CYBERSOURCE CORP, S-1/A, 1999-06-07

CYBERSOURCE CORP
S-1/A, 1999-06-07
COMPUTER PROCESSING & DATA PREPARATION

Previous: HARRINGTON FINANCIAL GROUP INC, 4, 1999-06-07

Next: HOLLYBANK INVESTMENTS LP, SC 13G/A, 1999-06-07

<PAGE>

As filed with the Securities and Exchange Commission on June 7, 1999

Registration No. 333-77545
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
under
The Securities Act of 1933

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

CYBERSOURCE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware 7374 77-0472961
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Industrial Identification Number)
of incorporation or Classification Code
organization) Number)

550 S. Winchester Blvd., Suite 301
San Jose, California 95128
(408) 556-9100
(Address, including zip code, and telephone number, including
Area Code, of registrant's principal executive offices)

William S. McKiernan
President and Chief Executive Officer
550 S. Winchester Blvd., Suite 301
San Jose, California 95128
(408) 556-9100
(Name, address, including zip code, and telephone number, including
area code, of agent for service)

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

Copies to:
<TABLE>
<S> <C>
Richard Scudellari, Esq. Jeffrey D. Saper, Esq.
Justin L. Bastian, Esq. J. Robert Suffoletta, Esq.
Heike E. Fischer, Esq. Robert G. Day, Esq.
David B. Tom, Esq. Allison L. Berry, Esq.
Morrison & Foerster LLP Wilson Sonsini Goodrich & Rosati
755 Page Mill Road Professional Corporation
Palo Alto, CA 94304 650 Page Mill Road
(650) 813-5600 Palo Alto, CA 94304
(650) 493-9300
</TABLE>

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

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

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

If any of the securities being registered in this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [_]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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, 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 of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

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

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

PROSPECTUS Prospectus dated June 7, 1999

4,000,000 Shares

[CYBERSOURCE LOGO APPEARS HERE]

Common Stock

-----------

This is CyberSource Corporation's initial public offering of common stock.

We expect the public offering price to be between $8.00 and $10.00 per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the common stock will trade on the Nasdaq National
Market under the symbol "CYBS."

Investing in the common stock involves risks which are described in the
"Risk Factors" section beginning on page 4 of this prospectus.

-----------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price............................... $ $
Underwriting discount............................... $ $
Proceeds, before expenses, to CyberSource
Corporation........................................ $ $
</TABLE>

The underwriters may also purchase up to an additional 600,000 shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

-----------

Merrill Lynch & Co.
J.P. Morgan & Co.
PaineWebber Incorporated
C.E. Unterberg, Towbin

-----------

The date of this prospectus is , 1999.
<PAGE>

The graphic depicts the CyberSource logo with the words "the power behind the
buy button" above a graphical representation of our tagline including the buy
button, currency sign and credit card numbers. Below are the words "CyberSource
is a leading developer and provider of Internet commerce services. Over 400
Internet merchants worldwide have chosen to use CyberSource services to provide
the power behind their buy buttons. CyberSource provides mission-critical
reliability with the CyberSource Internet Commerce Suite offering merchant-
controlled, real-time services including Payment Services, Tax Services, Risk
Management Services, Distribution Control Services, and Fulfillment Management
Services." The bottom of the graphic contains provisions relating to the
intellectual property rights of CyberSource.

<PAGE>

The graphic depicts the CyberSource logo with the words "the power behind the
buy button" above a screenshot of the Beyond.com web site. Below the screenshot
of the Beyond.com web site is a seated figure using a laptop computer. A "Buy"
computer keyboard button is depicted to the left of the seated figure. To the
right of the Beyond.com screenshot are four colored lines representing data
streams. The colored lines extend from the Beyond.com screenshot to a large box
with the title "Internet Commerce Suite." The colored lines proceed and pass
between two gears inside the large box. One gear is titled "Tax" and contains
financial data as a graphical fill. The second gear is titled "Distribution
Control" and contains a picture of an airplane as a graphical fill.

<PAGE>

The graphic depicts a continuation of the large box titled "Internet Commerce
Suite." The continuation of the large box contains three additional gears
aligned vertically. The uppermost gear is titled "Risk Management" and contains
a picture of a credit card swipe as a graphical fill. The middle gear is title
"Payment Services" and contains a picture of currency and a credit card as a
graphical fill. The lowest gear is titled "Fulfillment Management" and contains
a picture of a warehouse as a graphical fill. The four colored lines,
representing data streams, split and pass between the three gears and proceed to
the right of the large box containing gears. The colored lines extend to three
boxes aligned vertically on the right side of the graphic. The uppermost box
contains graphs that represent "Merchant Data Analysis Results for Risk
Management." The middle box contains financial data, the term "Bank" and the
phrase "merchant status cleared." The lowest box contains a picture of three
individuals unloading boxes from a delivery truck.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 4
Forward-Looking Statements............................................... 13
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Consolidated Financial Data..................................... 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 23
Management............................................................... 36
Principal Stockholders................................................... 44
Transactions between CyberSource and its Officers, Directors and
Significant Stockholders................................................ 46
Description of Capital Stock............................................. 49
Shares Eligible for Future Sale.......................................... 51
Underwriting............................................................. 52
Legal Matters............................................................ 55
Experts.................................................................. 55
Where You Can Find More Information...................................... 55
Index to Consolidated Financial Statements............................... F-1
</TABLE>

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

Unless otherwise indicated, the information in this prospectus

. reflects the conversion of all outstanding shares of preferred
stock into 10,489,809 shares of common stock effective
automatically upon the closing of this offering;

. assumes a one-for-two reverse split of our outstanding common
stock;

. assumes the issuance of an aggregate of 1,527,048 shares of common
stock pursuant to the exercise of warrants and the conversion of a
convertible promissory note; and

. assumes no exercise of the underwriters' over-allotment option.

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to
provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition,
results of operations and prospects may have changed since that date.

CyberSource(R) is a registered trademark of CyberSource Corporation.
This prospectus contains product names and trade names and trademarks of
CyberSource and of other organizations.
<PAGE>

PROSPECTUS SUMMARY

This summary is not complete and does not contain all of the information
that may be important to you. You should read the entire prospectus carefully,
including the financial data and related notes, before making an investment
decision.

CyberSource Corporation

We are a leading developer and provider of real-time, or on-demand, e-
commerce transaction services. Through our Internet Commerce Suite, we offer
services to online merchants for global payment processing, fraud prevention,
tax calculation, export compliance, territory management, delivery address
verification and fulfillment management. Our services enable online merchants
to focus their resources on areas where they can most effectively differentiate
themselves, such as marketing, Web site content, merchandising and customer
support. By outsourcing their e-commerce transaction processing needs to us,
online merchants can speed their time to market, reduce their overall operating
costs and process orders from around the world in local currencies. Our
services are comprehensive, scalable (adaptable to meet increases in the number
of transactions), highly reliable and performed via a secure messaging
protocol, or transmission format. Our merchants have used our services to
process more than 14 million transactions since January 1998, of which
approximately 5.8 million were processed in the first quarter of 1999.

As the Internet has become an increasingly important communications
medium, merchants and consumers have embraced using the Internet to buy and
sell goods and services. International Data Corporation, or IDC, forecasts that
the actual number of Web buyers worldwide will expand from 28 million in 1998
to approximately 128 million in 2002 and that the amount of commerce conducted
over the Web will increase from approximately $50 billion in 1998 to
approximately $734 billion in 2002 worldwide. To succeed online, a merchant
must attract customers to its Web site and provide an appealing and easy-to-use
environment that encourages customers to place an order by clicking on the
"buy" button. Once the customer places an order, the merchant must then process
the order by executing numerous transactions, such as credit card
authorization, calculation of sales tax and fulfillment of the order, often
while the customer is waiting.

While early adopters of e-commerce business models often developed custom
transaction processing systems, today many online merchants are seeking to
outsource their transaction processing requirements. Our services offer online
merchants a solution to the challenges of e-commerce transaction processing.
Key benefits of our services include:

. Faster time-to-market,

. Access to a comprehensive suite of services,

. Enhanced merchant flexibility and control,

. Global reach, and

. Reduced overall costs.

More than 400 merchants have chosen to use our services. Our merchants
include Beyond.com, BUY.COM, Compaq Computer, Egghead.com, Fawcette
Publications, MarketWatch.com, Remedy and Shopping.com. We target merchants
worldwide through a direct sales force as well as through an indirect sales
channel. Our indirect sales channel partners include payment services providers
(such as First Data Corp., Paymentech and Vital Processing Services), systems
integrators (such as Fort Point Partners, iXL and USWeb/CKS), commerce server
providers, or developers of software for Internet commerce servers (such as
BroadVision, IBM, Intershop, Interworld, Mercantec and Microsoft) and merchant
aggregators, or Internet companies that host groups of merchants (such as
TicketMaster Online-CitySearch and Verio). We have also entered into strategic
relationships with General Electric Capital Corp., or GE Capital and Visa
International to penetrate new e-commerce markets.

1
<PAGE>

CyberSource Corporation was incorporated by Beyond.com in Delaware in
December 1997 under the name Internet Commerce Services Corporation.
Beyond.com, whose original name was CyberSource Corporation, contributed all
the assets and liabilities comprising its Internet commerce services business
to Internet Commerce Services Corporation and spun off Internet Commerce
Services Corporation to Beyond.com's stockholders in December 1997. In October
1998 we changed our name to CyberSource Corporation. Our headquarters are
located at 550 S. Winchester Blvd., Suite 301, San Jose, California 95128, and
our telephone number is (408) 556-9100. Information contained on our Web site
at www.cybersource.com does not constitute part of this prospectus.

The Offering

<TABLE>
<S> <C>
Common stock offered.... 4,000,000 shares
Common stock to be
outstanding after this
offering............... 21,548,848 shares(1)
Use of proceeds......... For general corporate purposes, including sales and marketing,
product development and other corporate expenses.
Proposed Nasdaq National
Market symbol.......... CYBS
</TABLE>
- --------

(1) Excludes 2,035,575 shares of common stock issuable upon exercise of options
outstanding and 1,389,934 shares available for grant as of March 31, 1999
(of which options to purchase 311,000 shares were granted in April 1999)
under our 1998 Stock Option Plan and our 1999 Stock Option Plan. See
"Description of Capital Stock--Authorized and Outstanding Capital Stock"
and Notes 5 and 9 of Notes to Consolidated Financial Statements.

2
<PAGE>

Summary Consolidated Financial Data

<TABLE>
<CAPTION>
Period From
March 20, 1996 Years Ended Three Months
(Inception) to December 31, Ended March 31,
December 31, ----------------- ----------------
1996 1997 1998 1998 1999
-------------- ------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenues................... $ 144 $ 968 $ 3,384 $ 639 $ 1,713
Gross profit (loss)........ 7 644 (87) (8) 208
Total operating expenses... 1,150 4,969 9,950 1,823 4,406
Loss from operations....... (1,143) (4,325) (10,037) (1,831) (4,198)
Net loss................... $(1,143) $(4,338) $(10,085) $(1,824) $(4,190)
Basic and diluted net loss
per share................. $ (2.05) $ (0.40) $ (0.77)
Shares used in computing
basic and diluted net loss
per share................. 4,918 4,535 5,465
Pro forma basic and diluted
net loss per share........ $ (0.86) $ (0.26)
Shares used in computing
pro forma basic and
diluted net loss per
share(1).................. 11,740 15,955
Selected Non-Financial
Operating Data:
Number of transactions
processed................. 8,560 870 5,800
</TABLE>

<TABLE>
<CAPTION>
March 31, 1999
------------------------------
Pro As
Actual Forma(1) Adjusted(2)
-------- -------- -----------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents...................... $ 7,423 $11,357 $43,957
Working capital................................ 3,222 10,156 42,756
Total assets................................... 12,150 16,084 48,684
Redeemable convertible preferred stock......... 18,911 -- --
Total stockholders' equity (net capital
deficiency)................................... (13,056) 12,789 45,389
</TABLE>
- --------
(1) Adjusted to reflect the conversion of all shares of preferred stock into
10,489,809 common stock and the issuance of 1,527,048 shares of common
stock pursuant to the exercise of warrants and the conversion of a
convertible promissory note.

(2) Adjusted to reflect the sale of 4,000,000 shares in this offering hereby,
based on an assumed initial public offering price of $9.00 per share.

3
<PAGE>

RISK FACTORS

You should carefully consider the following factors as well as other
information contained in this prospectus before deciding to invest in shares of
our common stock.

We Have a Limited Operating History and Are Subject to the Risks Encountered by
Early-Stage Companies

We commenced operations in March 1996. From March 1996 until December
1997, we operated as a division of Beyond.com. In December 1997, we were
incorporated as a separate legal entity and our company was spun off from
Beyond.com. Accordingly, we have a very limited operating history, and our
business and prospects must be considered in light of the risks and
uncertainties to which early-stage companies in rapidly evolving markets such
as e-commerce are particularly exposed. These risks include:

. risks that the intense competition and rapid technological change
in our industry could adversely affect market acceptance of all of
our services;

. risks that we may not be able to expand our systems to handle
increased traffic, resulting in slower response times and other
difficulties in providing services to our merchant customers;

. risks that we may not be able to fully utilize relationships with
our strategic partners and indirect sales channels; and

. risks that any fluctuations in our quarterly operating results
will be significant relative to our revenues.

These risks are discussed in more detail below. We cannot assure you that
our business strategy will be successful or that we will successfully address
these risks and the risks detailed below.

We Have a History of Losses, Expect Future Losses and Cannot Assure You that We
Will Achieve Profitability

Although our revenues have increased on a quarterly basis since 1997, we
have not achieved profitability and cannot be certain that we will realize
sufficient revenue to achieve profitability. We have incurred significant net
losses since our inception. We incurred net losses of $4.3 million in 1997,
$10.1 million in 1998 and $4.2 million in the first quarter of 1999. As of
March 31, 1999, we had incurred cumulative losses of $19.8 million. You should
not consider recent quarterly revenue growth as indicative of our future
performance. We do not expect to sustain similar levels of growth in future
periods. We anticipate that we will increase our sales and marketing, network
infrastructure, product development and general and administrative expenses in
1999 and, as a result, we will need to generate significantly higher revenues
in order to achieve profitability. If we do achieve profitability, we may not
be able to sustain it.

The Expected Fluctuations of Our Quarterly Results Could Cause Our Stock Price
to Fluctuate or Decline

We expect that our quarterly operating results will fluctuate
significantly in the future based upon a number of factors, many of which are
not within our control. We plan to significantly increase our operating
expenses in order to expand our sales and marketing activities, build our
network infrastructure and broaden our service capabilities. We base our
operating expenses on anticipated market growth and our operating expenses are
relatively fixed in the short term. As a result, if our revenues are lower than
we expect, our quarterly operating results may not meet the expectations of
public market analysts or investors, which could cause the market price of our
common stock to decline.

4
<PAGE>

Our quarterly results may fluctuate in the future as a result of many
factors, including the following,

. changes in the number of transactions effected by our merchants,
especially as a result of seasonality or general economic
conditions;

. our ability to attract new merchants and to retain our existing
merchants;

. merchant acceptance of our pricing model; and

. our success in expanding our sales and marketing programs.

Other factors that may affect our quarterly results are set forth
elsewhere in this section. As a result of these factors, our revenues are not
predictable with any significant degree of certainty.

Due to the uncertainty surrounding our revenues and expenses, we believe
that quarter-to-quarter comparisons of our historical operating results should
not be relied upon as an indicator of our future performance.

We Could Lose a Significant Portion of Our Business Because We Do Not Have a
Long-Term Contract with Our Largest Customer

Revenues from services provided to Beyond.com accounted for 23.7% of our
revenues in 1998 and 21.9% of our revenues in the first quarter of 1999. No
other customer accounted for more than 10% of our revenues in 1998 or the
first quarter of 1999. Any significant decrease in revenues from Beyond.com
could materially adversely affect our operating results. We have no long-term
contract with Beyond.com that requires it to continue to use any of our
services. Accordingly, Beyond.com could cease using all or part of our
services on short notice without penalty.

The Demand for Our Services Could Be Negatively Affected by a Reduced Growth
of E-commerce or Delays in the Development of the Internet Infrastructure

Sales of goods and services over the Internet do not currently represent
a significant portion of overall sales of goods and services. We depend on the
growing use and acceptance of the Internet as an effective medium of commerce
by merchants and customers. Rapid growth in the use of and interest in the
Internet is a relatively recent development. We cannot be certain that
acceptance and use of the Internet will continue to develop or that a
sufficiently broad base of merchants and consumers will adopt, and continue to
use, the Internet as a medium of commerce.

The emergence of the Internet as a commercial marketplace may occur more
slowly than anticipated for a number of reasons, including potentially
inadequate development of the necessary network infrastructure or delayed
development of enabling technologies and performance improvements. If the
number of Internet users or their use of Internet resources continues to grow,
it may overwhelm the existing Internet infrastructure. Delays in the
development or adoption of new standards and protocols required to handle
increased levels of Internet activity could also have a detrimental effect.
These factors could result in slower response times or adversely affect usage
of the Internet, resulting in lower numbers of e-commerce transactions and
lower demand for our services.

Potential System Failures and Lack of Capacity Issues Could Negatively Affect
Demand for Our Services

Our ability to deliver services to our merchants depends on the
uninterrupted operation of our e-commerce transaction processing systems. Our
systems and operations are vulnerable to damage or interruption from:

. earthquake, fire, flood and other natural disasters;

. power loss, telecommunications or data network failure, operator
negligence, improper operation by employees, physical and
electronic break-ins and similar events; and

. computer viruses.

5
<PAGE>

Despite the fact that we have implemented redundant servers in a third-
party hosting center, we may still experience service interruptions for the
reasons listed above and a variety of other reasons. If our redundant servers
are not available, our business may not have sufficient business interruption
insurance to compensate us for resulting losses. We have experienced periodic
interruptions, affecting all or a portion of our systems, which we believe will
continue to occur from time to time. In addition, any interruption in our
systems that impairs our ability to provide services could damage our
reputation and reduce demand for our services.

Our success also depends on our ability to grow, or scale, our e-commerce
transaction systems to accommodate increases in the volume of traffic on our
system, especially during peak periods of demand. We may not be able to
anticipate increases in the use of our systems and successfully expand the
capacity of our network infrastructure. Our inability to expand our systems to
handle increased traffic could result in system disruptions, slower response
times and other difficulties in providing services to our merchant customers,
which could materially harm our business.

A Breach of Our E-commerce Security Measures Could Reduce Demand for Our
Services

A requirement of the continued growth of e-commerce is the secure
transmission of confidential information over public networks. We rely on
public key cryptography, an encryption method that utilizes two keys, a public
and a private key, for encoding and decoding data, and digital certificate
technology, or identity verification, to provide the security and
authentication necessary for secure transmission of confidential information.
Regulatory and export restrictions may prohibit us from using the strongest and
most secure cryptographic protection available and thereby expose us to a risk
of data interception. A party who is able to circumvent our security measures
could misappropriate proprietary information or interrupt our operations. Any
compromise or elimination of our security could reduce demand for our services.

We may be required to expend significant capital and other resources to
protect against security breaches or to address any problems they may cause.
Concerns over the security of the Internet and other online transactions and
the privacy of users may also inhibit the growth of the Internet and other
online services generally, and the Web in particular, especially as a means of
conducting commercial transactions. Because our activities involve the storage
and transmission of proprietary information, such as credit card numbers,
security breaches could damage our reputation and expose us to a risk of loss
or litigation and possible liability. Our security measures may not prevent
security breaches and failure to prevent security breaches may disrupt our
operations.

The Intense Competition in Our Industry Could Reduce or Eliminate the Demand
for Our Services

The market for our services is intensely competitive and subject to rapid
technological change. We expect competition to intensify in the future. Our
primary source of competition comes from online merchants who develop custom
systems. These online merchants who have made large initial investments to
develop custom systems may be less likely to adopt an outsourced transaction
processing strategy. We also face competition from developers of other systems
for e-commerce transaction processing such as Clear Commerce, CyberCash,
Digital River, HNC Software, Open Market and Hewlett-Packard (VeriFone). In
addition, other companies may enter the market for our services. In the future,
we may also compete with large Internet-centric companies that derive a
significant portion of their revenues from e-commerce and may offer, or provide
a means for others to offer, e-commerce transaction services.

6
<PAGE>

ability of their services to address the needs of our prospective customers.
Our current and potential competitors may establish or strengthen cooperative
relationships with our current or future channel partners, thereby limiting our
ability to sell services through these channels. Competitive pressures could
reduce our market share or require the reduction of the prices of our services,
either of which could materially and adversely affect our business, results of
operations or financial condition.

If We Lose Key Personnel or Are Unable to Attract and Retain Additional
Qualified Personnel We May Not be Able to Successfully Manage Our Business and
Achieve Our Objectives

We believe our future success will depend upon our ability to retain our
key management personnel, including William S. McKiernan, our President and
Chief Executive Officer, and other key members of management because of their
experience and knowledge regarding the development, special opportunities and
challenges of our business. None of our key employees is subject to an
employment contract. We may not be successful in attracting and retaining key
employees in the future.

Our future success and our ability to expand our operations will also
depend in large part on our ability to attract and retain additional qualified
marketing, sales and technical personnel. Competition for these types of
employees is intense due to the limited number of qualified professionals. We
have in the past experienced difficulty in recruiting qualified marketing,
sales, engineering and support personnel. Failure to attract and retain
personnel, particularly marketing, sales and technical personnel, could make it
difficult for us to manage our business and meet our objectives.

Difficulties We May Encounter Managing Our Growth Could Adversely Affect Our
Results of Operations

We have experienced a period of rapid and substantial growth that has
placed and, if such growth continues, will continue to place a strain on our
administrative infrastructure. We have increased the number of our employees
from 50 employees at December 31, 1997 to 132 employees at December 31, 1998
and 146 employees at March 31, 1999. This expansion is placing a significant
strain on our managerial and financial resources.

We may not be able to enhance our management information and control
systems in an efficient and timely manner, and our current or planned
personnel, systems, procedures and controls may not be adequate to support our
future operations. In addition, we may not be able to hire, train, retain,
motivate and manage required personnel or to successfully identify, manage and
exploit existing and potential market opportunities. If we are unable to manage
growth effectively, our business, results of operations and financial condition
would be materially adversely affected.

If We Are Not Able to Fully Utilize Relationships With Our Indirect Sales
Channel Partners, We May Experience Lower Revenue Growth and Higher Operating
Costs

Our future growth will depend in part on the success of our relationships
with existing and future indirect sales channel partners that will market our
services to their merchant accounts. If these relationships are not successful
or do not develop as quickly as we anticipate, our revenue growth may be
adversely affected. Accordingly, we may have to increase our sales and
marketing expenses in an attempt to secure additional merchant accounts.

Our Management Team Must Work Together Effectively in Order to Expand Our
Business, Increase Our Revenues and Improve Our Operating Results

Several members of our existing senior management personnel joined us
recently, including our Vice President of Engineering, who joined us in June
1999, our Vice President of North American Sales, who joined us in April 1999,
our Vice President of Operations, who joined us in March 1999, and our Vice
President of Marketing, who joined us in December 1998. Because these members
of our management team are new, there

7
<PAGE>

is an increased risk that management will not be able to work together
effectively as a team, especially in the short term, to address the challenges
to our business. In addition, our new employees include a number of key
managerial, technical and operations personnel who have been with us for a
limited period of time. We expect to add additional key personnel in the near
future that will also need to be integrated into our management team.

Our Market is Subject to Rapid Technological Change and to Compete, We Must
Continually Enhance Our Systems to Comply with Evolving Standards

To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our services and the underlying
network infrastructure. The Internet and the e-commerce industry are
characterized by rapid technological change, changes in user requirements and
preferences, frequent new product and service introductions embodying new
technologies and the emergence of new industry standards and practices that
could render our technology and systems obsolete. Our success will depend, in
part, on our ability to both internally develop and license leading
technologies to enhance our existing services and develop new services. We must
continue to address the increasingly sophisticated and varied needs of our
merchants, and respond to technological advances and emerging industry
standards and practices on a cost-effective and timely basis. The development
of proprietary technology involves significant technical and business risks. We
may fail to develop new technologies effectively or to adapt our proprietary
technology and systems to merchant requirements or emerging industry standards.
If we are unable to adapt to changing market conditions, merchant requirements
or emerging industry standards, our business would be materially harmed.

We May Have Potential Conflicts of Interest with Beyond.com

In connection with our spin off from Beyond.com in December 1997, we
entered into agreements with Beyond.com to define the ongoing relationship
between the two companies. At the time these agreements were negotiated, all of
our directors were also directors of Beyond.com, and other members of our
management team were also executive officers of Beyond.com. As a result, these
agreements were not the result of arms' length negotiations between CyberSource
and Beyond.com. Further, although we and Beyond.com are engaged in different
businesses, the two companies currently have no policies to govern the pursuit
or allocation of corporate opportunities, in the event they arise. Our business
could be adversely affected if the overlapping board members of the two
companies, of which there are currently two, William S. McKiernan and Bert
Kolde, pursue Beyond.com's interests over ours either in the course of
transactions between the companies or where the same corporate opportunities
are available to both companies.

We May Not Be Able to Adequately Protect Our Proprietary Technology and May Be
Infringing Upon Third-Party Intellectual Property Rights

Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights.

As part of our confidentiality procedures, we enter into non-disclosure
agreements with our employees. Despite these precautions, third parties could
copy or otherwise obtain and use our technology without authorization, or
develop similar technology independently. Effective protection of intellectual
property rights may be unavailable or limited in foreign countries. We cannot
assure you that the protection of our proprietary rights will be adequate or
that our competitors will not independently develop similar technology,
duplicate our services or design around any patents or other intellectual
property rights we hold.

We also cannot assure you that third parties will not claim our current
or future services infringe upon their rights. We have not conducted any search
to determine whether any of our services or technologies may be infringing upon
patent rights of third parties. As the number of services in our market
increases and functionalities increasingly overlap, companies such as ours may
become increasingly subject to infringement

8
<PAGE>

claims. In addition, these claims also might require us to enter into royalty
or license agreements. Any infringement claims, with or without merit, could
cause costly litigation that could absorb significant management time. If
required to do so, we may not be able to obtain royalty or license agreements,
or obtain them on terms acceptable to us. See "Business--Intellectual Property"
for more information relating to protecting our intellectual property rights
and risks relating to claims of infringement upon the intellectual property
rights of others.

We May Not Be Able to Secure Necessary Funding in the Future

We require substantial working capital to fund our business. We have had
significant operating losses and negative cash flow from operations since
inception and expect this to continue for the foreseeable future. We expect to
use the net proceeds of this offering primarily to continue investments in
service development, to expand sales and marketing activities, to fund product
development, to fund continued operations and potentially to make future
acquisitions. We believe that these proceeds, together with our existing
capital resources, will be sufficient to meet our capital requirements for the
next twelve months. However, our capital requirements depend on several
factors, including the rate of market acceptance of our services, the ability
to expand our merchant base, the growth of sales and marketing and other
factors. If capital requirements vary materially from those currently planned,
we may require additional financing sooner than anticipated. If additional
funds are raised through the issuance of equity securities, the percentage
ownership of our stockholders will be reduced, and these equity securities may
have rights, preferences or privileges senior to those of the holders of our
common stock. Additional financing may not be available when needed on terms
favorable to us or at all. If adequate funds are not available or are not
available on acceptable terms, we may be unable to develop or enhance our
services, take advantage of future opportunities or respond to competitive
pressures.

We May Become Subject to Government Regulation and Legal Uncertainties

We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, export control laws and laws or regulations directly applicable to
e-commerce. However, due to the increasing usage of the Internet, it is
possible that a number of laws and regulations may be applicable or may be
adopted in the future with respect to conducting business over the Internet
covering issues such as:

. taxes;

. user privacy;

. pricing;

. content;

. right to access personal data;

. copyrights;

. distribution; and

. characteristics and quality of services.

For example, we believe that some of our services may require us to
comply with the Federal Credit Reporting Act. As a precaution, we are
implementing changes to our systems so that we will be in compliance with the
act. Complying with this act requires us to provide information about personal
data stored by us or our merchants. Failure to comply with this act could
result in claims being made against us.

Furthermore, the growth and development of the market for e-commerce may
prompt more stringent consumer protection laws that may impose additional
burdens on those companies conducting business online. The adoption of
additional laws or regulations may decrease the growth of the Internet or other
online services, which could, in turn, decrease the demand for our services and
increase our cost of doing business.

9
<PAGE>

The applicability of existing laws governing issues such as property
ownership, copyrights, encryption and other intellectual property issues,
taxation, libel, export or import matters and personal privacy to the Internet
is uncertain. The vast majority of laws were adopted prior to the broad
commercial use of the Internet and related technologies. As a result, they do
not contemplate or address the unique issues of the Internet and related
technologies. Changes to these laws intended to address these issues, including
some recently proposed changes in the United States regarding taxation and
encryption and in the European Union regarding contract formation and privacy,
could create uncertainty in the Internet marketplace and impose additional
costs and other burdens. This uncertainty, costs and burden could reduce demand
for our services or increase the cost of doing business due to increased costs
of litigation or increased service delivery costs.

Our International Business Exposes Us to Additional Foreign Risks

Services provided to merchants outside the United States accounted for 9%
of our revenues in 1998 and 17% of our revenues in the first quarter of 1999.
We intend to expand our international presence in the future. Conducting
business outside of the United States is subject to additional risks that may
affect our ability to sell our services and result in reduced revenues,
including:

. changes in regulatory requirements;

. reduced protection of intellectual property rights;

. evolving privacy laws in Europe;

. the burden of complying with a variety of foreign laws; and

. political or economic instability or constraints on international
trade.

In addition, some software exports from the United States are subject to
export restrictions as a result of the encryption technology in that software
and we may become liable to the extent we violate these restrictions. We might
not successfully market, sell and distribute our services in local markets and
we cannot be certain that one or more of these factors will not materially
adversely affect our future international operations, and consequently, our
business, financial condition and operating results.

We Face Year 2000 Risks

Many currently installed computer systems are not capable of
distinguishing 21st century dates from 20th century dates. As a result,
beginning on January 1, 2000, computer systems and software used by many
companies and organizations in a wide variety of industries, including
technology, transportation, utilities, finance and telecommunications, will
produce erroneous results or fail unless they have been modified or upgraded to
process date information correctly. Year 2000 compliance efforts may involve
significant time and expense, and uncorrected problems could materially
adversely affect our business, financial condition or operating results.

We have completed audits of our internal systems and are working closely
with suppliers of these systems to ensure that all systems are Year 2000
compliant. We have commenced modification or replacement of non-compliant
systems as necessary. In addition, we are highly dependent on a few personal
computer manufacturing companies for our supply of desktop hardware and
peripherals. These suppliers may not be able to deliver on schedule due to Year
2000 issues which could result in serious disruptions of employee productivity
and materially adversely affect our business. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Readiness
Disclosure."

Existing Stockholders May Exert Control Over CyberSource

After this offering, our officers, directors and principal stockholders
(i.e., greater than 5% stockholders) will together control approximately 56.4%
of our outstanding common stock. As a result, these stockholders, if they act
together, will be able to control the management and affairs of CyberSource and
all

10
<PAGE>

matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may have the effect of delaying or preventing a change in control of
CyberSource and might affect the market price of our common stock.

Our Stock Price May Fluctuate Substantially and You May Not Be Able to Resell
Your Shares Above the Offering Price

Prior to this offering, there has been no public market for shares of our
common stock. The initial public offering price of the shares of common stock
will be determined by negotiation between representatives of the underwriters
and us. This price will not necessarily reflect the market price of the common
stock following this offering and you may not be able to resell your shares at
or above the initial public offering price.

The market price for the common stock following this offering will be
affected by a number of factors, including the following:

. the announcement of new services or service enhancements by us or
our competitors;

. quarterly variations in our or our competitors' results of
operations;

. changes in earnings estimates or recommendations by securities
analysts;

. developments in our industry; and

. general market conditions and other factors, including factors
unrelated to our operating performance or the operating
performance of our competitors.

In addition, stock prices for many companies in the technology and
emerging growth sectors have experienced wide fluctuations that have often been
unrelated to the operating performance. These factors and fluctuations, as well
as general economic, political and market conditions, may materially adversely
affect the market price of our common stock.

Sales of Shares Eligible For Future Sale After This Offering Could Cause Our
Stock Price to Decline

If our stockholders sell substantial amounts of our common stock
(including shares issued upon the exercise of outstanding options and warrants)
in the public market following this offering, the market price of our common
stock could fall. These sales also might 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. Upon completion of this offering, we will have outstanding
21,548,848 shares of common stock (based upon shares outstanding as of March
31, 1999), assuming the issuance of an aggregate of 1,527,048 shares of common
stock pursuant to the exercise of warrants and the conversion of a convertible
note, no exercise of the underwriters' over-allotment option and no exercise of
outstanding options after March 31, 1999. Of these shares, the 4,000,000 shares
sold in this offering will be freely tradable. The remaining shares of common
stock outstanding after this offering will be available for sale in the public
market as follows:

<TABLE>
<CAPTION>
Number of
Date of Availability for Sale Shares
----------------------------- ----------
<S> <C>
, 1999 (120 days after the date of this prospectus).......... 312,431
, 1999 (180 days after the date of this prospectus).......... 15,686,870
Periodically thereafter upon the expiration of one-year holding
periods........................................................... 1,549,547
</TABLE>

11
<PAGE>

The Anti-Takeover Provisions in Our Certificate of Incorporation Could
Adversely Affect the Rights of the Holders of Our Common Stock

Anti-takeover provisions of Delaware law and our Certificate of
Incorporation may make a change in control of CyberSource more difficult, even
if a change in control would be beneficial to the stockholders. These
provisions may allow the Board of Directors to prevent changes in the
management and control of CyberSource. Under Delaware law, our Board of
Directors may adopt additional anti-takeover measures in the future.

One anti-takeover provision that we have is the ability of our Board of
Directors to determine the terms of preferred stock and issue preferred stock
without the approval of the holders of the common stock. Our Certificate of
Incorporation allows the issuance of up to 25,000,000 shares of preferred
stock. At the time of the offering, there are no shares of preferred stock
outstanding. However, because the rights and preferences of any series of
preferred stock may be set by the Board of Directors in its sole discretion
without approval of the holders of the common stock, the rights and preferences
of this preferred stock may be superior to those of the common stock.
Accordingly, the rights of the holders of common stock may be adversely
affected.

12
<PAGE>

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about CyberSource, including, among other
things:

. risks and uncertainties encountered by early-stage companies;

. continued growth in e-commerce and Internet infrastructure
development;

. our ability to retain our existing merchants and attract new
merchants;

. technical difficulties and unanticipated system downtime; and

. our relationship with Beyond.com.

We undertake no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties, and assumptions, the
forward-looking events discussed in this prospectus might not occur.

USE OF PROCEEDS

Net proceeds from the sale of our shares of common stock at an assumed
initial offering price of $9.00 per share are estimated to be approximately
$32.6 million. If the underwriters' over-allotment option is exercised in full,
our net proceeds will be approximately $37.6 million.

The principal purposes of this offering are to obtain additional working
capital, to create a public market for our common stock and to facilitate
future access by CyberSource to public equity markets. We expect to use the net
proceeds for general corporate purposes, including sales and marketing, product
development and other corporate expenses. Pending these uses, the net proceeds
of this offering will be invested in short-term, investment grade, interest-
bearing instruments.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock.
We currently intend to retain earnings, if any, to support the development of
our business and do not anticipate paying cash dividends for the foreseeable
future. Payment of future dividends, if any, will be at the discretion of our
Board of Directors after taking into account factors, such as our financial
condition, operating results and current and anticipated cash needs.

13
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of CyberSource as of
March 31, 1999:

. on an actual basis;

. on a pro forma basis to give effect to the conversion into
10,489,809 shares of common stock of all outstanding shares of
preferred stock; the issuance of 1,527,048 shares of common stock
pursuant to the exercise of warrants and the conversion of a
convertible promissory note; and

. as further adjusted to give effect to the sale by CyberSource of
4,000,000 shares of common stock offered by CyberSource hereby at
an assumed initial public offering price of $9.00 per share and
the receipt of estimated net proceeds.

This table should be read in conjunction with the consolidated financial
statements and related notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
March 31, 1999
-------------------------------
Pro Pro Forma
Actual Forma As Adjusted
-------- -------- -----------
(in thousands)
<S> <C> <C> <C>
Long term debt, including current portion...... $ 3,744 $ 744 $ 744
======== ======== ========
Redeemable convertible preferred stock,
24,037,372 shares designated, 16,957,061
shares issued and outstanding actual, none pro
forma or pro forma as adjusted................ 18,911 -- --
Stockholders' equity:
Preferred stock, $.001 par value; 25,000,000
shares authorized, no shares issued and
outstanding -- actual, pro forma and
pro forma as adjusted........................ -- -- --
Common stock, $.001 par value; 50,000,000
shares authorized, 5,531,991 shares issued
and outstanding, -- actual; 17,548,848 shares
issued and outstanding -- pro forma;
21,548,848 shares issued and outstanding --
pro forma as adjusted(1).................... 6 18 22
Additional paid in capital.................... 1,884 27,717 60,313
Deferred compensation related to stock
options...................................... (671) (671) (671)
Accumulated deficit........................... (14,275) (14,275) (14,275)
-------- -------- --------
Total stockholders' equity (net capital
deficiency)................................. (13,056) 12,789 45,389
-------- -------- --------
Total capitalization....................... $ 9,599 $ 13,533 $ 46,133
======== ======== ========
</TABLE>
- --------

(1) Excludes 2,035,575 shares of common stock issuable upon exercise of options
outstanding and 1,389,934 shares available for grant as of March 31, 1999
(of which options to purchase 311,000 shares were granted in April 1999)
under our 1998 Stock Option Plan and our 1999 Stock Option Plan. See
"Management -- Stock Plans" and "Executive Compensation" and Notes 5 and 9
of Notes to Consolidated Financial Statements.

14
<PAGE>

DILUTION

At March 31, 1999, our pro forma net tangible book value was $12.5
million or approximately $0.71 per share. Pro forma net tangible book value per
share represents the amount of our stockholders' equity divided by 17,548,848
shares of common stock (on a pro forma basis to give effect to the conversion
upon completion of this offering of all shares of preferred stock into
10,489,809 shares of common stock and the issuance of 1,527,048 shares of
common stock pursuant to the exercise of warrants and a conversion of the
convertible promissory note). After giving effect to the sale by us of
4,000,000 shares of our common stock hereby at an assumed initial public
offering price of $9.00 per share, and the application of the estimated net
proceeds therefrom, our pro forma net tangible book value as of March 31, 1999
would have been $45.1 million or $2.09 per share. This represents an immediate
increase in pro forma net tangible book value of $1.38 per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$6.91 per share to the purchasers of common stock in this offering, as
illustrated in the following table:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $9.00
Pro forma net tangible book value per share as of March 31,
1999............................................................ $0.71
Increase attributable to new investors........................... 1.38
-----
Pro forma net tangible book value per share after this offering.... 2.09
-----
Dilution per share to new investors................................ $6.91
=====
</TABLE>

The following table sets forth, on a pro forma basis as of March 31,
1999, the differences between the existing stockholders (on a pro forma basis
to give effect to the conversion upon completion of this offering of all shares
of preferred stock into 10,489,809 shares of common stock and the issuance of
1,527,048 shares of common stock pursuant to the exercise of warrants and the
conversion of the convertible promissory note) and the purchasers of shares in
this offering (at an assumed initial public offering price of $9.00 per share)
with respect to the number of shares purchased from us, the total consideration
paid and the average price per share paid:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.. 17,548,848 81.4% $19,780,000 35.5% $1.13
New investors.......... 4,000,000 18.6 36,000,000 64.5 9.00
---------- ----- ----------- -----
Total................ 21,548,848 100.0% $55,780,000 100.0%
========== ===== =========== =====
</TABLE>

The above computations assume no exercise of options after March 31,
1999. As of March 31, 1999, there were options outstanding under our 1998 Stock
Option Plan and 1999 Stock Option Plan to purchase a total of 2,035,575 shares
of common stock at a weighted average exercise price of $2.02 per share. In
addition 1,389,934 shares under our 1998 Stock Option Plan and 1999 Stock
Option Plan were reserved for future grants at March 31, 1999 (of which options
to purchase 311,000 shares were granted in April 1999). To the extent that
outstanding options are exercised, or any of the reserved shares are issued,
there will be further dilution to new investors. See "Capitalization,"
"Management--Stock Plans," "--Executive Compensation" and Notes 5 and 9 of
Notes to Consolidated Financial Statements.

15
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated statements of operations data for the
period from March 20, 1996 (inception) through December 31, 1996, and for the
years ended December 31, 1997 and 1998 and the selected balance sheet data as
of December 31, 1997 and 1998 are derived from our audited consolidated
financial statements appearing elsewhere in this prospectus. The selected
balance sheet data as of December 31, 1996 is derived from our audited
consolidated financial statements not included in this prospectus. The
consolidated financial data as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 was derived from unaudited financial statements
included elsewhere in this prospectus. We have prepared this unaudited
information on the same basis as the audited consolidated financial statements
and have included all adjustments, consisting only of normal recurring
adjustments that we consider necessary for a fair presentation of our financial
position and operating results for these periods. When you read this
consolidated financial data, you should also read the consolidated financial
statements and related notes included in this prospectus. The historical
results are not necessarily indicative of future results. The pro forma
consolidated balance sheet data as of March 31, 1999 is unaudited and reflects
the assumed conversion of all outstanding shares of preferred stock into common
stock upon the consummation of this offering.

<TABLE>
<CAPTION>
Period from Three Months
March 20 Year Ended Ended
(Inception) to December 31, March 31,
December 31, ----------------- ----------------
1996 1997 1998 1998 1999
-------------- ------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenues.................. $ 144 $ 968 $ 3,384 $ 639 $ 1,713
Cost of revenues.......... 137 324 3,471 647 1,505
------- ------- -------- ------- -------
Gross profit (loss)....... 7 644 (87) (8) 208
Operating expenses:
Product development...... 338 2,300 3,802 671 1,322
Sales and marketing...... 425 1,988 4,184 822 2,079
General and
administrative.......... 387 681 1,946 330 938
Deferred compensation
amortization............ -- -- 18 -- 67
------- ------- -------- ------- -------
Total operating
expense................ 1,150 4,969 9,950 1,823 4,406
------- ------- -------- ------- -------
Loss from operations...... (1,143) (4,325) (10,037) (1,831) (4,198)
Interest income (expense),
net...................... -- (13) (48) 7 8
------- ------- -------- ------- -------
Net loss.................. $(1,143) $(4,338) $(10,085) $(1,824) $(4,190)
======= ======= ======== ======= =======
Net loss per share(1)..... $ (2.05) $ (0.40) $ (0.77)
Shares used in computing
basic and diluted net
loss per share(1)........ 4,918 4,535 5,465
Pro forma basic and
diluted net loss per
share(1)................. $ (0.86) $ (0.26)
Shares used in computing
pro forma basic and
diluted net loss per
share(1)................. 11,740 15,955

Selected Non-Financial
Operating Data:
Number of transactions
processed................ 8,560 870 5,800
</TABLE>

<TABLE>
<CAPTION>
Pro forma
December 31, as of
------------------------ March 31, March 31,
1996 1997 1998 1999 1999
------- ------- ------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........ $ -- $ 2,000 $11,111 $ 7,423 $ 7,423
Working capital (deficit)........ (61) 2,016 7,554 3,222 3,222
Total assets..................... 106 3,735 14,975 12,150 12,150
Noncurrent obligations under
capital leases.................. -- 33 256 426 426
Redeemable convertible preferred
stock........................... -- 2,097 18,911 18,911 --
Total stockholders' equity (net
capital deficiency) / divisional
equity (1996)................... 421 1,037 (9,023) (13,056) 5,855
</TABLE>
- --------
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of the number of shares used in computing per share
amounts. Until December 31, 1997, the Company was operated as a division of
Beyond.com Corporation and had no outstanding common or preferred shares,
and, therefore, there are no loss per share amounts for the 1996 and 1997
periods.

16
<PAGE>

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

The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this prospectus.

Overview

We commenced operations in March 1996 as a division of Beyond.com. From
our inception to March 1997, our operating activities related primarily to
planning and developing proprietary e-commerce transaction systems, recruiting
personnel, raising capital and purchasing operating assets. On December 31,
1997, Beyond.com transferred assets and liabilities related to its e-commerce
transaction processing services division to CyberSource. Our financial
statements for 1996 and 1997 reflect our operations as a division of Beyond.com
through December 31, 1997. Our balance sheet as of December 31, 1997 has been
prepared using the historical basis of accounting and includes all the assets
and liabilities specifically identifiable to us. Our statements of operations
for 1996 and 1997 include all revenues and costs directly attributable to us,
including a corporate allocation of the costs of facilities, salaries and
employee benefits. Additionally, incremental corporate administration, finance
and management costs are allocated to us. We have incurred significant losses
since our inception, and through March 31, 1999 had incurred cumulative losses
of approximately $19.8 million. We expect to continue to incur substantial
operating losses for the foreseeable future.

We derive substantially all of our revenues from e-commerce monthly
transaction processing fees, and, to a lesser extent, support services and
digital product rights management fees. Transaction revenues and digital
product rights management fees are recognized in the period in which the
transactions occur. Our e-commerce transaction processing service revenues are
derived from contractual relationships providing revenues on a per transaction
basis, generally subject to a monthly minimum or maintenance fee. In general,
these contractual relationships provide for a one-year term with automatic
renewal and can be cancelled by either party at any time with sixty days prior
notice. Support service fees are recognized as the related services are
provided and costs are incurred. As our revenues grow, we expect e-commerce
transaction processing revenues to become an increasingly larger percentage of
our total revenues.

In view of the rapidly evolving nature of our business and our limited
operating history, we believe that period-to-period comparisons of our revenues
and operating results, including our gross margin and operating expenses as a
percentage of total revenues, are not meaningful and should not be relied upon
as indications of future performance. We do not believe that our historical
growth rates are indicative of future results.

Results of Operations

The following discussion does not contain data from the inception period
of March 20, 1996 through December 31, 1996, because we believe that amounts
from this inception period are not comparable to those for the years ended
December 31, 1997 and 1998 due to the different duration of the periods, and
due to the limited size of our operations as a division of Beyond.com in that
period.

Three Months Ended March 31, 1998 and 1999

Revenues. Revenues increased from $0.6 million for the three months ended
March 31, 1998 to $1.7 million for the three months ended March 31, 1999, an
increase of approximately $1.1 million or 168.1%. This increase is due to the
addition of merchants and transaction volume increases from existing merchants
resulting from the increased market acceptance of e-commerce. Our transactions
increased from approximately 870,000 processed during the three months ended
March 31, 1998 to approximately 5,800,000 during the three months ended March
31, 1999.

17
<PAGE>

Cost of Revenues. Cost of revenues consists primarily of costs incurred
in the delivery of e-commerce transaction services, including personnel costs
in our operations, professional services and merchant support functions,
depreciation of capital equipment used in our network infrastructure and costs
related to the hosting of our servers at third-party hosting centers in the
United States and United Kingdom. Cost of revenues increased from $0.6 million
for the three months ended March 31, 1998 to $1.5 million for the three months
ended March 31, 1999. The increase is due primarily to additional operations
and merchant support personnel and related costs.

Product Development. Product development expenses consist primarily of
compensation and related costs of employees engaged in the research, design and
development of new services, and to a lesser extent, facility costs and related
overhead. Product development expenses increased from $0.7 million for the
quarter ended March 31, 1998 to $1.3 million for the quarter ended March 31,
1999. The increase is primarily due to higher personnel related costs resulting
from an increase in personnel. We expect product development expenses to
increase in absolute dollars as we hire additional personnel and develop new
services.

Sales and Marketing. Sales and marketing expenses consist primarily of
compensation of sales and marketing personnel, market research and advertising
costs, and, to a lesser extent, facility costs and related overhead. Sales and
marketing expenses increased from $0.8 million for the three months ended March
31, 1998 to $2.1 million for the three months ended March 31, 1999. The
increase is primarily due to $0.7 million of additional personnel related costs
resulting from an increase in personnel and $0.1 million of additional sales
commissions. We expect sales and marketing expenses to increase in absolute
dollars as we substantially increase our marketing and promotional programs.

General and Administrative. General and administrative expenses consist
primarily of compensation for administrative personnel, fees for outside
professional services and, to a lesser extent, facility costs and related
overhead. General and administrative expenses increased from $0.3 million for
the three months ended March 31, 1998 to $0.9 million for the three months
ended March 31, 1999. The increase is primarily due to higher personnel related
costs resulting from an increase in personnel. We expect general and
administrative expenses to increase in absolute dollars to support the expected
growth of our business.

Deferred Compensation Amortization. During the three months ended March
31, 1999 and in April 1999, we recorded aggregate unearned compensation in the
amount of $0.6 million and $0.4 million in connection with the grant of stock
options with exercise prices less than the deemed fair value on the respective
dates of grant. Deferred compensation amortization, related to these stock
option grants, as well as 1998 stock option grants for years 1999, 2000 and
2001 and thereafter will be approximately $0.6 million, $0.4 million and $0.2
million, respectively.

Interest Income (Expense), Net. Interest income consists of interest
earnings on cash and cash equivalents and increased from $11,000 for the three
months ended March 31, 1998 to $0.1 million for the three months ended March
31, 1999. The increase is primarily due to an increase in cash and cash
equivalents as a result of equity financings completed during 1998. Interest
expense increased from $4,000 for the three months ended March 31, 1998 to $0.1
million for the three months ended March 31, 1999. The increase represents
interest on an unsecured convertible note issued in August 1998 and interest on
capital leases.

Years Ended December 31, 1997 and 1998

Revenues. Revenues increased from $1.0 million in 1997 to $3.4 million in
1998, an increase of approximately $2.4 million or 249.6%. The increase is a
result of the addition of merchants and increased transaction volumes from
existing customers resulting from the increased market acceptance of e-
commerce. Since we were a division of Beyond.com, no revenues were recorded
from Beyond.com transactions processed during 1997. During 1998, Beyond.com
accounted for approximately 23.7% of our revenues. Given the continued increase
in our customer base, we expect Beyond.com's percentage of total revenues to
decrease in future periods as new customers increase our transaction volumes
and revenues.

18
<PAGE>

Cost of Revenues. Cost of revenues increased from $0.3 million or 33.5%
of revenues in 1997 to $3.5 million or 102.6% of revenues in 1998. The increase
in 1998 in dollars and as a percent of revenues is due to an increase of $1.6
million in operations, professional services and merchant support personnel and
related costs, an increase of $0.2 million in depreciation expense on capital
equipment as well as an increase of $0.3 million in costs related to the
hosting of our servers at third party hosting centers in the United States and
United Kingdom which include costs for additional space, installation of
equipment and additonal phone line requirements.

Product Development. Product development expenses increased from $2.3
million in 1997 to $3.8 million in 1998. The addition of product development
personnel during 1998 primarily accounted for the increase.

Sales and Marketing. Sales and marketing expenses increased from $2.0
million in 1997 to $4.2 million in 1998. The increase is primarily due to
higher personnel related costs and increased sales commissions.

General and Administrative. General and administrative expenses increased
from $0.7 million in 1997 to $1.9 million in 1998. The increase is primarily
due to higher personnel related costs resulting from the hiring of additional
personnel and, to a lesser extent, from salary increases.

Deferred Compensation Amortization. During the year ended December 31,
1998, we recorded aggregate unearned compensation in the amount of $0.2 million
in connection with the grant of stock options during 1998 with exercise prices
less than the deemed fair value on the respective dates of grant.

Interest Income (Expense), Net. Interest income was approximately $0.1
million in 1998. Interest expense of $0.2 million in 1998 represents interest
on an unsecured convertible note and interest on capital leases.

Income Taxes. No provision for federal and state income taxes was
recorded as we incurred net operating losses since inception. As of December
31, 1998, we had federal and state net operating loss carryforwards of
approximately $8.6 million. If we are not able to use them, the federal and
state net operating loss carryforwards will expire in 2006 through 2018. The
Tax Reform Act of 1986 imposes substantial restrictions on the utilization of
net operating losses and tax credits in the event of a corporation's ownership
change, as defined in the Internal Revenue Code. Our ability to utilize net
operating loss carryforwards may be limited as a result of such an ownership
change. We do not anticipate that a material limitation on our ability to use
our carryforwards and credits will result from this offering.

We have provided a full valuation allowance on our deferred tax assets
because of the uncertainty regarding their realization. Our accounting for
deferred taxes under Statement of Financial Accounting Standards No. 109
involves the evaluation of a number of factors concerning the realizability of
our deferred tax assets. In concluding that a full valuation allowance was
required, we considered such factors as our history of operating losses and
expected future losses and the nature of our deferred tax assets.

19
<PAGE>

Quarterly Results of Operations

The following table presents our unaudited quarterly consolidated
statements of operations data and non-financial operating data for the five
quarters ended March 31, 1999. In management's opinion, the consolidated
statements of operations data has been prepared substantially on the same basis
as the audited consolidated financial statements appearing elsewhere in this
prospectus, and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below in order to present
fairly the unaudited quarterly results. The quarterly data should be read in
conjunction with our audited consolidated financial statements and the related
notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------
June Sept
Mar 31, 30, 30, Dec 31, Mar 31,
1998 1998 1998 1998 1999
------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenues......................... $ 639 $ 699 $ 943 $ 1,103 $ 1,713
Cost of revenues................. 647 655 895 1,274 1,505
------- ------- ------- ------- -------
Gross profit (loss).............. (8) 44 48 (171) 208
Operating expenses:
Product development............. 671 808 1,055 1,268 1,322
Sales and marketing............. 822 849 1,118 1,395 2,079
General and administrative...... 330 413 571 632 938
Deferred compensation
amortization................... -- -- -- 18 67
------- ------- ------- ------- -------
Total operating expenses....... 1,823 2,070 2,744 3,313 4,406
------- ------- ------- ------- -------
Loss from operations............. (1,831) (2,026) (2,696) (3,484) (4,198)
Interest income (expense), net... 7 11 (39) (27) 8
------- ------- ------- ------- -------
Net loss......................... $(1,824) $(2,015) $(2,735) $(3,511) $(4,190)
======= ======= ======= ======= =======
Non-Financial Operating Data:
Number of transactions
processed....................... 870 1,193 2,473 4,024 5,800
</TABLE>

Revenues increased during each quarter of 1998 and the first quarter of
1999 due to increases in transaction volumes and, to a lesser extent, increases
in merchant support services. The increase in cost of revenues during each
quarter of 1998 and the first quarter of 1999 is due to an increase in cost
related to operations, infrastructure and the hosting of our servers at third-
party hosting centers in the United States and United Kingdom, and to a lesser
extent, increases in merchant support personnel throughout the period. The
gross loss in the quarter ended March 31, 1998 is a result of continued
investment in network infrastructure and costs related to the hosting of our
servers. The gross loss in the quarter ended December 31, 1998 is a result of
an increase of $0.2 million in operations, professional services and merchant
support personnel related costs to support anticipated future revenue growth.
Product development expense increased during each quarter of 1998 and the first
quarter of 1999 principally due to an increase in product development
personnel. Sales and marketing expense increased in the three months ended
December 31, 1998 and March 31, 1999 due to an increase in sales and marketing
personnel costs of $0.4 million. The increase in general and administrative
expense in the three months ended March 31, 1999 is due to increased recruiting
expenses of $0.1 million, accounting and outside service expenses of $0.1
million and additional headcount. The deferred compensation amortization
represents the amortization of unearned compensation in connection with the
grant of stock options during 1998 and 1999 at exercise prices less than the
deemed fair value on the respective dates of grant.

Liquidity and Capital Resources

Our cash and cash equivalents increased by approximately $5.4 million
from December 31, 1997 to March 31, 1999. This increase resulted from our
receipt of approximately $16.5 million in proceeds from the

20
<PAGE>

sale of equity securities and issuance of an unsecured convertible note payable
for $3.0 million to an officer and stockholder, which was partially offset by
our net losses during 1998 and the three months ended March 31, 1999. Our
investment in property and equipment was approximately $2.0 million, excluding
approximately $0.9 million of property and equipment financed under capital
leases, during the period from December 31, 1997 to March 31, 1999.

Net cash used in our operating activities was approximately $8.9 million
in 1998 and approximately $3.1 million for the three months ended March 31,
1999. Cash used in operations in 1998 and the months ended March 31, 1999 was
primarily due to our net losses and increases in current assets, offset by
depreciation and amortization and increases in accounts payable and accrued
liabilities. Accounts payable and accrued liabilities increased in those
periods primarily due to the expansion of our operations and the related costs
and increases in accrued personnel costs related to headcount growth.

Net cash used in investing activities was approximately $1.4 million
during 1998 and approximately $0.5 million during the three months ended
March 31, 1999 and was comprised primarily of purchases of furniture and
equipment for new employees, and leasehold improvements related to office
expansions in both periods. Our planned capital expenditures for the remainder
of 1999 are approximately $4.5 million, primarily for capital equipment used in
our network infrastructure.

Net cash provided by financing activities was approximately $19.4 million
in 1998 and approximately $0.1 million for the three months ended March 31,
1999. Net cash provided by financing activities in 1998 was due primarily to
proceeds from our issuance of a convertible note payable of $3.0 million and
proceeds from the issuance of preferred stock of $16.5 million.

The convertible note payable of $3.0 million is due in full on October
21, 1999 and bears interest at a rate of 10% per annum, payable quarterly. On
the day immediately prior to the consummation of this offering, the note will
automatically convert into 828,729 shares of common stock.

We believe that the net proceeds from this offering, together with our
current cash balances, will be sufficient to meet our working capital and
capital requirements for at least the twelve months immediately following the
offering. We expect that we will continue to use our cash to fund operations
during that period as we hire additional personnel and continue to expand our
research and development, sales and marketing and general and administrative
activities. In addition, our future capital requirements will depend on many
factors including the level of investment we make in new businesses, new
products or new technologies. To the extent that the funds generated by this
offering, together with existing resources and future earnings, are
insufficient to fund our future activities, we may need to obtain additional
equity or debt financing. Additional funds may not be available or, if
available, we may not be able to obtain them on terms favorable to our
stockholders and us.

Year 2000 Readiness Disclosure

State of Readiness. We utilize a number of computer software programs and
operating systems across our entire organization, including applications used
in financial business systems and various administrative functions. To the
extent that our software applications contain source code that is unable to
appropriately interpret the upcoming Year 2000 and beyond, some level of
modification or replacement of applications will be necessary. We believe that
our internal Year 2000 issues are limited to information technology, or IT,
systems such as software programs and computer operating systems, and we are
working closely with the suppliers of these systems to ensure that all systems
are Year 2000 compliant. Employing a team made up of internal personnel, we
have completed our identification of IT systems that are not yet Year 2000
compliant and have commenced modification or replacement of non-compliant
systems as necessary. We anticipate that modification or replacement and
testing of these systems will be completed by September 1999.

We rely on two Internet service providers for our Internet access. Both
companies have represented in their public filings with the Securities and
Exchange Commission that their systems are fully Year 2000

21
<PAGE>

compliant or that they have processes in place to achieve full compliance
before the Year 2000. We are relying on these Internet service providers to
accomplish these tasks, but have obtained no contractual commitments from them
regarding Year 2000 issues.

We are highly dependent on a few personal computer manufacturing
companies for our supply of desktop hardware and peripherals. To the extent
that Year 2000 issues affect these suppliers' ability to deliver on schedule,
we must review the suppliers' plans for Year 2000 compliance and satisfy
ourselves that they have made the necessary modifications to or replacement of
their affected systems. We have requested these plans and will evaluate them as
they are received. We anticipate that this evaluation will be completed by May
1999. We will rely primarily on the suppliers' commitments to accomplish this
task but have no contractual commitment from the suppliers regarding Year 2000
issues.

In addition, we have not assessed the Year 2000 readiness of our
merchants. Merchants who are not Year 2000 compliant may be unable to utilize
our services resulting in a reduction in our revenues. Furthermore, the
Internet as a whole, and business conducted on the Internet, may be adversely
affected by Year 2000 issues. We have no means of assessing such risk.

Costs of Addressing Year 2000 Issues. Given the information known at this
time about our non-compliant systems, coupled with ongoing, normal course-of-
business efforts to upgrade or replace critical systems, as necessary, we do
not expect Year 2000 compliance costs to have any material adverse impact on
our business. We estimate that total costs for the Year 2000 compliance
assessment and remediation will not exceed $100,000. The costs of this
assessment and remediation will be paid out of general and administrative
expenses.

Risks of Year 2000 Issues. In light of our assessment and remediation
efforts to date, and the planned, normal course-of-business upgrades, we
believe that any residual Year 2000 risk, other than Year 2000 risks affecting
the Internet as a whole, is limited to non-critical business applications and
support hardware. No assurance can be given, however, that all of our systems
will be Year 2000 compliant or that compliance will not have a material adverse
effect on our business. We also do not have any assurance that the
manufacturers who supply desktop hardware or software for us will be Year 2000
compliant with their internal systems; a reduction in the supply of desktop
hardware or software from these suppliers could have a material adverse effect
on our business. In this case, we will find alternate suppliers of desktop
hardware and software. See "Risk Factors--We Face Year 2000 Risks."

Contingency Plans. We believe that, if our suppliers are not Year 2000
compliant, the reasonably likely worst case would be that we would be unable to
receive desktop hardware and software from them on a timely basis which would
disrupt employee productivity and could materially adversely affect our
business. We plan to develop a contingency plan for all operations to address
the most reasonably likely worst case scenarios regarding Year 2000 compliance.
We expect this contingency plan to be completed by July 1999.

Qualitative and Quantitative Disclosures about Market Risk

We provide our services to customers primarily in the United States and,
to a lesser extent, in Europe and elsewhere throughout the world. As a result,
our financial results could be affected by factors, such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. All
sales are currently made in U.S. dollars or pound sterling. A strengthening of
the dollar or the pound sterling could make our products less competitive in
foreign markets. Our interest income is sensitive to changes in the general
level of U.S. interest rates. Due to the nature of our short-term investments,
which are primarily money market funds, we have concluded that there is no
material market risk exposure.

22
<PAGE>

BUSINESS

Overview

We are a leading developer and provider of real-time e-commerce
transaction services. Through our CyberSource Internet Commerce Suite, we offer
services to online merchants for global payment processing, fraud prevention,
tax calculation, export compliance, territory management, delivery address
verification and fulfillment management.

Industry Background

The Rapid Growth of Internet Commerce

As the Internet has become an increasingly important communications
medium, merchants and consumers have begun using the Internet to buy and sell
goods and services. According to International Data Corporation, or IDC, the
number of Internet users worldwide will grow from an estimated 97 million at
the end of 1998 to an estimated 320 million by 2002. Increasingly, these
Internet users are becoming online consumers. IDC forecasts that the actual
number of Web buyers worldwide will expand from 28 million in 1998 to
approximately 128 million in 2002 and that the amount of worldwide commerce
conducted over the Web will increase from $50 billion in 1998 to approximately
$734 billion in 2002.

E-commerce offers both merchants and consumers numerous benefits:

. Merchants and consumers can interact 24 hours a day, 7 days a
week, regardless of their respective locations.

. Merchants can customize Web site content to match the needs and
preferences of individual users by transparently personalizing
content for each user.

. The online store enables merchants to readily increase the number
of products and services offered, thereby enhancing the product
selection available to customers.

. Online merchants can avoid investments in physical retail
locations.

. Much of the interaction between merchants and consumers can be
automated, resulting in reduced selling costs.

These benefits allow merchants to focus on growing their customer bases and to
market and sell their products around the world in a cost-effective and
efficient manner.

The early adopters of e-commerce were often Internet-centric companies, such as
Amazon.com and Beyond.com, which were founded specifically to transact business
on the Internet. Today, many businesses consider it essential to offer their
goods and services online, and traditional retailers such as department stores,
car dealers, and toy stores have opened online stores to supplement their
traditional retail models. An increasingly broad selection of products is now
being sold online, ranging from the initial online product offerings of books,
music, computers and software to more traditional consumer goods such as
automobiles, clothes, movie tickets, vitamins and even such personal products
as prescription drugs. Accordingly, the need for online transaction processing
is affecting virtually all industries.

Transaction Processing Demands

To succeed online, a merchant must attract customers to its Web site and
provide an appealing and easy-to-use environment that encourages customers to
place an order by clicking on the "buy" button. Once the customer places an
order, the merchant must process the order by effectively and efficiently
executing numerous transactions. With the rapid increase in the number of
online merchants and the vast array of products and services becoming available
online, competition among online merchants is increasingly intense. Due to
these competitive pressures, merchants must focus their resources on attracting
customers to their Web

23
<PAGE>

sites and providing compelling content to keep customers in their online
stores. However, as a merchant succeeds in these efforts, the increased number
of resulting orders creates another set of complex challenges. These challenges
include:

. Payment processing. The vast majority of online consumer purchases
are conducted using credit cards. These credit card transactions
should be processed in real-time to confirm an order while the
customer is online. Increasingly, merchants are also seeking to
process transactions in local currencies around the world.

. Fraud prevention. Because of the anonymity offered by the Internet
and the speed with which one can make purchases, the opportunity
for fraud is significant. In e-commerce transactions, because the
credit card is not present, a merchant is generally held liable by
its bank for the full value of the transaction in the event of
credit card fraud even if a pre-authorization had been obtained.
Online merchants must find ways to combat this fraud to avoid
losing both the product being sold and the related revenue.

. Sales Tax/VAT. An online merchant must comply with many different
national, state and local sales tax/value added tax (VAT)
regulations that vary depending on merchant and customer locations
or product type.

. Export compliance. Online merchants must ensure that a proposed
transaction complies with complex, rapidly changing export
regulations that restrict the export of some goods to prohibited
countries, persons and entities.

. Territory management. A transaction may be subject to policies and
restrictions imposed by manufacturers that may prohibit the
merchant from selling products due to a customer's geographic
location.

. Fulfillment management. Online orders for physical goods must be
transmitted to fulfillment centers, distributors or merchant-owned
distribution centers for shipment of the goods.

The online merchant must often address these demands while the customer
is waiting online. Information that a traditional retailer can collect during a
period of hours, such as fraud screen or export restrictions, often must be
available to the online merchant immediately. In addition, the merchant must
have an e-commerce system that scales as the business grows, provides a high
level of reliability and handles peak loads. The merchant's e-commerce system
should also integrate smoothly into its existing business and technology and
must support secure, authenticated messaging.

Evolution of E-commerce Transaction Processing Systems

Early adopters of e-commerce business models typically developed custom
transaction processing systems. Merchants that built these systems often faced
long development cycles, which delayed their time-to-market. These custom
systems often had limited functionality and scalability and high ongoing
maintenance costs.

More recently, online merchants have attempted to address their
transaction processing needs by either purchasing or outsourcing discrete
systems. Merchants that turn to discrete systems like payment processing are
still faced with the need to address other potentially costly and time-
consuming transaction processing issues like fraud screening or export control.
In addition, merchants that purchase discrete systems often discover that these
systems cannot scale as their business grows.

As the Internet becomes an essential marketplace, merchants seek e-
commerce service providers with the expertise to deliver a comprehensive system
that shortens time-to-market and maximizes the value of their investment. This
transaction processing solution should be available at a low initial and
overall cost and, at the same time, be scalable to support the growth of the
online business. A solution should also allow the merchant to maintain control
over its online content and customer relationships and to integrate new
services easily.

24
<PAGE>

The CyberSource Solution

We are a leading developer and provider of real-time e-commerce
transaction services. Through our CyberSource Internet Commerce Suite, we offer
online merchants a solution to the challenges of e-commerce transaction
processing. Key benefits of our solution include:

. Faster Time-To-Market. Our services and technical support enable
online merchants to begin processing transactions without lengthy
or costly integration efforts. Our services are invoked by a
single common interface installed on a merchant's commerce server.
This interface may be easily installed with a "plug-in," software
that resides on the merchant's commerce server and enables them to
easily activate our services. "Plug-ins" integrate with many
popular commerce servers such as those offered by BroadVision, IBM
and Microsoft. In addition, we have developed our software
libraries to run on most operating systems including Microsoft NT,
UNIX (Sun Solaris, HP UX, IBM AIX, and others) and Linux.

. Access to Comprehensive Suite of Services. We provide merchants
with on-demand, online access to services that address a broad
spectrum of e-commerce transaction processing issues related to
global payment processing, fraud prevention, tax calculation,
export compliance, territory management, delivery address
verification and fulfillment management.

. Enhanced Merchant Flexibility and Control. Our comprehensive
transaction processing solution enables the merchant to choose
transaction services a la carte on a per order basis. The merchant
has the flexibility to purchase any or all of our offered services
for each order as needed. In addition, because our services are
provided transparently to the customer, merchants retain complete
control over their customers' buying experiences.

. Global Reach. Our services are used by merchants in many countries
throughout the world. We have established a network of virtual
data centers in 19 countries on 6 continents. In addition, our
payment gateways currently support over 100 currencies and provide
sales tax/VAT calculations for all Canadian provinces and all
countries in the European Union in addition to all United States
jurisdictions.

. Reduced Overall Costs. Our services enable merchants to
effectively process online transactions without the cost of
developing and maintaining their own complex transaction
processing systems and infrastructure. Furthermore, our services
lower transaction costs by reducing fraud and avoiding the
shipment of goods to undeliverable physical addresses in the
United States and Canada.

The technology underlying our e-commerce transaction services provides
the following benefits:

. Scalability. Our services allow merchants to deliver consistent
quality of service as transaction volumes grow, and to handle
daily and seasonal peak periods. As a result, merchants do not
have to expand these areas of their transaction processing
infrastructure as their businesses grow.

. High Reliability. Our systems are engineered to provide high
reliability, and we provide transaction processing 24 hours a day,
7 days a week. In addition, we offer our merchants support 24
hours a day, 7 days a week.

. Secure Messaging. All communications between the merchant's Web
server and our system are facilitated by our Simple Commerce
Messaging Protocol, or SCMP. This encrypted protocol allows for
digital signature processing, message integrity, and identity
verification of all communications between the merchant and us.

. Real-Time Responses. Because our services enable online merchants
to process e-commerce transactions in real-time, merchants can
improve their level of customer satisfaction and reduce their
support costs by avoiding delayed responses and minimizing the
need for follow-up communications.

25
<PAGE>

Strategy

Our objective is to be the leading worldwide provider of real-time e-
commerce transaction services. Key elements of our strategy include the
following:

Enhance and Extend Our Suite of E-commerce Services. We intend to build
upon our scalable, state-of-the-art transaction processing systems to enhance
the services we currently offer. By continuing to invest resources in our core
transaction processing engine, CyberSource Internet Commerce Engine, we intend
to further improve availability, reliability and scalability. Based on input
from our merchants, we plan to introduce new services to solve e-commerce
problems as they emerge. For example, in response to merchant demand, in March
1999, we introduced as part of our service suite delivery address verification,
which uses database and artificial intelligence technologies to determine
whether the merchant's customer has supplied a deliverable street address in
the United States or Canada. To supplement our internal development efforts, we
will also consider acquisitions of complementary technologies and companies.

Expand Merchant Customer Base through Improved Brand Recognition and
Increased Marketing. To date, we have made limited investments in marketing and
branding. We intend to substantially increase our marketing and promotional
programs, including brand recognition, advertising and public relations
efforts, to capitalize upon our advantage as an early leader in the e-commerce
transaction services market. We also intend to increase the size of our direct
sales force and enter into additional collaborative relationships to generate
new merchant customers as well as to increase the number of transaction
services used by our existing merchants.

Utilize Partnerships to Drive Transactions. We intend to utilize or
leverage our relationships with our channel partners including First Data
Corp., Microsoft, Paymentech and Vital Processing Services and our strategic
relationships with GE Capital's Equity Capital Group and Visa International to
increase our transaction volume and create new markets. We intend to enter into
additional relationships with other companies that offer similar benefits.

Increase International Presence and Operations. We intend to expand the
availability and brand recognition of our services throughout the world. For
example, we plan to offer payment processing services in all major currencies
and sales tax/VAT services in all major nations. In addition, we expect to
expand our e-commerce infrastructure through new relationships outside the
United States and to increase our international direct sales force.

Build Organization Around the Merchant. We will continue to focus on the
needs of our merchants and build our services and organization accordingly. For
example, we have established a merchant advisory board which provides us with
valuable feedback on how to improve existing services and identifies potential
new services. In addition, we conduct market research utilizing focus groups
and customer surveys to learn more about our market and business opportunities.
Our merchant customers benefit from the collective experience of over 400
merchants as we improve existing services and develop new services.

CyberSource Services

CyberSource provides a suite of e-commerce transaction services designed
to simplify merchants' operations and allow them to focus on marketing and
merchandising tasks required for their online businesses. Our services are
transparent to the merchant's customers. We also offer digital product rights
management and professional services.

CyberSource Internet Commerce Suite

The CyberSource Internet Commerce Suite is offered to online merchants
worldwide on a remotely accessed, pay-per-transaction basis. All of our
services are accessible through a common software interface

26
<PAGE>

residing on the merchant's Web server. The diagram below illustrates the
logical flow of an order being processed by our Internet Commerce Suite.

[The graphics depicts a replica of the on screen button with the word "BUY" on
the button. Next to the button are six connected circles labeled from left to
right "Calculate Tax", "Authorize Payment", "Screen For Fraud", "Verify
Delivery Address", "Check Export Compliance" and "Check Distribution Policies".
An arrow points to a box labeled "Fulfill Order or Provide Access" which has a
line connecting it to two options (1) on top "Physical Product Shipment" which
has two connected circles, the first one labeled "Message Fulfillment Center"
and the second labeled "Settle Payment" between the two circles the line is
labeled "Product Shipment"; (2) on bottom "Digital Products and Services" which
has two connected circles, the first one labeled "Issue Rights Deliver Product"
and the second labeled "Settle Payment". Below this group connected by a dotted
line is a box entitled "Digital Property Preparation, Warehousing, Rights
Management".]

The CyberSource Internet Commerce Suite currently consists of:

Tax Services Our tax service calculates sales and use taxes
for over 7,000 taxing jurisdiction in the
United States and Canada. The service also
supports VAT calculation for all countries in
the European Union and many others outside the
European Union, enabling businesses to comply
with most international VAT regulations.

Payment Services We provide secure, real-time credit card
processing services for all major card brands
through major processing gateways in the United
States and Europe. We support transactions in
over 100 currencies, including the Euro.

Risk Management Services
Our Internet fraud screening system uses
artificial intelligence, in conjunction with an
extensive transaction history database, to
allow Internet merchants to predict and control
fraud. The service, which typically returns a
predictive score in fewer than ten seconds,
significantly reduces our merchants' risk of
fraud losses.

Distribution Control We provide a range of distribution control
Services services to help ensure merchants comply with
corporate, partner, and government policies for
product and service sales. They include:

. Export control. Through this service, we
help to ensure that online merchants comply
with United States Government export
regulations, monitoring order acceptance
against a rapidly changing list of denied
countries, persons or entities and
electronically verifying the customer's
location using our geolocation technology.

27
<PAGE>

. Policy control. We offer this distribution
control service to assist merchants in
complying with internal corporate policies
and partner marketing and distribution
agreements for product sales. Specifically,
this service allows merchants to limit
product or service distribution to specific
territories requested by the business,
thereby ensuring compliance with marketing
policies or distribution agreements.

Fulfillment Management We support a number of services to help online
Services merchants manage physical and digital product
delivery in a secure, efficient fashion. These
include:

. Fulfillment messaging. We provide secure
fulfillment messaging to simplify the
transmission of online orders to fulfillment
centers, distributors, and merchant-owned
distribution centers. The service handles
all message routing and supports secure-
mail, file transfer protocol and electronic
data interchange formats. In addition, this
service works in conjunction with our
payment services to comply with card
association rules regarding settlement upon
product shipment.

. Delivery address verification. This service
is designed to prevent merchants from
shipping goods to incorrect physical
addresses in the United States and Canada.
This service identifies undeliverable
addresses while the customer is still online
so that discrepancies can be resolved
immediately. This service utilizes database
and artificial intelligence technologies to
confirm in real-time that city/state/zip
combinations are correct and that streets
and street addresses are valid.

. Secure digital delivery. We use patented
technology and digital certificates to
provide simple, secure, electronic delivery
of digital content, such as software, music,
images and documents. Globally distributed
servers provide geographic distribution
efficiency.

Digital Products Rights Management

We provide online digital product registration services which allow
digital property owners to specify licensing and distribution conditions.
Digital property owners may designate agents authorized to sell or distribute
their property, and assign distribution controls by product or geographic
location.

We maintain secure digital warehouses for property owned by, or
authorized to be sold by, the transacting merchant. Digital products may be
archived in the digital warehouses indefinitely to support returns and
replacement.

Professional Services

Our professional services organization provides business application
expertise, technical know-how, and product knowledge to complement our products
and assist our merchants in achieving faster time-to-market. Our professional
services include planning, implementation, and training. Our planning services
include system and resource evaluation, back-office commerce system design,
order fulfillment strategies and commerce applications assessment and
recommendations. Our implementation services include project

28
<PAGE>

management, merchant bank account acquisition, commerce application
configuration and activation and commerce application testing and validation.
Our training services include digital product preparation, customer service and
support training and ongoing site maintenance.

Merchants and Markets

We have a broad customer base from a variety of industry groups.
Beyond.com accounted for 23.7% of our revenues in 1998 and 21.8% during the
three months ended March 31, 1999. No other customer accounted for 10% or more
of our revenues during 1997, 1998 or the three months ended March 31, 1999. The
following is a representative list of customers that have chosen to use our
services:

<TABLE>
<S> <C> <C>
Hardware/Electronics Media/Books Pharmaceutical
- ---------------------------- ---------------------------- ----------------------------
Compaq Computer Definitive Stock Green Tree Nutrition
Computerstore.com Fawcette Publications HealthShop.com
Cybershop Electronics.net Liquid Audio mybasics.com
Western Digital VarsityBooks.com
</TABLE>

<TABLE>
<S> <C>
Retail Merchandise Software
-------------------------------- --------------------------------
BUY.COM Adobe Systems
BuySafe International Beyond.com
CyberShop eGift.com Egghead.com
K-Tel IBM Software Group (Lotus)
Shopping.com Remedy
</TABLE>

The following examples illustrate how customers are using our real-time
e-commerce transaction services.

BUY.COM

BUY.COM, one of the Internet's fastest-growing superstores, uses our
Internet Commerce Suite for payment, risk management and fulfillment management
services. These services have allowed BUY.COM to keep pace with their sales
growth, cut costs, speed time-to-market and mitigate fraud. At the same time,
BUY.COM is maintaining its flexibility to integrate its transaction processing
systems with its business processes. By using our services, BUY.COM was able to
replace its existing, internally developed, e-commerce transaction processing
system that had limited payment handling capabilities, did not integrate well
with their back-office processes and was costly to maintain.

Compaq Computer

Compaq Computer, one of the world's largest personal computer
manufacturers, sought to implement a Web-based commerce system that could meet
their rigorous demands for secure, reliable, high-volume, highly scalable
processing services. Compaq Computer had been working on increasing its
visibility and revenue generating capability of its factory outlets operation.
This operation had been selling direct via retail and telesales for four years.
In 1998, Compaq Computer decided to commerce-enable the factory outlet Web
site. Compaq Computer chose to use the CyberSource Internet Commerce Suite. In
particular, they sought to leverage our tax and risk management services. As a
result, the factory outlet Web site was able to benefit from our scalable on-
demand processing power that handled their unpredictable transaction volumes
and reduced overhead and fraud.

VarsityBooks.com

VarsityBooks.com, a leading online college bookstore, uses our payment
services to overcome the limitations of its initial order processing strategy
to accomodate a higher volume of customers more efficiently.

29
<PAGE>

Our solution enables VarsityBooks.com to fully automate its returns and credits
processes, internally control the customer experience and still outsource the
back-office processing for an economical per-transaction fee. As a result, they
have reduced their overhead and administrative expenses.

Sales and Marketing

Target customers for our e-commerce transaction services include
Internet-centric merchants, including those who have developed custom
transaction processing systems, established retailers that have opened online
stores to supplement their traditional retail models and merchant aggregators
that host Web sites for other merchants. We reach these merchants worldwide
through a direct sales force as well as through an indirect sales channel that
leverages existing sales and marketing infrastructures developed by our
partners. In addition to our direct and indirect sales efforts, we work with
several strategic partners to promote our e-commerce transaction services. As
of March 31, 1999, we had a total of 49 persons in sales and marketing.

Direct Sales. Our direct sales force is comprised of dedicated sales
professionals that target medium to large Internet commerce merchants that
focus primarily on business-to-consumer sales and typically process over 2,500
customer orders per month. In addition, these merchants typically maintain
their own online stores. Our direct sales organization consists of account
managers and territory managers. Our account managers focus on maintaining high
merchant satisfaction and selling additional services to existing merchants,
and our territory managers are responsible for attracting new merchants to our
services.

Indirect Sales Channel. Our indirect sales channel is divided into sales
channel partners and merchant aggregators. Our sales channel partners, who
according to contractual relationships with us receive commissions based on
support services and transaction fees paid by merchants they refer to us,
include payment service providers, system integrators and commerce server
providers.

. Our payment service providers, who process credit card
transactions for a significant majority of domestic banks issuing
credit card accounts, include First Data Corp., Paymentech and
Vital Processing Services.

. Our systems integrators, who assist merchants in the design,
development and implementation of online stores, include iXL, Fort
Point Partners, USWeb/CKS and other leading systems integrators.

. Our commerce server providers, who design, develop and distribute
software that facilitates the deployment of commerce-enabled Web
sites allowing for seamless integration of our e-commerce
transaction services, include BroadVision, IBM, Intershop,
Interworld, Mercantec and Microsoft.

Our merchant aggregators, who provide hosted online store systems to
their customers, include TicketMaster Online-CitySearch and Verio. Both
channels refer and facilitate the sale of our e-commerce transaction services
to their customer base.

Strategic Partners. Our strategic partners include GE Capital and Visa
International. We work together with our strategic partners to enhance our
existing suite of products, develop new services, and drive the adoption of
industry standards while further increasing the visibility of our e-commerce
services. We currently have contractual relationships with our strategic
partners under which we pay commissions to our strategic partners who refer
internet merchants to us and with whom we enter into a contractual
relationship.

Marketing. We use a variety of marketing activities to increase market
awareness of our services and educate our target audience. In addition to
building awareness of our brand, our marketing activities focus on generating
leads for our sales efforts. To build awareness and attract new merchants we
conduct marketing and partnership programs including, advertising, public
relations activities, referral programs, co-branded initiatives, virtual
seminars and trade shows.

30
<PAGE>

Merchant Support

We provide a range of merchant support services to ensure a high level of
performance and reliability and to enable merchants to get to market more
quickly. We offer three levels of support services including account
activation, standard support and premier support. All of these services include
transaction reporting, fraud list updating and notification of scheduled and
unscheduled system downtime and self-help merchant support tools on our Web
site.

Account Activation. Our account activation level service is intended for
use by merchants that receive technical support from a technically qualified
third party or organization that resells the CyberSource Internet Commerce
Suite. Account activation provides the ability to get merchants connected to
the CyberSource Internet Commerce Suite, configuration of all merchant IDs and
account information, full test services, secure access to our online merchant
support center and limited e-mail support.

Standard Support. Our standard support level is designed to provide
support during regular standard business hours. Standard support provides all
of the services of account activation as well as toll free technical support
from 7 a.m. to 7 p.m., Pacific Time, Monday through Friday, from our merchant
support group with a guaranteed four hour response. The standard support also
includes email support with a guaranteed two hour response and an initial one
hour project orientation conference call with our support professionals.

Premier Support. Our premier support level provides the benefits of the
standard support level with the addition of a dedicated merchant support
engineer available 24 hours a day, 7 days a week, via toll-free telephone
access or email with a two hour guaranteed response. Also included are a
dedicated business account manager and a review to optimize fraud scoring and
other Internet commerce services.

Through toll-free numbers, our merchants can reach our support desk
professionals around the clock. As of March 31, 1999, 19 of our employees were
dedicated to merchant support.

31
<PAGE>

Technology

Our proprietary transaction processing system employs a modular
architecture that was designed to scale rapidly and handle the transaction
processing demands of our merchants across the Internet. This system is
composed of multiple groups of servers and routers acting as a single point of
contact for our merchants' transaction processing requirements. The primary
software components of our system are the E-Transaction Databases, the Internet
Commerce Engine, or ICE, the Internet Commerce Services Applications, the
Simple Commerce Messaging Protocol, or SCMP, and the SCMP client. This system
utilizes industry standards to maximize our compatibility with our merchants'
e-commerce systems. In addition, we have implemented a global network of data
centers and access points that are designed to minimize transaction processing
time and system failures.

[The graphic depicts a main box with the words "CyberSource Data Center" above
it. Inside the main box top center are the words "Internet Commerce
Applications." Below is a row of seven boxes labeled from left to right "Tax
Calculation," Global Payment Procedures," "Fraud Prevention," "Delivery Address
Verification," "Territory Management," "Export Compliance," and "Fulfillment
Management." Below is a box labeled "Internet Commerce Engine" and below that
is a graphical representation of a disk labeled "eTransaction Databases." One
zigzag line connects the main box with a box on the left. The line is labeled
"Secure Commerce Messaging Protocol," the box is labeled "Merchant Commerce
Server (SCMP Client)." To the right of the main box are four zigzag lines
labeled from to bottom "Paymentech," "First Data Corp.," "NatWest," and "Other
External Resources."]

E-Transaction Database Architecture

Three primary databases form the core of our transaction processing
system: the transaction process database which maintains information necessary
to process each individual transaction; the decision support database, which
processes reports and provides detailed information about merchants'
transactions and the digital products rights management database, which manages
and reports on the digital property rights that customers have purchased. Our
transaction services rely on these databases to store the information necessary
to process transactions. For example, our fraud prevention service relies upon
a proprietary database of millions of transactions to assess the risk of fraud.

Internet Commerce Engine

Our ICE manages work flow functions and the required communications
between CyberSource commerce servers, our database and any external resources
including First Data Corp., National Westminster Bank, Paymentech and Vital
Processing Services. Our Internet Commerce Engine is designed to meet the
transaction processing demands of our merchants in a secure, fast, efficient,
reliable, scalable and interoperable manner. Our ICE was designed to scale
rapidly to handle peak transaction processing loads. Separate ICE servers share
the transaction load from our merchants and provide for immediate backup
services should any ICE server fail. Additional ICE servers can be readily
added to our data centers to accommodate increased merchant demand.

Internet Commerce Services Applications

We have developed a set of software applications that perform the
services in our Internet Commerce Suite. These services include global payment
processing, fraud prevention, tax calculation, export compliance, territory
management, delivery address verification and fulfillment management. These
applications contain the rules and logic necessary to provide our transaction
services to merchants. The applications share resources with the ICE and
databases which allow us to efficiently add new application services to meet
our customers needs.

32
<PAGE>

Simple Commerce Messaging Protocol

We have developed the Simple Commerce Messaging Protocol, or SCMP, to
enable efficient and secure connections between our ICE and our merchants. In
order to ensure secure messaging, SCMP utilizes industry standards for secure
communications including the Data Encryption Standard, RSA/public key
cryptography and digital certificates. SCMP enables our merchants to securely
access our suite of commerce services. Most importantly, SCMP can be integrated
into any software product that might require our application services.

SCMP Client

Our services are invoked by a common programming interface, residing on
our merchants' commerce servers. This client may be easily installed with a
"plug-in" that is available for most popular commerce servers including those
offered by BroadVision, IBM and Microsoft. In addition, we have developed
software libraries which act as a client and run on most operating systems
including Microsoft NT, UNIX (Sun Solaris, HP UX, Linux, IBM AIX). A merchant
can access our commerce services using either the plug-in or the software
libraries that we have developed.

Industry Standards

The implementation of our architecture is based on and complies with
widely accepted industry standards. For example, the ICE utilizes industry
standard components from industry leaders such as Cisco, Harbinger, Microsoft,
Retail Logic, RSA Data Security, Sun Microsystems and Sybase. Adherence to
industry standards provides compatibility with existing applications, enables
ease of modification and reduces the need for software modules to be rewritten
over time, thus protecting our merchants' investments.

Data Centers and Network Access

Our data centers are located at leased facilities in San Jose, California
and London, England. A data center is a facility containing servers, modem
banks, network circuits and other physical equipment necessary to connect users
to the Internet. These data centers have multiple levels of redundant
connectivity to the Internet, back-up power, fire suppression, seismic
reinforcement and security surveillance 24 hours a day, 7 days a week. In
addition we have 19 "points of presence" located on 6 continents that allow us
to serve merchants globally. A "point of presence," or POP, is a point along an
Internet service provider's network that enables users to connect to the
Internet where the POP is located, thereby enabling users within that
geographic location to make a local connection with their Internet service
provider. These points of presence provide rapid access to our suite of
services and significantly reduce the number of Internet connections a
transaction must pass through to reach us.

Product Development

Our product development team is responsible for the design, development
and release of our core infrastructure and services. We have a well-defined
software development methodology that we believe enables us to deliver services
that satisfy real business needs for the global market while meeting commercial
quality expectations. We emphasize quality assurance throughout our software
development lifecycle. We believe that a strong emphasis placed on analysis,
design and rapid prototyping early in the project lifecycle reduces the number
and costs of defects that may be found in later stages. Our development
methodology focuses on delivery of product to a global market, enabling
localization into multiple languages, multi-currency payment processing, global
fraud detection, and local regulatory compliance from a single code base. As of
March 31, 1999, we employed 38 persons in our product development organization.

When appropriate, we utilize third parties to expand the capacity and
technical expertise of our internal product development organization. On
occasion, we have licensed third-party technology that we feel provides the
strongest technical alternative. We believe this approach shortens time-to-
market without compromising our competitive position or product quality.

33
<PAGE>

Intellectual Property

We have been issued one patent and have five applications pending. The
issued patent, for a method and system for controlling distribution of software
in a multitiered distribution chain, expires in April 2016. We have pending
patent applications covering our Internet fraud screen system, digital
delivery, delivery address verification and other technologies for services not
yet offered for sale to the public. We investigate, define and prepare
applications for new patents as a part of the standard product development
cycle. Our engineering management team meets on a routine basis to harvest new
invention disclosures from the engineering and architecture groups. We cannot
assure you that any patent application that we file will issue as a patent, and
we cannot assure you that any patent issued to us will not be held invalid or
unenforceable based on prior art or for any other reason.

We believe that numerous patent applications relating to the Internet
commerce field have been filed or have issued as patents. From time to time, in
the ordinary course of business, we become aware of one or more patents of
third parties that we choose to evaluate for a variety of purposes. These
purposes may include determining the general contents of patents, reviewing the
technological developments of their assignees, and determining whether our
technology may overlap. We have not conducted any search to determine whether
any of our services or technology could be alleged to infringe upon any patent
rights of any third party. We cannot assure you that none of our products,
services, and technology infringes any patent of any third party.

As part of our confidentiality procedures, we generally enter into non-
disclosure agreements with our employees, distributors, and corporate partners
and into license agreements with respect to our software, documentation and
other proprietary information. Despite these precautions, third parties could
reverse engineer, copy or otherwise obtain our technology without
authorization, or develop similar technology independently. While we police the
use of our services and technology through online monitoring and functions
designed into SCMP and our ICE, an unauthorized third-party may nevertheless
gain unauthorized access to our services or pirate our software. We are unable
to determine the extent to which piracy of our intellectual property or
software exists. Software piracy is a prevalent problem in our industry.
Effective protection of intellectual property rights may be unavailable or
limited in foreign countries. We cannot assure you that the protection of our
proprietary rights will be adequate or that our competitors will not
independently develop similar technology, duplicate our services or design
around any intellectual property rights we hold.

From time to time we may receive notice of claims of infringement of
other parties' intellectual property rights. As the number of services in our
market increases and functionalities overlap, companies such as ours may become
increasingly subject to infringement claims. Any infringement claims, with or
without merit, could be time-consuming, result in costly litigation and
diversion of technical and management personnel or require us to develop non-
infringing technology or enter into licensing agreements. Such licensing
agreements, if required, may not be available on acceptable terms, if at all.
In the event of a successful claim of infringement and our failure or inability
to develop non-infringing technology or license the proprietary rights on a
timely basis, our business, operating results and financial condition could be
materially adversely affected.

Competition

34
<PAGE>

companies may enter the market for our services. In the future, we may compete
with large Internet-centric companies that derive a significant portion of
their revenues from e-commerce and may offer, or provide a means for others to
offer, e-commerce transaction services.

Many of our competitors have longer operating histories, substantially
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Our competitors may be able to respond more quickly
than we can to new or emerging technologies and changes in customer
requirements. Competition could seriously impede our ability to sell additional
services on terms favorable to us. Our current and potential competitors may
develop and market new technologies that render our existing or future services
obsolete, unmarketable or less competitive. Our current and potential
competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with other e-commerce transaction service
providers, thereby increasing the ability of their services to address the
needs of our prospective customers. Our current and potential competitors may
establish or strengthen cooperative relationships with our current or future
channel partners, thereby limiting our ability to sell services through these
channels. Competitive pressures could reduce our market share or require the
reduction of the prices of our services, either of which could materially and
adversely affect our business, results of operations or financial condition.

We compete on the basis of certain factors, including:

. system reliability;

. product performance;

. breadth of service offering;

. ease of implementation;

. time to market;

. customer support; and

. price.

We believe that we presently compete favorably with respect to each of
these factors. However, the market for our services is still rapidly evolving,
and we may not be able to compete successfully against current and potential
competitors.

Facilities

Our primary offices are located in approximately 27,782 square feet of
space in San Jose, California under a lease expiring in January 2001. We also
lease space for our sales and support offices in Weybridge, United Kingdom.

Employees

As of March 31, 1999, we had a total of 146 employees, including 38
persons in Product Development, 49 persons in sales and marketing, 38 persons
in consulting, customer support and training, and 21 persons in general and
administrative services. None of our employees is represented by a labor union,
and we consider employee relations to be good.

Legal Proceedings

A former Vice President of Product Management filed a lawsuit against us
in the Superior Court of California in Santa Clara County on April 8, 1999
seeking unspecified monetary damages and equitable relief. The plaintiff
alleges several causes of action, including wrongful termination, defamation,
fraud, and unfair business practices arising out of her three month employment
with us. While we cannot assure you as to the outcome of this litigation, we
believe the lawsuit is without merit, and we intend to vigorously defend
against the claims asserted.

35
<PAGE>

MANAGEMENT

Officers, Directors and Key Employees

Our officers, key employees and directors, their ages and their positions
as of April 15, 1999, are as follows:

<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<C> <C> <S>
Executive Officers
William S. McKiernan.......... 42 Chairman of the Board of Directors,
President and Chief Executive Officer
Anthony V. Bates.............. 48 Executive Vice President of International
Charles E. Noreen, Jr. ....... 38 Vice President of Finance and
Administration and Chief Financial
Officer
William E. Donahoo............ 37 Vice President of Marketing
Thomas A. Arnold.............. 44 Chief Technical Officer
Robert J. Ford................ 49 Vice President of Engineering
Eric M. Wun................... 40 Vice President of Operations
L. Evan Ellis, Jr. ........... 44 Vice President of North American Sales
Key Employees
Vice President of Payment Industry
Steven W. Klebe............... 43 Alliances
Anthony F. Quilici............ 29 Vice President of Merchant Support
Tracy Wilk.................... 40 Vice President of Product Marketing
Directors
Bert Kolde(1)(2).............. 44 Director
Linda Fayne Levinson(1)(2).... 57 Director
Steven P. Novak(1)(2)......... 51 Director
Richard Scudellari(1)(2)...... 42 Director and Secretary
</TABLE>
- --------
(1) Member of Audit Committee.

(2) Member of Compensation Committee.

William S. McKiernan founded CyberSource and has been our President and
Chief Executive Officer since our inception in December of 1997. In 1994, Mr.
McKiernan co-founded Beyond.com, an on-line reseller of computer software, and
was its Chief Executive Officer from its inception until 1998. He currently
serves as Chairman of the Board of Directors of Beyond.com. From 1992 to 1994,
Mr. McKiernan was employed by McAfee Associates, Inc. (now known as Network
Associates), a developer of computer security software, where he served as
President and Chief Operations Officer during its initial public offering in
October 1992. Prior to joining McAfee Associates in 1992, Mr. McKiernan was
Vice President of Princeton Venture Research, Inc., an investment banking and
venture consulting firm from 1990 to 1992. Mr. McKiernan has also held
management positions with IBM/ROLM, a telecommunications company, and Price
Waterhouse. Mr. McKiernan holds a B.S. from Boston College and an M.B.A. from
the Harvard Business School.

Anthony V. Bates has served as our Executive Vice President of
International since joining us in February 1997. From 1996 to 1997, Mr. Bates
was Vice President of Worldwide Sales and Marketing for Serena Software
International, a software developer. From 1990 to 1996, Mr. Bates was President
and Chief Executive Officer of Specialix, Inc., a leading international
supplier of data communications products. Mr. Bates received an Honors Degree
in Electronics and Electrical Engineering from Newcastle upon Tyne Polytechnic
in the United Kingdom.

36
<PAGE>

Charles E. Noreen, Jr. has served as our Vice President of Finance and
Administration and Chief Financial Officer since joining us in September 1998.
Mr. Noreen was employed by RockShox, Inc., a bicycle component manufacturer,
first as its Vice President and Chief Financial Officer from May 1996 to July
1998, then as its Vice President of Business Development from July 1998 to
September 1998. Mr. Noreen was employed by Coopers & Lybrand L.L.P. from 1983
to 1996, where he was a partner from 1994 to 1996. Mr. Noreen is a certified
public accountant and received a B.S. in Business Administration from the
University of Southern California.

William E. Donahoo has served as our Vice President of Marketing since
joining us in December 1998. From July 1998 to November 1998, Mr. Donahoo was
Vice President of Marketing & Business Development for DigiCash, Inc., a
developer of electronic currency, DigiCash filed for Chapter 11 bankruptcy
protection in November 1998. From March 1997 to March 1998, Mr. Donahoo was
Vice President of Marketing for Novonyx, a network software developer, which he
co-founded. From October 1990 to March 1997, Mr. Donahoo was employed by
Novell, Inc., a network software developer, where he most recently was Vice
President of Marketing for the Netware Product Group. Mr. Donahoo received a
B.S. in Computer Science and an M.B.A. from Brigham Young University.

Thomas A. Arnold joined us in March 1996 and is currently serving as our
Chief Technical Officer. From October 1989 to March 1996, Mr. Arnold managed
applications development at Silicon Graphics, Inc., a developer and
manufacturer of high performance computer workstations. Mr. Arnold received a
B.S. in Public Administration at San Jose State University and an M.B.A. with
an emphasis in Information Technology Management from Golden Gate University.

Robert J. Ford has served as our Vice President of Engineering since
joining us in June 1999. From 1997 to 1999, Mr. Ford was Vice President of
Engineering for Extensity, Inc., a vendor of web-based e-business applications.
From 1995 to 1997, Mr. Ford served as Vice President of Engineering for
Intrinsa Corporation, a developer of defect detection software. From 1992 to
1995, Mr. Ford was Vice President of Engineering for Objectivity, Inc., a
developer of database management systems. Also, Mr. Ford was employed by Boole
& Babbage, Inc., a vendor of systems management software, from 1980 to 1992,
where he was Vice President of Systems from 1989 to 1992. Mr. Ford received a
B.S. from Witwatersrand College for Advanced Technical Education.

Eric M. Wun has served as our Vice President of Operations since joining
us in March 1999. From August 1998 to February 1999, Mr. Wun was Vice President
of Operations for Corio, Inc., a computer application service provider. From
December 1996 to August 1998, Mr. Wun was Vice President of Operations for Zip2
Corp., a developer of personalized Web sites. Mr. Wun was Vice President and
Data Center Manager for Visa International from February 1992 to October 1996.
Mr. Wun received a B.S. in Economics from the University of San Francisco.

L. Evan Ellis, Jr. has served as our Vice President of North American
Sales since joining us in April 1999. From 1990 to 1999, Mr. Ellis was with
Silicon Graphics, Inc. where he was Senior Vice President of Field Operations
for the Americas. From 1978 to 1990, Mr. Ellis was employed by International
Business Machines in various sales and sales management roles. Mr. Ellis
received a B.S. in Economics from the University of California, Los Angeles.

Steven W. Klebe has served as Vice President of Payment Industry
Alliances for CyberSource since January 1999. Prior to that, Mr. Klebe was Vice
President of Sales and Marketing and Vice President of Business Development.
From 1994 to 1997, Mr. Klebe was Vice President of Sales for CyberCash, a
provider of Internet payment services. From 1985 to 1994, Mr. Klebe was
employed by VeriFone. Mr. Klebe received a B.S. in Marketing from Northeastern
University.

Anthony F. Quilici has served as our Vice President of Merchant Support
since February 1999. From February 1998 to February 1999, Mr. Quilici served as
Vice President of Operations, and from our inception in

37
<PAGE>

December 1997 until February 1998, he served as our Director of Operations.
Prior to joining us, Mr. Quilici was employed at Silicon Graphics, Inc. from
1992 to 1997. Mr. Quilici received a B.S. in Management Information Systems
from California State University, Chico.

Tracy Wilk has served as our Vice President of Product Marketing since
joining us in April 1999. From 1992 to 1999, Mr. Wilk was Vice President of
Strategic Alliances and Investments at Visa International. Mr. Wilk received a
B.A. in Economics and an M.B.A. from the University of California, Berkeley.

Bert Kolde has been a director of CyberSource since our inception in
December 1997. Mr. Kole serves as a director, Vice President, Treasurer and
Secretary of Vulcan Ventures Inc., an investment organization, Vice Chairman of
the Portland Trail Blazers, Seattle Seahawks, Oregon Arena Corporation, and
First and Goal Corporation. In addition, Mr. Kolde serves as President of the
Paul G. Allen Virtual Education Foundation, a fund promoting Internet-based
learning and the Paul G. Allen Forest Protection Foundation, a trust for public
land. Mr. Kolde co-founded Asymetrix Learning Systems, Inc., a provider of
online learning services in 1985, and serves as Chairman of its Board of
Directors. Mr. Kolde also serves as a director of MetaCreations Corporation, a
developer of visual computing software tools, Precision Systems, Inc., a
developer of computer products and Beyond.com. Mr. Kolde holds a B.A. in
Business Administration from Washington State University and an M.B.A. from the
University of Washington.

Linda Fayne Levinson has been a director of CyberSource since our
inception in December 1997. Ms. Levinson has served as a principal of Global
Retail Partners, L.P. since April 1997. From 1994 to 1997, she served as
President of Fayne Levinson Associates, an independent general management
consulting firm that advised major corporations and start-up entrepreneurial
ventures. In 1993, Ms. Levinson was a financial adviser with Creative Artists
Agency, Inc. From 1989 to 1992, Ms. Levinson was a partner of Wings Partners,
Inc., a merchant banking firm and was actively involved in taking Northwest
Airlines private. From 1984 to 1987, Ms. Levinson was a Senior Vice President
of American Express Travel Related Services, Inc., a payment card company.
Prior to that, Ms. Levinson was a partner at McKinsey & Co. Ms. Levinson
presently serves as a director of Administaff, Inc., a professional employer
organization, Genentech, Inc., a biotechnology company, Jacobs Engineering
Group, Inc., a provider of engineering, design and consulting services, NCR
Corporation, a developer of information technology products, GoTo.com, Inc., a
developer of search engine technologies, as well as several privately-held
companies. Ms. Levinson received her A.B. from Barnard College in Russian
Studies, her M.A. from Harvard University in Russian Literature and her M.B.A.
from New York University.

Steven P. Novak has been a director of CyberSource since our inception in
December 1997. Mr. Novak is the Managing Director heading C.E. Unterberg,
Towbin's Internet Practice. From February 1993 to January 1998, Mr. Novak
served as co-founder, President, and Chief Investment Officer of C.E.
Unterberg, Towbin Advisors, a registered investment advisor. Mr. Novak also
serves as a director of several privately held companies. Mr. Novak's prior
affiliations include, among others, Forstmann Leff Associates, a fund manager,
Sanford C. Bernstein & Company, Inc, an independent investment counselor, and
Harris Bankcorp, a multibank holding company. Mr. Novak holds a B.S. from
Purdue University and an M.B.A. from the Harvard Business School.

Richard Scudellari has been a director of CyberSource since our inception
in December 1997. Mr. Scudellari has been a partner at Morrison & Foerster LLP,
a law firm, since February 1999. From 1990 to January 1999 Mr. Scudellari was a
partner at Jackson Tufts Cole & Black, LLP., a law firm. Mr. Scudellari holds a
B.S. and J.D. from Boston College.

We currently have authorized five directors. Our executive officers are
appointed by, and serve at the discretion of, our Board of Directors. Each of
our officers and directors, excluding non-employee directors, devotes
substantially full time to our affairs. Our non-employee directors devote such
time to our affairs as is necessary to discharge their duties. There are no
family relationships among any of our directors, officers or key employees. Two
of the five members of our Board of Directors also serve as directors of
Beyond.com.

38
<PAGE>

Board Committees

Our Audit Committee reviews, acts on and reports to our Board of
Directors with respect to auditing and accounting matters, including the
selection of our independent accountants, the scope of our annual audits, fees
to be paid to the independent accountants, the performance of our independent
accountants and our accounting practices. Ms. Levinson and Messrs. Kolde,
Novak, and Scudellari are the members of our Audit Committee.

Our Compensation Committee establishes salaries, incentives and other
forms of compensation for officers and other employees. This Committee also
administers our incentive compensation and benefit plans. Ms. Levinson and
Messrs. Kolde, Novak, and Scudellari are the members of the Compensation
Committee.

Compensation Committee, Insider Participation and Interlocks

None of the members of our Compensation Committee is an officer or
employee of CyberSource. Two members of our Board of Directors also serve as
members of the board of directors of Beyond.com. Other than with respect to
Beyond.com, 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.

Director Compensation

We do not pay directors cash compensation for their services as directors
or members of committees of the Board of Directors. We do reimburse them for
their reasonable expenses incurred in attending meetings of the Board of
Directors. In addition, each new non-employee director receives an option to
purchase 5,000 shares of our common stock upon joining the Board of Directors.
Each incumbent non-employee director is granted an option to purchase an
additional 5,000 shares of our common stock thereafter annually on January 1.
All options are immediately exercisable upon grant and remain subject of a
right of repurchase as determined under the 1999 Plan. See "Stock Option
Plans -- 1999 Plan."

39
<PAGE>

Executive Compensation

The following table sets forth information concerning compensation of our
Chief Executive Officer and our other most highly compensated executive
officers whose aggregate cash compensation exceeded $100,000 during the year
ended December 31, 1998 (collectively, our "Named Executive Officers").

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------- ------------
Other Securities
Annual Underlying
Name and Principal Position Salary Bonus(1) Compensation Options
- --------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
William S. McKiernan
President and Chief Executive
Officer........................ $144,375(2) -- -- --
Anthony V. Bates
Executive Vice President of
International.................. 137,500 $36,500 -- 77,500
Thomas A. Arnold
Vice President of Engineering
and Chief Technology Officer... 118,688 5,700 -- 85,000
Gregory Quinn(3)
Vice President Sales........... 118,693 53,400 -- 65,000
</TABLE>
- --------
(1) Includes bonus amounts earned in 1998 and paid in 1999.

(2) Does not include $60,000 in deferred compensation earned by Mr. McKiernan
in 1994 as President of Beyond.com, allocated to us in connection with the
spin off and paid to Mr. McKiernan in 1998.

(3) Mr. Quinn's employment with us terminated in March 1999.

40
<PAGE>

Option Grants In Fiscal Year 1998

The following table sets forth information for each of our Named
Executive Officers concerning stock options granted to them during the fiscal
year ended December 31, 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Price Appreciation
Underlying Options Exercise for Option Term(5)
Options Granted to Price Expiration ----------------------
Granted(1) Employees(2) Per Share(3) Date(4) 5% 10%
---------- ------------ ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
William S. McKiernan.... -- -- -- -- -- --
Anthony V. Bates........ 50,000 4.27% $0.045 3/18/08 $ 13,789 $ 23,437
12,500 1.07 0.2000 3/18/08 1,572 3,984
15,000 1.28 0.5400 7/30/08 5,094 12,909
Thomas A. Arnold........ 75,000 6.40 0.015 3/18/08 22,933 37,406
10,000 0.85 0.5400 7/30/08 3,396 8,606
Gregory Quinn........... 50,000 4.27 0.2000 3/18/08 6,289 15,937
15,000 1.28 0.5400 7/30/08 5,094 12,909
</TABLE>
- --------
(1) Each of the above options was granted pursuant to our 1998 Stock Option
Plan. 25% of the options granted vest one year from the date of grant.
Thereafter the remaining 75% of the options granted vest monthly over the
next three years.

(2) In the last fiscal year, we granted options to employees to purchase an
aggregate of 1,170,998 shares.

(3) In determining the fair market value of our common stock, our board of
directors considered factors, such as our financial condition and business
prospects, our operating results, the absence of a market for our common
stock and the risks normally associated with high technology companies. The
exercise price may be paid in cash, check, promissory note, shares of our
common stock, through a cashless exercise procedure involving same-day sale
of the purchased shares or any combination of these methods.

(4) Options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated or upon the optionee's
death or disability.

(5) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future common stock prices.

Aggregate Option Exercises In Last Fiscal Year and Year-End Option Values

The following table sets forth information concerning exercises of stock
options during the fiscal year ended December 31, 1998 by each of our Named
Executive Officers and the number and value of unexercised options held by each
of our Named Executive Officers on December 31, 1998.

<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Shares December 31, 1998 December 31, 1998(1)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William S. McKiernan.... -- -- -- -- -- --
Anthony V. Bates........ 17,187 $ 8,422 3,125 57,188 $ 5,500 $ 91,426
Thomas A. Arnold........ 42,188 21,938 7,813 35,000 13,984 57,450
Gregory Quinn........... -- -- -- 65,000 -- 217,200
</TABLE>
- --------
(1) The value of "in-the-money" stock options represents the positive spread
between the exercise price of stock options and the fair market value for
our common stock of $3.62 per share as of December 31, 1998, as determined
by our Board of Directors.

41
<PAGE>

Stock Option Plans

In March 1998, we adopted our 1998 Stock Option Plan. We reserved
1,900,000 shares of common stock for stock option grants under the 1998 Plan.
Additionally, in January 1999, we adopted our 1999 Stock Option Plan. We
reserved 2,500,000 shares of common stock for stock option grants under the
1999 Plan. The purpose of each plan is to enhance our long-term stockholder
value by offering our employees, directors, officers, consultants, agents,
advisors and independent contractors the opportunity to promote and participate
in our growth and success, and to encourage these people to remain in our
service and acquire and maintain stock ownership in us.

As of March 31, 1999, options to purchase 2,035,575 shares of common
stock were outstanding under the 1998 Plan and the 1999 Plan with exercise
prices ranging from $0.0066 to $3.62 per share. As of March 31, 1999, options
to purchase 1,389,934 shares were available for grant under the 1998 Plan (of
which options to purchase 311,000 shares were granted in April 1999), and 1999
Plan and options for 974,491 shares had been exercised.

Our Board of Directors or a committee appointed by the Board may
administer the plans.

1999 Plan

The administrator has the authority to select individuals who are to
receive options under the 1999 Plan and to specify the terms and conditions of
options granted (including whether or not the options are incentive or
nonstatutory stock options), the vesting provisions, the option term and the
exercise price. The 1999 Plan provides that we may grant incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986
to employees, including our officers and employee directors, and we may grant
nonstatutory stock options to employees and consultants, including non-employee
directors.

The exercise price of incentive stock options granted under the 1999 Plan
shall equal the fair market value of our common stock on the date of grant
(except in the case of grants to any person holding more than 10% of the total
combined voting power of all classes of our, or any of our parent's or
subsidiary's, stock in which case the exercise price shall equal 110% of the
fair market value on the date of grant). The exercise price of nonqualified
stock options shall not be less than 85% of the fair market value on the date
of grant. Option holders may pay for an exercise in cash or other
consideration, including a promissory note, as approved by the administrator.

Generally, options granted under the 1999 Plan (other than those granted
to non-employee directors) vest at a rate of 25% of the shares underlying the
option after one year and the remaining shares vest in equal portions over the
following 36 months, so that all shares are vested after four years. The form
of stock option grant under the 1999 Plan used to grant options to our
employees provides for accelerated vesting of half of all unvested shares upon
involuntary termination of employment with us without cause occurring within
one year of a change in control of CyberSource. Unless otherwise provided by
the administrator, an option granted under the 1999 Plan generally expires 10
years from the date of grant (five years in the case of an incentive stock
option granted to any person holding more than 10% of the total combined voting
power of all classes of our, or any of our parent's or subsidiary's, stock or,
if earlier, 30 days after the optionee's termination of employment or service
with us or any of our affiliates for any reason other than termination for
death or disability, or one year after termination for death or total and
permanent disability and six months in the case of other types of disability).
Options granted under our 1999 Plan are not generally transferable by the
optionee except by will or the laws of descent and distribution and generally
are exercisable during the lifetime of the optionee only by the optionee.

In the event of (i) a merger or consolidation as a result of which the
holders of our voting securities prior to the transaction hold shares
representing less than 51% of our voting securities after giving effect to the
transaction (other than a merger or consolidation with a wholly-owned
subsidiary or where there is no

42
<PAGE>

substantial change in our stockholders and the options granted under the 1999
Plan are assumed by the successor corporation), or (ii) the sale of all or
substantially all of our assets the successor corporation will assume or
substitute the options we have granted under the 1999 Plan or shall provide
substantially similar consideration to optionees as is provided to the
stockholders. In the event the successor corporation refuses to assume or
substitute outstanding options as provided above, or in the event of our
dissolution or liquidation, outstanding options shall expire, notwithstanding
any contrary terms in the grant, on a date specified in a written notice sent
to all optionees (which date shall be at least 20 days after the date of the
notice).

The 1999 Plan also provides for automatic grants to non-employee
directors. Each non-employee director, upon initial election or appointment to
the Board of Directors, is entitled to receive options to purchase 5,000 shares
of common stock, provided that the election or appointment does not occur
within the last quarter of a given year. Thereafter, each non-employee director
is entitled to receive options to purchase 5,000 shares of common stock
annually on January 1 of each year, provided he or she is a non-employee
director on the date of grant and has continuously been an active member of the
Board of Directors for the year prior to the grant date. Options granted to
non-employee directors pursuant to the automatic grant provisions of the 1999
Plan are immediately exercisable, nonqualified stock options with an exercise
price equal to the fair market value of our common stock as of the date of
grant and remain subject to a right of repurchase that lapses on June 30, 1999.
Grants to non-employee directors are subject to the general requirements of the
1999 Plan.

1998 Plan

The terms of options which we may grant under the 1998 Plan are generally
the same as those we may grant under the 1999 Plan. However, under the 1998
Plan, the administrator may not grant options to an individual in any one
fiscal year which would permit that individual to purchase more than 250,000
shares of common stock. The administrator may, however, grant a newly-hired
optionee a one-time grant of an option to purchase up to an additional 250,000
shares of common stock. Also, the form of stock option grant used to grant
options to our employees under the 1998 Plan does not provide for accelerated
vesting as is provided in the form of stock option grant used to grant options
to our employees under the 1999 Plan.

Stock options previously granted under the plans to the executives and
directors are described above under "Executive Compensation." At this time we
cannot determine the number of shares of common stock that may be subject to
options we grant in the future to our executive officers and other officers,
key employees and directors.

43
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information known to us with respect to
beneficial ownership of our common stock as of March 31, 1999 as adjusted to
reflect the sale of shares offered hereby, by:

. each person known by us to own beneficially more than 5% of the
outstanding shares of common stock,

. each of our directors,

. each Named Executive Officer (see "Management--Executive
Compensation"), and

. all current executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of March 31, 1999 are
deemed outstanding. Percentage of beneficial ownership is based upon 17,548,848
shares of common stock outstanding prior to this offering and 21,548,848 shares
of common stock outstanding after this offering. To our knowledge, except as
set forth in the footnotes to this table and subject to applicable community
property laws, each person named in the table has sole voting and investment
power with respect to the shares set forth opposite the person's name. Except
as otherwise indicated, the address of each of the persons in this table is as
follows: c/o CyberSource Corporation, 550 S. Winchester Blvd., Suite 301, San
Jose, California 95128.

<TABLE>
<CAPTION>
Percent
Beneficially
Owned
-----------------
5% Beneficial Owners, Directors, Named Executive Number of Before After
Officers Shares Offering Offering
- ------------------------------------------------ ---------- -------- --------
<S> <C> <C> <C>
William S. McKiernan(1).......................... 5,328,729 29.0% 23.8%
Bert Kolde(2).................................... 2,490,604 14.2 11.6
Vulcan Ventures, Inc.
110 110th Avenue NE, Suite 550
Bellevue, WA 98004.............................. 2,480,604 14.1 11.5
Linda Fayne Levinson(3).......................... 1,936,639 11.0 9.0
Global Retail Partners, L.P. and its
affiliates(4)
2121 Avenue of the Stars, Suite 1630
Los Angeles, CA 90067........................... 1,931,643 11.0 9.0
General Electric Capital Corporation(5)
260 Long Ridge Road
Stamford, CT 06927.............................. 1,665,171 9.3 7.6
Steven P. Novak(6)............................... 1,565,632 8.9 7.3
Entities affiliated with C.E. Unterberg,
Towbin(7)
Swiss Bank Tower
10 East 50th Street, 22nd Floor
New York, NY 10002.............................. 1,535,632 8.8 7.1
Thomas A. Arnold(8).............................. 60,313 *
Richard Scudellari(9)............................ 45,000 *
Anthony V. Bates(10)............................. 33,177 *
Gregory Quinn(11)................................ 19,375 *
All executive officers and directors as a group
(11 persons)(12)................................ 11,460,097 62.2% 51.1%
</TABLE>
- ----------------
* Less than 1% of the outstanding common stock.

44
<PAGE>

(1) Includes 4,200,275 shares of common stock held my Mr. McKiernan, 299,725
shares of common stock held by members of Mr. McKiernan's immediate family
and 828,729 shares of common stock issuable pursuant to a convertible
promissory note. Mr. McKiernan disclaims beneficial ownership of the
shares held by his immediate family.

(2) Includes 2,480,604 shares held by Vulcan Ventures, Inc. Mr. Kolde is a
director, the Vice President, Secretary and Treasurer of Vulcan Ventures,
Inc. Mr. Kolde disclaims beneficial ownership of the shares owned by
Vulcan, except for his proportional interest therein, if any.

(3) Includes options to purchase 5,000 shares of common stock that vest within
60 days of March 31, 1999, held by Ms. Levinson. Also includes 1,931,639
shares held by Global Retail Partners, L.P. and its affiliates. Ms.
Levinson is a principal of Global Retail Partners, L.P. Ms. Levinson
disclaims beneficial ownership of these shares, except for her
proportional interest therein, if any.

(4) Includes 1,238,465 shares of common stock held by Global Retail Partners,
L.P., 85,265 shares held by Global Retail Partners Funding, Inc., 80,509
shares held by GRP Partners, L.P., 369,038 shares held by DLJ Diversified
Partners, L.P., 137,050 shares held by DLJ Diversified Partners-A, L.P.,
13,202 shares held by DLJ ESC II, L.P., 8,114 shares held by DLJ ESC
L.L.C. (collectively, the "Global Affiliates").

(5) Includes warrants to purchase 283,955 shares of common stock that vest
within 60 days of March 31, 1999, held by General Electric Capital
Corporation.

(6) Includes 1,535,626 shares of Common Stock held by the Unterberg Affiliates
(as defined below). Mr. Novak disclaims beneficial ownership of these
shares, except for his proportional interest therein, if any.

(7) Includes 57,582 shares of Common Stock held by UT Capital Partners
International, LDC (formerly UH Capital Partners International, LDC),
377,760 shares held by UT Technology Partners, LDC (formerly UH Technology
Partners, LDC); 841,529 shares held by C. E. Unterberg Towbin Capital
Partners I, L.P. (formerly Unterberg Harris Capital Partners I, L.P.);
176,798 shares held by Unterberg Harris Private Equity Partners, L.P.;
37,764 shares held by Unterberg Harris Private Equity Partners, CV and
44,199 shares held by C.E. Unterberg Towbin LLC (collectively, the
"Unterberg Affiliates").

(8) Includes options to purchase 18,125 shares of common stock that vest
within 60 days of March 31, 1999, held by Mr. Arnold.

(9) Includes options to purchase 5,000 shares of common stock that vest within
60 days of March 31, 1999, held by Mr. Scudellari.

(10) Includes options to purchase 15,990 shares of common stock that vest
within 60 days of March 31, 1999, held by Mr. Bates.

(11) Includes options to purchase 19,375 shares of common stock that vest
within 60 days of March 31, 1999, held by Mr. Quinn.

(12) Includes (i) options to purchase 44,115 shares of common stock that vest
within 60 days of March 31, 1999, held by all directors and executive
officers of CyberSource and (ii) 828,729 shares issuable pursuant to Mr.
McKiernan's convertible promissory note.

45
<PAGE>

TRANSACTIONS BETWEEN CYBERSOURCE AND

ITS OFFICERS, DIRECTORS AND SIGNIFICANT STOCKHOLDERS

Relationship with Beyond.com

In December 1997, we were spun-off from Beyond.com into a new Delaware
corporation, now called CyberSource Corporation. In connection with the spin-
off, Beyond.com issued our capital stock to their stockholders such that,
following consummation of the spin-off, each of Beyond.com's stockholders held
shares of common stock, Series A preferred stock, Series B preferred stock, and
Series C preferred stock of CyberSource in equal number and ownership
proportion and with the same rights as the stockholder had as a Beyond.com
stockholder. On the date of the spin-off, Beyond.com employees were granted
stock options in CyberSource based on the extent to which the employees'
original options in Beyond.com were vested. Immediately following the spin-off,
our employees maintained their outstanding vested stock options in Beyond.com
and were granted additional stock options in CyberSource to the extent of their
original options. The exercise prices of the original and additional option
grants were adjusted to reflect the allocation of the fair market per share
price between Beyond.com and our common stock, respectively, at the time of the
spin-off.

We have entered into agreements with Beyond.com for the purpose of
defining the ongoing relationship between the two companies. Because four out
of five of our directors were also directors of Beyond.com at the time these
agreements were negotiated and members of our management team were formerly a
part of the management team of Beyond.com, these agreements are not the result
of arm's length negotiations. However, we believe the terms of these agreements
are no less favorable to us than could have been negotiated with a non-
affiliated party. We qualify the following description of these agreements in
their entirety by reference to the agreements, which have been filed as
exhibits hereto.

Under our Conveyance Agreement dated December 31, 1997, we received from
Beyond.com:

. technology (including rights to all patent applications,
trademarks and other of our intellectual property rights);

. contracts and licenses with third parties; and

. tangible assets in connection with credit card processing, fraud
screening, export control, territory management and electronic
fulfillment services.

In addition, we received employees engaged in the Internet commerce services
business from Beyond.com. We believe that we obtained all property from
Beyond.com necessary to operate our business. We do not share any property with
Beyond.com.

In connection with this transfer, we entered into an InterCompany Cross-
License Agreement with Beyond.com in April 1998, which was amended in May 1998,
pursuant to which Beyond.com granted us a non-exclusive, worldwide, perpetual,
irrevocable, royalty-free license to (1) internally use technology related to
electronic software distribution, and (2) use and sublicense its customer
database in connection with fraud detection and verification. Under this
agreement, we granted Beyond.com a worldwide, perpetual, irrevocable, royalty-
free license to internally use our Sm@rtCert technology. We also granted
Beyond.com the right to modify this technology for purposes of merging the
technology into its Cache Manager technology (either alone or in combination
with other software) for subsequent sublicense to enterprises and governmental
agencies. The Cross-License Agreement further provides that the parties shall
have joint ownership of certain utility tools made by the parties and allocates
between us and Beyond.com the ownership of improvements, enhancements and
modifications made by the parties to the Sm@rtCert and Cache Manager technology
during 1999. The Cross-License Agreement also allocates between us and
Beyond.com the ownership of the inventions each party made on or before June
30, 1998. Each party has agreed to indemnify the other against any third party
claims regarding the licensee's use of licensed technology that results in a
claim against the licensor, except to the extent that the claim is based upon a
claim that the licensed technology infringes upon any third party's
intellectual property rights.

46
<PAGE>

We also entered into an Internet Commerce Services Agreement with
Beyond.com, pursuant to which we agreed to provide services including credit
card processing, fraud screening, export control, territory management and
electronic fulfillment. This agreement expires on April 23, 2000, and
automatically renews for an additional one-year term, unless otherwise
terminated by either party. Pursuant to the terms of this agreement, Beyond.com
agreed to indemnify us for an amount not to exceed $100,000 against any claim
based upon an allegation that the software we distributed infringes upon any
third party's intellectual property rights. We agreed to indemnify Beyond.com
for an amount not to exceed $100,000 against any claim based upon an allegation
that our services, or the use of any software we provided in connection with
our services, infringes any third party's intellectual property rights. During
1998 and the three months ended March 31, 1999, we recorded approximately
$801,000 and $375,000, respectively, of revenues related to these services.

Stock and Warrant Issuances

Since our inception in December 1997, we have issued shares of common
stock and shares of preferred stock in private placement transactions each as
set forth below.

In March and April 1998, we issued shares of Series D preferred stock in
private placements to investors at a purchase price of $1.08 per share. In
October and December 1998, we issued shares of Series E preferred stock in
private placements to investors at a purchase price of $1.81 per share. Upon
the closing of this offering, each two shares of Series D and Series E
Preferred Stock convert into one share of common stock.

The following table shows the number of shares of Series D and Series E
preferred stock purchased by the listed investors:

<TABLE>
<CAPTION>
Number of Shares Number of Shares
of Series D of Series E
Preferred Stock Preferred Stock
Purchaser Purchased Purchased
- --------- ---------------- ----------------
<S> <C> <C>
Vulcan Ventures Incorporated................ 735,231 1,657,459
UT Technology Partners, LDC................. 276,243
UT Capital Partners International, LDC...... 55,249
UH Technology Partners, LDC................. 294,092
C.E. Unterberg, Towbin Capital Partners I,
L.P ....................................... 176,796
C.E. Unterberg, Towbin LLC.................. 88,397
C.E. Unterberg, Towbin 401k Profit sharing
Plan FBO Robert Matluck.................... 13,812
C.E. Unterberg, Towbin 401k Profit Sharing
Plan FBO David Wachter..................... 5,525
Thomas I. Unterberg......................... 55,249
Unterberg Harris Private Equity Partners,
L.P........................................ 60,583 91,050
Unterberg Harris Private Equity Partners,
C.V. ...................................... 12,940 19,448
DLJ Diversified Partners, L.P. ............. 140,465 316,655
DLJ Diversified Partners-A, L.P............. 52,164 117,596
DLJ ESC II, L.P............................. 8,113 18,289
GRP Partners, L.P........................... 30,643 69,082
Global Retail Partners Funding, Inc......... 32,456 73,162
Global Retail Partners, L.P. ............... 471,390 1,062,674
General Electric Capital Corporation........ 2,762,431
</TABLE>

Messrs. Novak and Kolde and Ms. Levinson, directors of our company,
disclaim beneficial ownership of the shares of common stock now held by the
Unterberg Affiliates, Vulcan and GRP and its affiliates, respectively, except
for any proportional interest held therein.

47
<PAGE>

Concurrent with the issuance of Series E preferred stock to General
Electric Capital Corporation, we issued General Electric Capital Corporation
warrants to buy 567,910 shares of Series E preferred stock with a weighted
average exercise price of $2.64. These shares are convertible into 283,955
shares of our common stock.

Option Grants and Agreements with Executive Officers and Directors

We granted options to the following directors to purchase shares of
common stock on the date, for the number of shares, with an exercise price as
indicated opposite each person's name:

<TABLE>
<CAPTION>
Securities
Underlying Option
Name Grant Date(1) Options Price
---- ------------- ---------- ------
<S> <C> <C> <C>
Bert Kolde................................... 3/18/98 5,000 $0.045
3/18/98 5,000 0.200
1/1/99 5,000 3.620
Linda Fayne Levinson......................... 3/18/98 5,000 0.200
1/1/99 5,000 3.620
5/10/99 10,000 9.000
Steven P. Novak.............................. 3/18/98 10,000 0.003
3/18/98 10,000 0.013
3/18/98 5,000 0.045
3/18/98 5,000 0.200
1/1/99 5,000 3.620
5/10/99 10,000 9.000
Richard Scudellari........................... 3/18/98 5,000 0.200
1/1/99 5,000 3.620
5/10/99 10,000 9.000
</TABLE>
- --------
(1) Options with a grant date in 1998 are subject to the terms of the 1998
Plan. Options with a grant date in 1999 are subject to the terms of the
1999 Plan.

Under the terms of an oral agreement between us and William S.
McKiernan, our President, Chief Executive Officer and Chairman of our Board of
Directors, we repaid, in two installments in December 1997 and January 1998,
an aggregate of $105,000 for unpaid salary that we had accrued on Mr.
McKiernan's behalf for services Mr. McKiernan provided to our predecessor,
from whom we were spun-off, from the date of its inception through December
31, 1994.

In July 1998, Mr. McKiernan loaned us $3,000,000 pursuant to a
convertible promissory note dated August 7, 1998 that was amended and restated
on October 21, 1998. In accordance with the terms of the convertible
promissory note, the principal balance of $3,000,000 automatically converts
into 828,729 shares of our common stock on the day immediately prior to the
consummation of this offering at a price of $3.62 per share. Interest accrues
on the note at a rate of ten percent (10.0%) per annum, and was payable to
Mr. McKiernan in quarterly installments.

We have entered into indemnification agreements with each of our
executive officers and directors.

48
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Authorized and Outstanding Capital Stock

We are authorized to issue up to 50,000,000 shares of common stock and
25,000,000 shares of preferred stock. The following description of our capital
stock is not complete and is qualified in its entirety by our Certificate of
Incorporation and Bylaws, both of which were included as exhibits to the
registration statement of which this prospectus forms a part.

Common Stock

As of March 31, 1999, there were 17,548,848 shares of common stock
outstanding held of record by approximately 95 stockholders, including
10,489,809 shares that will be issued upon the automatic conversion of the
outstanding shares of our preferred stock into common stock upon the closing of
the offering and 1,527,048 shares issuable upon the exercise of warrants and
the conversion of a convertible promissory note. Holders of our common stock
shall be entitled to one vote for each share in all matters required or
permitted to be voted on by our stockholders. The Board of Directors may
declare a dividend out of funds legally available and the holders of common
stock are entitled to receive ratably any such dividends. In the event of our
liquidation, dissolution or winding up, holders of our common stock are
entitled to share ratably in all of our assets. Holders of our common stock
have no preemptive rights or other subscription rights to convert their shares
into any other securities. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are
fully paid and nonassessable.

Preferred Stock

The Board of Directors has the authority, without further action by the
stockholders, to issue up to 25,000,000 shares of preferred stock in one or
more series and to fix the privileges and rights of each series. These
privileges and rights may be greater than those of the common stock. The Board
of Directors, without stockholder approval, can issue preferred stock with
voting, conversion or other rights that could adversely affect the voting power
and other rights of the holders of common stock. Therefore, we could issue
preferred stock quickly with terms calculated to delay or prevent a change in
control of the Company or make removal of management more difficult.
Additionally, if we issue preferred stock, then the market price of common
stock may decrease, and voting and other rights may be adversely affected. We
have no plans to issue any preferred stock.

Warrants

As of March 31, 1999, we had outstanding warrants to purchase an
aggregate amount of 1,396,639 shares of Series E preferred stock which will be
exercisable for an aggregate of 698,319 shares of common stock upon the closing
of this offering. The right to purchase shares subject to these warrants
terminates upon the consummation of this offering, unless the initial public
offering price is less than $8.00 per share.

Charter and Bylaw Provisions

We are subject to Section 203 of the Delaware General Corporation Law
which prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. The term "business combination" includes mergers and stock
and asset sales. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock. The effect of this statute could, among other
things, make it more difficult for a third party to gain control of us,
discourage bids for the common stock at a premium or otherwise adversely affect
the market price of the common stock.

49
<PAGE>

Limitation of Directors' and Officers' Liability; Indemnification

Our Certificate of Incorporation includes provisions that limit the
personal liability of our officers and directors for monetary damages for
breach of their fiduciary duties as directors, except for liability that cannot
be eliminated under the Delaware General Corporation Law. The Delaware General
Corporation Law does not permit a provision in a corporation's certificate of
incorporation that would eliminate this liability (i) for any breach of their
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) for any unlawful payment of a dividend or unlawful
stock repurchase or redemption, as provided in Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.

While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate this
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions described above apply to an
officer of a corporation only if he or she is a director of the corporation and
is acting in his or her capacity as director, and do not apply to the officers
of the corporation who are not directors.

Our Bylaws provide that, to the fullest extent permitted by the Delaware
General Corporation Law, we shall indemnify our directors and officers. In
addition, we anticipate that each director will enter into an indemnification
agreement pursuant to which we will indemnify the director to the fullest
extent permitted by the Delaware General Corporation Law. At present, there is
no pending litigation or proceeding involving any of our directors or officers
in which indemnification is required or permitted, and we are not aware of any
threatened litigation or proceeding that may result in a claim for
indemnification.

Registration Rights

After the SEC declares this registration statement effective, and
assuming we comply with other requirements, the holders of approximately
16,516,856 shares of common stock will hold registration rights. These rights
are held under the terms of several agreements between us and the holders of
these shares of common stock. Under the terms of these agreements, if we
propose to register any of our securities under the Securities Act, either for
our own account or for other security holders, we must give the holders of
registration rights notice of registration and include a portion of their
shares of common stock in the registration at our expense. In addition, holders
of registration rights may require us to file a registration statement under
the Securities Act at our expense with respect to their shares of common stock.
We are required to use our commercially reasonable efforts to effect this
registration. All of these registration rights are subject to conditions and
limitations, among them the right of the underwriters of any offering to limit
the number of shares included in such registration and our right not to effect
a registration in certain specific situations. Under these agreements, we have
agreed to bear all registration expenses (other than underwriting discounts and
commissions and fees, and fees and disbursements of counsel of the holders of
registration rights subject to limitations). We have agreed to indemnify the
holders of registration rights against liabilities under the Securities Act. We
are bearing all costs related to the registration statement of which this
prospectus is a part.

Listing

Application has been made for quotation of our common stock on the Nasdaq
National Market under the symbol "CYBS."

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock
Transfer and Trust Company. Its address is 40 Wall Street, New York, NY 10005,
and its telephone number is 212-936-5100.

50
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have 21,548,848 shares of
common stock outstanding based on shares outstanding as of March 31, 1999. Of
these shares, the 4,000,000 shares sold in this offering will be freely
transferable without restriction under the Securities Act, unless held by
"affiliates" of CyberSource as that term is used under the Securities Act and
the Regulations promulgated thereunder.

The remaining 17,548,848 outstanding shares were sold by us in reliance
on exemptions from the registration requirements of the Securities Act and are
restricted securities within the meaning of Rule 144 under the Securities Act.
Upon the expiration of agreements not to sell entered into with us, 120 days
after the effective date approximately 312,431 shares will become eligible for
sale subject to compliance with Rule 144. Beginning 180 days after the date of
this prospectus, approximately 15,686,870 shares will become eligible for sale
subject the provisions of Rule 144, Rule 144(k) or Rule 701 upon the expiration
of agreements not to sell such shares entered into between the underwriters and
such stockholders of CyberSource. Beginning 180 days after the date of this
prospectus, approximately 327,677 additional shares will become eligible for
sale subject to vested options as of the Effective Date in compliance with Rule
701 and upon the expiration of agreements not to sell such shares entered into
between the underwriters and such stockholders. Any shares subject to lock-up
agreements may be released at any time without notice by the underwriters.

<TABLE>
<CAPTION>
Shares
First
Days After Date of This Eligible
Prospectus for Sale Comment
----------------------- ---------- -------
<C> <C> <S>
Upon Effectiveness........ 4,000,000 Freely tradeable shares sold in offering.
120 days.................. 312,431 CyberSource lockup released; shares saleable under Rules 144 and 701.
180 days.................. 15,686,870 Underwriter lockup released; shares saleable under Rules 144 and 701.
</TABLE>

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially
owned restricted shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the Effective Date, a number of
shares that does not exceed the greater of (i) 1% of the then outstanding
shares of common stock (approximately 2,570,945 shares immediately after this
offering) or (ii) the average weekly trading volume in the Common Stock during
the four calendar weeks preceding such sale, subject to the filing of a Form
144 with respect to such sale and other limitations and restrictions. In
addition, a person who is not deemed to have been an affiliate of CyberSource
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, would be entitled to
sell such shares under Rule 144(k) without regard to the requirements described
above.

Any employee, officer or director of or consultant to CyberSource who
purchased his or her shares prior to the Effective Date or who holds vested
options as of that date pursuant to a written compensatory plan or contract is
entitled to rely on the resale provisions of Rule 701, which permits non-
affiliates to sell their Rule 701 shares without having to comply with the
public-information, holding-period, volume-limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding-period restrictions, in each case commencing 90
days after the Effective Date. However, we and our officers, directors and our
other stockholders have agreed not to sell or otherwise dispose of any shares
of our common stock for the 180-day period after the date of this prospectus
without the prior written consent of the underwriters. See "Underwriting."

As soon as practicable after the Effective Date, we intend to file a
registration statement on Form S-8 under the Securities Act to register shares
of common stock reserved for issuance under the 1998 Plan and the 1999 Plan,
thus permitting the resale of such shares by non-affiliates in the public
market without restriction under the Securities Act. Such registration
statements will become effective immediately upon filing.

Prior to this offering, there has been no public market for our common
stock, and any sale of substantial amounts in the open market may adversely
affect the market price of our common stock offered in this offering.

51
<PAGE>

UNDERWRITING

General

We intend to offer our common stock through a number of underwriters.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan & Co.,
PaineWebber Incorporated and C.E. Unterberg, Towbin are acting as
representatives of each of the underwriters named below. Subject to the terms
and conditions set forth in a purchase agreement between us and the
underwriters, we have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from us, the
number of shares of our common stock set forth opposite its name below.

<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................................
J.P. Morgan & Co...................................................
PaineWebber Incorporated...........................................
C.E. Unterberg, Towbin.............................................
---------
Total......................................................... 4,000,000
=========
</TABLE>

In the purchase agreement, the several underwriters have agreed, subject
to the terms and conditions set forth in that agreement, to purchase all of the
shares of our common stock being sold under the terms of the agreement if any
of the shares of common stock are purchased. Under the purchase agreement, the
commitments of non-defaulting underwriters may be increased.

We have agreed to indemnify the underwriters against liabilities under
the Securities Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.

The expenses of this offering, exclusive of the underwriting discount,
are estimated at $880,000 and are payable by us.

The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of legal matters by counsel for the underwriters and other
conditions. The underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part.

The shares of common stock will be ready for delivery in New York, New
York on or about , 1999.

Commissions and Discounts

The representatives have advised us that the underwriters propose
initially to offer the shares of our common stock to the public at the initial
public offering price set forth on the cover page of this prospectus, and to
dealers at such price less a concession not in excess of $ per share of
common stock. The underwriters may allow, and such dealers may allow, a
discount not in excess of $ per share of common stock to other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.

52
<PAGE>

The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no
exercise or full exercise by the underwriters of their over-allotment options.

<TABLE>
<CAPTION>
Per Without With
Share Option Option
----- ------- ------
<S> <C> <C> <C>
Public offering price...................................... $ $ $
Underwriting discount...................................... $ $ $
Proceeds, before expenses, to CyberSource.................. $ $ $
</TABLE>

Over-Allotment Option

We have granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of an
additional 600,000 shares of our common stock at the initial public offering
price set forth on the cover of this prospectus, less the underwriting
discount. The underwriters may exercise this option solely to cover over-
allotments, if any, made on the sale of our common stock offered hereby. To the
extent that the underwriters exercise this option, each underwriter will be
obligated to purchase a number of additional shares of our common stock
proportionate to such underwriter's initial amount reflected in the foregoing
table.

Reserved Shares

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 8% of the shares offered hereby to be sold to some
of our employees, directors and other persons with relationships with us. The
number of shares of our common stock available for sale to the general public
will be reduced to the extent that those persons purchase the reserved shares.
Any reserved shares which are not orally confirmed for purchase within one day
of the pricing of the offering will be offered by the underwriters to the
general public on the same terms as the other shares offered by this
prospectus.

No Sales of Similar Securities

We and our executive officers and directors have agreed not to directly
or indirectly

. offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, lend or otherwise
dispose of or transfer any shares of our common stock or
securities convertible into or exchangeable or exercisable for or
repayable with our common stock, whether now owned or later
acquired by the person executing the agreement or with respect to
which the person executing the agreement later acquires the power
of disposition, or file any registration statement under the
Securities Act relating to any shares of our common stock or

. enter into any swap or other agreement or any other agreement that
transfers, in whole or in part, the economic consequence of
ownership of our common stock whether any such swap or transaction
is to be settled by delivery of our common stock or other
securities, in cash or otherwise, without the prior written
consent of Merrill Lynch on behalf of the underwriters for a
period of 180 days after the date of the prospectus. See "Shares
Eligible for Future Sale."

Nasdaq National Market Listing

Before this offering, there has been no market for our common stock. The
initial public offering price will be determined through negotiations between
us and the representatives of the underwriters. The factors to be considered in
determining the initial public offering price, in addition to prevailing market
conditions,

53
<PAGE>

include the valuation multiples of publicly traded companies that the
representatives believe to be comparable to us, some of our financial
information, the history of, and the prospects for, us and the industry in
which we compete, and an assessment of our management, its past and present
operations, the prospects for, and timing of, future revenues of CyberSource,
the present state of our development, the percentage interest of CyberSource
being sold as compared to the valuation for CyberSource and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to ours. There can be no assurance that an active
trading market will develop for our common stock or that our common stock will
trade in the public market subsequent to the offering at or above the initial
public offering price.

Our common stock has been approved for listing on the Nasdaq National
Market under the symbol "CYBS."

The underwriters do not expect sales of our common stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered under the prospectus.

Price Stabilization and Short Positions

Until the distribution of our common stock is completed, rules of the
Commission may limit the ability of the underwriters and selling group members
to bid for and purchase our common stock. As an exception to these rules, the
underwriters are permitted to engage in transactions that stabilize the price
of our common stock. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of our common stock.

If the underwriters create a short position in our common stock in
connection with the offering, i.e., if they sell more shares of our common
stock than are set forth on the cover page of this prospectus, the underwriters
may reduce that short position by purchasing our common stock in the open
market. The underwriters may also elect to reduce any short position by
exercising all or part of the over-allotment option described above.

Penalty Bids

The underwriters may also impose a penalty bid on other underwriters and
selling group members. This means that if the underwriters purchase shares of
our common stock in the open market to reduce their short position or to
stabilize the price of our common stock, they may reclaim the amount of the
selling concession from the underwriters and selling group members who sold
those shares as part of the offering.

In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of our common stock to the extent
that it discourages resales of our common stock.

Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the
representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.

54
<PAGE>

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
us by Morrison & Foerster LLP, Palo Alto, California. A partner of Morrison &
Foerster LLP owns 45,000 shares of our common stock and holds an option to
purchase an additional 10,000 shares of our common stock. Legal matters in
connection with this offering will be passed upon for the underwriters by
Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule and the financial statements and schedule of
our predecessor division of Beyond.com corporation at December 31, 1997 and
1998 and for the period from March 20, 1996 (inception) to December 31, 1996
and for the years ended December 31, 1997 and 1998, as set forth in their
report. We have included our consolidated financial statements and schedule in
this prospectus and elsewhere in the registration statement in reliance on
Ernst & Young LLP's reports, given on their authority as experts in accounting
and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, with respect to the Common Stock offered hereby. This
prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Items are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to CyberSource and our common stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed as a part thereof. Statements contained in this prospectus as
to the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, if such contract or document is
filed as an exhibit, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference to such exhibit. The Registration
Statement, including exhibits and schedules thereto, may be inspected without
charge at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at the North Western Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center,
13th Floor, New York, NY 10048, and copies of all or any part thereof may be
obtained from such office after payment of fees prescribed by the Commission.
The Commission maintains a web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.

55
<PAGE>

CYBERSOURCE CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 1997 and 1998
and for the period from March 20, 1996 (inception)
to December 31, 1996

CONTENTS

<TABLE>
<S> <C>
Report of Ernst & Young LLP Independent Auditors........................... F-2

Audited Consolidated Financial Statements

Consolidated Balance Sheets................................................ F-3

Consolidated Statements of Operations...................................... F-4

Consolidated Statement of Redeemable Convertible Preferred Stock, Division
Equity and Stockholders' Equity (Net Capital Deficiency).................. F-5

Consolidated Statements of Cash Flows...................................... F-6

Notes to Consolidated Financial Statements................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS

The Board of Directors and Stockholders
CyberSource Corporation

We have audited the accompanying consolidated balance sheets of
CyberSource Corporation as of December 31, 1997 and 1998, and the related
consolidated statements of operations, redeemable convertible preferred stock,
division equity and stockholders' equity (net capital deficiency), and cash
flows of CyberSource Corporation and its predecessor division of Beyond.com
Corporation for the period from March 20, 1996 (inception) to December 31, 1996
and for the years ended December 31, 1997 and 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CyberSource Corporation at December 31, 1997 and 1998, and the consolidated
results of operations and cash flows of CyberSource Corporation and its
predecessor division of Beyond.com Corporation for the period from March 20,
1996 (inception) to December 31, 1996 and for the years ended December 31, 1997
and 1998, in conformity with generally accepted accounting principles.

San Jose, California

February 18, 1999, except
as to the first paragraph
of Note 9, as to which
the date is June , 1999

- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the approval
by the Company's shareholders of the 1 for 2 reverse stock split as described
in Note 9 of the Notes to the Financial Statements.

/s/ Ernst & Young LLP

San Jose, California

June 4, 1999

F-2
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
--------------- March 31, March 31,
1997 1998 1999 1999
------ -------- ----------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents......... $2,000 $ 11,111 $ 7,423
Accounts receivable, net of
allowances of $332, $229, and
$163 at December 31, 1997 and
1998, and March 31, 1999......... 466 863 1,022
Prepaid expenses and other current
assets........................... 118 411 646
------ -------- --------
Total current assets............ 2,584 12,385 9,091
Property and equipment, net......... 1,151 2,300 2,795
Other noncurrent assets............. -- 290 264
------ -------- --------
Total assets.................... $3,735 $ 14,975 $ 12,150
====== ======== ========
Liabilities and stockholders' equity
(net capital deficiency)
Current liabilities:
Accounts payable.................. $ 269 $ 531 $ 972
Other accrued liabilities......... 128 969 1,348
Deferred revenue.................. 150 120 231
Current obligations under capital
leases........................... 21 211 318
Convertible note payable to an
officer and stockholder.......... -- 3,000 3,000
------ -------- --------
Total current liabilities....... 568 4,831 5,869
Noncurrent obligations under capital
leases............................. 33 256 426
Commitments
Redeemable convertible preferred
stock:
Designated shares--24,037,372
Issued and outstanding shares--
7,022,558 in 1997, 16,957,061 in
1998 and 1999, and none pro forma
(liquidation preference of
$18,616 at December 31, 1998 and
March 31, 1999, respectively).... 2,097 18,911 18,911 $ --
Stockholders' equity (net capital
deficiency):
Convertible preferred stock,
$0.001 par value:
Authorized shares--25,000,000
Issuable in series; see above as
to series designated as
redeemable and shares issued
Common stock, $0.001 par value:
Authorized shares--50,000,000
Issued and outstanding shares--
4,535,000 in 1997, 5,406,536 in
1998, 5,531,991 in 1999, and
16,021,800 pro forma........... 5 5 6 16
Additional paid-in capital........ 1,032 1,199 1,884 20,785
Deferred compensation............. -- (142) (671) (671)
Accumulated deficit............... -- (10,085) (14,275) (14,275)
------ -------- -------- --------
Total stockholders' equity (net
capital deficiency)............ 1,037 (9,023) (13,056) $ 5,855
------ -------- -------- ========
Total liabilities and
stockholders' equity (net
capital deficiency)............ $3,735 $ 14,975 $ 12,150
====== ======== ========
</TABLE>
See accompanying notes.

F-3
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

<TABLE>
<CAPTION>
Period From
March 20,
1996 Three Months Ended
(Inception) to Years Ended December 31, March 31,
December 31, ------------------------ --------------------
1996 1997 1998 1998 1999
-------------- ------------ ------------ --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 144 $ 968 $ 3,384 $ 639 $ 1,713
Cost of revenues........ 137 324 3,471 647 1,505
------- ----------- ------------ --------- ---------
Gross profit (loss)..... 7 644 (87) (8) 208
Operating expenses:
Product development... 338 2,300 3,802 671 1,322
Sales and marketing... 425 1,988 4,184 822 2,079
General and
administrative....... 387 681 1,946 330 938
Deferred compensation
amortization......... -- -- 18 -- 67
------- ----------- ------------ --------- ---------
Total operating
expenses............... 1,150 4,969 9,950 1,823 4,406
------- ----------- ------------ --------- ---------
Loss from operations.... (1,143) (4,325) (10,037) (1,831) (4,198)
Interest income......... -- -- 108 11 103
Interest expense........ -- (13) (156) (4) (95)
------- ----------- ------------ --------- ---------
Net loss................ $(1,143) $ (4,338) $ (10,085) $ (1,824) $ (4,190)
======= =========== ============ ========= =========
Basic and diluted net
loss per share......... $ (2.05) $ (0.40) $ (0.77)
============ ========= =========
Shares used in computing
basic and diluted net
loss per share......... 4,918 4,535 5,465
============ ========= =========
Pro forma basic and
diluted net loss per
share.................. $ (0.86) $ (0.26)
============ =========
Shares used in computing
pro forma basic and
diluted net loss per
share.................. 11,740 15,955
============ =========
</TABLE>

See accompanying notes.

F-4
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK,
DIVISION EQUITY AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)

(In thousands, except share and per share amounts)

Period from March 20, 1996 (inception) to March 31, 1999

<TABLE>
<CAPTION>
Redeemable
Convertible Division
Preferred Stock Equity
------------------ --------
Shares Amount Amount
---------- ------- --------
<S> <C> <C> <C>
Funding provided by Beyond.com
Corporation.................. -- $ -- $ 1,564
Net loss and comprehensive
loss......................... -- -- (1,143)
---------- ------- -------
Balance at December 31, 1996.. -- -- 421
Funding provided by Beyond.com
Corporation.................. -- -- 7,051
Net loss and comprehensive
loss......................... -- -- (4,338)
Incorporation of CyberSource
and issuance of redeemable
convertible preferred stock
and common stock in December
1997 upon capital stock
dividend from Beyond.com
Corporation.................. 7,022,558 2,097 (3,134)
---------- ------- -------
Balance at December 31, 1997.. 7,022,558 2,097 --
Issuance of common stock under
stock option plan............ -- -- --
Issuance of Series D
redeemable convertible
preferred stock, net of
issuance costs of $20........ 1,851,850 1,980 --
Issuance of Series E
redeemable convertible
preferred stock, net of
issuance costs of $114....... 8,082,653 14,516 --
Issuance of warrants to Visa
and GE Capital............... -- 318 --
Deferred compensation related
to stock option grants....... -- -- --
Amortization of deferred
compensation................. -- -- --
Net loss and comprehensive
loss......................... -- -- --
---------- ------- -------
Balance at December 31, 1998.. 16,957,061 18,911 --
Common shares issued for
services (unaudited)......... -- -- --
Issuance of common stock under
stock option plan
(unaudited).................. -- -- --
Deferred compensation related
to stock option grants
(unaudited).................. -- -- --
Amortization of deferred
compensation (unaudited)..... -- -- --
Net loss and comprehensive
loss (unaudited)............. -- -- --
---------- ------- -------
Balance at March 31, 1999
(unaudited).................. 16,957,061 $18,911 $ --
========== ======= =======
<CAPTION>
Stockholders' Equity
------------------------------------------------------------
Total
Stockholders'
Common Stock Deferred Additional Accumu- Equity
---------------- Compen- Paid-In lated (Net Capital
Shares Amount sation Capital Deficit Deficiency)
--------- ------ -------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Funding provided by Beyond.com
Corporation.................. -- $-- $ -- $ -- $ -- $ --
Net loss and comprehensive
loss......................... -- -- -- -- -- --
--------- ------ -------- ---------- --------- -------------
Balance at December 31, 1996.. -- -- -- -- -- --
Funding provided by Beyond.com
Corporation.................. -- -- -- -- -- --
Net loss and comprehensive
loss......................... -- -- -- -- -- --
Incorporation of CyberSource
and issuance of redeemable
convertible preferred stock
and common stock in December
1997 upon capital stock
dividend from Beyond.com
Corporation.................. 4,535,000 5 -- 1,032 -- 1,037
--------- ------ -------- ---------- --------- -------------
Balance at December 31, 1997.. 4,535,000 5 -- 1,032 -- 1,037
Issuance of common stock under
stock option plan............ 871,536 -- -- 7 -- 7
Issuance of Series D
redeemable convertible
preferred stock, net of
issuance costs of $20........ -- -- -- -- -- --
Issuance of Series E
redeemable convertible
preferred stock, net of
issuance costs of $114....... -- -- -- -- -- --
Issuance of warrants to Visa
and GE Capital............... -- -- -- -- -- --
Deferred compensation related
to stock option grants....... -- -- (160) 160 -- --
Amortization of deferred
compensation................. -- -- 18 -- -- 18
Net loss and comprehensive
loss......................... -- -- -- -- (10,085) (10,085)
--------- ------ -------- ---------- --------- -------------
Balance at December 31, 1998.. 5,406,536 5 (142) 1,199 (10,085) (9,023)
Common shares issued for
services (unaudited)......... 22,500 -- -- 81 -- 81
Issuance of common stock under
stock option plan
(unaudited).................. 102,955 1 -- 8 -- 9
Deferred compensation related
to stock option grants
(unaudited).................. -- -- (596) 596 -- --
Amortization of deferred
compensation (unaudited)..... -- -- 67 -- -- 67
Net loss and comprehensive
loss (unaudited)............. -- -- -- -- (4,190) (4,190)
--------- ------ -------- ---------- --------- -------------
Balance at March 31, 1999
(unaudited).................. 5,531,991 $ 6 $(671) $1,884 $(14,275) $(13,056)
========= ====== ======== ========== ========= =============
</TABLE>

See accompanying notes.

F-5
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Period From Three Months
March 20, 1996 Years Ended Ended
(Inception) to December 31, March 31,
December 31, ----------------- ----------------
1996 1997 1998 1998 1999
-------------- ------- -------- ------- -------
(In thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss................... $(1,143) $(4,338) $(10,085) $(1,824) $(4,190)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Common stock issued to
employers for services.. -- -- -- -- 81
Depreciation and
amortization............ 73 325 778 150 351
Amortization of deferred
compensation............ -- -- 18 -- 67
Changes in assets and
liabilities:
Accounts receivable..... (35) (431) (397) (171) (159)
Prepaid expenses and
other current assets... (70) (48) (293) (120) (174)
Accounts payable........ 122 147 262 144 441
Other accrued
liabilities............ 19 109 841 227 379
Deferred revenue........ 26 124 (30) 2 111
------- ------- -------- ------- -------
Net cash used in operating
activities................ (1,008) (4,112) (8,906) (1,592) (3,093)
Investing activities
Purchases of property and
equipment................. (556) (927) (1,419) (270) (542)
------- ------- -------- ------- -------
Net cash used in investing
activities................ (556) (927) (1,419) (270) (542)
Financing activities
Proceeds from issuance of
convertible note payable
to an officer and
stockholder............... -- -- 3,000 -- --
Principal payments on
capital lease
obligations............... -- (12) (67) (21) (62)
Financing provided by
Beyond.com Corporation.... 1,564 7,051 -- -- --
Loan to Beyond.com
Corporation............... -- -- (400) (400) --
Repayment of loan by
Beyond.com Corporation.... -- -- 400 275 --
Proceeds from issuance of
redeemable convertible
preferred stock, net...... -- -- 16,496 1,521 --
Proceeds from exercise of
stock options............. -- -- 7 -- 9
------- ------- -------- ------- -------
Net cash provided by (used
in) financing activities.. 1,564 7,039 19,436 1,375 (53)
------- ------- -------- ------- -------
Net increase (decrease) in
cash and cash
equivalents............... -- 2,000 9,111 (487) (3,688)
Cash and cash equivalents
at beginning of period.... -- -- 2,000 2,000 11,111
------- ------- -------- ------- -------
Cash and cash equivalents
at end of period.......... $ -- $ 2,000 $ 11,111 $ 1,513 $ 7,423
======= ======= ======== ======= =======
Supplemental schedule of
cash flow information
Interest paid.............. $ -- $ -- $ 156 $ 4 $ 96
Supplemental schedule of
noncash financing
activities
Property and equipment
acquired under capital
leases.................... $ -- $ 66 $ 480 $ -- $ 339
Issuance of warrants to
Visa and GE Capital....... $ -- $ -- $ 318 $ -- $ --
Deferred compensation
related to stock option
grants.................... $ -- $ -- $ 160 $ -- $ 596
</TABLE>

See accompanying notes.

F-6
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

1. Summary of Significant Accounting Policies

The Company

CyberSource Corporation (the Company) was incorporated in the state of
Delaware on December 30, 1997. Prior to its incorporation, the Company operated
as a division of Beyond.com Corporation (Beyond.com). The Company is a
developer and provider of real time e-commerce transaction services.

Basis of Presentation

The accompanying consolidated financial statements reflect the financial
position and results of operations of the Company and its wholly owned
subsidiary and the predecessor division of Beyond.com. All intercompany
transactions and balances have been eliminated.

On December 31, 1997, Beyond.com transferred assets and liabilities to
its wholly owned subsidiary, CyberSource Corporation. Upon this transfer,
Beyond.com distributed capital stock in the form of a dividend to all existing
stockholders of Beyond.com on a pro rata basis such that the stockholders of
the Company were the same as the stockholders of Beyond.com at the time of the
distribution (the Spin-off). The accompanying financial statements for fiscal
1996 and 1997 reflect the operations of the Company as a division of Beyond.com
through December 31, 1997. The balance sheet as of December 31, 1997 has been
prepared using the historical basis of accounting and include all of the assets
and liabilities specifically identifiable to the Company. Beyond.com's
corporate accounting systems were not designed to track cash receipts and
payments and liabilities on a business-specific basis.

The statements of operations for fiscal 1996 and 1997 include all revenue
and costs directly attributable to the Company, including a corporate
allocation of the costs of facilities, salaries, and employee benefits.
Additionally, incremental corporate administration, finance, and management
costs are allocated to the Company. See Note 6.

All of the allocations reflected in 1996 and 1997 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 the Company had
been operated on a stand-alone basis in fiscal 1996 and 1997 nor are they
necessarily indicative of future costs to support the operations of the
Company.

Interim Financial Statements

In the opinion of management, the unaudited interim consolidated
financial statements at March 31, 1999 and for the three months ended March 31,
1998 and 1999 include all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the Company's financial position at March
31, 1999, and results of operations and cash flows for the three months ended
March 31, 1998 and 1999. Results for the three months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the entire year.

Foreign Currency Translation

The financial statements of the Company's non-U.S. subsidiary are
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation." Assets

F-7
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

and liabilities of this subsidiary are translated at the rates of exchange at
the end of the period. Revenues and expenses are translated using the average
exchange rates in effect during the period. Gains and losses from foreign
currency translation were not material through March 31, 1999.

Use of Estimates

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

Revenue Recognition

The Company derives its revenues primarily from e-commerce service
monthly transaction processing fees, and, to a lesser extent, support service
fees and digital product rights management fees. Individual transactions,
monthly transaction revenues, and digital product rights management fees are
recognized in the period in which the transactions occur. Support service fees
are recognized when the services are provided and the related costs are
incurred. In fiscal 1998, Beyond.com, a related party, accounted for 24% of
revenues. In fiscal 1996, a different customer accounted for 26% of revenues.
There were no customers which accounted for greater than 10% of revenues in
fiscal 1997. In the three months ended March 31, 1999, one customer accounted
for 22% of revenues.

Cash and Cash Equivalents

The Company 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, 1997 and 1998 and March 31, 1999, cash
equivalents consist primarily of investments in money market funds. To date,
the Company has not experienced losses on any of its investments.

Accounts Receivable and Concentration of Credit Risk

At December 31, 1997, 10% of accounts receivable was due from one
customer. At December 31, 1998 and March 31, 1999, 13% and 16%, respectively,
of accounts receivable were due from Beyond.com. The Company generally does not
require collateral. The Company maintains allowances for potential credit
losses.

Property and Equipment

Property and equipment are stated at cost and are depreciated on a
straight-line basis over estimated useful lives of three years. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
lease terms or the estimated useful lives.

F-8
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
------------- March 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Computer equipment and software..................... $1,230 $2,916 $3,545
Furniture and fixtures.............................. 169 272 380
Office equipment.................................... 78 116 133
Leasehold improvements.............................. 72 144 210
------ ------ ------
1,549 3,448 4,268
Less accumulated depreciation and amortization...... 398 1,148 1,473
------ ------ ------
$1,151 $2,300 $2,795
====== ====== ======
</TABLE>

Product Development

Product development expenditures are charged to operations as incurred.

Advertising Expense

The cost of advertising is recorded as an expense when incurred.
Advertising costs were not significant during any of the periods presented.

Accounting Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB Opinion No. 25), and
related interpretations in accounting for its employee stock options because
the alternative fair value accounting provided for under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS
123), requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APB Opinion No. 25, when the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

Pro forma Net Loss Per Share and Unaudited Pro Forma Stockholders' Equity

In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," basic and diluted net loss per share has been computed
using the weighted average number of shares of common stock outstanding during
the period. Potentially dilutive securities have been excluded from the
computation as their effect is antidilutive. Because the Company was a division
of Beyond.com through December 31, 1997 and had no outstanding common or
preferred stock, there is no earnings or loss per share presented.

Pro forma net loss per share has been computed as described above and
also gives effect, under Securities and Exchange Commission guidance, to the
conversion of redeemable convertible preferred shares and convertible notes
payable not included above that will automatically convert upon completion of
the

F-9
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

Company's initial offering (using the if-converted method). If the offering
contemplated by this prospectus is consummated, all of the redeemable
convertible preferred stock outstanding as of March 31, 1999 will automatically
be converted into an aggregate of 10,489,809 shares of common stock, based on
the shares of redeemable convertible preferred stock outstanding at March 31,
1999. Unaudited pro forma stockholders' equity at March 31, 1999, as adjusted
for the conversion of redeemable convertible preferred stock, is disclosed on
the balance sheet.

Pro forma basic and diluted net loss per share is as follows (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
Three Months
Year Ended Ended
December 31, March 31,
1998 1999
------------ ------------
<S> <C> <C>
Net loss............................................. $(10,085) $(4,190)
======== =======
Weighted average shares used in computing basic and
diluted net loss per common share................... 4,918 5,465
======== =======
Pro forma:
Shares used in computing basic and diluted net loss
per share used above.............................. 4,918 5,465
Adjusted to reflect the effect of the assumed
conversion of redeemable convertible preferred
stock from the date of issuance................... 6,822 10,490
-------- -------
Weighted average shares used in computing pro forma
basic and diluted net loss per share................ 11,740 15,955
======== =======
Pro forma basic and diluted net loss per share....... $ (0.86) $ (0.26)
======== =======
</TABLE>

If the Company had reported net income, diluted earnings per share would
have included the shares used in the computation of pro forma net loss per
share as well as an additional approximately 2,528,000 and 3,564,000 common
equivalent shares related to the outstanding options, warrants, and convertible
notes payable not included above for the year ended December 31, 1998 and for
the three months ended March 31, 1999, respectively. The common equivalent
shares from options and warrants would be determined on a weighted average
basis using the treasury stock method. The common equivalent shares related to
the convertible note payable would be determined on a weighted average basis.

Income Taxes

Income taxes are calculated under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). Under
FAS 109, the liability method is used in accounting for income taxes, which
includes the effects of temporary differences between financial and taxable
amounts of assets and liabilities.

New Accounting Pronouncements

In January 1999, the Company adopted American Institute of Certified
Public Accountants Statement of Position, "Accounting for Computer Software
Developed For or Obtained For Internal Use" (SOP 98-1).

F-10
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

SOP 98-1 applies to all nongovernmental entities and provides revised guidance
for the accounting treatment for software which is internally developed,
acquired, or modified solely to meet the entity's internal needs. SOP 98-1 did
not have a material effect on the Company's financial statements or results of
operations for the three months ended March 31, 1999.

2. Segment Information

The Company has adopted Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information" (FAS
131) in the fiscal year ended December 31, 1998. FAS 131 supersedes Statement
of Financial Accounting Standards No. 14, "Financial Reporting for Segments of
a Business Enterprise" (FAS 14). FAS 131 changes current practice under FAS 14
by establishing a new framework for reporting information regarding operating
segments in annual financial statements and requires selected information for
these segments in interim financial statements. FAS 131 also establishes
standards for related disclosures about products and services and geographic
areas.

Operating segments are identified as components of an enterprise about
which separate discrete financial information is available that is evaluated by
the chief operating decision maker or decision making group to make decisions
about how to allocate resources and assess performance. The Company's chief
operating decision maker is the Chief Executive Officer. To date, the Company
has viewed its operations as principally two segments, e-commerce transaction
services (ECTS) and digital product rights management (DPR) for software and
other digital products and manages the business based on the revenues of these
segments. Additionally, in 1996, 1997 and 1998 the Company derived less than
10% of its revenues from outside the United States. Revenues from outside the
United States were 17% of revenues in the three months ended March 31, 1999.

The following table presents revenues and operating loss by the Company's
two business units for the period from March 20, 1996 (inception) to December
31, 1996, for the year ended 1997 and 1998, and for the three months ended
March 31, 1999. There were no interbusiness unit sales or transfers. The
Company does not report operating expenses, depreciation and amortization,
interest income (expense), income taxes, capital expenditures, or identifiable
assets by industry segment to the Chief Executive Officer. Revenues are as
follows (in thousands):

<TABLE>
<CAPTION>
Year ended
December 31, Three months
---------------- ended March 31,
1996 1997 1998 1999
---- ---- ------ ---------------
<S> <C> <C> <C> <C>
ETCS........................................... $131 $770 $2,708 $1,512
DPR............................................ 13 198 676 201
---- ---- ------ ------
Total.......................................... $144 $968 $3,384 $1,713
==== ==== ====== ======
</TABLE>

3. Commitments

The Company leases its primary facility and equipment under noncancelable
operating leases expiring periodically through 2001. Rental expense was
approximately $43,000, $144,000, $459,000, and $201,000 for the period from
March 20, 1996 (inception) to December 31, 1996 and for 1997 and 1998, and for
the three

F-11
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

months ended March 31, 1999, respectively. The Company has the option to extend
the lease term for an additional three years.

Beginning in 1997, the Company leased equipment under noncancelable lease
agreements that are accounted for as capital leases. Equipment under capital
lease arrangements, which is included in property and equipment, aggregated
approximately $546,000 and $885,000 at December 31, 1998 and March 31, 1999,
respectively. Related accumulated amortization was approximately $69,000 and
$126,000 at December 31, 1998 and March 31, 1999, respectively. Amortization
expense related to assets under capital leases is included with depreciation
expense.

Future minimum lease payments under noncancelable operating leases and
capital leases at December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
Operating Capital
Leases Leases
--------- -------
<S> <C> <C>
1999....................................................... $1,048 $227
2000....................................................... 947 197
2001....................................................... 73 81
------ ----
Total minimum payments..................................... $2,068 505
======
Less amount representing interest.......................... 38
----
467
Less current portion....................................... 211
----
$256
====
</TABLE>

4. Redeemable Convertible Preferred Stock

Redeemable convertible preferred stock at December 31, 1998 and March 31,
1999 is as follows:

<TABLE>
<CAPTION>
Issued and
Designated Outstanding
Shares Shares
---------- -----------
<S> <C> <C>
Series A.............................................. 1,985,520 1,985,520
Series B.............................................. 2,500,000 2,037,038
Series C.............................................. 3,000,000 3,000,000
Series D.............................................. 1,851,852 1,851,850
Series E.............................................. 14,700,000 8,082,653
---------- ----------
Total............................................... 24,037,372 16,957,061
========== ==========
</TABLE>

The holders of Series A, B, C, D, and E redeemable convertible preferred
stock are entitled to receive annual noncumulative dividends at the rate of
$0.0064, $0.0432, $0.03264, $0.108, and $0.181 per share, respectively, plus,
with respect to the Series B, C, D, and E preferred stock, cumulative dividends
at a rate of $0.00252, $0.001904, $0.0063, and $0.0106 per share, per month,
subsequent to the respective original

F-12
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

issuance date, respectively, when and if declared by the Board of Directors,
payable in preference to common stock dividends. There were no dividends
declared or payable by the Company at December 31, 1998.

Each share of preferred stock is convertible at any time at the option of
the holder into shares of common stock at the then effective conversion price.
Each outstanding share of Series A and B, preferred stock is convertible into
1.00 share of common stock, and each two shares C, D, and E preferred stock are
convertible into 1 share of common stock subject to adjustment as specified in
the Certificate of Incorporation. Each series of preferred stock will
automatically convert into common stock immediately prior to the consummation
of a firm commitment underwritten public offering under the Securities Act of
1933 (IPO) in which the sale price to the public is not less than $7.00 per
share, and the aggregate offering price to the public is not less than
$15,000,000, or at such time as the Company receives the consent of not less
than two-thirds of the holders of each series of the preferred stock.

Each preferred share has voting rights equal to the number of common
shares into which it is convertible. Upon liquidation, the holders of the
Series A preferred stock are entitled to receive $0.064 per share, plus any
declared but unpaid dividends, before any distribution may be made to the
holders of the Series B, C, D, and E preferred or common shares. After the
payment to the holders of the Series A preferred stock, the holders of the
Series B, C, D, and E preferred stock are entitled to receive $0.432, $0.3264,
$1.08, and $1.81 per share, respectively, plus any declared but unpaid
dividends, before any distribution may be made to the holders of common shares.

At any time after January 5, 2000, the holders of a majority of the then
outstanding shares of Series A preferred stock may request the redemption of
all of the outstanding shares of Series A redeemable convertible preferred
stock. The Company shall redeem such shares at a price per share of $0.12, plus
accrued dividends, if any, for Series A preferred stock. At any time after July
12, 2002, the majority of the then outstanding shares of Series B preferred
stock may request the redemption of all of the outstanding shares of Series B
preferred stock at the original issuance price per share of $0.432 plus accrued
dividends, if any. At any time after July 12, 2002, the respective holders of
at least two-thirds of the then outstanding shares of Series C, D, and E
preferred stock separately may request the redemption of all of the outstanding
shares of Series C, D, and E preferred stock, respectively. The Company shall
redeem such shares at the original issuance price per share of $0.3264, $1.08,
and $1.81, respectively, plus accrued dividends, if any. All of the outstanding
preferred stock is recorded at its redemption amount.

During 1998, in connection with the issuance of Series E preferred stock
and certain strategic marketing agreements with Visa and GE Capital, the
Company issued warrants to purchase 552,486, 442,910, and 401,243 shares of the
Company's Series E preferred stock at exercise prices of $1.81, $3.00, and
$4.00 per share, respectively. The warrants are fully exercisable upon the date
of issuance and expire three years from the original date of the marketing
services agreements. Preferred shares issued upon exercise of the warrants are
non-forfeitable.

The Company has determined the fair value of the warrants at the time of
issuance to be $318,000 and has recorded this amount as a cost of the strategic
marketing agreements. The determined value of the warrants was credited to
redeemable convertible preferred stock and is being amortized ratably over the
three year term of the strategic marketing agreements. The Company amortized
$28,000 and $26,000 of the value of the warrants to sales and marketing expense
in 1998 and for the three months ended March 31, 1999, respectively.

F-13
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

5. Stockholders' Equity

Common Shares

The Company is authorized to issue 50,000,000 shares of common stock. The
holders of common stock are entitled to one vote per share on all matters to be
voted upon by the stockholders of the Company. Subject to the preferences that
may be applicable to any outstanding shares of preferred stock, the holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors.

The Company has reserved shares of common stock for future issuance at
December 31, 1998 as follows:

<TABLE>
<S> <C>
1998 Stock Option Plan:
Options outstanding............................................. 1,000,701
Options available for future grants............................. 27,763
Convertible note payable.......................................... 828,729
Redeemable convertible preferred stock............................ 10,489,809
Outstanding warrants.............................................. 698,319
----------
13,045,321
==========
</TABLE>

Stock Options

In conjunction with the Spin-off of the Company on December 31, 1997,
employees of the Company, immediately following the Spin-off, maintained their
outstanding exercisable stock options in Beyond.com and in March 1998 were
granted additional incentive stock options in the Company. Employees of
Beyond.com were granted additional stock options in the Company in March 1998
based on the extent that the employees' original Beyond.com options were
exercisable on the date of the Spin-off. The exercise prices of the original
Beyond.com option grants and the additional Company stock option grants were
adjusted to reflect the allocation of the fair market value per share price
between the Company's and Beyond.com's common stock at December 31, 1997. The
adjustments to these options resulted in nonstapled options to the employees of
each entity and were accounted for and in compliance with the guidelines in
Emerging Issues Task Force Issue No. 90-9, and therefore, no compensation
expense has been recorded.

In March 1998, the Company adopted its 1998 Stock Option Plan (the 1998
Plan). There are 1,900,000 shares of common stock authorized for issuance under
the 1998 Plan. The 1998 Plan provides for the issuance of common stock and the
granting of options to employees, officers, directors, consultants, independent
contractors, and advisors of the Company. The exercise price of a nonqualifying
stock option and an incentive stock option shall not be less than 85% and 100%,
respectively, of the fair value of the underlying shares on the date of grant.
Options granted under the 1998 Plan generally become exercisable over five
years at the rate of 20% per year from the grant date.

In January 1999, the Company adopted its 1999 Stock Option Plan (the 1999
Plan). The Company has reserved 2,500,000 shares of common stock for issuance
under the 1999 Plan. The provisions of the 1999 Plan and similar to those of
the 1998 Plan.

F-14
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

The following table summarizes information about the Company's stock
option activity under the 1998 Plan and the 1999 Plan. Options granted prior to
December 31, 1997 were originated from options granted by Beyond.com and were
granted by the Company immediately following the adoption of the 1998 Plan.

<TABLE>
<CAPTION>
Options Outstanding
---------------------------
Number Weighted
Shares of Average Adjusted
Available Shares Exercise Price
---------- --------- ----------------
<S> <C> <C> <C>
Shares reserved....................... 1,900,000 -- $ --
Options granted based upon Beyond.com
option grants prior to Spin-off...... (1,227,183) 1,227,183 $0.160
Options granted....................... (679,575) 679,575 $0.474
Options exercised..................... -- (871,536) $0.008
Options canceled...................... 34,521 (34,521) $0.378
---------- ---------
Balance at December 31, 1998.......... 27,763 1,000,701 $0.310
Additional shares reserved
(unaudited).......................... 2,500,000 -- $ --
Options granted (unaudited)........... (1,233,350) 1,233,350 $3.620
Options exercised (unaudited)......... -- (102,955) $0.064
Options canceled (unaudited).......... 95,521 (95,521) $2.504
---------- ---------
Balance at March 31, 1999
(unaudited).......................... 1,389,934 2,035,575 $2.024
========== =========
</TABLE>

In connection with certain stock options granted in 1998, the three months
ended March 31, 1999 and April 1999, the Company recorded deferred compensation
for the estimated difference between the exercise price of the options and the
deemed fair value of $160,000, $596,000 and $424,000, respectively, which is
being amortized on a graded method over the four-year vesting period of the
options.

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

<TABLE>
<CAPTION>
Weighted Number of Weighted
Weighted Average Options Average
Number of Average Remaining Exercisable Adjusted
Options Adjusted Contractual Upon Exercise
Exercise Price Outstanding Exercise Price Life (Years) Issuance Price
-------------- ----------- -------------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
$0.006 -- $0.04 312,384 $0.04 7.76 253,295 $0.03
$0.06 34,417 $0.06 8.84 25,859 $0.06
$0.20 163,150 $0.20 9.20 26,946 $0.20
$0.54 490,750 $0.54 9.71 -- $ --
--------- -------
1,000,701 $0.31 306,100 $0.05
========= =======
</TABLE>

At December 31, 1997, 828,640 options were exercisable at a weighted
average exercise price of $0.004.

Stock-Based Compensation

Pro forma information regarding net loss is required by FAS 123, which
also requires that the information be determined as if the Company has
accounted for its employee stock options granted under the

F-15
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

fair value method of FAS 123. The fair value for these options was estimated at
the date of grant using the minimum value method with the following weighted
average assumptions: a risk-free interest rate of 5.51%, 6.16%, and 5.15% for
1996, 1997, and 1998, respectively; no dividend yield or volatility factors of
the expected market price of the Company's common stock; and a weighted average
expected life of the option of four years.

The option valuation models were developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected life of the option. Because the
Company's employee stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

Had compensation cost been determined using the fair value at the grant
date for options granted calculated using the minimum value method of FAS 123,
the Company's actual net loss would have been increased to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Pro forma net loss (in thousands).............. $(1,143) $(4,339) $(10,088)
Pro forma basic and diluted net loss per
share......................................... $ (2.05)
</TABLE>

The weighted average fair value of options granted, which is the value
assigned to the options under FAS 123, was $0.002, $0.02, and $0.08 per share
for options granted during 1996, 1997, and 1998, respectively.

The pro forma impact of options on the net loss for the period from March
20, 1996 (inception) to December 31, 1996 and for the years ended December 31,
1997 and 1998 is not representative of the effects on net income (loss) for
future years, as future years will include the effects of options vesting as
well as the impact of multiple years of stock option grants.

6. Related Party Transactions

Funding Prior to Spin-off

Through December 31, 1997, the Company utilized Beyond.com's centralized
cash management services and processes related to receivables, payables,
payroll, and other activities. Through December 31, 1997, the Company's net
cash requirements were funded by Beyond.com. Net financing provided by
Beyond.com to the Company in 1996 and 1997 was approximately $1,564,000 and
$7,051,000, respectively, including funding related to corporate services
provided, as described below. No amounts were paid to Beyond.com by the Company
in repayment of the financing during these periods, and through the date of the
Spin-off, these amounts were included in division equity. The average balances
financed by Beyond.com during fiscal 1996 and 1997, which did not bear
interest, were approximately $800,000 and approximately $6,000,000,
respectively.

F-16
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

Corporate Services

In accordance with Staff Accounting Bulletin No. 55, additional
allocations have been reflected in these financial statements for 1996 and
1997. These expenses have included 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 net
sales, headcount, and relative expenditure levels. Such allocations and
corporate charges totaled $519,000 and $688,500 for the period from March 20,
1996 (inception) to December 31, 1996 and for the year ended December 31,
1997, 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 result from transactions among unrelated parties.

The CEO of the Company is Chairman of the Board of Beyond.com and the
companies also have one other member of their Board of Directors in common.
Pursuant to the terms of an agreement entered into in connection with the
Spin-off from Beyond.com, the Company provides services to Beyond.com on a
nonexclusive basis. During 1998 and the three months ended March 31, 1999, the
Company recorded approximately $801,000 and $375,000, respectively, of
revenues related to these services. As of December 31, 1998 and March 31,
1999, amounts receivable from Beyond.com were approximately $147,000 and
$179,000, respectively.

Note Receivable Issued to Beyond.com

On March 18, 1998, the Company loaned $400,000 to Beyond.com. The note
was repaid as of June 1998.

Convertible Note Payable to Officer and Stockholder

In August 1998, the Company issued an unsecured convertible one-year
promissory note to an officer and stockholder from whom it had borrowed an
aggregate of $3,000,000 in July 1998. The note, which was amended in October
1998, is payable in full on October 21, 1999 and bears interest at a rate of
10% per annum. Interest is payable in quarterly installments. The note, will
automatically convert into 828,729 shares of common stock on the day
immediately prior to the consummation of the IPO.

7. Litigation and Contingencies

From time to time, the Company may be involved in litigation relating to
claims arising out of its ordinary course of business. See Note 9. The Company
believes that there are no claims or actions pending or threatened against the
Company, the ultimate disposition of which would have a material impact on the
Company's financial position or results of operations.

F-17
<PAGE>

CYBERSOURCE CORPORATION
and its predecessor division of Beyond.com Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 is unaudited)

8. Income Taxes

As of December 31, 1998, the Company had federal and state net operating
loss carryforwards of approximately $8,600,000. As of December 31, 1998, the
Company also had federal and state research credit carryforwards of
approximately $130,000 and $70,000, respectively. The net operating loss and
credit carryforwards will expire at various dates beginning in 2006 through
2018, if not utilized.

The utilization of the net operating losses and credits may be subject to
a substantial annual limitation due to the "change in ownership" provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.

Significant components of the Company's deferred tax assets and
liabilities for federal and state income taxes at December 31, 1998 are as
follows (in thousands):

<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.................................. $ 3,400
Research credit carryforwards..................................... 200
Other, net........................................................ 300
-------
Net deferred tax assets............................................. 3,900
Valuation allowance................................................. (3,900)
-------
Net deferred tax assets............................................. $ --
=======
</TABLE>

9. Subsequent Events

Reverse Stock Split

On April 30, 1999, the Company's Board of Directors approved a 1 for 2
reverse split of the Company's outstanding common stock, subject to stockholder
approval. The par value of the common stock and the authorized shares of common
stock were not adjusted as a result of the reverse split. The conversion ratios
of each series of preferred stock were adjusted accordingly. The stock split is
reflected in the accompanying financial statements and footnotes on a
retroactive basis in all periods presented.

Legal Matter (unaudited)

A former Vice President of Product Management filed a lawsuit against the
Company in the Superior Court of California in Santa Clara County on April 8,
1999 seeking monetary and equitable relief. The plaintiff alleges several
causes of action, including wrongful termination, defamation, fraud, and unfair
business practices arising out of her three month employment with the Company.
While there can be no assurances as to the outcome of this litigation, the
Company believes the lawsuit is without merit, and intends to vigorously defend
against the claims asserted.

Stock Options (unaudited)

In April 1999, the Company granted options to purchase 311,000 shares of
common stock at a weighted average price of $5.10 per share and recorded
deferred compensation of $424,000 related to these grants.

F-18
<PAGE>

The graphic depicts the words "Successful Internet companies using CyberSource
Internet Commerce Suite" above four boxes. Each box contains a screenshot of
the web site for one of the following companies: Buy.com, Liquid Audio, Compaq
Corporation, and Shopping.com.

<PAGE>

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

Through and including , (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 dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

4,000,000 Shares

[CYBERSOURCE LOGO APPEARS HERE]

Common Stock

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

P R O S P E C T U S

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

Merrill Lynch & Co.

J.P. Morgan & Co.

PaineWebber Incorporated

C.E. Unterberg, Towbin

, 1999

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The expenses to be paid by the Registrant in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:

<TABLE>
<CAPTION>
Amount
--------
<S> <C>
Securities and Exchange Commission Filing Fee.................... $ 12,800
NASD Filing Fee.................................................. 5,100
Nasdaq National Market Listing Fee............................... 95,000
Accounting Fees and Expenses..................................... 200,000
Blue Sky Fees and Expenses....................................... 10,000
Legal Fees and Expenses.......................................... 200,000
Transfer Agent and Registrar Fees and Expenses................... 3,500
Printing Expenses................................................ 150,000
Miscellaneous Expenses........................................... 203,600
--------
Total......................................................... $880,000
========
</TABLE>
- --------
* All amounts are estimates except the SEC filing fee, the NASD filing fee and
the Nasdaq National Market listing fee.

Item 14. Indemnification of Directors and Officers

Under Section 145 of the General Corporate Law of the State of Delaware,
the Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Amended and Restated Bylaws (Exhibit 3.3 hereto) also provide for mandatory
indemnification of its directors and executive officers, and permissive
indemnification of its employees and agents, to the fullest extent permissible
under Delaware law.

The Registrant's Amended and Restated Certificate of Incorporation
(Exhibit 3.1 hereto) provides that the liability of its directors for monetary
damages shall be eliminated to the fullest extent permissible under Delaware
law. Pursuant to Delaware law, this includes elimination of liability for
monetary damages for breach of the directors' fiduciary duty of care to the
Registrant and its stockholders. These provisions do not eliminate the
directors' duty of care and, in appropriate circumstances, equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant, for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for any transaction from which the director derived
an improper personal benefit, and for payment of dividends or approval of stock
repurchases or redemptions that are unlawful under Delaware law. The provision
also does not affect a director's responsibilities under any other laws, such
as the federal securities laws or state or federal environmental laws.

Prior to the effective date of the Registration Statement, the Registrant
will have entered into agreements with its directors and certain of its
executive officers that require the Registrant to indemnify such persons
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of the Registrant or any of its affiliated enterprises, provided such
person acted in good faith and in a

II-1
<PAGE>

manner such person reasonably believed to be in or not opposed to the best
interests of the Registrant and, with respect to any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. The indemnification
agreements also set forth procedures that will apply in the event of a claim
for indemnification thereunder.

The Registrant intends to obtain in conjunction with the effectiveness of
the Registration Statement a policy of directors' and officers' liability
insurance that insures our directors and officers against the cost of defense,
settlement or payment of a judgment under limited circumstances.

The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of the Registrant
and its officers and directors for liabilities arising under the Securities Act
or otherwise.

Item 15. Recent Sales of Unregistered Securities

For the period from December 31, 1997 to March 31, 1999, the Registrant
has issued and sold the following unregistered securities:

1. During the period, the Registrant granted stock options to employees,
directors and consultants under its 1998 Stock Option Plan and its 1999 Stock
Option Plan (collectively, the "Stock Plans") covering an aggregate of
3,150,109 shares of the Registrant's common stock, at exercise prices ranging
from $0.20 to $3.62 with an average exercise price of $1.52 per share.

2. During the period, the Registrant issued and sold an aggregate of
973,524 shares of its common stock to 40 employees, directors and consultants
for cash and promissory notes in the aggregate amount of $946,049 upon exercise
of stock options granted pursuant to the Registrant's Stock Plans.

3. During the period, the Registrant issued an aggregate of 4,535,000
shares of its common stock in connection with the spin off from Beyond.com in
December 1997, and 20,000 shares of its common stock for an aggregate
consideration of $72,400.

4. During the period, the Registrant issued an aggregate of 1,985,520
shares of its Series A Preferred Stock, convertible into 1,985,520 shares of
its common stock, in connection with its spin off from Beyond.com in December
1997.

5. During the period, the Registrant issued an aggregate of 2,037,038
shares of its Series B Preferred Stock, convertible into 2,037,038 shares of
its common stock, in connection with its spin off from Beyond.com in December
1997.

6. During the period, the Registrant issued an aggregate of 3,000,000
shares of its Series C Preferred Stock, convertible into 1,500,000 shares of
its common stock, in connection with its spin off from Beyond.com in December
1997.

7. During the period, the Registrant issued and sold an aggregate of
1,851,850 shares of its Series D Preferred Stock, convertible into 925,925
shares of its common stock, for an aggregate purchase price of $1,714,676.

8. During the period, the Registrant issued and sold an aggregate of
8,082,653 shares of its Series E Preferred Stock, convertible into 4,041,327
shares of its common stock, for an aggregate purchase price of $14,629,602.

II-2
<PAGE>

9. During the period, the Registrant issued and sold warrants for a total
of 1,396,639 shares of its Series E Preferred Stock, convertible into 698,319
shares of its common stock, for an aggregate consideration of $3,483,702.

10. During the period, the Registrant issued a convertible note for a
total of 1,657,458 shares of its Series E Preferred Stock, convertible into
828,729 shares of its common stock, for an aggregate consideration of
$3,000,000.

The sale and issuance of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act by virtue
of Rule 701 promulgated thereunder in that they were offered and sold either
pursuant to written compensatory benefit plans or pursuant to a written
contract relating to compensation, as provided by Rule 701 or were deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2)
thereof.

Appropriate legends were affixed to the stock certificates issued in the
above transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. No underwriters were employed in any
of the above transactions.

Item 16. Exhibits and Consolidated Financial Statement Schedules

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Document
------- --------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Certificate of Incorporation of the Registrant.
3.2** Registrant's Bylaws.
4.1 Reference is made to Exhibits 3.1 and 3.2.
5.1 Opinion of Morrison & Foerster LLP.
Form of Indemnification Agreement between the Registrant and each of its officers
10.1** and directors.
10.2** 1998 Stock Option Plan.
10.3** 1999 Stock Option Plan.
10.4** Standard Office Lease dated August 20, 1996 by and between California State
Automobile Association Inter-Insurance Bureau as Landlord and CyberSource
Corporation as Tenant.
10.5** First Amendment to Lease dated October 20, 1997 by and between California State
Association Inter-Insurance Bureau as Landlord and CyberSource Corporation as
Tenant.
10.6** Assignment of Standard Office Lease dated December 31, 1997 by and between
CyberSource Corporation as Assignor and Internet Commerce Services Corporation as
Assignee.
10.7** Sublease dated July 1, 1998 by and between MultiGen Inc. of California as
Sublessor and CyberSource of California as Sublessee.
10.8** Second Amendment to Lease dated October 30, 1998 by and between California State
Automobile Association Inter-Insurance Bureau as Landlord and CyberSource
Corporation as Tenant.
10.9+ Conveyance Agreement dated December 31, 1997 by and between CyberSource
Corporation and Internet Commerce Services Corporation.
10.10+ Amended and Restated Inter-Company Cross License Agreement dated May 19, 1998 by
and between Internet Commerce Services Corporation and software.net Corporation.
10.11+** Internet Commerce Services Agreement dated April 23, 1998 by and between Internet
Commerce Services Corporation and software.net Corporation.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Document
------- --------
<C> <S>
10.12** Amended and Restated Investors' Rights Agreement dated October 21, 1998.
10.13 Amended and Restated Convertible Promissory Note, dated October 21, 1998.
23.1 Consent of Morrison & Foerster LLP. Reference is made to Exhibit 5.1.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1** Powers of Attorney. Reference is made to Page II-5.
27.1** Financial Data Schedule
</TABLE>
- --------
+ Confidential treatment requested as to portions of this exhibit.

** Previously provided.

(b) Consolidated Financial Statement Schedules

<TABLE>
<S> <C>
Schedule II -- Valuation and Qualifying Accounts
</TABLE>

All schedules have been omitted since they are not required or are not
applicable or the required information is shown in the consolidated financial
statements or related notes.

Item 17. Undertakings

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

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, 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 Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the 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 Act shall be deemed to be part
of this Registration Statement as of the time the Commission declared
it effective.

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

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto,
State of California on June 7, 1999.

Cybersource Corporation

/s/ William S. McKiernan
By: _________________________________
William S. McKiernan
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:

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

<S> <C> <C>
/s/ William S. McKiernan Chairman of the Board of June 7, 1999
____________________________________ Directors, President and
William S. McKiernan Chief Executive Officer
(Principal Executive
Officer)

Charles E. Noreen, Jr.* Vice President of Finance June 7, 1999
____________________________________ and Administration and Chief
Charles E. Noreen, Jr. Financial Officer (Principal
Financial and Accounting
Officer)

____________________________________ Director June 7, 1999
Bert Kolde

Linda Fayne Levinson* Director June 7, 1999
____________________________________
Linda Fayne Levinson

Steven P. Novak* Director June 7, 1999
____________________________________
Steven P. Novak

Richard Scudellari* Director June 7, 1999
____________________________________
Richard Scudellari

/s/ William S. McKiernan
*By: _______________________________
William S. McKiernan
Attorney-In-Fact
</TABLE>

II-5
<PAGE>

CYBERSOURCE CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

December 31, 1997 and December 31, 1998
(In thousands)

<TABLE>
<CAPTION>
Amounts
Charged to
Balance at Revenue, Balance
beginning Costs, or Write-offs and at End
of year Expenses Recoveries of Year
---------- ---------- -------------- -------
<S> <C> <C> <C> <C>
1997
Allowance for Doubtful
Accounts............... $ -- $332 $ -- $332
1998
Allowance for Doubtful
Accounts............... $332 $193 $296 $229
</TABLE>

II-6
<PAGE>

EXHIBIT INDEX

+ Confidential treatment requested as to portions of this exhibit.

** Previously provided.

<PAGE>

Exhibit 5.1

June 7, 1999

CyberSource Corporation
550 South Winchester Blvd.,
Suite 301
San Jose, CA 95128

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-1 initially filed by
CyberSource Corporation, a Delaware corporation (the "Company"), with the
Securities and Exchange Commission on April 30, 1999 (Registration No. 333-
77545) and Amendment No. 1 thereto filed on June 7, 1999 (collectively the
"Registration Statement"), relating to the registration under the Securities Act
of 1933, as amended, of up to 4,000,000 authorized but unissued shares of the
Company's Common Stock, $0.001 par value per share (the "Shares"), being offered
by the Company (including up to 600,000 shares that may be issued upon exercise
of the underwriters' over-allotment option). The Shares are to be sold to the
underwriters named in the Registration Statement for resale to the public.

As counsel to the Company, we have examined the proceedings taken by the
Company in connection with the issuance and sale by the Company of up to
4,600,000 Shares.

We are of the opinion that the Shares to be offered and sold by the Company
have been duly authorized and, when issued and sold by the Company in the manner
described in the Registration Statement and in accordance with the resolutions
adopted by the Board of Directors of the Company, will be legally 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 in the Registration
Statement, the prospectus constituting a part thereof and any amendments
thereto.

Very truly yours,

/s/ Morrison & Foerster LLP

<PAGE>

EXHIBIT 10.9

CONVEYANCE AGREEMENT

THIS CONVEYANCE AGREEMENT ("Agreement"), dated this 31st day of
December, 1997, is made and entered into by and between CyberSource Corporation,
a California Corporation ("CyberSource"), and Internet Commerce Services
Corporation, a Delaware corporation ("ICS").

ARTICLE 1.
DEFINITIONS

The following definitions shall for all purposes, unless otherwise
clearly indicated to the contrary, apply to the terms used in this Agreement:

1.1. "Assets" means all of CyberSource's right, title and interest,
legal or equitable, in and to the assets, properties, rights, contract rights,
licenses, interests, claims, demands, causes of action, utility (and similar)
deposits, business, and goodwill used or acquired by CyberSource in connection
with its internet commerce services business (hereinafter referred to as the
"Commerce Services Business"), including the assets listed as Exhibit A attached
hereto, and the contents of such business throughout the United States and the
rest of the world including, but not limited to, all of the furniture, fixtures,
equipment and other items of personal property reflected on the balance sheet of
CyberSource relating to the Commerce Services Business and the contracts of the
Commerce Services Business. "Assets" specifically excludes the assets,
properties, rights, contract rights, licenses, interests, claims, demands,
causes of action, utility (and similar) deposits, business, and goodwill used or
acquired by CyberSource in connection with its Software.net business.

1.2. "Liabilities" means, with respect to the Assets being transferred
pursuant to this Agreement, all of CyberSource's liabilities, duties and
obligations of every kind reflected on the balance sheet of CyberSource,
including the liabilities set forth on Exhibit C hereof, acquired by CyberSource
in connection with the Commerce Services Business, or associated with a contract
being transferred to ICS hereunder.

ARTICLE 2.
CONVEYANCES

CyberSource hereby grants, bargains, sells, conveys, assigns, transfers
and delivers all of the Assets to ICS and ICS hereby accepts such Assets, at and
as of the Effective Time hereinafter provided.

TO HAVE AND TO HOLD all and singular the said Assets hereby granted,
bargained, sold, conveyed, assigned, transferred and delivered or intended so to
be unto ICS, its successors and assigns, to and for its and their own use
forever, together with all and singular the properties, assets, members and
appurtenances thereunder belonging or in anyway incident or appertaining
thereto.

* Further information in this document has been omitted and filed separately
with the Securities and Exchange Commission.
<PAGE>

If the conveyance and assignment attempted to be made hereunder of any
agreement, lease, permit, license, right, claim or other Asset would be
ineffective as between CyberSource and ICS without the consent of any third
person, or would serve as a cause for terminating or invalidating any such
agreement, lease, permit, license, right, claim or other Asset or would cause or
serve as a cause for the loss of ownership thereof, then such Asset is
temporarily excluded from the aforesaid conveyance and assignment to the extent
agreed by CyberSource and ICS. However, under such circumstances CyberSource
shall, to the greatest extent permitted, hold such Asset for the exclusive use
and benefit of ICS until such consent has been obtained. Upon the obtaining of
such consent no further conveyance or assignment shall be required, but full and
complete title to such Asset shall automatically become vested in ICS by virtue
of this Agreement.

ARTICLE 3.
ASSUMPTION OF LIABILITIES

In connection with the grant, bargain, sale, conveyance, assignment,
transfer and delivery made under Article 2 and for any conveyances, assignments,
transfers and deliveries to be made by CyberSource to ICS pursuant to Article 7,
ICS hereby assumes and agrees to perform and fully discharge all of the
Liabilities at and as of the Effective Time. ICS hereby agrees to indemnify,
defend and hold harmless CyberSource, its successors and assigns, of and from
any and all costs, liabilities and expense, including court costs and reasonable
attorneys' fees, arising from or connected with the Liabilities hereby assumed
to the extent of the assumption hereunder.

ARTICLE 4.
CONSIDERATION

In consideration of the transfer of the Assets to ICS hereunder, ICS
hereby agrees to issue, and shall be issuing at and as of the Effective Time
upon the written instruction of CyberSource to (i) the holders of the Series A
Preferred Stock of CyberSource 1,985,520 shares of the Series A Preferred Stock
of ICS ("ICS Series A"), (ii) the holders of the Series B Preferred Stock of
CyberSource 2,037,038 shares of Series B Preferred Stock of ICS ("ICS Series
B"), (iii) the holders of the Series C Preferred Stock of CyberSource 3,000,000
Series C Preferred Stock of ICS ("ICS Series C"), and to the holders of the
Company Common Stock 9,070,000 shares of the common stock of ICS ("ICS Common"),
each such issuance to be on a same percentage basis with respect to each
shareholder's shareholdings in CyberSource with the same preferential
characteristics (adjusted for the value of the distribution) for the Company's
preferred shareholders and with the same percentage ownership for each
shareholder as those which currently exist (the "ICS Stock Issuance"), and the
agreement by ICS to assume, perform and fully discharge all of the Liabilities.
CyberSource and ICS hereby agree that for tax purposes the capital stock issued
by ICS shall be deemed to have been issued to CyberSource and distributed by
CyberSource to its shareholders.

-2-
<PAGE>

ARTICLE 5.
WARRANTIES

EXCEPT AS SET FORTH IN ARTICLE 11 TO THE CONTRARY, ALL SALES,
CONVEYANCES, ASSIGNMENTS, TRANSFERS AND DELIVERIES TO BE MADE HEREUNDER WILL BE
MADE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND (INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY OF TITLE). ALL ASSETS, RIGHTS AND
BUSINESSES TO BE SOLD, CONVEYED, ASSIGNED, TRANSFERRED AND DELIVERED HEREUNDER
WILL BE SOLD, CONVEYED, ASSIGNED, TRANSFERRED AND DELIVERED "AS IS". CYBERSOURCE
EXPRESSLY DISCLAIMS ANY WARRANTIES OF CONDITION, MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE. This Agreement is made, however, with full rights of
substitution and subrogation of ICS in and to all covenants, warranties and
other rights of indemnification by others heretofore given or made with respect
to any of the Assets.

ARTICLE 6.
SALES TAXES AND RECORDING FEES

The parties agree that ICS shall pay all sales, use and similar taxes
arising out of the sales, conveyances, assignments, transfers and deliveries to
be made hereunder, and shall pay all documentary, filing and recording fees
required in connection therewith.

ARTICLE 7.
FURTHER ASSURANCES

From time to time after the date hereof, and without any further
consideration, CyberSource will execute and deliver such instruments of
conveyance, assignment, transfer and delivery, and take such other action, as
ICS may reasonably request in order more effectively to vest in ICS beneficial
and record title to the Assets to be conveyed and assigned hereunder or intended
so to be and to put ICS in actual possession and operating control of such
Assets. After the date hereof, CyberSource agrees to use its best efforts to
obtain, without additional cost to ICS any and all consents and approvals that
may be necessary to vest or confirm title to all the Assets in ICS.

ARTICLE 8.
POWER OF ATTORNEY

CyberSource does hereby constitute and appoint ICS, its successors and
assigns, the true and lawful attorney of CyberSource with full power of
substitution for it and in its name, place and stead or otherwise on behalf of
CyberSource, its successors and assigns, and for the benefit of ICS, its
successors and assigns, to demand and receive from time to time any and all
property and assets, real, personal, and mixed, tangible and intangible, hereby
conveyed and assigned or intended so to be and to execute in the name of
CyberSource, its successors and assigns, deeds, assignments and other
instruments of further assurance and to give receipts and releases in respect of
the same, and from time to time to institute and prosecute in the name of ICS or

-3-
<PAGE>

CyberSource for the benefit of ICS as may be appropriate, any and all
proceedings at law, in equity or otherwise which ICS, its successors and
assigns, may deem proper in order to collect, assert or enforce any claims,
rights or title of any kind in and to the Assets hereby conveyed and assigned or
intended so to be, and to defend and compromise any and all actions, suits or
proceedings in respect of any of said Assets and to do any and all such acts and
things in furtherance of this Agreement as ICS, its successors or assigns, shall
deem advisable. CyberSource hereby declares that the appointment hereby made and
the powers hereby granted are coupled with an interest and are and shall be
irrevocable and perpetual and shall not be terminated by any act of CyberSource
or its successors or assigns or by operation of law.

ARTICLE 9.
SECURITIES LAW REPRESENTATIONS

CyberSource acknowledges that the capital stock to be issued pursuant to
the ICS Stock Issuance are being issued to it pursuant to a private offering
exemption from registration under the Securities Act of 1933, as amended (the
"Securities Act"), and, as a result thereof, the shares of ICS capital stock are
"restricted securities" for purposes of Rule 144 as promulgated under the
Securities Act. CyberSource represents and warrants that it and each of its
shareholders is an "accredited investor" as such term is defined in Regulation D
as promulgated under the Securities Act.

ARTICLE 10.
GENERAL

10.1. Registration Rights. The holders of ICS Series A, ICS Series B,
and ICS Series C are hereby granted by the Company the information rights and
registration rights with respect to their Preferred Stock holdings in ICS as
such holders have with respect to the shares of Preferred Stock of CyberSource.

10.2. McKiernan Transfers. William S. McKiernan ("McKiernan") hereby
agrees that the holders of ICS Series A Interests, ICS Series B and ICS Series C
shall have co-sale and rights of first offer on proposed transfers of shares of
ICS capital stock by McKiernan to the same extent such holders have with respect
to the shares of Preferred Stock of CyberSource.

10.3. Effective Time. Regardless of when executed, this Conveyance
Agreement shall be effective as of 3:30 p.m., Pacific Standard Time (the
"Effective Time"), on December 31, 1997.

10.4. Headings. All article or section headings in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any of the provisions hereof.

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

-4-
<PAGE>

10.6. Integration. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior agreements and understandings pertaining thereto.

10.7. Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.

10.8. Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California.

ARTICLE 11.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES

11.1 Representations and Warranties of CyberSource. CyberSource hereby
represents and warrants to ICS the following:

(a) Neither the execution of this Agreement by CyberSource nor
the consummation of the transactions contemplated hereby which are to be
performed by CyberSource violates the provisions of Section 500 the California
General Corporation Law (the "GCL") as applicable to CyberSource.

(b) All consents and approvals necessary or appropriate for
CyberSource to execute this Agreement and to consummate the transactions
contemplated hereby which are to be performed by CyberSource have been obtained,
except for such consents and approvals the failure of which to obtain would not
result in any material adverse effect on CyberSource or its shareholders; it
being specifically understood that the effect of Sections 502, 503 and 506 of
the GCL are expressly excluded from this representation.

(c) To the best knowledge of CyberSource , the transfer by
CyberSource of its internet commerce services business to ICS as provided in
this Agreement in exchange for stock of ICS qualifies as a Section 351
transaction under the Internal Revenue Code.

11.2 Representations and Warranties of ICS. ICS hereby represents and
warrants to CyberSource the following:

(a) ICS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own and hold its properties, carry on its
business as now conducted and as proposed to be conducted. ICS has the corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated by this Agreement.

(b) The total number of shares of capital stock which ICS is
authorized to issue is forty million (40,000,000), divided into two classes as
follows: thirty million (30,000,000) shares of common stock, $.001 par value per
share (the "Common Stock") and ten million shares of preferred stock. $.001 par
value per share (the "Preferred Stock"). 1,985,520 shares of Preferred Stock
have been designated Series A Preferred Stock (the "Series A Stock"),

-5-
<PAGE>

2,500,000 shares of Preferred Stock have been designated Series B Preferred
Stock (the "Series B Stock") and 3,000,000 shares of Preferred Stock have been
designated Series C Preferred Stock (the "Series C Stock"). No such shares will
have been issued by ICS prior to the ICS Stock Issuance. The rights, preferences
and privileges of the Series A Stock, Series B Stock and the Series C Stock will
be as stated in the Certificate of Incorporation of ICS. Except as set forth in
this Agreement, ICS has no obligations as of the date of this Agreement to issue
any shares of its capital stock.

(c) All corporate action on the part of ICS, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of ICS hereunder
and for the authorization, issuance and delivery of the shares of capital stock
to be issued in the ICS Stock Issuance has been taken and this Agreement
constitutes a valid and legally binding agreement of ICS enforceable against ICS
in accordance with its terms, except as limited by (i) bankruptcy or insolvency
laws or (ii) equitable principles or public policy.

(d) The shares to be issued in the ICS Stock Issuance, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable. The Board of Directors of ICS has adopted resolutions reserving
the shares of Common Stock to be issued upon conversion of the Series A Stock,
Series B Stock and Series C Stock and when the shares of Common Stock are issued
upon such conversion in accordance with the Certificate of Incorporation of ICS,
such shares will be duly and validly issued, fully paid and nonassessable.

(e) ICS has no assets or liabilities other than those conveyed
pursuant to this Agreement.

11.3 Covenants of ICS. ICS hereby covenants that it will take all
actions reasonably necessary or appropriate to grant and preserve the rights of
the ICS stockholders set forth in Sections 10.1 and 10.2 of this Agreement and
any other rights or duties such stockholders have in their capacity as
CyberSource shareholders, such that the CyberSource shareholders will have
equivalent rights and duties in their capacity as ICS stockholders.

11.4 Beneficiaries of Representations and Warranties. The
representations and warranties of CyberSource and ICS set forth in this Article
11 are expressly made for the benefit of, in addition to the party specified
above, the shareholders and stockholders, as the case may be, of the relevant
entity. CyberSource expressly acknowledges that its shareholders are relying on
these representations and warranties in connection with their approval of this
Agreement and the transactions contemplated hereby. The representations and
warranties set forth in this Article 11 shall expire and be of no further force
and effect as of the close of business on January 30, 1998.

-6-
<PAGE>

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

INTERNET COMMERCE SERVICES
CORPORATION

By: /s/ William S. McKiernan
-------------------------------
/s/ William McKiernan
- ----------------------------
William McKiernan Name: William S. McKiernan
----------------------------
Title: CEO
---------------------------

CYBERSOURCE CORPORATION

By: /s/ William S. McKiernan
-------------------------------

Name: William McKiernan

Title: President and Chief Executive
Officer

-7-
<PAGE>

EXHIBIT A

LIST OF INCLUDED ASSETS

1. All contract, technology license and other rights between
CyberSource and third parties for the operation of the Commerce Services
Business, and other directly related services, including CyberSource's customer
contracts and employment agreements with Commerce Services Business employees,
including specifically those assets and liabilities set forth on the balance
sheet attached hereto as Exhibit B and the schedule of employees and other
assets contained in Appendix I hereto.

2. All technology currently used in the Commerce Services
Business;

3. The portion of the leases for the space occupied by the
Commerce Services Business and the Employees thereof; and

4. All of the employees of CyberSource who are singularly engaged
in the Commerce Services Business.
<PAGE>

EXHIBIT B

* Further information on this page has been omitted and filed separately with
the Securities and Exchange Commission.

<PAGE>

EXHIBIT C

[Missing]

<PAGE>

APPENDIX I

* Further information on this page has been omitted and filed separately with
the Securities and Exchange Commission.

<PAGE>

EXHIBIT 10.10

AMENDED AND RESTATED

INTER-COMPANY CROSS LICENSE AGREEMENT

This Agreement is entered into as of this 19th day of May, 1998 by and
between Internet Commerce Services Corporation, a Delaware corporation, with its
principal place of business at 550 S. Winchester Boulevard, Suite 300, San Jose,
CA 95128 (hereafter "ICS") and software.net Corporation, a California
corporation previously known as CyberSource Corporation, with its principal
place of business at 3031 Tisch Way, Suite 900, San Jose, CA 95128 (hereafter
"software.net").
RECITALS

A. WHEREAS, the parties entered into that certain Conveyance Agreement
dated December 31, 1997 (hereafter "Conveyance Agreement"), which among other
things, conveyed, transferred and assigned from CyberSource Corporation to
Internet Commerce Services Corporation all intellectual property and other
assets of the "back office" aspects of the internet commerce services business
of CyberSource Corporation; and

B. WHEREAS, in furtherance of the Conveyance Agreement, CyberSource has
executed and recorded with the United States Patent & Trademark Office, that
certain Assignment of Applications of Letters of Patent of the United States
dated March 26, 1998, and that certain Assignment of Marks dated March 26,
1998; and

C. WHEREAS, on or about April 22, 1998, CyberSource Corporation changed
its name to software.net Corporation; and

D. WHEREAS, on or about April 23, 1998, the parties entered into that
certain Inter-Company Cross License Agreement (the "Original Cross-License
Agreement") for the purposes of clarifying the ownership of such intellectual
property which has not been specifically described in the foregoing assignments
and to set forth the terms for the cross licensing of technology, data and
information held by each party; and

E. WHEREAS, the parties now desire to amend the Original Cross License
Agreement for the purposes of clarifying the terms of the Original Cross
License Agreement.

AGREEMENT

In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt and sufficiency of which is hereby
acknowledged, the parties agree that the Original Cross License Agreement shall
be amended and restated as follows:

1. DEFINITIONS. The following definitions shall apply to this Agreement
and each of the Schedules attached hereto.

1.1. "Internal use" (with or without capitalization) shall mean
use only by IP Licensee's employees, agents or authorized representatives on
computer systems controlled by IP Licensee.

1.2. "IP Owner" shall mean a party which is the owner of the
particular technology or intellectual property as identified in Section 2
hereunder.

* Further information in this document has been omitted and filed separately
with the Securities and Exchange Commission.
<PAGE>

1.3. "IP Licensee" shall mean a party which is the licensee for a
particular technology or intellectual property as identified in Section 3
hereunder.

1.4. "Licensed IP" shall mean the particular technology or
intellectual property which is cross licensed under Section 3, herein.

2. OWNERSHIP OF INTELLECTUAL PROPERTY

2.1 software.net acknowledges, agrees and affirms that, as
between software.net and ICS, ICS is the sole and exclusive owner of the
following, and that nothing else was transferred to ICS under the Conveyance
Agreement except for the following:

2.1.1. That SmartCert Technology as described in Schedule
2.1.1, attached hereto (hereafter "SmartCert"), including without limitation,
any and all improvements, enhancements and modifications thereto created and
developed by either or both parties on or before December 31, 1998;

2.1.2. Those certain inventions as described in the patent
applications identified in Schedule 2.1.2, attached hereto ("Patents Pending");

2.1.3. Those certain "back office" technologies and
systems as described in Schedule 2.1.3, attached hereto (hereafter "Backoffice
Systems");

2.1.4. The rights to licenses of software and other
intellectual property acquired from third parties in connection with ICS's
internet commerce operations as described in Schedule 2.1.4, attached hereto
(hereafter "ICS Third Party Software"), subject to any required consents to
assignment which have not been obtained; and

2.1.5. The trademarks and service marks and applications
thereof described in Schedule 2.1.5, attached hereto (hereafter "ICS Trademarks,
Services Marks and Applications Thereof").

2.2. ICS acknowledges, agrees and affirms that as between
software.net and ICS, software.net is the sole and exclusive owner of the
following:

2.2.1. That software known as "Cache Manager", but
excluding the underlying SmartCert Technology, as described in Schedule 2.2.1
attached hereto (hereafter "Cache Manager"), including without limitation any
and all improvements, enhancements and modifications thereto created and
developed by either or both parties on or before December 31, 1998;

2.2.2. That certain database of customer information, as
described in Schedule 2.2.2, attached hereto (hereafter "Customer Database");

2.2.3. That certain software which comprises
software.net's internet software and digital content superstore and related
server engine as described in Schedule 2.2.3, attached hereto (hereafter "Store
Engine");

-2-

<PAGE>

2.2.4. The rights to licenses of software and other
intellectual property acquired from third parties in connection with
software.net's operations as described in Schedule 2.2.4, attached hereto
(hereafter "software.net Third Party Software"); and

2.2.5. The trademarks and service marks and applications
thereof described in Schedule 2.2.5, attached hereto (hereafter "software.net
Trademarks, Service Marks and Applications Thereof").

2.3. The parties acknowledge, agree and affirm that the utility
tools set forth in Schedule 2.3, attached hereto (hereafter "Jointly Owned
Utility Tools") are jointly owned by both parties and may be freely used by
either party without accounting to each other.

2.4. Ownership of any other inventions not cited in above
sections 2.1, 2.2 and 2.3, which were made by the parties on or before June 30,
1998 ("Background Inventions") shall be as follows:

2.4.1. If made exclusively by one party, then such
Background Inventions shall be the property of that party.

2.4.2. If made jointly by both parties, then such
Background Inventions shall be jointly owned without accounting to each other.
In the case of a jointly filed patent application, the patent expenses shall be
divided equally between the parties. If either party elects not to file an
application on a joint Background Invention and/or not pay its share of the
expenses thereof, the other party may file at its own expense and shall have
sole control of the prosecution thereof. The party not participating in the
prosecution thereof shall remain liable for its share of the expenses for
prosecution of the application unless it assigns its entire interest in the
Background Invention to the prosecuting party.

2.5. Ownership of improvements, enhancements and modifications
made by the parties after December 31, 1998 and before January 1, 2000 to any of
the technologies and information which are licensed under sections 3.1 and 3.3,
herein (hereafter "Enhancements") shall be treated as follows:

2.5.1. If made exclusively by one party, then such
Enhancements shall be the property of that party.

2.5.2. If made jointly by both parties, then such Enhancements shall
be jointly owned without accounting to each other. In the case of a jointly
filed patent application, the patent expenses shall be divided equally between
the parties. If either party elects not to file an application on a jointly
owned Enhancement and/or not pay its share of the expenses thereof, the other
party may file at its own expense and shall have sole control of the prosecution
thereof. The party not participating in the prosecution thereof shall remain
liable for its share of the expenses for prosecution of the application unless
it assigns its entire interest in the Enhancement to the prosecuting party.

-3-

<PAGE>

2.6. Each of the parties agrees to execute, acknowledge, and
deliver as necessary any instruments confirming the ownership by the other in
accordance with this Section 2.

3. CROSS LICENSES.

3.1. SmartCert. ICS hereby grants to software.net, and
software.net accepts, a worldwide, perpetual, irrevocable, royalty-free license
with respect to the SmartCert Technology in object and source code (including
all related user documentation) as follows:

3.1.1. a non-exclusive license for software.net's
internal use only, which license shall also include the right to
reproduce and modify;

3.1.2. a license to modify the SmartCert software for
the purposes of merging it into Cache Manager alone or Cache
Manager in combination with other software (including all
related user documentation) developed, owned or licensed by
software.net and to reproduce and sublicense the merged product
(but not the SmartCert software alone) directly to, and for use
by, enterprises (including without limitation corporations,
partnerships, sole proprietorships and universities) and
governmental agencies, provided:

3.1.2.1. sublicenses of the merged product to
the U.S. Government or other governmental agencies shall
be as "restricted computer software" or "limited rights
data" as set forth in "Rights in Data - General" at 48
CFR 52.227-14, or as "commercial computer software" or
"commercial computer software documentation" under DFARS
252.227-7015, or under such other similar applicable
terms and conditions to prevent the transfer of rights
in and to the technology to the government other than
under normal commercial licensing terms and conditions;
and

3.1.2.2. sublicenses of the merged product shall
not include the right to further sublicense to another
party the merged product;

3.1.3. software.net shall keep the source code for the SmartCert
Technology confidential in accordance with Section 6, below.

3.2. Patents Pending. In the event that letters patent issue from the
Patents Pending, ICS grants to software.net, and software.net accepts, a
worldwide, perpetual, irrevocable, royalty-free, nonexclusive license to
practice any and all methods, systems and other inventions described in said
letters patent with the following conditions:

3.2.1. Such license shall not include the right to sublicense,
except in conjunction with, and only to the extent as necessary to give
effect to, the sublicense of any software, products or technology
licensed by ICS to software.net pursuant to any other license which may
be granted in writing by ICS to software.net, including the license set
forth in above Section 3.1.

3.2.2. Such license shall not in any way convey, grant or
transfer to software.net any right to use any software, technical data
or physical device owned by ICS, including without limitation, the
SmartCert Technology, its object code, source code and related
documentation. Any right to use such software, technical data or
physical device shall be governed by a separate license agreement, or
in the case of the SmartCert Technology, shall be governed by above
section 3.1.

-4-
<PAGE>

3.3. Cache Manager. software.net hereby grants to ICS, and ICS accepts,
a non-exclusive, worldwide, perpetual, irrevocable, royalty-free license with
respect to the Cache Manager software in source and object codes (including all
related user documentation) as follows:

3.3.1. such license shall be for ICS's internal use only, and
shall include the right to reproduce and modify the source and object
codes;

3.3.2. such license shall not permit any right to sublicense;
and

3.3.3. ICS shall keep the source code for the Cache Manager
confidential in accordance with Section 6, below.

3.4. Customer Database. software.net hereby grants to ICS, and ICS
accepts, a non-exclusive, worldwide, perpetual, irrevocable, royalty-free
license with respect to the Customer Database as follows:

3.4.1. Customer Database shall be used only as part of the fraud
detection and verification system owned by ICS, including without the
limitation, the IVS system, and shall include the right to reproduce and
modify;

3.4.2. sublicensing of the Customer Database is not permitted
except in conjunction with the sublicensing of ICS's fraud detection and
verification system provided that (i) sublicensees are expressly
prohibited under such sublicenses from using the Customer Data for any
purpose other than for fraud detection and verification utilizing ICS's
fraud detection and verification system, (ii) sublicensees shall not
have access to the raw, human-readable Customer Database, but shall have
only access to the evaluated scores derived from the utilization of the
fraud detection and verification system, (iii) such sublicensees shall
agree under said sublicenses that any such breach of said limitation of
use by sublicensee shall constitute irreparable injury which shall
entitle ICS and software.net to extraordinary remedies, including
without limitation, injunctive relief, and (iv) ICS indemnifies and
holds harmless software.net for any and all damages and losses suffered
by software.net resulting from any breach of said limitation of use by
any of such sublicensees, including without limitation any and all
attorneys' fees and costs to enjoin the unlawful use of the Customer
Data caused by such breach; and

3.4.3. ICS shall keep the Customer Database confidential in
accordance with Section 6, below.

3.5. Background Inventions. If any letters patent should issue on
Background Inventions which are owned exclusively by one party ("Single Owner
Background Patents"), the parties agree as follows:

-5-
<PAGE>

3.5.1. The owner of the Single Owner Background Patent
shall grant to the other party a worldwide, perpetual,
irrevocable, royalty-free, nonexclusive license, without the
right to sublicense, to practice any and all methods, systems
and inventions contained in the Single Owner Background Patent;

3.5.2. Such license to practice the Single Owner
Background Patent does not convey in any way to the licensee any
right to use any of the licensor's software, technical data or
physical device in connection with the Single Owner Background
Patent. Such use of the licensor's software, technical data or
physical device shall be governed by a separate license to be
negotiated and agreed to by the parties.

3.6. Relations Back to Date of Conveyance Agreement. Each of the
licenses of the Licensed IP by the IP Owners to the IP Licensees as set forth in
this Agreement shall be effective as of December 31, 1997, the effective date of
the Conveyance Agreement.

4. MOST FAVORED TERMS FOR ENHANCEMENTS. A party owning exclusively a
Enhancement is not required to offer such Enhancement to any entity. However, if
the party owning such Enhancement should offer such Enhancement to any third
party, it shall offer to the other party under this Agreement such Enhancement
under terms and conditions which are at least as favorable to the best terms and
conditions offered to any other third party under similar circumstances. If at
any time more favorable terms and conditions are granted to any third party
pertaining to such Enhancement, the party acting as IP Owner or grantor shall
notify the other party herein and, if the other party so elects, shall be
automatically become entitled to such more favorable terms and conditions.

5. LIMITATION OF WARRANTY. DISCLAIMER OF WARRANTIES. EACH OF THE
TECHNOLOGIES, INFORMATION AND INTELLECTUAL PROPERTIES LICENSED HEREUNDER ARE
PROVIDED "AS IS" WITH ALL FAULTS AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES.
THE ENTIRE RISK AS TO SATISFACTORY QUALITY, PERFORMANCE, ACCURACY, AND EFFORT IS
WITH THE IP LICENSEE. THIS DISCLAIMER OF WARRANTY EXTENDS TO THE RESPECTIVE IP
LICENSEES AND IP LICENSEE'S CUSTOMERS AND END-USERS AND IS IN LIEU OF ALL
WARRANTIES AND CONDITIONS WHETHER EXPRESS, IMPLIED, OR STATUTORY, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, TITLE AND
NONINFRINGEMENT WITH RESPECT TO THE LICENSED TECHNOLOGIES AND INTELLECTUAL
PROPERTIES.

6. CONFIDENTIALITY. The Customer Database, the Patents Pending,
Backoffice Systems and the source code for SmartCert, Cache Manager and the
Store Engine and all documentation and information designated by the party
disclosing the information (the "Disclosing Party") as proprietary and
confidential, including without limitation drawings, computer program listings,
techniques, algorithms and processes and technical and marketing information
which are supplied by the Disclosing Party in connection with this Agreement or
which have been treated by either of the parties heretofore as proprietary and
confidential (the foregoing shall be collectively referred to hereafter as
"Confidential Information") shall be

-6-
<PAGE>

treated confidentially by the recipient of Confidential Information
("Recipient") and its employees, and shall not be disclosed by the
Recipient without Disclosing Party's prior written consent. Each party
shall have an appropriate agreement with each of its employees having
access to the Confidential Information sufficient to enable the party to
comply with all terms of this Agreement. Each party agrees to protect
the Confidential Information with the same (but in no case less than
reasonable) standard of care and procedures it uses to protect its own
trade secrets and proprietary information.

7. INDEMNITY.

7.1. Each IP Licensee shall indemnify and hold harmless the IP
Owner for any and all third party claims based on the IP Licensee's usage of the
Licensed IP, excluding any third party claim based on a claim that Licensed IP
infringes the third party's patent, copyright, trademark or other proprietary
right.

7.2. The indemnities set forth in sections section 3.4.2 and 7.1,
above, will not apply to the extent the party claiming the indemnification was
responsible for giving rise to the matter upon which the claim for
indemnification is based and will not apply unless the party claiming
indemnification promptly notifies the other of any matters in respect of which
the indemnity may apply and of which the notifying party has knowledge and gives
the other full opportunity to control the response thereto and the defense
thereof, including without limitation any agreement relating to the settlement
thereof.

8. LIMITATION OF LIABILITY. EXCEPT FOR LIABILITY FOR PERSONAL INJURY AND
PHYSICAL PROPERTY DAMAGE, THE INDEMNITY PROVISIONS OF SECTION 3.4.2, ABOVE, AND
A BREACH OF THE CONFIDENTIALITY PROVISIONS OF SECTION 6, ABOVE, IN NO EVENT
SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, PUNITIVE, EXEMPLARY, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO SUCH DAMAGES
ARISING FROM BREACH OF CONTRACT OR WARRANTY OR FROM NEGLIGENCE OR STRICT
LIABILITY), OR FOR INTERRUPTED COMMUNICATIONS, LOST DATA, LOST PROFITS, LOST
SAVINGS, OR ANY COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES ARISING OUT
OF OR RESULTING FROM THIS AGREEMENT, EVEN IF THE PARTY HAD BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.

9. MARKINGS. In conjunction with the licenses granted herein, the
respective IP Licensee shall agree to place such markings, notices and legends
as requested by the IP Owner for purposes of preservation of rights under
patent, copyright, trademark or other proprietary rights.

10. TERMINATION. Any IP Licensee may terminate its license for the
applicable Licensed IP by giving written notice and returning to the IP Owner
all copies of the Licensed IP in its possession. All sublicenses and licenses,
if any, granted by the IP Licensee as permitted under the terms of this
Agreement shall continue under their own terms.

11. GENERAL

-7-
<PAGE>

11.1. Governing Law. This Agreement shall be governed and
interpreted by the laws of the State of California, excluding its conflict of
laws provisions. The parties agree that any action brought for any dispute
between the parties relating to this Agreement shall take place in, and the
parties consent to jurisdiction of, the Superior Court for the County of Santa
Clara or the United States District Court for the Northern California District
in San Jose, California.

11.2. Irreparable Injury. The parties agree that a violation or
breach of Sections 3, 4, 6 and 9, herein, will result in irreparable injury and
agree that such provisions shall be specifically enforced by the injured party.

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

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

11.5. Successors and Assigns. This Agreement, and the licenses
herein granted, will inure to the benefit of, and be binding upon, the parties
hereto and their respective successors and assigns, but will not be assigned by
either party, except to a wholly-owned subsidiary or to a party acquiring
substantially all of its business and assuming all of its obligations and
liabilities, without the written consent of the other party. In the event of any
assignment, the transferor or assignor will remain obligated to perform its own
obligations and, in addition, will be jointly liable for the proper performance
of the obligations of the transferee or assignee pursuant to this Agreement.

11.6. Notice. Any notices required or permitted hereunder shall
be given to the appropriate party at the address specified above or at such
other address as the party shall specify in writing. Such notice shall be deemed
given: upon personal delivery; if sent by telephone facsimile, upon confirmation
of receipt; if sent by electronic mail, upon confirmation of receipt; or if sent
by certified or registered mail, postage prepaid, five (5) days after the date
of mailing.

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

11.8. Entire Agreement. This Agreement, including any exhibits
attached hereto, and the Conveyance Agreement sets forth the entire
understanding and agreement of the parties and supersedes any and all oral or
written agreements or understandings between the parties, including without
limitation the Original Cross License Agreement, as to the subject matter of
this Agreement. It may be changed only by a writing signed by both parties.
Neither party is relying upon any warranties, representations, assurances or
inducements not expressly set forth herein.

-8-
<PAGE>

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

SOFTWARE.NET CORPORATION: INTERNET COMMERCE SERVICES
CORPORATION:

By: /s/ Jim Lussier By: /s/ W.S. McKiernan
------------------------------- -----------------------------

Title: V.P., Business Operations Title: President & CEO
---------------------------- --------------------------

Fax: 415-241-8258 Fax: 408-241-8270
---------------------------- ----------------------------

E Mail: [email protected] E Mail: [email protected]
--------------------------- -------------------------

-9-
<PAGE>

SCHEDULE 2.1.1
SMARTCERT TECHNOLOGY

All right, title, interest, and benefit (including to make, use, or sell
under patent law; to copy, adapt, distribute, display, perform, transmit and
access under copyright law; and to use and disclose under trade secret law) in
and to all United States and foreign patents and patent applications, patent
license rights, patentable inventions, trade secrets, trademarks, service marks,
trade names (including, in the case of trademarks, service marks and trade
names, all goodwill appertaining thereto), copyrights, technology licenses,
know-how, confidential information, shop rights, and all other intellectual
property rights owned or claimed in the following:

That certain software program, in object code and source code,
called SmartCert by the parties, which program is used to deliver
products electronically together with marketing and promotional
information. Such program, among other things, tracks the
transmission of electronically distributed software and has
features which enables interrupted downloads to be resumed
without reloading the entire product.
<PAGE>

SCHEDULE 2.1.2
PATENTS PENDING

Subject to the Assignment of Applications of Letters Patent of the United States
dated March 26, 1998 which has been recorded with the United States Patent &
Trademark Office, all right, title and interest (including without limitation,
all divisional, continuing, substitute, renewal and reissue applications
thereof) in and to the following applications pending with the United States
Patent & Trademark Office:

TITLE APPLICATION NO. FILING DATE
- ----------- ---------------- -------------
<S> <C> <C>
[*] [*] [*]

A Method and System for Controlling 08/638,949 04/24/96
Distribution of Software in a Multitiered
Distribution Chain

[*] [*] [*]
</TABLE>

* Further information on this page has been omitted and filed separately with
the Securities and Exchange Commission.
<PAGE>

SCHEDULE 2.1.3
BACK OFFICE SYSTEMS

All right, title and interest in those backoffice software systems which
are operated by ICS as of the date of this Agreement, except as otherwise
specified in Section 2.2 of this Agreement, including without limitation:

1. Payment processing system

2. IVS system

3. Export and territory management system

4. Fulfillment house notification system

5. Rights management system

6. Global rights registry (old LCH) database system

7. US sales tax calculation system

8. IBM/SMS NetTrade Finance system for international currency payment
processing

9. VAT calculation system

10. Digital warehouse for storing and downloading digital products like
software

11. Simple Commerce Messaging Protocol (SCMP) client libraries and
related server libraries and functions

12. Digital Commerce Component (DCC), an SCMP implementation over
Windows NT for Microsoft Site Server

13. Payment processing software for direct connection to FUSA and other
processors

14. SmartReg web site and associated images, scripts and server
components

15. www.cybersource.com web site and associated images, scripts, server
components and worldwide registered use of name

16. www.esdmap.org web site and associated images, scripts, server
components and worldwide registered use of name

17. CommerceFLEX and all components

18. CommerceEZ and all related components
<PAGE>

19. The EDI message and transaction processing systems and
infrastructure

20. The Thin Server framework and application concepts

-2-
<PAGE>

SCHEDULE 2.1.5
ICS TRADEMARKS, SERVICE MARKS AND APPLICATIONS THEREOF

A. Subject to the Assignment of Marks dated March 26, 1998, all right,
title and interest in and to the following trademarks, service marks and
applications thereof, together with all goodwill appertaining thereto:

UNITED STATES MARK USPTO REGISTRATION NO.
- ------------------ ----------------------
<S> <C>
CYBERSOURCE 2,006,769

UNITED STATES MARK USPTO APPLICATION SERIAL NO.
- ------------------ ----------------------------

CYBERSOURCE 75/411012

IVS 75/310542

COMMERCEEZ 75/240894

COMMERCEFLEX 75/240895

SMARTCERT 75/417912
</TABLE>

B. All right, title and interest in and to the following trademarks,
service marks and applications thereof, together with all goodwill appertaining
thereto:

INTERNATIONAL MARK
APPLICATION NO. COUNTRY
- ------------------ ------- -------
<S> <C> <C>
CYBERSOURCE European Union (CTM)
000678391

CYBERSOURCE Canada
0869935

SMARTCERT European Union (CTM)
000728253

SMARTCERT Canada
0869936

</TABLE>
<PAGE>

SCHEDULE 2.1.5
ICS TRADEMARKS, SERVICE MARKS AND APPLICATIONS THEREOF

UNITED STATES MARK USPTO REGISTRATION NO.
- ------------------ ----------------------
<S> <C>
CYBERSOURCE 2,006,769

UNITED STATES MARK USPTO APPLICATION SERIAL NO.
- ------------------ ----------------------------

CYBERSOURCE 75/411012

IVS 75/310542

COMMERCEEZ 75/240894

COMMERCEFLEX 75/240895

SMARTCERT 75/417912
</TABLE>

B. All right, title and interest in and to the following trademarks,
service marks and applications thereof, together with all goodwill appertaining
thereto:

INTERNATIONAL MARK
APPLICATION NO. COUNTRY
- ------------------ ------- -------
<S> <C> <C>
CYBERSOURCE European Union (CTM)
000678391

CYBERSOURCE Canada
0869935

SMARTCERT European Union (CTM)
000728253

SMARTCERT Canada
0869936

</TABLE>
<PAGE>

SCHEDULE 2.2.1
CACHE MANAGER

That software, in object code and source code, called Cache
Manager by the parties, which works in conjunction with the
SmartCert software to enable a cache of downloaded software at
locations inside a customer's firewall. Cache Manager enables the
distribution of caches of software to locations within an
enterprise, ensuring a large enterprise that the current release
of software programs is available to staff with minimal
management intervention.
<PAGE>

SCHEDULE 2.2.2
CUSTOMER DATABASE

All right, title and interest in the information gathered by software.net
related to its customers and which information has been used by ICS in its fraud
detection and verification system as of April 23, 1998.
<PAGE>

SCHEDULE 2.2.3
THE STORE ENGINE

All right, title and interest in the software and digital content
superstore software systems (the "Store Engine" systems) which are operated by
software.net as of the date of this Agreement, except as otherwise specified in
Section 2.1 of this Agreement, including without limitation:

The computer software, in object code and source code, which is
based on a distributed transaction processing model that runs the
entire software.net site, excluding any ownership rights to
software that is licensed by ICS or third parties to
software.net.

Any and all software (source and object) related to the webpages
produced by either or both parties since its inception
appertaining to the software.net URL.
<PAGE>

SCHEDULE 2.2.4
SOFTWARE.NET THIRD PARTY SOFTWARE

All rights to the licenses from third parties for products which are
used by software.net in its operations, including without limitation:

1. Netscape web servers

2. Any and all operating system and development tools software
licensed for machines owned by software.net

3. All software licensed from Microsoft under the internal use
agreement between Microsoft and software.net

4. Such other business applications resident on systems owned by
software.net

5. Solomon accounting software

6. Quickbooks accounting software
<PAGE>

SCHEDULE 2.2.5
SOFTWARE.NET TRADEMARKS, SERVICE MARKS AND APPLICATIONS THEREOF

All right, title and interest in and to the following trademarks,
service marks and applications thereof, together with all goodwill appertaining
thereto:

UNITED STATES MARK USPTO SERIAL NO.
- ------------------ ----------------
<S> <C>
SOFTWARE.NET 74/565186

SOFTWARE.NET plus DESIGN 75/304973

SOFTWARE TV 75/371655

DIGITAL GEAR 75/442168

</TABLE>
<PAGE>

SCHEDULE 2.3
JOINTLY OWNED UTILITY TOOLS

Any and all internally written tools to monitor the correct operation of
web servers, routers and other network equipment created by either or both
parties on or before the date of this Agreement.

<PAGE>

EXHIBIT 10.13

AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE

$3,000,000 October 21, 1998

WHEREAS, Internet Commerce Services Corporation, a Delaware
corporation (also known as CyberSource Corporation, the "Company"), and William
S. McKiernan, an individual ("Lender"), are party to that certain Convertible
Promissory Note, dated as of August 7, 1998 (the "Note");

WHEREAS, pursuant to the terms of the Note and subject to the
conditions set forth therein, Lender loaned the Company the sum of Three Million
Dollars (US $3,000,000) lawful money of the United States of America (the
"Loan") on the Effective Date (as defined below); and

WHEREAS, the parties desire to amend and restate the terms and
conditions of the Note as provided in this Amended and Restated Convertible
Promissory Note (the "Restated Note"):

NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Company hereby promises to pay to the order of Lender, the sum
of Three Million Dollars (US $3,000,000) lawful money of the United States of
America which shall be legal tender for the payment of debts from time to time,
together with interest on the principal amount hereof remaining outstanding and
unpaid, from the Effective Date until maturity, at the rate of ten percent (10%)
per annum (the "Interest Rate") (computed on the actual number of days elapsed
over a year of 365 days).

1. Repayment Procedures. The principal balance evidenced by this Note
--------------------
(the "Repayment Amount"), and any accrued but unpaid interest, shall be due and
payable in full on the Due Date (as defined below).

2. Interest. Interest shall be paid by the Company in quarterly
--------
installments.

3. Conversion.
----------

A. Conversion Events.
-----------------

(i). In the event of the consummation of a Private Equity
Financing (as defined below) after the Effective Date and prior to the Due
Date, the Note shall convert:

1
<PAGE>

(a) Prior to the Due Date, at the discretion of Lender into a
number of shares of the securities offered in such Private Equity
Financing, such number to be calculated by dividing the Repayment
Amount by the price per-share paid by investors in such Private Equity
Financing for shares of the securities offered in such Private Equity
Financing; or

(b) On the Due Date, if no conversion has occurred in
accordance with subsection (a) above, automatically into a number of
shares of the securities offered in such Private Equity Financing,
such number to be calculated by dividing the Repayment Amount by the
price per-share paid by investors in such Private Equity Financing for
shares of the securities offered in such Private Equity Financing.

(c) For purposes of this Section 4.A(i), if several Private
Equity Financings occur after the Effective Date and prior to the Due
Date, then this Note shall convert in accordance with this Section
4.A.(i) into a number of shares of the securities offered in the first
Private Equity Financing after the issuance of this Note, such number
to be calculated by dividing the Repayment Amount by the price per-
share of the securities offered in such Private Equity Financing.

(ii).In the absence of a Private Equity Financing after the
Effective Date and prior to the Due Date, the Note shall convert
automatically on the Due Date into a number of shares of Common Stock of
the Company, such number to be calculated by dividing the Repayment Amount
by $1.08.

B. Conversion Process.
------------------

(i). Upon conversion, Lender shall immediately surrender this Note
at the office of the Company in its entirety. Thereupon, the Company shall
promptly issue and deliver at such office to Lender a certificate for the
number of shares of equity securities to which Lender shall be entitled. No
partial conversion of this Note shall be permitted.

(ii).With respect to the conversion described in Section 4.A above,
Lender and the Company hereby agree that Lender will (a) execute all
documents in connection with the Private Equity Financing as if Lender were
a cash investor in the Private Equity Financing, and (b) be subject to all
other terms and conditions of the Private Equity Financing.

4. Investor Representations. Lender, by acceptance hereof, acknowledges that
------------------------
this Note and other shares of equity securities issuable upon conversion hereof
are being acquired solely for Lender's own account and not as a nominee for any
other party, and for investment, and that Lender will not offer, sell or
otherwise dispose of this Note or any shares of equity securities to be issued
upon conversion hereof except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended

2
<PAGE>

(the "Act"), or any state securities laws. Upon conversion of this Note, Lender
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the shares of equity securities so purchased are being
acquired solely for Lender's own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale and
that Lender is an "accredited investor" as such term is defined in Regulation D
promulgated under the Act. If the Lender cannot make such representations
because they would be factually incorrect, it shall be a condition to Lender's
conversion of this Note that the Company receive such other representations as
shall be reasonably necessary to assure the Company that the issuance of its
securities upon conversion of this Note shall not violate the United States' or
any state's securities laws.

5. Default. The Company expressly agrees that upon the happening or
occurrence of an Event of Default (as defined below):

(i). To pay interest, to the maximum extent permitted by law, on
the sum of (a) principal amount of the Note, and (b) accrued but unpaid
interest as of the Default Date (as defined below), at an increased
rate of the greater of (x) the Prime Rate plus three percent (3%) or
(y) twelve and one-half percent (12.5%) per annum (computed on the
actual number of days elapsed over a year of 365 days); and

(ii).Lender may at its option, declare by written notice given to
the Company the unpaid principal balance of this Note and all interest
then accrued hereon, at once due and payable; and in such event, the
Company shall promptly pay all such amounts to Lender.

6. Event of Default. The occurrence or existence of any one of the
following events or conditions shall constitute an "Event of Default" under this
Note:

(i). the Company makes an assignment for the benefit of
creditors, or applies to any tribunal for the appointment of a trustee
or receiver of a substantial part of the assets of the Company, or
commences, or has commenced against it, any proceedings relating to the
Company under any bankruptcy, reorganization, arrangement, readjustment
of debts or other insolvency law of any jurisdiction; or an order is
entered appointing such trustee or receiver, or adjudicating the
Company bankrupt, or approving the petition in any such proceedings; or

(ii).a breach of any the nonpayment terms of this Note by the
Company which is not cured by the Company within forty-five (45) days
of receipt of notice by the Company or breach of the interest payment
terms of this Note by the Company which is not cured by the Company
within fifteen (15) days of receipt of notice by the Company (the
"Default Date").

3
<PAGE>

7. Securities Legend. This Note, and all shares of equity securities
-----------------
issued upon conversion hereof shall be stamped or imprinted with a legend in
substantially the following form (in addition to any legend required by state
securities laws):

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."

8. Definitions. For the purposes of this Note:

(i). "Acquisition" shall mean (a) the sale or transfer of
shares of the Company's capital stock which entitles the acquiring
party to voting rights in excess of fifty percent (50%) of the
Company's capital stock, or (b) the sale of all or substantially all
of the Company's assets.

(ii). Due Date" shall mean one (1) year from the date hereof;
provided, however, that in the event of an IPO (as defined below) or
an Acquisition, the Due Date shall be accelerated to the day
immediately prior to the consummation of the IPO or Acquisition.

(iii). "Effective Date" shall mean July 28, 1998.

(iv). "IPO" shall mean the Company's initial registered firm
commitment public offering with an aggregate offering price of at
least $15,000,000.

(v). "Prime Rate" shall mean the prime commercial lending
rate of Bank of America (or the successor thereof) as publicly
announced to be in effect from time to time.

(vi). "Private Equity Financing" shall mean the sale by the
Company of equity securities yielding net capital (exclusive of
aggregate consideration received by the Company as a result of the
conversion of this Note) in excess of Seven Million Dollars
($7,000,000).

9. Applicable Interest Rate. If the Interest Rate hereunder exceeds the
------------------------
maximum amount allowed by law, the interest collected hereunder shall be the
maximum allowed by law and that portion, if any, of interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and shall be applied against the principal then owing
under this Note.

4
<PAGE>

10. Entire Agreement. This Restated Note contains the entire agreement
----------------
between the parties with respect to the transactions contemplated hereby and
supersedes all prior agreements or understandings between the parties. The
Convertible Promissory Note, dated August 6, 1998 (previously defined as the
"Note") is expressly superseded, void and no longer of any force or effect.

11. Successors and Assigns. All of the provisions hereof shall be binding
----------------------
upon and inure to the benefit of the Company and Lender and their respective
successors and permitted assigns, except as otherwise provided. This Note may
not be assigned by Lender without the consent of the Company.

12. Governing Law. This Note shall be governed by and construed by the
-------------
laws of the State of California without reference to its conflicts of law
principles. Any action brought hereunder shall be heard by a court sitting in
the County of Santa Clara, California.

13. Consent to Jurisdiction. The parties hereby consent to the exclusive
-----------------------
jurisdiction of the state courts sitting in California in any action on a claim
arising out of, under or in connection with this Note or the transaction
contemplated hereunder.

14. Prepayment. The Company shall have no right to prepay all or any part
----------
of the principal or interest hereunder.

15. Waivers. The Company hereby waives presentment for payment, demand,
--------
protest, notice of nonpayment or dishonor and of protest, and any other notices
and demands whatsoever.

16. Attorney's Fees. If any legal action is necessary to enforce the
---------------
terms of this Note, the prevailing party shall be entitled to reasonable
attorney's fees and expenses in addition to any other relief to which that party
is entitled.

"COMPANY" "LENDER"

INTERNET SERVICES CORPORATION, a WILLIAM S. MCKIERNAN
Delaware corporation (also known as
CyberSource Corporation)

By: /s/ Charles E. Noreen By: /s/ William S. McKiernan
--------------------- ------------------------
Name: Charles E. Noreen William S. McKiernan
-------------------
Title: VP & CFO
------------------
5

<PAGE>

Exhibit 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated
February 18, 1999, except as to the first paragraph of Note 9, as to which the
date is June , 1999, in Amendment No. 1 to the Registration Statement (Form S-
1) and related Prospectus of CyberSource Corporation for the registration of
4,000,000 shares of its common stock.

Our audit also included the financial statement schedule of CyberSource
Corporation listed in Item 16(b). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

San Jose, California

June 4, 1999

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

The foregoing is in the form that will be signed upon the approval by the
Company's shareholder's of the 1 for 2 reverse stock split, as described in
Note 9 of the Notes to the Financial Statements.

/s/ Ernst & Young LLP

San Jose, California

June 4, 1999