the Career Center and any Career
Center intellectual property (other than Snowball Property) stored on the
JobDirect.com server. Notwithstanding anything contained in this Section 6.4 to
the contrary, JobDirect.com shall be given unlimited access to all data
collected pursuant to the "JobDirect Career Survey" feature of the Career Center
(or any similar feature of the Career Center), JobDirect.com shall have an
unrestricted license to use such data in any manner, except as limited elsewhere
in this Agreement and JobDirect.com shall have an unrestricted right to provide
links from any JobDirect.com site to such data and such feature.

6.5 Snowball Discretion. Unless expressly provided in this Agreement, the
-------------------
form, format and position of any JobDirect.com link or advertisement described
in this Agreement, and date of placement, will be determined by Snowball in its
discretion. Snowball may, upon written notice to JobDirect.com, reject any
content provided by JobDirect under this Agreement if it fails to comply with
Snowball's reasonable requirements or is otherwise inappropriate for the users
of the Snowball Network sites. Nothing in this Agreement will be construed to
limit Snowball's right to modify any of the content or any aspect of structure
of the Snowball Network sites, or to rename or reposition the Snowball Network
sites, in its discretion; provided that, in the event any such change affects
Snowball's ability to perform any obligation described in this Agreement,
Snowball will provide reasonable alternative performance. Within the co-branded
Career Center, all visual modifications will be mutually agreed to. Nothing
contained in this Section 6.5 shall limit or otherwise modify the obligations of
Snowball set forth in Section 2.

6.6 JobDirect.com Site Information. JobDirect will provide Snowball with
------------------------------
any information reasonably required to implement links from the Snowball
Networks to the JobDirect.com Site. JobDirect.com will give Snowball reasonable
advance notice in the event JobDirect.com changes its universal record locator
(URL) for the JobDirect.com Site.

7. Confidential Information.
------------------------

7.1 Obligations. Each party ("Receiving Party") agrees to treat as
-----------
confidential all proprietary information disclosed to it by the other party
("Disclosing Party") including marketing information, customer data, any data
described herein and the terms of this Agreement ("Confidential Information").
Receiving Party agrees not to publish or disclose the Disclosing Party's
Confidential Information to others except to those employees and subcontractors
to whom disclosure is necessary in order to carry out the purposes of this
Agreement. All tangible materials embodying such Confidential Information will
remain the sole property of Disclosing Party and will be delivered to Disclosing
Party by Receiving Party upon Disclosing Party's request. Receiving Party
<PAGE>

will inform all its employees and subcontractors who receive Confidential
Information of the confidential nature of such Confidential information and of
their obligation to keep same confidential and not to use it other than as
permitted hereunder.

7.2 Exceptions. Neither party will have any obligation with respect to
----------
any Confidential Information which: (1) was rightfully known to Receiving Party
prior to receipt of such Confidential Information from Disclosing Party; (2) is
lawfully obtained by Receiving Party from a third party under no obligation of
confidentiality; (3) is or becomes generally known or available without any act
or failure to act by Receiving Party; (d) is developed independently by
Receiving Party. Either party may disclose the Confidential Information of the
Disclosing Party if required by court order or legal requirement and the party
subject to the order has given the other party a reasonable opportunity (and has
cooperated fully) to contest or limit the scope of such required disclosure
(including application for a protective order).

8. User Data.
---------

8.1 Ownership. Subject to the restrictions in this section and any rights
---------
to use the applicable data granted under this Agreement, Snowball will own
Snowball Network user registration data, and JobDirect.com will own
JobDirect.com user registration data.

8.2 Treatment of Individually Identifiable User Data. Neither party will
------------------------------------------------
sell, disclose, transfer, or rent any user data obtained by it from the other
party which data identifies, or can be used to identify, a specific individual
("Individually Identifiable User Data") to any third party or use any
Individually Identifiable User Data on behalf of any third party, without the
express permission of the applicable user specifically approving such use.
Snowball and JobDirect.com will only use Individually Identifiable User Data in
accordance with the Terms of Service and Privacy Policy posted on the Snowball
Network sites, as they may be amended from time to time by Snowball. Snowball
acknowledges and agrees that any user collected by JobDirect.com or through
links from or activities related to the Career Center other than the Registrant
Data shall be the sole property of JobDirect.com and Snowball shall have no
rights with respect to such data. In those cases where permission for disclosure
of Individually Identifiable User Data has been obtained from the applicable
user, each party will use all reasonable efforts to implement an "opt out"
feature on its own behalf, and an include and enforce through its agreements
with third parties a requirement for the inclusion of an "opt out" feature in
all e-mail communications generated by, or on behalf of, third party users of
the Individually Identifiable User Data; provided, however, that nothing
contained in this section shall obligate JobDirect.com to provide or cause to be
provided to Snowball any Individually Identifiable User Data other than the
Registration Data.

8.3 Aggregate Data. Notwithstanding the restrictions above, the parties
--------------
retain the right to use, sell, disclose, transfer, or rent any user data as long
as such user data is in an aggregate form that does not include any Individually
Identifiable User Data.

9. Term and Termination.
--------------------

9.1 Term. This Agreement will commence on the Effective Date and remain
----
in effect for a period of [**] after the Launch Date (as defined in Section 2)
(the "Initial Term"), unless terminated earlier under this Section 9. Commencing
[**] prior to the last day of the Initial Term, JobDirect.com shall have a
period of [**]

** Confidential treatment has been requested with respect to the information
contained within the "[**]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and Exchange
Commission
<PAGE>

in which it may give notice to Snowball of its desire to renew this Agreement
on new terms to be mutually agreed between the parties. In the event that during
that [**] notice period, JobDirect.com provides such notice, Snowball will enter
into good faith negotiations with JobDirect.com in an effort to reach agreement
on renewal terms, and for [**] after receipt of such notice, Snowball will not
negotiate with any other providers of career placement and job search/listings
to replace JobDirect upon termination of this Agreement. If during the [**]
notice period JobDirect.com does not provide notice of its desire to renew, or
if within the [**] negotiation period the parties are unable to reach agreement
on the renewal terms, Snowball's rights to negotiate with other such providers
will not be limited by this Agreement.

9.2 Termination. Upon written notice no fewer than [**] prior to the end
-----------
of the [**] after the Launch Date, JobDirect.com may terminate this Agreement on
the last day of the [**] after the Launch Date at their sole discretion with no
further obligation to pay any fees other than those already due and payable
before the termination date. If by the end of the [**] after the later of the
Launch Date or the first date on which JobDirect.com obtains and implements the
technical capability to receive dual registration data from Snowball's
registration protocol, no more than [**] Registrants (as defined in Section
2.1(c)) have "registered with" JobDirect.com, as that term is defined in Section
5.4 of this Agreement, then JobDirect.com may terminate and, at JobDirect.com's
request (whether or not JobDirect.com so terminates), Snowball will continue to
deliver the monthly impressions specified in Section 2.4 and the registration
programs described in Sections 2.1 and 2.2 for a period of [**] after the [**]
of the Launch Date or until the [**] new Registrants are delivered, whichever
occurs first, for no additional fee or cost to JobDirect.com. Section 1,
"Exclusivity," will not apply during that additional [**] period.

9.3 Effect of Termination. Except as set forth in the preceding Section,
---------------------
JobDirect.com's payment obligations hereunder, as well as the provisions of this
Section and the following Sections will survive any termination of this
Agreement: Section 2.4(g) (remedy for insufficient impressions), Section 6
(Compensation), Section 6.5 (Ownership), Section 7 (Confidential Information),
Section 8 (User Data), Section 10 (Limitation of Liability), Section 11
(Indemnification) and Section 12 (General).

10. Limitation of Liability. EXCEPT WITH RESPECT TO ITS OBLIGATIONS UNDER
-----------------------
SECTION 7 AND SECTION 8, NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY
INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, OR ANY LOSS OR REVENUE, PROFITS,
OR DATA, ARISING IN CONNECTION WITH THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

11. Indemnification.
---------------

11.1 Snowball Obligations. Snowball.com hereby agrees to defend, indemnify
--------------------
and hold harmless JobDirect.com, and its directors, officers and employees,
against any and all claims, actions, losses, damages, costs, and expenses
(including reasonable attorneys' fees, "Losses") arising out of or based on any
claim related to any Snowball Marks, the Snowball Networks or Snowball's
performance of its obligations herein other than those claims described in
Section 11.2 below. Snowball's obligations under this section are hereby
expressly conditioned on the following: (1) JobDirect.com provides Snowball.com
with prompt notice of any such claim; (2) JobDirect.com

** Confidential treatment has been requested with respect to the information
contained within the "[**]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and Exchange
Commission
<PAGE>

and (2) JobDirect.com provides Snowball with any information or assistance
requested by Snowball, at Snowball's expense.

11.2 JobDirect.com's Obligations. JobDirect.com hereby agrees to defend,
---------------------------
indemnify and hold harmless Snowball, and its directors, officers and employees,
against any and all Losses arising out of or based on any claim related to
(1) the JobDirect.com Site and any products or services provided by
JobDirect.com (or omissions) with respect to any customer, or (2) any content,
information or other materials provided to Snowball under this Agreement.
JobDirect.com's obligations under this section are hereby expressly conditioned
on the following: (1) Snowball provides JobDirect.com with prompt notice of any
such claim; (2) Snowball permits JobDirect.com to assume and control the defense
of such action, with counsel chosen by JobDirect.com (who will be reasonably
acceptable to Snowball); and (3) Snowball provides JobDirect.com with any
information or assistance requested by JobDirect.com, at JobDirect.com's
expense.

12. General.
-------

12.1 Waivers/Modifications. Any waiver modification or amendment to any
---------------------
provision of this Agreement will be effective only if in writing and executed by
both parties. The waiver by either party of any default or breach of this
Agreement will not constitute a waiver of any other or subsequent default or
breach.

12.2 Notices. All notices required to be given under this Agreement will
-------
be deemed given when delivered personally or sent by confirmed facsimile or U.S.
certified mail, return receipt requested, to the address shown in the preamble
above, or as may otherwise be specified by either party to the other in writing.

12.3 Severability. If any provision of this Agreement is found illegal or
------------
unenforceable, it will be enforced to the maximum extent permissible, and the
legality and enforceability of the other provisions of this Agreement will
remain in full force and effect.

12.4 Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of California applicable to agreements
entered into, and to be performed entirely, within California between California
residents.

12.5 No Partnership. The relationship of the parties hereto is solely that
--------------
of independent contractors, and not partners, joint venturers or agents.
Neither party has any authority to bind the other in connection with this
Agreement.

12.6 Entire Agreement. This Agreement, including any exhibits attached
----------------
hereto, is the complete and exclusive agreement between the parties with respect
to the subject matter hereof, and supersedes and replaces any and all prior or
contemporaneous agreements regarding such subject matter. The parties agree
that the letter of intent, dated
<PAGE>

as of January 5, 2000, between the parties is hereby terminated and replaced
in its entirety by this Agreement.

12.7 Force Majeure. Neither party will be liable to the other party as a
-------------
result of its failure to perform any obligation or duty under this Agreement,
other than the obligation to pay money, to the extent that such failure is cause
by flood, war, riot, civil insurrection, labor or material shortages, failure of
contractors to perform their obligations, or other events that are not
reasonably foreseeable or are beyond the reasonable control of the party.

12.8 No Assignment. Neither party may assign this Agreement without the
-------------
other party's written consent except in the event of a reorganization, merger,
consolidation or sale of all or substantially all of its assets related to this
Agreement. Such consent will not be unreasonably withheld. Any assignment in
violation of this section will be null and void.

12.9 Consolidated URL Listing. JobDirect.com hereby grants Snowball
------------------------
permission to include all of the URLs related to the pages served on the Career
Center through the Snowball Networks together with other Snowball-related URLs
in a consolidated listing assembled by third-party measurement companies,
including but not limited to Media Metrix, NetRatings or another similar
measuring service selected by Snowball; provided that Snowball provide
JobDirect.com with all results, compilations, analyses, data and reports
provided by such third-party in a reasonable time after receipt thereof.
JobDirect.com agrees that the rights granted under this section are exclusive to
Snowball and that JobDirect.com will not grant the same or similar rights to any
other party. Nothing contained in this Section shall limit JobDirect.com's right
to collect or analyze such data or to hire a third-party to collect or analyze
such data on JobDirect.com's behalf.

12.10 Calculation of Periods. With respect to the determination of any
----------------------
month, six month, twelve month, year or other period set forth herein and the
determination of the date of any event to occur at the end of any such period,
the anniversary of the Effective Date shall be used to determine the end of such
period. (For example, if the Effective Date is the 15th of the month, then the
end of a six-month period beginning on the Effective Date shall be the 15th of
the sixth month following the Effective Date.)

In Witness Whereof, the parties have entered into this Agreement as of the
Effective Date.

JobDirect.com, Inc. Snowball.com, inc.

By: /s/ Kevin E. Gage By: /s/ James R. Tolonen
_________________________ ________________________

Name: Kevin E. Gage Name: James R. Tolonen
_______________________ ______________________

Title: Chairman and CEO Title: COO/CFO
______________________ _____________________
<PAGE>

Schedule A
----------

[**]

<PAGE>

EXHIBIT A

NEW REGISTRANT BOUNTY FEE

Unless this Agreement has been terminated in accordance with its terms, at the
end of [**] after the Launch Date, JobDirect.com will pay Snowball a new
registrant bounty fee for each Qualified Registrant (as defined below) over the
Benchmark for that period (as defined below). A Qualified Registrant will be any
person who "registers with" JobDirect.com (as that term is defined in Section
5.4 of this Agreement) who has reached the age of twenty years or older.

The Benchmark for the first [**] period after the Launch Date will be [**] new
Qualified Registrants. In the event that, pursuant to the above calculation, the
number of new Qualified Registrants exceeds the Benchmark in the first [**]
after the Launch Date, the new registrant bounty fee will be as follows for each
Qualified Registrant:

First [**]

[**] [**]
[**] [**] (20+ years of age) for such number in excess of [**]
[**] [**] (20+ years of age) for such number in excess of [**]
[**] [**] (20+ years of age) for such number in excess of [**].

The Benchmark for the second [**] period after Launch Date will be [**] new
Qualified Registrants (such amount to include only those Qualified Registrants
delivered in such second [**] period and shall not include any Qualified
Registrants delivered prior to such period). In the event that, pursuant to the
above calculation, the number of new Qualified Registrants exceeds the Benchmark
for the second [**] after the Launch Date, the new registrant bounty fee will be
as follows for each Qualified Registrant:

Second [**]

[**] [**]
[**] [**] (20+ years of age) for such number in excess of [**]
[**] [**] (20+ years of age) for such number in excess of [**]
[**] [**] (20+ years of age) for such number in excess of [**].

**Confidential treatment has been requested with respect to the information
contained within "[**]" markings. Such marked portions have been omitted from
this filing and have been filed separately with the Securities and Exchange
Commission.
<PAGE>

Schedule B

PAYMENT TERMS

JobDirect.com will pay Snowball a total participation fee of [**]. The
participation fee will be payable in [**] installments, due and payable as set
forth below:

The parties acknowledge and agree that each date set forth below reflects a
Launch Date of March 1, 2000. In the event that the Launch Date is delayed for
any reason whatsoever, then each date set forth below shall similarly be
extended by such period of delay.

[**]

<PAGE>

Exhibit 23.02

Consent of Ernst & Young LLP, Independent Auditors
--------------------------------------------------

We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated January 28, 2000,
in Amendment No. 3 to the Registration Statement (Form S-1 No. 333-93487) and
related Prospectus of Snowball.com, Inc. for the registration of 7,187,500
shares of its common stock.

/s/ Ernst & Young LLP
Palo Alto, California
March 9, 2000

<PAGE>

EXHIBIT 23.03

Consent of Independent Accountants

We hereby consent to the use in Amendment 3 of Snowball.com on Form S-1 of our
report dated December 9, 1999 relating to the audited financial statements of
Extreme Interactive Media, Inc., which appear in such registration statement. We
also consent to the reference to us under heading "Experts" in such registration
statement.

Sincerely,

/s/ Hamilton & Associates, Inc.
Hamilton & Associates, Inc.

March 9, 2000

<PAGE>

Exhibit 23.04

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated October 8, 1999, with respect to the financial
statements and schedules of Ameritrack, Inc. included in Amendment #3 to the
Registration Statement (Form S-1) and related Prospectus of Snowball.com, Inc.
for the registration of shares of its common stock.

/s/ J.W. Hunt and Company, LLP

Columbia, South Carolina
March 9, 2000