<PAGE>


As filed with the Securities and Exchange Commission on September 14, 1999

                                                 Registration No. 333-84535
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION

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

                              AMENDMENT NO. 1

                                    to


                                 FORM S-1

                          REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

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

                                 BE FREE, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                     7374                  04-3303188
     (State or other      (Primary Standard Industrial   (I.R.S. Employer
       jurisdiction        Classification Code Number) Identification Number)
   of incorporation or
      organization)

                             154 Crane Meadow Road
                        Marlborough, Massachusetts 01752
                                 (508) 357-8888
    (Address, including zip code, telephone number, including area code, of
                   registrant's principal executive offices)

                              Gordon B. Hoffstein
                     President and Chief Executive Officer
                                 BE FREE, INC.
                             154 Crane Meadow Road
                        Marlborough, Massachusetts 01752
                                 (508) 357-8888
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

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

                                   Copies to:
         JAY E. BOTHWICK, ESQ.                  MARK H. BURNETT, ESQ.
       DAVID A. WESTENBERG, ESQ.                JOCELYN M. AREL, ESQ.
           HALE AND DORR LLP               TESTA, HURWITZ & THIBEAULT, LLP
            60 State Street                        125 High Street
      Boston, Massachusetts 02109            Boston, Massachusetts 02110
       Telephone: (617) 526-6000              Telephone: (617) 248-7000
       Telecopy: (617) 526-5000                Telecopy: (617) 248-7100

   Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date hereof.

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

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

   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>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. Although we    +
+are permitted by U.S. federal securities laws to offer these securities using +
+this prospectus, we may not sell them or accept your offer to buy them until  +
+the documentation filed with the SEC relating to these securities has been    +
+declared effective by the SEC. This prospectus is not an offer to sell these  +
+securities or our solicitation of your offer to buy these securities in any   +
+jurisdiction where that would not be permitted or legal.                      +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

                 SUBJECT TO COMPLETION-SEPTEMBER 14, 1999

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Prospectus
     , 1999

                          [Be Free logo appears here]

                              Shares of Common Stock
--------------------------------------------------------------------------------

                             The Offering:
The Company:
                             . We are offering            shares of our common
 . We are a leading             stock.
  provider of services
  that enable our
  customers to market
  their products and
  services in tens of
  thousands of locations
  on the Internet and to
  pay for these
  promotions based on the
  sales or traffic they
  generate.

                             . The underwriters have an option to purchase up
                               to an additional           shares from us to
                               cover over-allotments.

                             . This is our initial public offering. We
                               anticipate that the initial public offering
                               price will be between $     and $     per
                               share.

Proposed Symbol & Market:    . Closing:     , 1999
 . BFRE/NASDAQ

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

<TABLE>
<CAPTION>
                              Per Share Total
    -----------------------------------------
      <S>                     <C>       <C>
      Public offering price:    $       $
      Underwriting fees:
      Proceeds to Be Free:
    -----------------------------------------
</TABLE>

     This investment involves risk. See "Risk Factors" beginning on page 6.

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

Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.

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

Donaldson, Lufkin & Jenrette

             Hambrecht & Quist

                          Dain Rauscher Wessels
                           a division of Dain Rauscher Incorporated

                                                                  DLJdirect Inc.
<PAGE>


[Be Free logo]

                           [Inside Front Cover Artwork]
Graphic of two Web site pages that contain promotions of Be Free's e-merchant
customers.


[Be Free logo]

     Graphic of a promotion featured on the Web site of a marketing affiliate.
This graphic is being viewed by a crowd of miniature people and is connected by
arrows flowing through a graphic of Be Free's Data Interchange to a graphic of
an e-merchant customer's Web site. These three graphics together represent the
exchange of information between Be Free, its customers and their marketing
affiliates, and illustrate how performance marketing works in the Internet.

<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
Prospectus Summary........................................................    1
Risk Factors..............................................................    6
Use of Proceeds...........................................................   19
Dividend Policy...........................................................   19
Capitalization............................................................   20
Dilution..................................................................   21
Selected Consolidated Financial Data......................................   22
Management's Discussion and Analysis of Financial Condition and Results of
 Operations...............................................................   24
Business..................................................................   33
</TABLE>
<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
Management.................................................................  47
Transactions with Related Parties..........................................  53
Principal Stockholders.....................................................  56
Description of Capital Stock...............................................  58
Shares Eligible for Future Sale............................................  62
Underwriting...............................................................  64
Legal Matters..............................................................  66
Experts....................................................................  67
Where You Can Find More Information........................................  67
Index to Financial Statements.............................................. F-1
</TABLE>

                                       i
<PAGE>

                               PROSPECTUS SUMMARY

   This summary may not contain all of the information that is important to
you. You should read the entire prospectus, including the financial statements
and related notes, before making an investment decision. As used in this
prospectus, the terms "we," "us," "our" and similar terms refer to Be Free,
Inc. and not to its management or stockholders. Unless otherwise indicated, all
information in this prospectus:

  .  reflects a    for    reverse stock split effected on         , 1999;

  .  assumes that the underwriters will not exercise their over-allotment
     option;

  .  gives effect to the conversion of all outstanding shares of preferred
     stock into          shares of common stock upon the completion of this
     offering; and

  .  assumes the effectiveness of our amended and restated certificate of
     incorporation.

                                    Be Free

Our Business

   We are a leading provider of services that enable our customers to market
their products and services in tens of thousands of locations on the Internet
and to pay for these promotions based on the sales or traffic they generate.
Our customers include both online merchants, which sell goods or services over
the Internet, and portals, which are high traffic Web sites designed to provide
content and Internet search capabilities. Our customers use our services to
establish and manage their own marketing relationships directly with third
parties that host Web sites or send e-mail messages. We refer to these third
parties as our customers' marketing partners and our customers sometimes refer
to them as their affiliates. We enable these marketing partners to integrate
our customers' promotions into content contained in their Web sites and e-mail
messages that is relevant to our customers' products or services being
promoted.

   Our customers pay their marketing partners only for those promotions that
perform by generating sales or traffic. We call this performance marketing. In
contrast, businesses that use more traditional Internet marketing, such as
banner advertising, pay for their promotions based upon the number of times the
advertisment is viewed, without regard to any sales or traffic generated.
Because of this difference and the way promotions are integrated into relevant
content in the marketing partner's Web site or e-mail message, our customers
generally view their establishment of these marketing relationships as a
separate online sales channel for their goods and services. These are commonly
known as performance marketing sales channels. We provide customers with a
cost-effective solution for establishing, managing and rewarding these
performance marketing sales channels. We enable our customers to increase their
sales and traffic and decrease their cost of customer acquisition.

   Our services are critical to performance marketing because they:

  .  provide a data interchange, consisting of a centralized database, that
     enables the exchange of data between our customers' catalog,
     transactional and fulfillment systems with their marketing partners' Web
     sites and e-mail messages;

                                       1
<PAGE>


  .  enable our customers to manage promotions that we store on our servers,
     consisting of hyperlinks in a variety of formats for each of our
     customers' products or services;

  .  enable each of our customer's marketing partners to select and generate
     those promotions from our servers that are relevant to the content on
     its Web site or within its e-mail messages and integrate those
     promotions within that content;

  .  track the effectiveness of each individual promotion by recording each
     time a user views it on a marketing partner's site, clicks on it and is
     directed to our customer's site, and makes a purchase on that customer's
     site; and

  .  collect, store and analyze viewing, click-through and sales data to
     improve the effectiveness of online marketing and to reduce the cost of
     customer acquisition.

   Using our services, our customers pay only for those individual promotions
that succeed. Our online merchant customers typically pay each marketing
partner only for the sales it generates. Our portal customers typically pay
each marketing partner only for the traffic the marketing partner sends to the
portal. Our customers typically pay us separate fees based on the level of
sales or traffic generated by their marketing partners. As a result, our
economic interests are closely aligned with the economic interests of our
customers and their marketing partners.

   Our performance marketing services to date have focused on enabling our
customers to establish and manage marketing relationships with third party Web
sites that include on their sites hyperlinks to our customers' Web sites. We
also provide performance marketing services which enhance more traditional
online marketing, such as the serving of ad banners, by tracking their
effectiveness through to a sale. Recently, we expanded our services to enable
the inclusion of hyperlinks in e-mail messages sent by businesses and
individuals.

   The promotions we tracked for our customers were shown more than 300 million
times in June 1999 through our customers' more than one million performance
marketing relationships. Jupiter Communications, an Internet research firm,
estimates that online merchants that have established performance marketing
relationships with Web site publishers generate on average 17% of their online
sales through these relationships. We believe that performance marketing sales
channels will constitute an increasingly significant revenue source for our
customers.

Our Market Opportunity

   The Internet has experienced rapid growth both in terms of the number of
users online and in the amount and dispersion of content available to them
online. The Internet has also emerged as a significant sales channel for goods
and services to consumers, with total U.S. online consumer spending projected
to increase from $7.8 billion in 1998 to $108.0 billion in 2003.

   Online merchants and portals use online promotions to reach a global
audience for their products and services, drive traffic to their Web sites,
attract customers and facilitate transactions. Initially, these online
promotions took the form of banner advertisements. Under this model an
advertiser pays fees based on the number of times its ad is displayed and
typically evaluates the performance of that ad based on the rate at which
viewers click on it and are directed to the advertiser's Web site.

                                       2
<PAGE>


   As a result of decreases in these click-through rates and a need to reach a
broader audience viewing more widely dispersed content, online merchants and
portals sought to pay for their marketing programs based on the sales or
traffic they generated.

   However, online merchants and portals face several challenges in
establishing and managing performance marketing sales channels. These
challenges include the internal development and operation of software and
hardware to exchange data with thousands of marketing partners that operate
disparate systems, generating and placing hyperlinks and managing relationships
with large numbers of marketing partners. In addition, marketing partners want
to minimize the time and expense associated with enrolling in a performance
marketing sales channels and creating and changing hyperlinks for a particular
online merchant or portal. We believe these challenges provide a significant
opportunity for our comprehensive solutions that are designed to help online
merchants and portals establish and manage performance marketing sales channels
and to help marketing partners enhance their revenue.

Our Strategy

   Our objective is to be the leading provider of online performance marketing
solutions. We are focusing on the following strategic initiatives to achieve
this objective:

  . continue our technology leadership and expertise to enhance and extend
    our comprehensive solutions for performance marketing programs;

  . rapidly expand our targeted customer base, both in the U.S. and selected
    markets abroad;

  . continue to provide customer branded and controlled solutions;

  . increase the size and effectiveness of our customers' sales channels; and

  . expand our services to existing customers.

Our History

   We were incorporated in 1996 in Delaware under the name Freedom of
Information, Inc. and changed our name to Be Free, Inc. in March 1999. In
August 1998 we combined with two affiliated companies under common control and
management. One affiliated company was incorporated in 1985 in Pennsylvania and
the other was incorporated in 1996 in Delaware. All of our financial statements
and data in this prospectus are presented on a consolidated basis for all three
entities.

   Our principal executive office is located at 154 Crane Meadow Road,
Marlborough, Massachusetts 01752, and our telephone number is (508) 357-8888.
Our corporate Web sites are located at www.befree.com and
www.affiliaterecruiters.com. The information contained on our Web sites is not
a part of this prospectus.

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

   Be Free, BFAST, BFIT, B-INTOUCH and e-nabled are our servicemarks. This
prospectus also contains other trademarks, servicemarks and tradenames that are
the property of other parties.

                                       3
<PAGE>

                                  The Offering

<TABLE>
<S>                                 <C>
Common stock offered by Be Free....    shares

Common stock to be outstanding
 after this offering...............    shares

Use of proceeds.................... Working capital and other general corporate
                                    purposes

Proposed Nasdaq National Market
 symbol............................ BFRE
</TABLE>

   The common stock outstanding after the offering is based on the number of
shares outstanding as of        , 1999, and excludes:

  .           shares issuable upon the exercise of outstanding options with a
    weighted average exercise price of $        per share;

  .     shares available for issuance and grant under our 1998 Stock
    Incentive Plan, net of outstanding options; and

  .     shares issuable upon the exercise of outstanding warrants at a
    weighted average exercise price of $       per share.

                                       4
<PAGE>


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

   The financial data set forth below should be read with "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and related notes, all included elsewhere in this prospectus.

   Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding shares of preferred stock
into shares of common stock, as if the shares had converted immediately upon
issuance. Accordingly, accretion of preferred stock to redemption value has not
been included in the calculation of unaudited pro forma basic and diluted net
loss per share.

<TABLE>
<CAPTION>
                                                                 Six Months
                                                                 Ended June
                                     Year Ended December 31,         30,
                                     -------------------------  --------------
                                      1996     1997     1998    1998    1999
<S>                                  <C>      <C>      <C>      <C>    <C>
Statement of Operations Data:
Revenue:
 Performance marketing services..... $   --   $   216  $ 1,319  $ 617  $ 1,396
 Other..............................     196       60        8      3      --
                                     -------  -------  -------  -----  -------
  Total revenue.....................     196      276    1,327    620    1,396
Total operating expenses............   1,461    1,211    5,432    825    7,841
                                     -------  -------  -------  -----  -------
Operating loss......................  (1,265)    (935)  (4,105)  (205)  (6,445)
Interest expense, net...............     (26)     (99)    (224)   (61)    (168)
                                     -------  -------  -------  -----  -------
Net loss............................  (1,291)  (1,034)  (4,329)  (266)  (6,613)
Accretion of preferred stock to
 redemption value...................     --       --       (99)   --      (654)
                                     -------  -------  -------  -----  -------
Net loss attributable to common
 stockholders....................... $(1,291) $(1,034) $(4,428) $(266) $(7,267)
                                     =======  =======  =======  =====  =======

Basic and diluted net loss per
 share.............................. $        $        $        $      $

Shares used in computing basic and
 diluted net loss per share.........
Unaudited pro forma basic and
 diluted net loss per share.........                   $               $

Shares used in computing unaudited
 pro forma basic and diluted net
 loss per share.....................
</TABLE>

   The pro forma as adjusted balance sheet data as of June 30, 1999 give effect
to the conversion of all outstanding shares of preferred stock into shares of
common stock and have been adjusted to give effect to the sale of
shares of common stock offered hereby at the assumed initial public offering
price of $   per share, after deducting underwriting discounts and commissions
and estimated offering expenses.

<TABLE>
<CAPTION>
                                                           As of June 30, 1999
                                                           ---------------------
                                                                      Pro Forma
                                                            Actual   As Adjusted
<S>                                                        <C>       <C>
Balance Sheet Data:
 Cash, cash equivalents and marketable securities......... $ 24,325    $
 Working capital..........................................   21,032
 Total assets.............................................   30,183
 Long-term debt, net of current portion...................    6,018     6,018
 Convertible preferred....................................   34,818       --
 Total stockholders' equity (deficit).....................  (15,962)
</TABLE>

                                       5
<PAGE>


                               RISK FACTORS

   You should consider carefully the following risks, together with all other
information included in this prospectus, before you decide to buy our common
stock. Please keep these risks in mind when reading this prospectus, including
any forward-looking statements appearing in this prospectus. If any of the
following risks actually occurs, our business, financial condition or results
of operations would likely suffer materially. As a result, the trading price of
our common stock may decline, and you could lose all or part of the money you
paid to buy our common stock.

Our limited operating history makes the evaluation of our business and
prospects difficult

   We introduced our first performance marketing services and recorded our
first revenue from these services in the third quarter of 1997. Accordingly,
you have limited information about our company with which to evaluate our
business, strategies and performance and an investment in our common stock. Our
current business has never achieved profitability and our business model and
profit potential are unproven. Before buying our common stock, you should
consider the risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets, particularly those companies
whose business depends on the Internet. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

We have a history of losses and expect future losses

   Our accumulated deficit as of June 30, 1999 was $13.4 million. Our current
business has never achieved profitability and we expect to continue to incur
losses for the foreseeable future in light of the level of our planned
operating and capital expenditures. We also expect to experience negative
operating cash flow for the foreseeable future as we fund our operating losses
and capital expenditures. If our revenue grows more slowly than we anticipate,
or if our operating expenses exceed our expectations and cannot be adjusted in
a timely manner, our business, results of operations, financial condition and
prospects would be materially and adversely affected. To support our current
and future lines of business, we plan to invest in our technology and
infrastructure, including an expansion of our existing data center and the
opening of new data centers. We also intend to increase our expenditures
relating to sales and marketing and product development activities. The timing
of our investments and expansion could cause material fluctuations in our
results of operations. We also plan to purchase additional capital equipment,
which will result in additional depreciation expense. Our losses may increase
in the future and we may not be able to achieve or sustain profitability. We
will need to generate significant additional revenue to achieve profitability.
Even if we do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis in the future. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

If the Internet fails to grow as an advertising, marketing and sales medium our
future revenue and business prospects would be materially and adversely
affected

   Our future revenue and business prospects depend in part on a significant
increase in the use of the Internet as an advertising, marketing and sales
medium. The Internet advertising and marketing market is new and rapidly
evolving, and it cannot yet be compared with traditional advertising media or
marketing programs to gauge its effectiveness. As a result, demand for and
market acceptance of

                                       6
<PAGE>


Internet advertising and marketing solutions are uncertain. Further, the
Internet is still emerging as a significant channel for selling goods and
services to consumers. Our business and prospects will be materially and
adversely effected if the Internet does not become accepted as an advertising
and marketing medium or if consumers do not increasingly purchase goods and
services online. The adoption of Internet advertising and marketing,
particularly by entities that have historically relied upon more traditional
methods, requires the acceptance of a new way of advertising and marketing.
These customers may find Internet advertising and marketing to be less
effective for meeting their business needs than other methods of advertising
and marketing. Even if a customer believes that performance marketing is more
effective, it may choose an alternative method to promote its goods and
services. Performance marketing requires a customer to permit us access to its
online transaction data, marketing information and consumer data which many
companies may regard as too sensitive to share with a third party,which may
deter them from using our services.


Because our business model is new and unproven, we do not know if we will
generate significant revenue on a sustained basis or achieve profitability

   Substantially all of our revenue is derived from a new business model. Our
revenue depends on whether the online marketing that we facilitate generates
sales or traffic for our customers. In contrast, others earn fees based merely
on placing online advertisements for customers. Our customers' marketing
partners may not generate substantial volumes of sales or traffic for our
customers. Similarly, our customers' product and service offerings may not be
sufficient to attract or retain their marketing partners. In either situation,
we may lose revenue and, ultimately, customers. If the assumptions underlying
our business model are not valid or we are unable to implement our business
plan, achieve the predicted level of market penetration or obtain the desired
level of pricing of our services for sustained periods, our business,
prospects, results of operations and financial condition will be materially and
adversely affected.

Most of our revenue is derived from a small number of customers. If we lose any
of these major customers, our revenue could dramatically decline

   We derive a substantial portion of our revenue from a small number of
customers. Our largest customer, barnesandnoble.com, represented 78%, 73% and
40% of our revenue in 1997, 1998 and the first six months of 1999,
respectively. GeoCities, a subsidiary of Yahoo! Inc., which became a customer
in 1999, accounted for 15% of our revenue in the first six months of 1999. Our
revenue would be materially and adversely affected by the loss of either of
these customers, any significant reduction in net revenue generated from these
customers or any system or other disruptions related to these customers or
their significant marketing partners. Our contract with barnesandnoble.com
expires in January 2001, and our contract with GeoCities expires in January
2002. GeoCities has the right to terminate its contract prior to the expiration
of its term by giving us notice and paying a penalty. Both contracts provide
that either party may terminate upon a material breach. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note B to the Consolidated Financial Statements included elsewhere in this
prospectus.

                                       7
<PAGE>


System disruptions and failures may result in customer dissatisfaction,
customer loss or both, which could materially and adversely affect our
reputation and business

   The continued and uninterrupted performance of the computer systems used by
us, our customers and their marketing partners is critical to our success.
Customers may become dissatisfied by any system failure that interrupts our
ability to provide our services to them. These failures could affect our
ability to deliver and track promotions quickly and accurately to the targeted
audience and deliver reports to our customers and their marketing partners.
Sustained or repeated system failures would reduce the attractiveness of our
services significantly. Our operations depend on our ability to protect our
computer systems against damage from fire, power loss, water damage,
telecommunications failures, vandalism and similar unexpected adverse events.
In addition, interruptions in our services could result from the failure of
telecommunications providers to provide the necessary data communications
capacity in the time required. Our critical computer hardware and software is
housed at Exodus Communications, Inc., a third party provider of Internet
hosting and communication services located in the Harborside, New Jersey area.
Any system failure by us or Exodus, or any of the above factors affecting the
Harborside, New Jersey area specifically, would have a material adverse effect
on our business. Further, despite our efforts to implement network security
measures, our systems are vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering. We do not carry enough business
interruption insurance to compensate for any significant losses that may occur
as a result of any of these events.

   We have experienced systems outages in the past, during which we were unable
to route transactions to our customers from their marketing partners or provide
reports. During these outages our customers may have lost sales and some of
their marketing partners may have failed to earn commissions. We expect to
experience additional outages in the future. Our customers or their marketing
partners may make claims for damages allegedley resulting from a system outage.
The expansion of our existing data center and the opening of additional data
centers may not eliminate systems outages or prevent the loss of sales when
system outages occur. Any damage or failure that interrupts or delays our
operations could result in material harm to our business and expose us to
material liabilities. See "Business--Technology Infrastructure."

Intense competition in our markets may reduce the number of our customers and
the pricing of our services

   We compete in markets that are new, intensely competitive, highly fragmented
and rapidly changing. We compete against larger companies with respect to our
BFIT services, the banner ad serving portion of our business. We compete more
broadly against similar sized, private companies, We face competition in the
overall performance marketing solutions market, as well as in the affiliate
sales channel and banner advertising delivery segments of the Internet
advertising and marketing markets. In addition, we have recently entered the
online e-mail referral services market and expect to face competition in this
market. We have experienced and expect to continue to experience increased
competition from current and potential competitors. We believe our principal
competitors are Commission Junction, LinkShare and Microsoft's LinkExchange.
See "Business--Competition."

   Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements than we can. In addition, our
current and potential competitors may bundle their products with other software
or services, including operating systems and Internet

                                       8
<PAGE>


browsers, in a manner that may discourage users from purchasing services
offered by us. Also, many current and potential competitors have greater name
recognition and significantly greater financial, technical, marketing and other
resources than we do. Increased competition could result in price reductions,
fewer customer orders, reduced gross margins and loss of market share.

Any breach of our system's security measures that results in the release of
confidential customer data could cause customer dissatisfaction, customer loss,
or both and expose us to lawsuits

   A fundamental requirement for e-commerce is the secure transmission of
confidential information over public networks. Third parties may attempt to
breach our security. If they are successful, they could obtain our customers'
or their marketing partners' confidential information, including marketing
data, sales data, passwords, and financial account, performance and contact
information. A breach of security could materially and adversely affect our
reputation, business and prospects. We rely on encryption technology licensed
from third parties. Our systems are vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions, which could lead to
interruptions, delays or loss or theft of data. We may be required to expend
significant capital and other resources to license encryption technology and
additional technologies to protect against security breaches or to alleviate
problems caused by any breach. We may be liable for any breach in our security
and any breach could harm our reputation, reduce demand for our services or
cause customers to terminate their relationships with us.

If our system produces inaccurate information about the transactions we track,
we may experience customer dissatisfaction, customer loss, or both and be
exposed to lawsuits

   Software defects or inaccurate data may cause incorrect recording, reporting
or display of information about transactions to our customers, their marketing
partners or both. This may cause us to pay, on our customer's behalf, incorrect
transaction fees to their marketing partners. It may also provide us with an
inaccurate basis on which to extend, terminate or alter our customer
relationships and may lead to customer dissatisfaction. As a result, we could
lose customers or mismanage our customer relationships. We could also be sued
for losses incurred by our customers, their marketing partners or both caused
by inaccurate data. Our services depend on complex software that we have
internally developed or licensed from third parties. Software often contains
defects, particularly when first introduced or when new versions are released,
which can adversely affect performance or result in inaccurate data. We may not
discover software defects that affect our new or current services or
enhancements until after they are deployed. In addition, our services depend on
our customers and their marketing partners supplying us with data regarding
contacts, performance and sales. They may provide us with erroneous or
incomplete data.

To be competitive, we must continue to develop new and enhanced services, and
our failure to do so may adversely affect our prospects

   Our market is characterized by rapid technological change, frequent new
service introductions, changes in customer requirements and evolving industry
standards. The introduction of services embodying new technologies and the
emergence of new industry standards could render our existing services
obsolete. Our revenue growth depends upon our ability to develop and introduce
a variety of new services and service enhancements to address the increasingly
sophisticated needs of our

                                       9
<PAGE>

customers. We have experienced delays in releasing new services and service
enhancements and may experience similar delays in the future. Material delays
in introducing new services and enhancements may cause customers to forego
purchasing or renewing our services and purchase those of our competitors.

If government regulations and legal uncertainties related to doing business on
the Internet cause a decline in e-commerce and Internet advertising and
marketing, our business and prospects could be materially and adversely
affected

   Laws and regulations directly applicable to Internet communications,
commerce and marketing are becoming more prevalent. If any of these laws
hinders the growth in use of the Web generally or decreases the acceptance of
the Web as a medium of communications, commerce and marketing, our business and
prospects may suffer materially. The United States Congress has enacted
Internet laws regarding children's privacy, copyrights and taxation. Other laws
and regulations may be adopted covering issues such as user privacy, pricing,
content, taxation and quality of products and services. The governments of
states and foreign countries might attempt to regulate our transmissions or
levy sales or other taxes relating to our activities. The laws governing the
Internet remain largely unsettled, even in areas where legislation has been
enacted. It may take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel and taxation apply to the
Internet and Internet advertising and marketing services. In addition, the
growth and development of the market for Internet commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business over the
Internet.

If privacy concerns prevent us from effectively tracking the behavior of
Internet users on the Web sites of our customers, their marketing partners or
both, our business prospects could decline significantly

   We develop and maintain data related to communications, consumer behavior
and marketing profiles. Privacy concerns may cause visitors to avoid Web sites
that track behavioral information and may indirectly inhibit market acceptance
of our services. When a user first views or clicks on a customer's promotion
managed through the use of our services, our software creates an anonymous
profile for that user. We then add and change profile attributes based upon
that user's behavior on our customer's Web site and its marketing partners' Web
sites. We are able to track the user through the use of a "cookie". Cookies are
small files of information that uniquely identifies a user, are stored on the
hard drive of the user's computer and are passed through the user's browser to
us.

   Legislative or regulatory requirements may heighten privacy concerns if
businesses must notify users that the data captured after visiting Web sites
may be used to direct product promotions and advertising to that user. For
example, the European Union recently enacted its own privacy regulations that
may result in limits on the collection and use of some user information. Also,
Germany has imposed its own laws limiting the use of cookies and other
countries may also adopt similar limitations. If foreign regulations like these
limit significantly the collection of anonymous user profiles or the use of
cookies, our revenue growth may be materially affected because we are
expanding, and plan to continue to expand, our international operations. If our
domestic operations

                                       10
<PAGE>


ever become subject to regulations that limit significantly the collection of
anonymous user profiles or the use of cookies, whether as a result of
regulations adopted by the United States or by other countries, our revenue and
our business prospects could decline significantly.

If a significant number of Internet users use software to block online
advertising, our business and prospects could decline materially

   Software programs exist that limit or prevent advertising from being
delivered to a user's computer. Widespread adoption of this software by Web
users would significantly undermine the commercial viability of Internet
advertising and marketing. This development could cause a significant decline
in our revenue.

If we fail to protect our intellectual property rights, our business and
prospects could be materially and adversely affected

   We seek to protect our proprietary rights through a combination of patent,
copyright, trade secret and trademark law and assignment of invention and
confidentiality agreements. The unauthorized reproduction or other
misappropriation of our proprietary rights could enable third parties to
benefit from our technology without paying us for it. If this occurs, our
business could be materially and adversely affected. In December 1998, we were
granted U.S. Patent No. 5,848,396 regarding a technology that enables us to
create profiles of Internet users based on their viewing history and to target
appropriate advertisements for the users based upon these profiles. We have
also filed applications to register various servicemarks. We cannot assure you
that any of our servicemark registrations will be approved.

If we infringe upon the intellectual property rights of others, we could be
exposed to significant liability

   We cannot assure you that our patent or any future patents or servicemark
registrations we receive will not be successfully challenged by others or
invalidated. In addition, we cannot assure you that we do not infringe any
intellectual property rights of third parties or that we will be able to
prevent misappropriation of our technologies, particularly in foreign countries
where laws or law enforcement practices may not protect our proprietary rights
as fully as in the United States.

If we fail to manage effectively the rapid growth in our operations, our
business and prospects will be materially and adversely affected

   We have experienced rapid growth and expansion in our operations that have
placed a significant strain on our managerial, operational and financial
resources. Many members of our management have only recently joined us. We have
grown from 12 employees as of June 30, 1998 to 118 employees as of June 30,
1999, and we expect the number of employees to increase in the future. To
compete successfully, we must:

  .  continue to improve our financial and management controls;

  .  enhance our reporting systems and procedures;

  .  continue to scale our performance marketing systems;

                                       11
<PAGE>


  .  expand, train and manage our work force;

  .  integrate new customers effectively; and

  .  expand our sales, marketing and customer support departments.

If we fail to attract and retain key personnel, our business will be materially
and adversely affected

   We depend on the continued services of our key technical, sales and senior
management personnel, including our President and Chief Executive Officer,
Gordon B. Hoffstein. Any officer or employee can terminate his or her
relationship with us at any time. Our future business also depends on our
ability to attract, train, retain and motivate highly qualified technical,
marketing, sales and management personnel. Competition for these personnel is
intense, and we may not be able to attract and retain them.

If our services are disrupted by the year 2000 problem, our business would be
materially and adversely affected and we could be exposed to material
liabilities from lawsuits against us

   Beginning in the year 2000, the date fields coded in some computer systems
and software products will need to accept four-digit entries in order to
distinguish between 21st century and 20th century dates. There is significant
uncertainty regarding the potential effects of this issue. We have not had any
independent verification of our Year 2000 readiness or assessment of potential
costs associated with Year 2000 risks. We also have not procured any Year 2000
specific insurance or made any contingency plans to address Year 2000 risks.
Unanticipated costs associated with any Year 2000 compliance may exceed our
present expectations and have a material adverse effect on our business,
results of operations and financial condition.

   We depend on the uninterrupted availability of the Internet infrastructure
to conduct our business. We also rely on the continued operations of our
customers, in particular their e-commerce sites where commercial transactions
are performed, and our customers' marketing partners, in particular the Web
sites and e-mail systems that host and distribute promotions, for our revenue.
We are thus dependent upon the success of the Year 2000 compliance efforts of
the service providers that support the Internet, our customers and their
marketing partners. Interruptions in the Internet infrastructure affecting us,
our customers or their marketing partners, or the failure of the Year 2000
compliance efforts of one or more of our customers or their marketing partners,
could have a material adverse effect on our business, results of operations and
financial condition. Further, the marketing initiatives pursued by our
prospective customers could be affected by Year 2000 issues as companies expend
significant resources to correct their current systems for the year 2000. These
expenditures may result in reduced funds available for Internet advertising.
This could materially and adversely affect our business, results of operations
and financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance."

                                       12
<PAGE>


We depend on a limited number of hardware and software vendors for essential
products. If we were unable to purchase or license these essential products on
acceptable terms or if we had to obtain substitutes for these essential
products from different vendors, we might suffer a loss of revenue due to
business interruption and might incur higher operating costs.

   We buy and lease hardware, including our servers and storage arrays from Sun
Microsystems. We also license software, including our servers' operating
systems, Web server technology, database technology, graphical user interface
technology and encryption technology, primarily from Sun Microsystems, Oracle
Corporation and PowerSoft. If these vendors changed the terms of our license
arrangements with them so that it would be uneconomical to purchase our
essential products from them, or if they were unable or unwilling to supply us
with a sufficient quantity of properly functioning products, our business could
be materially and adversely affected:

  .  business interruption caused by any delay in product and service
     development until equivalent technology can be identified; and

  .  the cost of integrating new technology.

We may be exposed to liability for information displayed on our customers' Web
sites or within their marketing partners' Web sites or e-mail messages

   Because the provision of our services require us to provide a connection to
the Web sites of our customers and their marketing partners, we may be
perceived as being associated with the content of these Web sites. We do not
and cannot screen all of the content generated by our customers and their
partners. As a result, we may face potential liability for defamation,
negligence, copyright, patent or trademark infringement and other claims based
on the materials displayed on our customers' sites and on their marketing
partners' sites and e-mail messages. For example, if one of our customers is
sued for posting information on its Web site that is alleged to be defamatory,
we may be also be named as a defendant in that legal action based solely on our
limited association with that customer's Web site. As a result, we could be
involved in legal proceeding and disputes that are costly to resolve,
regardless of their lack of merit. We may also suffer a loss of customers or
reputational harm based on this information or resulting from our involvement
in these legal proceedings. Furthermore, some foreign governments have enforced
laws and regulations related to content distributed over the Internet that are
more strict than those currently in place in the United States.

   Our insurance may not cover claims of these types or may not be adequate to
indemnify us for all liability that may be imposed. There is a risk that a
single claim or multiple claims, if successfully asserted against us, could
exceed the total of our coverage limits. There is also a risk that a single
claim or multiple claims asserted against us may not qualify for coverage under
our insurance policies as a result of coverage exclusions that are contained
within these policies. Any imposition of liability, particularly liability that
is not covered by insurance or is in excess of insurance coverage could have a
material adverse effect on our reputation and our business and operating
results, or could result in the imposition of criminal penalties.

We expect our operating results to fluctuate and the price of our common stock
could fall if quarterly results are lower than the expectations of securities
analysts or stockholders

   We believe that quarter-to-quarter comparisons of our operating results are
not necessarily meaningful. You should not rely on the results of one quarter
as an indication of our future

                                       13
<PAGE>


performance. If our quarterly operating results fall below the expectations of
securities analysts or stockholders, however, the price of our common stock
could fall. We have experienced significant fluctuation in our quarterly
operating results and may continue to experience significant fluctuation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Consolidated Quarterly Results of Operations" for a discussion of
the factors causing fluctuation of quarterly operating results.

We may be unable to fund our operating and capital requirements and service our
debt satisfactorily

   We expect the net proceeds from this offering, our current cash and cash
equivalents and borrowings to meet our operating and capital requirements and
service our debt for at least the next 12 months. After that, we may need to
raise additional funds. We cannot be certain that we will be able to obtain
additional financing on favorable terms, if at all. If we cannot raise funds
when needed, on acceptable terms, we may not be able to develop or enhance our
services, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements. This could seriously harm our
business, results of operations and financial condition.

   We plan to devote substantial resources to expand our existing data center
and open additional data centers in 1999 and 2000. In addition, we expect to
make significant investments in sales and marketing and the development of new
services as part of our business strategy. The failure to generate sufficient
cash from operations or to raise sufficient funds to finance this growth could
require us to delay or abandon some or all of our plans or otherwise forego
market opportunities. This could make it difficult for us to respond to
competitive pressures.

If we are not able to overcome the challenges of our planned international
expansion, our revenue and our prospects for profitability may be materially
and adversely affected

   We intend to expand our international operations and international sales and
marketing efforts. To date, we have limited experience in developing localized
versions of our services and in marketing, selling and distributing our
services internationally. We have agreed to provide performance marketing
services for an existing customer in Europe and may agree to provide services
in additional European countries and Japan. Our success in these markets will
depend on the success of our customers in these countries.

   International operations are subject to other inherent risks, including:

  .  the impact of recessions in economies outside the United States;

  .  changes in regulatory requirements;

  .  potentially adverse tax consequences;

  .  difficulties and costs of staffing and managing foreign operations;

  .  political and economic instability;

  .  compliance with foreign regulations regarding Internet privacy concerns;

  .  fluctuations in currency exchange rates; and

  .  seasonal reductions in business activity during the summer months in
     Europe and some other parts of the world.


                                       14
<PAGE>


Management may invest or spend the proceeds of this offering in ways with which
you may not agree

   Our board of directors and management will have significant flexibility in
applying the net proceeds of this offering. As of the date of this prospectus,
we do not have plans for using most of the proceeds from this offering other
than for working capital and general corporate purposes, which may include the
prepayment of our existing indebtedness.

We depend on the continued viability of the Internet infrastructure

   Our business depends upon the development and maintenance of a viable
Internet infrastructure. The current Internet infrastructure may be unable to
support an increased number of users. The timely development of products such
as high-speed modems and communications equipment will be necessary to continue
reliable Internet access. Furthermore, the Internet has experienced outages and
delays as a result of damage to portions of its infrastructure. Outages and
delays, including those resulting from Year 2000 problems, could adversely
affect Web sites, e-mail and the level of traffic on the Web sites of our
customers and their marketing partners. We also depend upon Internet access
providers that provide consumers with access to our services. In the past,
users have occasionally experienced difficulties due to system failures
unrelated to our systems. Any disruption in the Internet access provided by
third-party providers or any failure of third-party providers to handle higher
volumes of user traffic could have a material adverse effect on our business,
results of operations and financial condition. Finally, the effectiveness of
the Internet may decline due to delays in the development or adoption of new
standards and protocols designed to support increased levels of activity. If
new standards or protocols are developed, we may be required to incur
substantial expenditures to adapt our products.

Projections included in this prospectus relating to the growth of e-commerce
and the Internet are based on assumptions that could turn out to be incorrect
and actual results could be materially different from the projections

   This prospectus contains various third-party data and projections, including
those relating to revenue generated by electronic commerce, the number of
Internet users and the amount of Internet advertising. See "Summary--Our Market
Opportunity" and "Business Industry Background." These data and projections
have been included in studies prepared by independent market research firms,
and the projections are based on surveys, financial reports and models used by
these firms. Actual results or circumstances may be materially different from
the projections. This could reduce our revenue and harm our operating results.
These data and projections are inherently imprecise and investors are cautioned
not to place undue reliance on them.

Our stock price may be extremely volatile which may prevent you from reselling
your shares at or above the initial public offering price

   The market price of the common stock after this offering may vary from the
initial public offering price. Fluctuations in market price and volume are
particularly common among securities of

                                       15
<PAGE>


Internet and other technology companies. As a result, you may not be able to
resell your shares at or above the initial offering price. The market price of
our common stock may fluctuate significantly in response to the following
factors, some of which are beyond our control:

  .  variations in quarterly operating results;

  .  changes in market valuations of Internet and other technology companies;

  .  our announcements of significant contracts, acquisitions, strategic
     partnership, joint ventures or capital commitments;

  .  failure to complete significant sales;

  .  additions or departures of key personnel;

  .  future sales of common stock; and

  .  changes in financial estimates by securities analysts.

If our stock price is volatile, we may be subject to securities class action
litigation

   In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
stock. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources.

If substantial sales of our common stock occur our stock price could decline

   Sales of a substantial number of shares of common stock after this offering
could adversely affect the market price of the common stock. On completion of
this offering, we will have shares of common stock outstanding and   shares
subject to outstanding options. The shares sold in this offering will be freely
tradable without restriction or further registration under the federal
securities laws unless purchased by our "affiliates" as that term is defined in
Rule 144. The remaining     shares, or  %, of common stock outstanding on
completion of the offering will be "restricted securities" as that term is
defined in Rule 144. Our directors, executive officers and other stockholders
who collectively beneficially own approximately  % of our outstanding stock
have entered into lock-up agreements that limit their ability to sell common
stock. These stockholders have agreed not to sell or otherwise dispose of any
shares of common stock for a period of 180 days after the date of this
prospectus without the prior written approval of Donaldson, Lufkin & Jenrette
Securities Corporation. When the lock-up agreements expire, most of the
restricted securities will become eligible for sale.

Our existing stockholders will be able to control all matters requiring
stockholder approval and could delay or prevent someone from acquiring or
merging with us on terms favored by a majority of our independent stockholders

   On completion of this offering, our executive officers and directors and
their affiliates will beneficially own approximately   % of our outstanding
common stock. As a result, these

                                       16
<PAGE>

stockholders will be able to exercise control over the company's operations and
all matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions. This could delay or prevent
a third party from acquiring or merging with us.

If we issue more equity securities in the future, your influence over corporate
matters that require stockholder approval may be diluted

   If we raise additional capital by selling more equity securities, your
percentage ownership may decrease and any additional equity securities may have
rights, preferences or privileges senior to those of existing holders of common
stock. As a result, your ability to influence corporate matters that require
stockholder approval may be reduced.

Anti-takeover provisions in our charter documents and Delaware law could
prevent or delay a change in control of our company

   Some provisions of our amended and restated certificate of incorporation and
by-laws may discourage, delay or prevent a merger or acquisition that a
stockholder may consider favorable, which could reduce the market price of our
common stock. These provisions include:

  .  authorizing the issuance of blank check preferred stock or additional
     shares of common stock;

  .  providing for a classified board of directors with staggered, three-year
     terms;

  .  providing that directors may only be removed for cause by a two-thirds
     vote of stockholders;

  .  limiting the persons who may call special meetings of stockholders;

  .  prohibiting stockholder action by written consent; and

  .  establishing advance notice requirements for nominations for election to
     the board of directors or for proposing matters that can be acted on by
     stockholders at stockholder meetings.

   Delaware law may also discourage, delay or prevent a third party from
acquiring or merging with us.

Investors will experience immediate dilution in the book value of their shares

   The initial public offering price is expected to be substantially higher
than the book value per share of the outstanding common stock immediately after
this offering. Accordingly, if you purchase common stock in the offering, you
will incur immediate dilution of approximately $    in the book value per share
of the common stock from the price you pay for the common stock.

                                       17
<PAGE>

The forward-looking statements we make in this prospectus might prove
inaccurate. As a result, our actual results, levels of activity, performance or
achievements may differ materially from those expressed in the forward-looking
statements

   Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute forward-
looking statements. In some cases, you can identify forward-looking statements
by terminology such as "may," "might," "will," "should," "could," "expects,"
"plans," "intends," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or other comparable terminology. These statements
involve known and unknown risks and uncertainties that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. These
factors include, among other things, the risk factors discussed above.

   We cannot guarantee any future results, levels of activity, performance or
achievements. Moreover, neither we nor anyone else assumes responsibility for
the accuracy and completeness of these statements. We do not intend to update
any of the forward-looking statements after the date of this prospectus.

                                       18
<PAGE>

                                USE OF PROCEEDS

   We estimate that the net proceeds from our sale of      shares of common
stock at an initial public offering price of $      per share to be $        ,
after deducting estimated underwriting discounts and offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that the
net proceeds will be approximately $  , after deducting the estimated
underwriters discounts and offering expenses.

   Our primary purposes for this offering are to increase our equity capital,
create a public market for our common stock and facilitate our future access to
public equity markets. We intend to use our net proceeds of this offering for
working capital and other general corporate purposes, including expansion of
our existing data center and the addition of new data centers. We also intend
to increase our expenditures relating to sales and marketing and product
development activities. As of June 30, 1999, we had outstanding the following
principal amounts under our credit arrangements with Comdisco, Inc. that we may
repay, in whole or in part, with a portion of the proceeds of this offering:

  .  $5,000,000 with an interest rate of 12% per annum under a subordinated
     debt agreement, to be repaid in equal monthly installments of principal
     beginning December 1999 and ending November 2001; and

  .  $1,824,228 with an interest rate of 6.8% per annum under a revolving
     capital equipment line of credit with each borrowing under the line to
     be repaid in equal monthly installments of principal over four years
     from the date of that borrowing.

These borrowings were used to provide working capital and to acquire computer
equipment, furniture and fixtures.

   We have not identified specific uses for a substantial portion of our net
proceeds of this offering, and we will have discretion over their use and
investment. Pending use of the net proceeds, we intend to invest these proceeds
in short-term, investment grade, interest-bearing securities.

                                DIVIDEND POLICY

   We currently intend to retain future earnings, if any, to finance our
growth. We have not paid any cash dividends since January 1, 1996 and do not
anticipate paying cash dividends on our common stock in the foreseeable future.
Payment of future dividends, if any, will be at the discretion of our board of
directors after taking into account various factors, including our financial
condition, operating results, current and anticipated cash needs, restrictions
in financing agreements and plans for expansion.

   Under the terms of our existing subordinated debt agreement, we are
prohibited from paying any cash dividends without the prior consent of our
lenders.

                                       19
<PAGE>

                                 CAPITALIZATION

   The following table sets forth our capitalization as of June 30, 1999 on an
actual basis and pro forma as adjusted basis. This information should be read
in conjunction with our consolidated financial statements and related notes,
all included elsewhere in this prospectus.

   The pro forma as adjusted basis:

  .  gives effect to the automatic conversion of all outstanding shares of
     preferred stock into               shares of common stock upon the
     closing of this offering; and

  .  reflects our receipt and application of the estimated net proceeds from
     the sale of            shares of common stock in this offering at an
     assumed initial public offering price of $          per share after
     deducting the estimated underwriting discounts and offering expenses
     payable by us.

   Shares of common stock reflected by this table exclude:

  .      shares issuable upon the exercise of outstanding options with a
     weighted average exercise price of $     per share;

  .      shares available for issuance and grant under our 1998 Stock
     Incentive Plan, net of outstanding options; and

  .      shares issuable upon the exercise of outstanding warrants at a
     weighted average exercise price of $     per share.

<TABLE>
<CAPTION>
                                                         As of June 30, 1999
                                                        -----------------------
                                                                     Pro Forma
                                                                         As
                                                          Actual      Adjusted
<S>                                                     <C>          <C>
Cash, cash equivalents and marketable securities....... $24,324,816  $
                                                        ===========  ==========
Current portion of long-term debt...................... $ 1,932,355  $1,932,355
                                                        ===========  ==========
Long-term debt, net of current portion................. $ 6,018,464  $6,018,464
Series A Convertible Participating Preferred Stock;
 $.01 par value; 11,300,000 shares authorized, actual:
 10,600,000 shares issued and outstanding, actual; none
 authorized, issued and outstanding, pro forma as
 adjusted..............................................   9,367,007         --
Series A Convertible Participating Preferred Stock
 Warrants: 700,000 warrants, exercise price $1.00......     540,000         --
Series B Convertible Participating Preferred Stock;
 $.01 par value; 13,196,522 shares authorized, actual:
 13,196,522 shares issued and outstanding, actual; none
 authorized, issued and outstanding, pro forma as
 adjusted..............................................  25,450,975         --
Stockholders' equity (deficit):
 Common stock, $0.01 par value; 55,000,000 shares
  authorized, actual;      shares authorized, pro forma
  as adjusted:      shares issued, actual;      shares
  issued pro forma as adjusted.........................
 Additional paid-in capital............................
 Unearned compensation.................................  (5,164,250)
 Shareholders notes receivable.........................    (309,659)
 Accumulated deficit................................... (13,361,858)
 Treasury stock, at cost (     shares, actual and pro
  forma as adjusted)...................................  (1,593,239)
                                                        -----------  ----------
Total stockholders' equity (deficit)................... (15,961,573)
                                                        -----------  ----------
Total capitalization................................... $25,414,873  $
                                                        ===========  ==========
</TABLE>

                                       20
<PAGE>

                                    DILUTION

   The pro forma net tangible book value of our common stock as of June 30,
1999 was $19,396,409, or $   per share, after giving effect to the automatic
conversion of all outstanding shares of preferred stock into      shares of
common stock upon the closing of this offering. After giving effect to the sale
of common stock pursuant to this offering at an assumed initial public offering
price of $        per share, assuming the underwriters' option to purchase
additional shares in this offering is not exercised, and after deducting
estimated underwriting discounts and offering expenses, the adjusted pro forma
net tangible book value as of June 30, 1999 would have been $           or
$           per share.

   Pro forma net tangible book value per share before the offering has been
determined by dividing pro forma net tangible book value, which is calculated
as total tangible assets less total liabilities, by the pro forma number of
shares of common stock outstanding as of June 30, 1999. This offering will
result in an increase in pro forma net tangible book value per share of
$           to existing stockholders and dilution in pro forma net tangible
book value per share of $           to new investors who purchase shares in
this offering. Dilution is determined by subtracting pro forma net tangible
book value per share from the assumed initial public offering price of
$              per share. The following table illustrates this dilution:

<TABLE>
<S>                                                                    <C> <C>
  Assumed initial public offering price per share.....................     $
   Pro forma net tangible book value per share as of June 30, 1999.... $
   Increase attributable to sale of common stock in this offering.....
                                                                       ---
  Pro forma net tangible book value per share after this offering.....
                                                                           ----
  Dilution of net tangible book value per share to new investors......     $
                                                                           ====
</TABLE>

   If the underwriters exercise their option to purchase additional shares in
this offering, the pro forma net tangible book value per share after the
offering would be $    per share, the increase in net tangible book value per
share to existing stockholders would be $    per share and the dilution to new
investors would be $    per share.

   The following table summarizes, on a pro forma basis as of June 30, 1999,
the differences between the total consideration paid and the average price per
share paid by the existing stockholders and the new investors with respect to
the number of shares of common stock purchased from us based upon an assumed
initial public offering price of $      per share:

<TABLE>
<CAPTION>
                                         Shares         Total
                                       Purchased    Consideration  Average Price
                                     -------------- --------------   Per Share
                                     Number Percent Amount Percent
<S>                                  <C>    <C>     <C>    <C>     <C>
Existing stockholders...............             %              %       $
New investors.......................
                                      ---     ---    ---     ---
  Total.............................          100%           100%
                                      ===     ===    ===     ===
</TABLE>

   These tables assume no exercise of stock options or warrants outstanding as
of        , 1999. At        , 1999, there were             shares of common
stock issuable upon exercise of outstanding stock options at a weighted average
exercise price of $           per share. Upon completion of this offering,
there will be outstanding warrants to purchase             shares of common
stock at a weighted-average exercise price of $         per share. To the
extent that outstanding options or warrants are exercised in the future, there
will be further dilution to new investors.

                                       21
<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

   The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and
related notes included elsewhere in this prospectus. The consolidated statement
of operations data for the fiscal years ended December 31, 1996, 1997 and 1998
and the consolidated balance sheet data as of December 31, 1997 and 1998 are
derived from our consolidated financial statements audited by
PricewaterhouseCoopers LLP, independent accountants. The consolidated statement
of operations data for the six-month periods ended June 30, 1998 and 1999 and
the consolidated balance sheet data as of June 30, 1999 are derived from our
unaudited consolidated financial statements included elsewhere in this
Prospectus. The consolidated statement of operations data for the years ended
December 31, 1994 and 1995 and the consolidated balance sheet data as of
December 31, 1994, 1995 and 1996 are derived from our unaudited consolidated
financial statements not included elsewhere in this prospectus. The unaudited
consolidated financial statements have been prepared on the same basis as our
audited consolidated financial statements and, in our opinion, include all
adjustments, consisting only of normal recurring adjustments, which we consider
necessary for a fair presentation of our results of operations and financial
position for these periods. These historical results are not necessarily
indicative of results to be expected for any future period.

   In the third quarter of 1997 we began providing performance marketing
services. Prior to that time, we provided customers software development
services which are reflected as other revenue.

   Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding shares of preferred stock
into shares of common stock, as if the shares had converted immediately upon
issuance. Accordingly, accretion of preferred stock to redemption value has not
been included in the calculation of unaudited pro forma basic and diluted net
loss per share.

                                       22
<PAGE>

                      Selected Consolidated Financial Data
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                   Six Months
                                Year Ended December 31,          Ended June 30,
                           ------------------------------------  ---------------
                           1994 1995   1996     1997     1998    1998     1999
<S>                        <C>  <C>   <C>      <C>      <C>      <C>    <C>
Statement of Operations
 Data:

Revenue:
 Performance marketing
  services...............  $--  $--   $   --   $   216  $ 1,319  $ 617  $ 1,396
 Other...................   662  463      196       60        8      3      --
                           ---- ----  -------  -------  -------  -----  -------
  Total revenue..........   662  463      196      276    1,327    620    1,396

Operating expenses:
 Cost of revenue.........   --   --       --       273      424    156      238
 Sales and marketing.....    83   49      398      180    1,454    146    4,496
 Development and
  engineering............   210  274      505      426      729    292    1,482
 General and
  administrative.........   192  125      558      332      875    231      854
 Equity related
  compensation...........   --   --       --       --     1,950    --       771
                           ---- ----  -------  -------  -------  -----  -------
  Total operating
   expenses..............   485  448    1,461    1,211    5,432    825    7,841
Operating income (loss)..   177   15   (1,265)    (935)  (4,105)  (205)  (6,445)
Interest income
 (expense), net..........    30   (5)     (26)     (99)    (224)   (61)    (168)
                           ---- ----  -------  -------  -------  -----  -------
Net income (loss)........   207   10   (1,291)  (1,034)  (4,329)  (266)  (6,613)

Accretion of preferred
 stock to redemption
 value...................   --   --       --       --       (99)   --      (654)
                           ---- ----  -------  -------  -------  -----  -------

Net income (loss)
 attributable to common
 stockholders............  $207 $ 10  $(1,291) $(1,034) $(4,428) $(266) $(7,267)
                           ==== ====  =======  =======  =======  =====  =======


Basic and diluted net
 income (loss) per share.  $    $     $        $        $        $      $

Shares used in computing
 basic and diluted net
 income (loss) per share.

Unaudited pro forma basic
 and diluted net loss per
 share...................                               $               $

Shares used in computing
 pro forma basic and
 diluted net loss per
 share...................

<CAPTION>
                                  As of December 31,                     As of
                           ------------------------------------         June 30,
                           1994 1995   1996     1997     1998             1999
<S>                        <C>  <C>   <C>      <C>      <C>      <C>    <C>
Balance Sheet Data:
Cash, cash equivalents
 and marketable
 securities..............  $ 30 $ 90  $    25  $    76  $ 4,327         $24,325
Working capital
 (deficit)...............   156  169     (443)    (502)   3,422          21,032
Total assets.............   257  294      140      254    5,971          30,183
Long-term debt, net of
 current portion.........    48   62      751      333    4,949           6,018
Convertible preferred....   --   --       --       --     9,219          34,818
Total stockholders'
 equity (deficit)........   158  168   (1,104)  (1,897)  (9,929)        (15,962)
</TABLE>

                                       23
<PAGE>

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

   This prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in the
forward-looking statements.

Overview

   We are a leading provider of services that enable our customers to promote
their products and services in tens of thousands of locations on the Internet
and to pay for these promotions based on performance. Our solutions-BFAST
affiliate marketing services, B-INTOUCH e-mail referral services and BFIT
advertising services-are designed to increase our customers' online sales or
traffic and to decrease their cost of customer acquisition.

   We were originally incorporated in January 1996. Initially we provided
customized software development and support services for automating marketing
programs. Later in 1996 we began to change our focus to performance marketing
services, although we continued to provide customized software and support
services on a limited basis through the third quarter of 1998. The financial
statements and data for us and these two affiliated companies, including the
description of our financial condition and results of operations, are set forth
on a consolidated basis for all periods presented.

   To date, we have generated our performance marketing services revenue
primarily from our BFAST affiliate marketing services. In general, we enter
into a standard service agreement that requires our BFAST customers to pay us a
one-time integration fee and monthly performance fees, subject to minimum
monthly or annual fees. For our online merchants, the performance fees are
generally based on either a percentage of the sales generated or on the number
of transactions or orders generated by their marketing partners. For our portal
customers, the performance fees are generally based on the volume of click-
throughs generated by their marketing partners. In addition to the core BFAST
service, we also offer related service options, such as affiliate commission
payment services, which customers may select on an item-by-item basis for set
fees. We also generate revenue through our other performance marketing
services-BFIT, a service that tracks the effectiveness of customers' banner
ads, launched in the second quarter of 1998, and B-INTOUCH, an e-mail referral
service, launched in the third quarter of 1999. Our BFIT customers pay us based
on the number of impressions served. Our B-INTOUCH customers typically pay us
based on the sales or traffic generated by these promotions. We are seeking to
develop additional performance marketing services.

   We have incurred significant net losses and negative cash flows from
operations since the commencement of our performance marketing business, and as
of June 30, 1999, had an accumulated deficit of approximately $13.4 million. We
had net losses of approximately $4.3 million in 1998 and $6.6 million in the
first six months of 1999. These losses have been funded primarily through the
issuance of preferred stock. We intend to continue to invest in our technology
and infrastructure, including investment in our existing data center and new
data centers. We intend to increase our expenditures relating to sales and
marketing and product development activities. As a result, we believe that we
will continue to incur operating losses and negative cash flow from operations
for the foreseeable future and that the rate at which these losses will be
incurred may increase from current levels.

                                       24
<PAGE>

Results of Operations

   The following table sets forth consolidated statement of operations data as
a percentage of total revenue for the periods indicated. The historical results
are not necessarily indicative of results to be expected for any future period.

<TABLE>
<CAPTION>
                                                                     Six
                                                                   Months
                                               Year Ended           Ended
                                              December 31,        June 30,
                                             ------------------   -----------
                                             1996   1997   1998   1998   1999
<S>                                          <C>    <C>    <C>    <C>    <C>
Revenue:
  Performance marketing services............  --  %   78 %   99 % 100 %   100 %
  Other.....................................  100     22      1   --      --
                                             ----   ----   ----   ---    ----
    Total revenue...........................  100    100    100   100     100
Operating expenses:
  Cost of revenue...........................  --      99     32    25      17
  Sales and marketing.......................  203     65    109    24     322
  Development and engineering...............  258    154     55    47     106
  General and administrative................  284    120     66    37      61
  Equity related compensation...............  --     --     147   --       55
                                             ----   ----   ----   ---    ----
    Total operating expenses................  745    438    409   133     561
Operating loss.............................. (645)  (338)  (309)  (33)   (461)
Interest expense (net)......................  (13)   (36)   (17)  (10)    (12)
                                             ----   ----   ----   ---    ----
Net loss.................................... (658)% (374)% (326)% (43)%  (473)%
                                             ====   ====   ====   ===    ====
</TABLE>

Revenue

   To date, performance marketing services revenue has included BFAST
integration fees and monthly service fees as well as BFIT monthly service fees.
Integration fees are recognized when the integration process is completed and a
customer begins accepting applications from potential marketing partners. BFAST
and BFIT service fees are recognized monthly. Other revenue reflects customized
software development and support services. We no longer offered these services
after September 30, 1998.

   Revenue from performance marketing services was first recognized in 1997 and
increased to $1.3 million in 1998 from $216,000 in 1997 as a result of
increases in our BFAST customer base and the introduction of BFIT. Other
revenue declined to $60,000 in 1997 from $196,000 in 1996 as a result of the
continued reduction of customized software development and support services.
Other revenue declined to $8,000 in 1998 when the final support contract for
customized software expired.

   Revenue from performance marketing services increased to $1.4 million for
the six months ended June 30, 1999, from $617,000 for the six months ended June
30, 1998, as a result of increases in our BFAST customer base and as the level
of transactions tracked by our services grew on average for each customer.
Other revenue declined to zero for the six months ended June 30, 1999 from
$3,000 for the six months ended June 30, 1998 when the last support contract
for customized software expired.

                                       25
<PAGE>

Cost of Revenue

   Cost of revenue consists of expenses related to the operation of our data
interchange. These expenses primarily include depreciation for systems and
storage equipment, costs for a third-party data center facility and costs for
Internet connectivity to our customers and their marketing partners.

   Cost of revenue was $273,000 in 1997 as a result of the introduction of
BFAST. Cost of revenue increased to $424,000 in 1998 as we expanded our server
and storage equipment and moved this equipment to a third-party facility.
However, cost of revenue decreased to 32% of total revenue in 1998 from 99% of
total revenue in 1997, primarily from the increased utilization of our server
and storage equipment resulting from an increased customer base and usage of
our services.

   Cost of revenue increased to $238,000 for the six months ended June 30,
1999, from $156,000 for the six months ended June 30, 1998, as a result of
increased depreciation and amortization reflecting higher equipment levels. As
a percentage of total revenue, cost of revenue decreased to 17% of total
revenue from 25% of total revenue over these periods as a result of higher
utilization of our server and storage equipment. In order to maintain targeted
service levels, we will be required to add equipment in advance of anticipated
future growth and this growth may not materialize as expected. Cost of revenue
as a percentage of total revenue may increase in the future as we add
additional equipment to support anticipated future growth.

Sales and Marketing Expenses

   Sales and marketing expenses consist of payroll and related costs for our
sales, customer service, marketing and business development groups. Also
included are the costs for marketing programs to promote our services to our
current and prospective customers, as well as programs to recruit marketing
partners for our current customers.

   Sales and marketing expenses decreased to $180,000 in 1997 from $398,000 in
1996 primarily as a result of approximately $250,000 in marketing-related
license fees incurred in 1996. Sales and marketing expenses increased to $1.5
million in 1998 as the result of the establishment of direct sales and internal
telesales groups and the use of third party public relations services.

   Sales and marketing expenses increased to $4.5 million for the six months
ended June 30, 1999, from $146,000 for the six months ended June 30, 1998, as a
result of the continued increase in our direct sales and internal telesales
forces, as well as an increase in our general marketing efforts and the
establishment of a recruitment program to assist customers in attracting
marketing partners. We expect that sales and marketing expenses will continue
to increase in amount in future periods to support expected growth.

Development and Engineering Expenses

   Development and engineering expenses primarily include payroll and related
costs for our product development and engineering groups and depreciation
related to equipment used for development purposes. The product development
group designs and develops the underlying

                                       26
<PAGE>

technologies for our BFAST, B-INTOUCH and BFIT services and the engineering
group develops and manages the infrastructure necessary to support our
services. Prior to 1998, development and engineering expenses also included the
expenses related to customized software development and support services.

   Development and engineering expenses decreased to $426,000 in 1997 from
$505,000 in 1996 primarily as a result of engineering start-up expenses that
were incurred in 1996 with the initial development of our performance marketing
technologies. Development and engineering expenses increased to $729,000 in
1998 as a result of an increase in product development and engineering
personnel.

   Development and engineering expenses increased to $1.5 million for the six
months ended June 30, 1999, from $292,000 for the six months ended June 30,
1998, primarily as a result of further personnel growth and additional
depreciation and amortization charges related to the purchase of additional
development and engineering hardware and software.

General and Administrative Expenses

   General and administrative expenses principally consist of payroll and
related costs and professional fees related to our general management, finance
and human resource functions. Facility and related costs are allocated to sales
and marketing, development and engineering and general and administrative
expenses based upon the relative number of employees in each area.

   General and administrative expenses decreased to $332,000 in 1997 from
$558,000 in 1996 primarily as a result of a higher level of professional fees
incurred in 1996 in connection with a contemplated financing. General and
administrative expenses increased to $875,000 in 1998 as a result of $218,000
of professional fees related to financing efforts and $277,000 of increased
personnel and related costs resulting from the addition of a new executive
management team.

   General and administrative expenses increased to $854,000 for the six months
ended June 30, 1999, from $231,000 for the six months ended June 30, 1998, as a
result of increased personnel and related costs.

Equity Related Compensation Expenses

   Equity related compensation expenses are non-cash charges representing the
difference between the exercise price of options to purchase common stock
granted to our employees and the price paid for restricted stock sold to our
employees and the fair value of these shares as of the date of grant, as
subsequently determined for financial reporting purposes. These expenses also
include the fair value of options granted to our consultants as of the date of
grant, as subsequently determined for financial reporting purposes. These fair
values were determined in accordance with Accounting Principles Board Opinion
25 and Statement of Financial Accounting Standards 123. We did not incur any
equity related compensation expenses in 1996 or in 1997. Equity related
compensation expenses were $2.0 million in 1998 and $771,000 for the six months
ended June 30, 1999. We expect to recognize additional equity related
compensation expenses of at least $375,000 per quarter through the end of 2002
as a result of the issuance of stock and stock options to employees and others
with exercise

                                       27
<PAGE>

prices per share subsequently determined to be below the fair market values per
share of our common stock for financial reporting purposes at the dates of
grant. The stock compensation is being expensed over the vesting period of the
applicable stock awards or options.

Interest Expense (net)

   Interest expense (net) is comprised of interest expense on our borrowings,
partially offset by interest income earned on our cash balances.

   As a result of increased borrowings used to finance the growth of our
business, interest expense (net) increased from $26,000 in 1996 to $99,000 in
1997 and to $224,000 in 1998. Interest expense (net) increased from $61,000 for
the six months ended June 30, 1998 to $168,000 for the six months ended June
30, 1999.

Consolidated Quarterly Results of Operations

   The following table sets forth unaudited consolidated quarterly statement of
operations data for the eight quarters ended June 30, 1999. This unaudited
consolidated quarterly information has been derived from our unaudited
consolidated financial statements and, in the opinion of management, have been
prepared on a basis consistent with the financial statements contained
elsewhere in this prospectus and includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the
information for the periods covered when read in conjunction with our financial
statements and related notes. The operating results for any quarter are not
necessarily indicative of the operating results for any future period.

<TABLE>
<CAPTION>
                                                     Quarter Ended
                         -------------------------------------------------------------------------
                         Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30,  Dec. 31  Mar. 31,  Jun. 30,
                           1997     1997     1998     1998     1998     1998      1999      1999
                                                     (in thousands)
<S>                      <C>      <C>      <C>      <C>      <C>       <C>      <C>       <C>
Revenue:
  Performance marketing
   services.............  $  48    $ 169    $ 237     $383   $   313   $   386  $   533   $   863
  Other.................     19       11      --       --          8       --       --        --
                          -----    -----    -----     ----   -------   -------  -------   -------
    Total revenue.......     67      180      237      383       321       386      533       863
Operating expenses:
  Cost of revenue.......     84       96       89       67        70       198      101       137
  Sales and marketing...     36       33      125      147       267       915    1,734     2,762
  Development and
   engineering..........     72       94      116      177       106       330      562       920
  General and
   administrative.......    168      154       47       59       327       442      351       503
  Equity related
   compensation.........    --       --       --       --      1,817       133      346       425
                          -----    -----    -----     ----   -------   -------  -------   -------
    Total operating
     expenses...........    360      377      377      450     2,587     2,018    3,094     4,747
Operating loss..........   (293)    (197)    (140)     (67)   (2,266)   (1,632)  (2,561)   (3,884)
Interest income
 (expense), net.........    (26)     (32)     (33)     (28)      (25)     (138)    (216)       48
                          -----    -----    -----     ----   -------   -------  -------   -------
Net loss................  $(319)   $(229)   $(173)    $(95)  $(2,291)  $(1,770) $(2,777)  $(3,836)
                          =====    =====    =====     ====   =======   =======  =======   =======
</TABLE>

Some noteworthy aspects of the information in the table above include the
following:

  .  Cost of revenue changes resulted from fluctuations in connectivity costs
     and increases in depreciation due to the addition of capital equipment;

  .  Sales and marketing expenses increased each consecutive quarter due to
     the continuous addition of staff, which grew from 5 employees in
     December 1997 to 74 employees in June 1999;

                                       28
<PAGE>


  .  Development and engineering expense changes resulted from quarterly
     fluctuations in computer maintenance and software purchases and the
     increase in salary and related expenses due to the addition of staff;


  .  Revenue increases from 1998 forward resulted from an increase in the
     number of customers as well as revenue growth of the existing clients;

  .  June 1998 revenue of $383,000 included non-recurring service fees of
     $120,000, causing revenue to decline to $321,000 in September 1998; and

  .  General and Administrative expense fluctuations resulted from varying
     professional service fees, legal expenses in connection with
     unsuccessful financing efforts in 1996 and 1998 and the addition of a
     senior management team during the third and fourth quarters of 1998.

   Our quarterly operating results have fluctuated in the past and may
fluctuate significantly in the future due to a variety of factors, including:

  . the continued acceptance of online commerce;

  . demand for and the timing of sales of our services;

  . changes in the rapidly evolving market for performance marketing
    services;

  .  delays in introducing new services;

  .  the timing of when we initially integrate our services with our new
     customers' systems and how long it takes them to generate significant
     regular online sales or traffic;

  .  possible seasonality of sales of our online merchants, most of whom sell
     goods and service at the retail level; and

  .  increased expenses, whether related to capital expenditures, sales and
     marketing, product development or administration.

Liquidity and Capital Resources

   We have financed our operations to date primarily through the private sale
of equity securities and borrowings. Net proceeds from financing activities
from January 1, 1998 through June 30, 1999 included:

  .  approximately $10.4 million received upon the sale of Series A preferred
     stock and common stock purchase warrants in August and September 1998;

  .  approximately $24.9 million received upon the sale of Series B preferred
     stock in March 1999; and

  .  approximately $8.0 million in borrowings under various credit facilities
     and capital lease agreements.

   Cash used in operating activities was $2.4 million and $4.7 million in 1998
and 1999, respectively. Cash used in operating activities during 1998, resulted
from net losses and deposits of $384,000 required primarily for our new offices
and related expenditures. These amounts were

                                       29
<PAGE>


partially offset by an increase of $345,000 of accounts payable and accrued
expenses. In the six months ended June 30, 1999, cash used in operating
activities resulted from net losses and from an increase of $534,000 in
prepaid expenses primarily relating to sales commissions paid for revenue to
be recognized in future periods and payments under annual hardware and
software maintenance contracts. These amounts were partially offset during the
first six months ended June 30, 1999 by an increase of $1.1 million in
deferred revenue for payments received from four customers for future
services, and by an increase of $779,000 of accounts payable and accrued
expenses.

   Through June 30, 1999, our investing activities for our business have
consisted primarily of capital expenditures totaling $610,000 and $598,000 in
1998 and the six months ended June 30, 1999, respectively. These capital
expenditures were incurred primarily to acquire computer hardware and software
for our operations and our internal use. We expect that as our customer base
and employee base grow, we will require additional computer hardware and
software and our related capital expenditures will increase significantly. We
currently have no material commitments to make future capital expenditures.

   At June 30, 1999 we had $24.3 million in cash, cash equivalents and
marketable securities and $21.0 million in working capital. In addition we
have agreements for a $5.0 million line of credit that bears interest at 12%
per annum and a $2.0 million equipment line of credit that bears interest at
6.8% per annum. The $5.0 million line of credit provides for principal
payments in equal monthly installments commencing in December 1999 and ending
November 2001. The $2.0 million equipment line of credit provides for
principal payments in monthly installments over a period of four years from
the date of each borrowing. The credit agreements prohibit us from paying cash
dividends or from engaging in a merger or sale involving substantially all our
assets or stock without prior lender consent. They also contain customary
provisions regarding the maintenance of collateral, insurance and the
provision of financial data to the lender. At June 30, 1999 we had borrowed
substantially all of the amounts available under these lines of credit. During
the first six months ended June 30, 1999, we prepaid $305,000 of indebtedness.

   We believe that the net proceeds of this offering, together with cash on
hand, cash equivalents and borrowings, will be sufficient to meet our debt
service, operating and capital requirements for at least the next 12 months.
After that, we may need to raise additional funds. We may seek to raise
additional funds through additional borrowings, public or private equity
financings or from other sources. There can be no assurance that additional
financing will be available at all or, if available, will be on terms
acceptable to us.

   We have not entered into any financial derivative instruments that expose
us to material market risk.

Year 2000 Compliance

   Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. In order to
distinguish 21st century dates from 20th century dates, the date code field
needs to be expanded to 4 digits. As a result, many companies' software and
computer systems may need to be upgraded or replaced in order to function
properly with dates after December 31, 1999. The use of software and computer
systems that are not Year 2000 compliant

                                      30
<PAGE>

could result in system failures or miscalculations resulting in disruptions of
operations, including among other things, a temporary inability to process
transactions, send invoices, or engage in normal business activities.

   Our proprietary software has been developed to be Year 2000 compliant since
its first version. Our services also rely on technology provided by third
parties, such as Oracle-based databases, Sun Microsystems servers, and high-
capacity Internet connections through Exodus Communications. We have reviewed
the public written statements of Oracle, Sun Microsystems, and PowerSoft
regarding Year 2000 compliance and are using versions of their products that
they state will operate properly in the new millennium. Based on our review of
the public written statements of Exodus Communications regarding its Year 2000
compliance, we have no reason to believe that our Internet connections through
Exodus will fail to operate properly in the new millennium. We have tested
elements of our system to ascertain the Year 2000 compliance of our services
and expect to complete a system-wide test prior to December 31, 1999. Failure
of our current service offerings to operate properly with regard to the Year
2000 and thereafter could require us to incur significant unanticipated
expenses to remedy any problems or replace affected vendors and could have a
material adverse effect on our business, operating results and financial
condition.

   We depend on the uninterrupted availability of the Internet infrastructure
to conduct our business. We also rely on the continued operations of our
customers, in particular their e-commerce sites where commercial transactions
are performed, and our customers' marketing partners, in particular the
affiliate sites and e-mail systems that host and distribute promotions, for our
revenue. We are thus dependent upon the success of the Year 2000 compliance
efforts of the service providers that support the Internet and the Year 2000
compliance efforts of our customers. Interruptions in the Internet
infrastructure affecting us, our customers or their marketing partners, or the
failure of the Year 2000 compliance efforts of one or more of our customers or
their marketing partners, could have a material adverse effect on our business,
results of operations and financial condition. Further, the marketing
initiatives pursued by our prospective customers could be affected by Year 2000
issues as companies expend significant resources to correct their current
systems for the year 2000. These expenditures may result in reduced funds
available for Internet advertising. This could materially and adversely affect
our business, results of operations and financial condition.

   We have not reviewed our non-information technology systems for Year 2000
issues relating to embedded microprocessors and do not expect to conduct a
formal review. We have not contacted our customers to inquire of their Year
2000 compliance status and do not expect to do so. Because our e-commerce and
portal customers operate computer-based businesses, we believe that they are
likely to take all necessary steps to ensure that their businesses will
function properly in the new millennium without any material interruption.

   Because our internal information systems, such as our payroll and accounting
systems, utilize relatively new equipment and mostly new standard software
applications, we believe that these internal information systems are currently
Year 2000 compliant, or will be timely made Year 2000 compliant with
commercially available patches or upgrades in the ordinary course of business.

   We do not separately account for Year 2000 related expenses but estimate
that the expenses we have incurred to date to address Year 2000 issues have not
been material and we do not expect to incur material expenses in connection
with any required future remediation efforts.

                                       31
<PAGE>


   At this time, we anticipate that the worst case scenario related to Year
2000 issues would involve a major shutdown of the Internet, which would result
in a total loss of revenue to us, or the significant online business
interruption of one or more of our larger customers, which could result in a
severe loss of revenue, until it were resolved. The most likely worst case
scenario would be that we would have a problem with our data interchange with
our customers that would reduce the flow of tracking information or cause this
information to be incorrect. This could result in substantial delays or
inaccuracies in reporting information to our customers, billing our customers,
paying marketing partner commissions and preparing our financial statements.

   We have not developed a Year 2000 contingency plan. We expect to develop a
plan prior to December 31, 1999.

   The information set forth above and elsewhere in this prospectus relating to
Year 2000 issues constitute "Year 2000 Readiness Disclosures," as the term is
defined by the Year 2000 Information and Readiness Disclosure Act of 1998,
enacted October 19, 1998 (Public Law 105-271, 112 State. 2386).

Recent Accounting Pronouncements

   In June 1998, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. To
date, we have not engaged in derivative and hedging activities, and accordingly
do not believe that the adoption of the SFAS No. 133 will have a material
impact on our financial reporting and related disclosures. We will adopt SFAS
No. 133 as required by SFAS No. 137, "Deferral of the effective date of FASB
Statement No. 133," in fiscal year 2000.

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<PAGE>

                                    BUSINESS

   We are a leading provider of services that enable our customers to market
their products and services online through tens of thousands of marketing
partners and to pay for these promotions based on performance. Our customers
use our services to establish and manage their own independent performance
marketing relationships directly with their marketing partners. Our online
merchant customers typically pay fees to their marketing partners based on the
sales they generate, as tracked through our services. Our portal customers
typically pay fees to their marketing partners based on the traffic sent to the
portal, as tracked through our services. We are typically paid fees by our
customers based upon the level of sales or traffic generated by these marketing
partners. We provide our customers a cost-effective solution for establishing,
managing and rewarding these performance marketing sales channels. We enable
our customers to increase their sales and traffic and decrease their cost of
customer acquisition.

Industry Background

   The Internet has emerged as a significant communications and commerce
medium. Nua Internet Surveys estimates that the number of Internet users
worldwide has increased from 26 million in December 1995 to 179 million in June
1999, and expects this growth to continue with the number of online users
reaching 350 million by 2005. In addition, as users gain online experience,
they tend to increase the amount of time they spend on the Internet and spend
their time online conducting a greater variety of activities.

Expansion and Dispersion of Content; Evolution of Internet User Habits

   The content available to Internet users has increased dramatically and
become more widely dispersed. Increased ease and lower cost of Web publishing
has permitted smaller businesses, organizations and individuals to create and
host their own Web sites. The NEC Research Institute estimated that the number
of pages available on the Web grew from 320 million pages in December 1997 to
approximately 800 million pages in February 1999.

   More experienced Internet users tend to rely increasingly on their own lists
or bookmarks of Web sites, rather than on search engines and directories to
access content that is of specific interest to them. While visits to high
traffic Web sites such as portals have grown in absolute numbers, they
represent a minority of all online traffic. Neilsen//NetRatings reports that
the top ten portals made up 20% of the average monthly page views as measured
in their home Internet user sample in June 1999.

Growth of E-commerce

   The Internet has emerged as a significant sales channel for goods and
services to consumers. The Internet provides a cost-effective means for online
merchants to reach a global audience, and provides consumers with increased
information, broad selection and greater convenience.

                                       33
<PAGE>

   In November 1998, Forrester Research projected that total online U.S.
consumer spending will grow to $108 billion in 2003, accounting for about 6% of
the $1.8 trillion in expected overall consumer spending that year:

<TABLE>
<CAPTION>
                                       1998   1999   2000   2001   2002   2003
<S>                                    <C>   <C>    <C>    <C>    <C>    <C>
Total U.S. online consumer spending
 (billions)........................... $ 7.8 $ 18.1 $ 33.0 $ 52.2 $ 76.3 $108.0
U.S. households online (millions).....  28.6   33.5   38.3   43.5   48.6   52.8
U.S. households shopping online
 (millions)...........................   8.7   13.1   17.7   23.1   30.3   40.3
Average online expenditures per U.S.
 household............................ $ 899 $1,385 $1,864 $2,259 $2,518 $2,678
</TABLE>

   Experienced Internet users are more likely to purchase goods or services
online than new Internet users. Forrester Research also reported in September
1998 that 15% of users with less than 18 months of Internet experience purchase
online, but that percentage increases to 39% for users with more than 42 months
of experience.

The Evolution of Internet Marketing

   In response to increasing demand for online products and services, and as
the Internet and electronic commerce expand, online merchants and portals are
increasingly adopting online promotions to reach a global audience for their
products and services, drive traffic to their Web sites, attract customers and
facilitate transactions.

   Initially, Internet advertising took the form of banner ads, similar to
advertising billboards, typically placed on portals and other high-traffic Web
sites. Advertising networks then emerged to allow banner ads to be placed
across multiple sites that did not have sufficient traffic individually to
appeal to larger advertisers. In order to allow different advertisements to
appear on the same space on a Web page, portals and advertising networks
require banner ads of specific size and format, generally in a rectangular
shape. Under this model, advertisers generally pay a fee each time an ad is
displayed on a cost-per-thousand-impressions basis. These pay-for-display
campaigns are typically evaluated based on the number of times a user clicks on
the banner ad and is directed to the online merchant's Web site.

   Online merchants face an increasingly difficult and expensive task in
converting viewers of banner ads into shoppers and eventually buyers. Banner ad
click-through rates have decreased significantly from 2.11%, as reported by
I/Pro in October 1996, to 0.37%, as reported by Nielsen//NetRatings for the
week ended June 30, 1999. We believe that decreasing click-through rates result
from the lack of integration and relevance of the banner ads with the content
of the site where they are displayed.

   Online merchants also face an increasing challenge in reaching their
audience. More experienced Internet users, who are more likely to buy online,
spend a smaller percentage of their time on portals, and instead focus on
content sites that match their interests. With millions of sites displaying
hundreds of millions of pages of content, online merchants must identify and
form partnerships with an increasing number of Web sites that might appeal to
their buying audience. The decreased effectiveness of banner ads together with
the online merchant's desire to expand promotional reach have led to the
development of online promotions targeted to specific Web sites with relevant
content and consumers, with the marketing partners rewarded according to the
actual results they generate.

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<PAGE>

The Emergence of Affiliate Sales Channels

   By the end of 1996, a few leading online merchants began to develop
marketing relationships with third-party Web sites to incorporate into their
Web sites a variety of promotions via hyperlink for the online merchant's goods
and services. As these relationships grew, online merchants began to view them
as a separate sales channel for their goods and services and they became known
as affiliate sales channels. In establishing these new affiliate sales
channels, online merchants generally paid commissions to the Web site
publishers based on the sales generated by the ads or promotions. These
affiliate sales channels were the first widely introduced type of performance
marketing program.

   These affiliate sales channels had benefits for both the online merchants
and the marketing partners. Online merchants could pay for their marketing
based upon the performance of the promotions, making it more cost-effective to
run promotions with a broader array of third parties than under pay-for-display
methods. Marketing partners could generate revenue from their Web pages at
little or no cost and use ad space that might otherwise go unsold, since there
was no limit to the number of promotions they could run. Marketing partners
could choose among a variety of promotions and the location for each, leading
to better merchandising and increased effectiveness of the promotions which
would benefit both the e-merchant and the marketing partner.

   Initially, online merchants developed their own software databases and used
their own servers for developing, managing and tracking affiliate sales
channels. Most of these internally developed systems track activity only on the
online merchant's site. Using internal techniques for tracking users to point
of sale, the online merchant could then determine the sales generated by
promotions hosted by each marketing partner and pay commissions accordingly.

The Challenges of Internally Developing and Managing Affiliate Sales Channels

   Online merchants face many challenges in building an affiliate sales channel
on a broad scale. Tracking individual transactions through to point of sale
requires that e-merchants and marketing partners exchange data. This is usually
done by creating hyperlinks that are specific to each marketing partner and the
online merchant's product or service being promoted. Recording orders, order
cancellations, sales and returns requires integration of data from databases
maintained on the e-merchant's transactional and fulfillment systems, which are
often separate. Following an initial integration, ongoing monitoring for
success and accuracy is required. Developing and operating the necessary
software and hardware internally, which may involve tracking promotions viewed
millions of times on thousands of separate Web sites, is time consuming and
expensive.

   Online merchants also face challenges in managing their relationships, often
with tens of thousands of marketing partners, including:

  .  creating a wide variety of promotions for each of its various products
     or services;

  .  generating, placing and replacing the promotions selected by individual
     marketing partners within the context of its Web site;

  .  measuring and managing the productivity and effectiveness of marketing
     partners;

  .  analyzing and reporting on the data collected from thousands of sources
     to permit better merchandising by both the online merchants and the
     marketing partners;

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<PAGE>


  .  communicating with and making payments to thousands of marketing
     partners; and

  .  enhancing their systems to reflect changes in business models and
     payment methods to influence the behavior of marketing partners.

   These Web site publishers also face challenges in realizing the potential
benefits offered by joining an affiliate sales channel. They want to minimize
the time and expense associated with enrolling and creating and changing
hyperlinks for a particular online merchant. In addition, these Web site
publishers are looking for easy, cost-effective solutions for the delivery,
targeting and tracking of the promotional efforts that they run to enhance
their revenue.

The Be Free Solution

   We provide a comprehensive solution specifically designed to enable our
customers to increase sales and decrease the cost of customer acquisition by
establishing and managing their own performance marketing sales channels. We
have developed, and continue to enhance, a broad set of technologies and
services that provide a data interchange between disparate databases utilized
by our customers and their thousands of marketing partners. Through this data
interchange, we track, store and analyze the effectiveness of individual
promotions and provide online data and analysis to both our customers and their
marketing partners.

Merchant Connection

   We integrate our systems with each customer's often disparate catalog,
transactional and fulfillment systems by establishing standard data formats and
file transfer protocols. Through this connection, we receive and store
information about our customer's available products and services and its Web
site. We also receive order, order cancellation, sales and return data from our
customer.

   Our data interchange also tracks each time a user views and clicks on a
specific hyperlink placed by any of our customers' marketing partners. We track
these individual viewings and clicks to unique transactions with our customers.
Promotions we tracked for our customers were shown more than 300 million times
in June 1999 through our customer's more than one million performance marketing
relationships. This combination of customer and marketing partner data is
stored at our central processing facilities and allows us to measure the sales
or traffic performance of each specific promotion.

Management Solutions

   We have significant resources and expertise dedicated to the successful
implementation, development, management and control of online performance
marketing programs. These solutions include:

  . Establishment of marketing relationships. We provide online, automated
    application and approval processes for Web site publishers to become a
    customer's marketing partner. We also help customers identify and recruit
    potential marketing partners.

                                       36
<PAGE>


  .  Customer control of sales channel. All of our services are designed to
     enable a customer to maximize the efficiency of its performance
     marketing sales channel. Each of our customers selects its marketing
     partners and determines the terms of its relationships with these
     marketing partners. We brand reports, communications and payments with
     our customer's name.

  .  Development and placement of promotions. We store and deliver hyperlinks
     for our customers on our servers. These hyperlinks are available in a
     wide variety of formats, including text, dynamic displays, search boxes,
     pull-down menus, banner ads and buttons. Each of our customer's
     marketing partners can access our servers, choose among that customer's
     available hyperlinks, and incorporate them into their Web sites or e-
     mail messages through simple procedures.

  .  Replacement of promotions. Since all users viewing and clicking on
     promotions are routed through our servers before being redirected to a
     customer's Web site, changes in that customer's Web site only require
     programming changes on our servers rather than the replacement of
     hyperlinks by all of its marketing partners.

  .  Data collection and reporting. We collect and store data both from our
     customers and their marketing partners, tracking specific promotions
     through sales and returns. We provide extensive data and analyses
     online, both to our customers and to their marketing partners. Analyses
     can be configured to examine the performance of the entire performance
     marketing sales channel, a specific hyperlink or a specific marketing
     partner.

  .  Communication and payment services. We can generate e-mail
     communications and payments to widely dispersed marketing partners on
     behalf of customers. Communications can be automatically generated and
     broadcast based upon customer selected criteria.

  .  Merchandising assistance. Our reporting and communication services
     permit both our customers and their marketing partners to make and
     implement more effective merchandising decisions. Our best practices
     group monitors industry and competitive trends, as well as results
     achieved by customers generally, and shares this expertise with
     customers and their marketing partners. Our online merchant customers
     can use our system to identify hyperlinks or sites that are leading to
     high sales or return rates, manage product demand, and rank marketing
     partners by effectiveness.

   Using our services, our customers pay only for those individual promotions
that succeed. Our online merchant customers typically pay each marketing
partner only for the sales it generates. Our portal customers typically pay
each marketing partner only for the traffic the marketing partner sends to the
portal. Our customers typically pay us separate fees based on the level of
sales or traffic generated by their marketing partners. As a result, our
economic interests are closely aligned with the economic interests of our
customers and their marketing partners.

Strategy

   Our objective is to be the leading provider of online performance marketing
solutions. To achieve this objective we are focused on the following strategic
initiatives:

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<PAGE>

Leverage Technology Leadership to Provide Comprehensive Solutions

   We intend to continue our focus on performance marketing solutions. We plan
to both enhance our existing, as well as develop new, performance marketing
technologies, expertise and services. We have made significant investments in
technology and personnel to develop a comprehensive set of online services
specifically designed for the development of performance marketing programs,
including affiliate sales channels. We believe that customers will continue to
seek cost-effective solutions to establish and manage performance marketing
programs.

Rapidly Expand Our Targeted Customer Base

   We seek continued expansion of our customer base nationally and
internationally, primarily through our direct sales force. Because our revenue
is tied to our customers' performance, we are currently targeting large online
merchants and portals in the U.S. as customers. We have recently begun to
expand our sales efforts to the emerging online markets in Europe.

Continue to Provide Customer Branded and Controlled Solutions

   We enable each customer to extend its merchandising techniques to its
marketing partners, with which they contract directly. Services we provide on
our customers' behalf to their marketing partners, including analyses,
communications and payments, are customer branded. We believe customers will
find our merchant branded solutions more appealing and will invest more heavily
in the development and growth of these sales channels and in performance
marketing solutions provided by us.

Increase the Size of Our Customers' Sales Channels

   We will continue to identify and recruit potential affiliates on behalf of
our customers. Increasing our customers' marketing reach and revenue increases
our revenue. We have launched an online affiliate recruiters program, located
at www.affiliaterecruiters.com, that allows Web site publishers to promote our
customers' affiliate sales channels. We are extending our Web site outreach for
customers by entering into strategic partnerships with companies that provide
Web site creation tools and hosting services. In addition, we are continuing to
develop relationships with syndicated content providers that permit them to
incorporate hyperlinks to our customers in syndicated content.

Increase Our Services to Existing Customers

   We intend to continue to develop additional services to support new online
performance marketing programs and new revenue sources for our customers and
us, such as our recently developed e-mail referral services, B-INTOUCH. We are
working with ad serving companies to utilize our technology to track the banner
ads they deliver to point of sale on our customer sites.

Increase the Effectiveness of Our Customers' Sales Channels

   We intend to continue and enhance services designed to help our customers
increase their sales. Our best practices research and consulting group helps
our customers generate better response rates by providing industry analysis,
benchmarks and merchandising expertise. We assist our customers' marketing
partners to increase their traffic through various tools and techniques, such
as search engine registration. We are also developing and enhancing
technologies to build and analyze anonymous, individual user profiles based on
browsing, clicking and buying behavior. We are developing services to target
promotions to a given user based on these profiles.

                                       38
<PAGE>

Expand Internationally

   We intend to be an early entrant and a leader in the development of
performance marketing programs outside the U.S. We have expanded our services
to Europe with our initial integration with Bertelsmann's online subsidiary,
BOL International. We have developed German, French and Dutch interfaces for
marketing partners in Europe. We will continue to develop foreign language
interfaces and may establish physical operations in Europe. We may also expand
our services to Japan. We will begin to target other large customers in Europe
during 2000.

Services

   Our data interchange provides the communications link, technologies and
services for performance marketing generally and Web-based affiliate sales
channels in particular. Our customers select core transactional services--
BFAST, B-INTOUCH and BFIT--and may then select additional related services. Our
core services enable the collection and tracking of data that resides on our
servers in Oracle databases. Reports analyzing the data are accessible to our
customers and their marketing partners from desktop computers using standard
Internet protocols and standard Web browser protocols. Specifically, our core
transactional services include:


Serving and Tracking Promotions and Routing Users

  .  Tracking of selected links each time a link is displayed or delivery of
     dynamic, rotating promotions and tracking of display of these promotions
     each time a dynamic link is displayed;

  .  Directing users clicking on any promotions to the correct location on
     our customer's site; and

  .  Collection of order, order cancellation, sales and return information
     from our customer's systems and matching that information with marketing
     partner data collected by our systems.

Reporting and Decision Support

  .  Online generation of daily customer-specific reports, including detail
     on orders and order cancellations, sales and returns, traffic,
     promotional success and payments due to marketing partners. A complete
     decision support system allows our customers to filter and sort these
     reports and to export this data for use in a spreadsheet or word
     processing program;

  .  Modification of the available promotions and addition of new promotions
     instantly; and

  .  Online generation of daily marketing partner reports including detail on
     orders and order cancellations, sales and returns, traffic, promotions
     used and success of each promotion, products purchased by the site's
     audience and commissions due to the marketing partner. Marketing
     partners may download these reports for use in a spreadsheet or word
     processing program.

   We provide these services through our BFAST, B-INTOUCH and BFIT services:

BFAST Affiliate Marketing Service

   BFAST allows our customers to build and maintain their own, branded
performance marketing channels with third-party Web site publishers. Our
customers use BFAST to create and build these

                                       39
<PAGE>


sales channels and to evaluate their marketing partners using more than 80
online analyses. BFAST enables customers to create and offer promotions,
including individual product hyperlinks, search links, product category links,
coupons and other incentives appearing in a variety of formats including text,
graphics, search boxes, regularly updated "top 10" lists and streaming video.
Each marketing partner can select the promotions that are most likely to appeal
to its audience and use BFAST to generate the code it needs to add those
hyperlinks to its site. These marketing partners can check the performance of
each hyperlink they implement with daily reporting.

   We also provide optional services to help recruit marketing partners for our
customers and provide merchandising advice directly to marketing partners. Our
outreach services include recruitment by marketing partner recruiters, direct
mail to Web site managers who have requested this information, sponsorship of
newsletters, and banner advertising. We also offer marketing partner
application review and approval services, where we accept marketing partner
applications on behalf of our customers based upon their established criteria.
We can provide customer-branded support by telephone and e-mail to marketing
partners to assist with applications, hyperlink generation, merchandising and
analysis. We can also provide performance analysis and promotional and
merchandising recommendations for the largest 250 sites in our customers'
performance marketing sales channels. We have a best practices group that has
developed expertise by monitoring industry and customer specific trends and
provides strategic advice designed to improve the performance of these sales
channels.

   In general, we enter into a standard service agreement that requires our
BFAST customer to pay us a one-time integration fee and monthly performance
fees, subject to minimum monthly or annual fees, for use of our data
interchange. For our online merchant customers, the performance fees are
generally based on either a percentage of the sales generated or a fee based on
the number of transactions or orders. For our portal customers, the performance
fees are generally based on the volume of click-throughs generated by their
marketing partners. We currently derive most of our revenue from BFAST
services.

B-INTOUCH E-mail Referral Services

   Our recently introduced B-INTOUCH services allow our customers to create
performance marketing sales channels composed of individuals and corporations
that send e-mail messages. B-INTOUCH lets an approved sender of e-mail messages
include our customers' promotions in e-mail messages and receive fees for the
sales or traffic that result from these promotions. B-INTOUCH offers a simple
user interface for hyperlink placement and reporting, designed for the less
technologically sophisticated e-mail user. We charge our customers for B-
INTOUCH services based on the volume of sales or traffic that results from a
customer's e-mail referral program.

BFIT Advertising Services

   BFIT is an enhanced banner ad delivery service that tracks our customers'
banner advertising through to point of sale and determines the performance for
a specific banner placed in a specific location. This may include ad placement
based on specifications provided by our customers on their ad agencies. By
integrating our BFIT and BFAST services, our customers' marketing partners can
dedicate space on their Web sites within which our customer may determine the
promotional

                                       40
<PAGE>


initiative displayed and modify it at any time or upon the occurrence of
specified criteria. We charge for our BFIT services based on the number of
impressions served.

Related Services

   We offer related services to complement BFAST, B-INTOUCH and BFIT. These
services are designed to automate aspects of the process of establishing and
managing performance marketing relationships. They include the following:

  .  Automated sign-up of potential marketing partners through an online
     application;

  .  Definition and selection of marketing partners, compensation rules and
     methods;

  .  Rapid review and approval of marketing partner applications by
     customers;

  .  Generation of individualized messages from our customers to selected
     marketing partners; and

  .  Payment of fees due to marketing partners.

Customers

   Our principal customers are large online merchants and portals. We have
successfully targeted as customers leading online merchants and portals in a
wide variety of markets. The following is a list of many of the larger e-
merchants and portals that have signed written contracts for our services. We
have not yet implemented our services for or received revenue from all of these
customers:

     American Greetings                      Lycos
     Ameritech                               Micro Warehouse
     Babbages, Etc.                          MotherNature.com
     BabyCenter                              Multiple Zones International
     barnesandnoble.com                      Network Solutions
     Bertelsmann (bol.com)                   OneCore
     CNET                                    Pets.com
     Compaq                                  priceline.com
     Digital Chef                            Reel.com
     eBags.com                               SEND.com
     egghead.com                             The SABRE Group (Travelocity.com)
     Enews.com                               toysmart.com
     eToys(R)                                Value America
     Franklin Covey                          Yahoo!
     Fogdog Sports                           Visa, U.S.A.
     Furniture.com

   Our customers typically enter into a written agreement with us that runs for
one year from program launch and renews automatically for successive one-year
periods unless either party gives notice not to extend. We generally provide
representations concerning our system performance and discount our fees if we
fail to meet specified performance levels. We also agree to indemnify our
customers for infringement of third party intellectual property rights. Our
customers agree to provide information regarding merchandise or services they
make available over the Internet and transactional information.

                                       41
<PAGE>


   For 1997 and 1998 and six months ended June 30, 1999, barnesandnoble.com
accounted for more than 10% of our revenue. For the six months ended June 30,
1999, GeoCities, a subsidiary of Yahoo!, accounted for more than 10% of our
revenue. Our contract with barnesandnoble.com expires in January 2001 and our
contract with GeoCities expires in January 2002. GeoCities has the right to
terminate its contract prior to the expiration of its term by giving notice and
paying a penalty. Both contracts provide that either party may terminate upon a
material breach. In addition, in 1997, Duquesne Light and Power, to whom we
provided customized software development and support, accounted for more than
10% of our revenue.

Sales and Marketing

   We have a direct sales force that targets large online merchants and portals
as customers. The direct sales force is assigned to different geographical
regions and is supported by sales engineers. We maintain direct sales personnel
in seven major metropolitan areas throughout the United States. We also have a
telesales group, located in our Marlborough, Massachusetts headquarters, that
targets mid-sized e-merchants as customers.

   In order to achieve broader distribution of our services, we have contracted
with third parties to resell our services. These resellers typically receive a
percentage of our revenue derived from the online merchant accounts they
generate during specified periods.

   We target potential customers through our public relations program, our Web
sites, conferences, trade shows and customer referrals. While we have primarily
focused on marketing efforts in the United States, we intend to extend these
efforts into Europe and may extend these efforts into Japan.

Customer Service

   We provide comprehensive integration, training, consulting and support
services. We provide our customers with individualized customer services
designed to increase the performance of their performance marketing sales
channels and their overall satisfaction with our services. We assign dedicated,
knowledgeable customer development managers to each customer.

   Our best practices consulting team gathers and analyzes data from industry
sources, our database and customer initiatives to provide our customers with
industry-wide performance results against which they can measure their own
success. This team formulates strategies for how our customers might more
effectively promote their products or services. We present our best practices
solutions through seminars, customer bulletins, case studies and one-on-one
dialogues with customers.

   We provide integration services, both by telephone and in person, to new
customers. We work with new customers to create a reliable, automated data
transfer between their databases and our databases.

   We teach our customers to use our technology effectively and efficiently. We
provide business training to customers, which helps them better understand the
business decisions that they face in launching their performance marketing
programs. We also offer regular refresher and update training.

                                       42
<PAGE>


   Our customer development managers assist our individual customers in
managing their performance marketing programs, developing and interpreting
their analyses, and testing new promotional methods. These customer development
managers also convey emerging customer strategies, communicate customer feature
requests, manage data requests and provide ongoing project management services
for special customer initiatives.

Technology Infrastructure

   Our technologies are designed to provide the following advantages:

Performance, Scalability, Availability and Reliability

   Our system infrastructure has been designed as a layered architecture to
yield significant benefits to our customers in performance, scalability,
availability and reliability. Our software and databases run on multiple high-
speed servers that are connected by high-capacity connections and are organized
into multiple tiers. Each tier functions to address specific data storage and
data traffic considerations to enhance reporting and real-time transactional
performance. We have recently upgraded this system by adding additional servers
or storage devices to each tier.

   Scalability is a term used to describe the ability of an application to
handle greater traffic when additional servers are added to a system.
Scalability is particularly important for growth-stage Internet applications
where demand can grow rapidly and unpredictably. Our servers are connected not
only within a given tier but also between tiers. This multi-tiered server
design enables us to add, extend, duplicate or exchange the specific servers
requiring the enhancement within the system as needed, without recompiling the
rest of the system or interrupting services.

   The multi-tiered server design better enables us to provide our customers
with highly-available and reliable uninterrupted service. Each tier is
comprised of multiple connected servers performing similar tasks, each of which
has its own power supply. If a server fails, that server's tasks are
automatically reassigned to another running computer. In addition, identical
data is also stored in various locations. This redundant design enhances the
ability of the system to tolerate the failure of an individual server or
failures in system storage without the loss of data or the ability of the
computers to give our customers' real-time operating capability.

   The connections from the network data center into the multi-tiered servers
are also designed to provide customers with reliable, uninterrupted service. We
regularly test and maintain the multiple connections between our servers, and
regularly test the connections between the network data center and the
Internet. Our engineering and hosting center personnel monitor traffic patterns
and congestion points and reroute traffic flows in an effort to reduce end-user
response times. We provide monitoring and support services required to maintain
transaction availability 24 hours a day, 365 days a year.

   Although our systems are designed to enhance reliability, system and
communication failures have caused both delays and cessation of services. We
recently experienced an 11-hour systems outage during which we were unable to
re-direct Internet users to our customers from their marketing partners or
provide reports.

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<PAGE>

   We have taken and are taking additional steps to decrease the likelihood of
future outages. These steps include installing additional server and storage
hardware, and adding an additional level of redundancy to all tiers of our
system architecture. Our development team is modifying our software to make it
more functional upon hardware failure. Even with these improvements, there can
be no assurance that our services will not be interrupted in the future.

Flexibility

   Our system infrastructure uses platform systems with UNIX, a non-proprietary
open operating system, and is also compatible with Microsoft's proprietary
operating system, Windows NT. We currently use servers manufactured by Sun
Microsystems. While we are not dependent on any single server hardware system
or vendor, any change could be costly and time consuming.

Internet Access

   Our systems are developed entirely for use over the Internet. Our customers
are able to access marketing, sales and merchandising data from our Oracle-
based databases using their desktop computers and their standard Internet
connection. Our reporting systems use standard Internet and Web protocols.

Central Operations Facility

   Our network data center is designed to optimize performance and maintain
reliability. Our network data center is housed at Exodus Communications in
Harborside, New Jersey. This center has multiple, physically distinct, high-
capacity connections to the Internet designed to reduce the likelihood that
outages within the network will materially impact customer use. The center also
has duplicate systems for power, climate-control, fire protection, seismic
reinforcement and continuous security surveillance. The facility utilizes
manual and automated intrusion detection techniques to monitor the security of
the center and its hardware. We regularly use outside security professionals to
evaluate our physical and electronic security measures. We currently plan to
open a data center in Europe before December 31, 1999.

Development

   Development of new services begins with our product marketing group. Based
upon customer, competitive and market analyses, our product marketing group
determines functions and specifications for future services and enhancements to
current services. Our development group develops new services and enhances
existing services based on specifications provided by the product marketing
group. Our development group is divided into strategic and tactical teams. Our
strategic team develops new performance marketing services and new generations
of current services. Our tactical development team focuses on extending
existing functions or developing additional functions within any given release.

   We have developed a managed release process to assist customers in the
adoption of new releases. This process includes testing and evaluating
revisions, updating online and paper documentation to include new features,
training customer support personnel and notifying and training customers.

                                       44
<PAGE>

   Our development group consists of 16 full-time employees as of June 30,
1999. For the year ended December 31, 1998 and the six months ended June 30,
1999, we spent $304,100 and $719,800, respectively, on research and
development activities.

Competition

   The market for online performance marketing solutions is new, rapidly
evolving and highly competitive. We do not currently compete against
established companies across the range of services we provide. We do, however,
compete against larger companies with respect to a portion of the services we
provide and compete more broadly against similar sized, private companies. We
expect to face future competition across a broad range of our services from
larger companies currently providing products or services that compete only
with respect to a portion of the services we provide.

   For the provision of online merchant branded affiliate sales channel
solutions, we compete against internally-developed performance marketing
solutions and against enterprise software solution providers. We also compete
against multi-merchant, shared affiliate program providers, including
Commission Junction, Linkshare and Microsoft's LinkExchange. We believe that
LinkExchange currently focuses on providing exchange services for banner ads
and, to a lesser extent, on providing services to midsize and smaller
merchants to enable payments for promotions based upon traffic generated.
Finally, we compete with ad server companies that provide banner ad services
that might be considered an alternative marketing solution.

   We believe that the principal competitive factors in our market are:

  .  the provision of comprehensive, reliable services;

  .  the ability to offer a customer ownership of and control over a
     significant sales channel;

  .  the provision of extensive online reports and analyses; and

  .  price.

We seek to compete against internally developed efforts and enterprise
software solutions by providing more comprehensive, cost-effective services
that are more easily managed. We seek to compete against multi-merchant,
shared affiliate program providers on the basis of our technology, by
permitting our customers greater control over their affiliate sales channel
and providing individualized customer service. We seek to compete against ad
serving companies by offering broader services and the ability to track
promotional efforts through to the point of sale.

Employees

   As of June 30, 1999, we had a total of 118 employees, 74 of whom were in
sales and marketing, 30 in development and engineering and 14 in finance and
administration. Sales and marketing employees include salespeople, sales
administration personnel, customer service personnel, product marketing and
marketing communications personnel. From time to time we also employ
independent contractors to supplement our development staff. Our employees are
not represented by a labor union and we have never experienced a work
stoppage. We believe our relations with our employees are good.

                                      45
<PAGE>

Facilities

   Our headquarters are located in Marlborough, Massachusetts, where we occupy
approximately 23,000 square feet under a lease that expires in March 2004. Our
development and engineering departments are located in Pittsburgh,
Pennsylvania, where we occupy approximately 12,000 square feet of office space
under a lease that expires in January 2004. In the future, we may lease
additional space as needed.

Legal Proceedings

   From time to time, we may be involved in litigation incidental to the
conduct of our business. We are not currently a party to any legal proceedings.

                                       46
<PAGE>

                                   MANAGEMENT

Directors and Executive Officers

   Our executive officers and directors, and their respective ages and
positions as of June 30, 1999, are set forth below:

<TABLE>
<CAPTION>
Name                      Age                           Position
<S>                       <C> <C>
Gordon B. Hoffstein.....   47 President, Chief Executive Officer and Director
Samuel P. Gerace, Jr....   36 Executive Vice President, Research & Technology and Director
Thomas A. Gerace........   28 Executive Vice President, Business Development
Stephen M. Joseph.......   40 Chief Financial Officer and Treasurer
Ellen M. Brezniak.......   40 Vice President, Product Marketing
W. Blair Heavey.........   37 Vice President, Sales
Steven D. Pike..........   46 Vice President, Client Services
Patricia L. Travaline...   43 Vice President, Marketing Communications
Ted R.                     47 Director
 Dintersmith(1)(2)......
W. Michael Humphreys(2).   47 Director
Daniel J. Nova(1)(2)....   37 Director
Jeffrey Rayport(1)......   39 Director
</TABLE>
---------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

   Gordon B. Hoffstein has been our Chief Executive Officer and a director
since August 1998. From October 1991 to April 1997, he was a co-founder and the
Chief Executive Officer of PCs Compleat, Inc., a direct marketer of PCs and
related products now known as CompUSA Direct. From February 1991 to June 1991,
he was Chief Executive Officer of Edsun Laboratories, a semiconductor designer.
He was a co-founder and the Chief Executive Officer of Microamerica, Inc., a
distributor of computer hardware and software products, from November 1979 to
May 1990. He currently serves as a director of various private companies. Mr.
Hoffstein earned a B.S. from the University of Massachusetts and an M.B.A. from
Babson College.

   Samuel P. Gerace, Jr. has been our Executive Vice President, Research &
Technology and a director since August 1998. He was a founder of and has been
involved in managing our business since the inception of one of our affiliated
companies in September 1985. Mr. Gerace holds an A.B. from Harvard College.
Samuel P. Gerace, Jr. is the brother of Thomas A. Gerace.

   Thomas A. Gerace has been our Executive Vice President, Business Development
since August 1998. He was a founder of and has been involved in managing our
business since inception. Previously, he served as a research analyst for
Harvard Business School. During his time at Harvard Business School, he also
served as a consultant for the Technology for Effective Cooperation Network, a
non-profit organization, and Welty-Leger Corporation, a distribution and
warehouse software provider. Mr. Gerace received an A.B. from Harvard College.
Thomas A. Gerace is the brother of Samuel P. Gerace, Jr.

   Stephen M. Joseph has been our Chief Financial Officer since August 1998.
From October 1991 to December 1997, he served as Chief Financial Officer of PCs
Compleat, Inc. From March 1991 to

                                       47
<PAGE>

June 1991, he was Chief Financial Officer of Edsun Laboratories. Prior to that
time, he held various financial positions in private companies and Ingersoll-
Rand Company, a machinery and equipment manufacturer. Mr. Joseph earned a B.S.
from Bentley College.

   W. Blair Heavey has been our Vice President, Sales since October 1998. From
April 1995 until joining us, he held sales positions at Open Market, Inc., an
Internet software developer, including Director of Sales and Director,
Strategic Channel Sales. From March 1989 until March 1995, he held several
sales and marketing positions at Hewlett-Packard Corporation, a manufacturer of
measurement, computation and communications systems and equipment. Mr. Heavey
received a B.A. from Boston College and an M.B.A. from Babson College.

   Ellen M. Brezniak has been our Vice President, Product Marketing since
November 1998. From October 1996 until joining us, she was Vice President,
Business-To-Business Operating Unit at Open Market, Inc. From March 1994 until
September 1996, she was Director, Product Marketing and Planning with Progress
Software Corporation, a supplier of application development and management
technology. Prior to that time, she held various marketing positions at Cognos,
Inc., which offers application development software and EIS tools, and software
database companies such as Sybase, Inc. and Oracle Corporation. Ms. Brezniak
holds a B.S. from Rensselaer Polytechnic Institute.

   Patricia L. Travaline has been our Vice President, Marketing Communications
since October 1998. From January 1992 to February 1998, she served in positions
at PCs Compleat, Inc. including Director of Marketing Communications and
Director, Extended Services Development. From December 1985 to September 1991,
she held positions at the public relations firm of Sharon Merrill Associates,
including Vice President, Investor Relations. Ms. Travaline earned a B.A. from
the University of Denver and an M.B.A. from Simmons College.

   Steven D. Pike has been our Vice President, Client Services since April
1999. From July 1998 until joining us, he served as Vice President, Customer
Services at Internet Commerce Services, Inc., a commerce service provider. From
September 1995 to June 1998, he held the position of Director of Technical
Services at Open Market, Inc. From January 1995 to September 1995, he held the
position of Manager, Product & Program Management at Progress Software
Corporation and from September 1992 to January 1995 he was Manager, Product
Support and Business Management at Bay Networks, a manufacturer of data
networking products. Mr. Pike holds a B.S. from Franklin Pierce College.

   Ted R. Dintersmith has been a director since August 1998. Since February
1996, he has been a General Partner of Charles River Partnership VIII, a
private venture capital firm. Prior to his association with Charles River, he
was a General Partner of Aegis Management Corporation, a venture capital firm.
Mr. Dintersmith is a director of Flycast Communications Corporation, an
Internet advertising company. Mr. Dintersmith holds a B.A. degree in Physics
and English from the College of William and Mary and a Ph.D. in Engineering
from Stanford University.

   W. Michael Humphreys has been a director since August 1998. Mr. Humphreys
has been a partner of Matrix Partners, a private venture capital firm, since
1979. He received a B.S. from the University of Oregon and an M.B.A. from
Harvard Business School.

                                       48
<PAGE>

   Daniel J. Nova has been a director since March 1999. Since August 1996, Mr.
Nova has served as a general partner of Highland Capital Partners, a venture
capital firm. Previously, he was a general partner of CMG@Ventures from January
1995 to August 1996 and a Senior Associate at Summit Partners from June 1991 to
January 1995. Mr. Nova is a director of eToys, Inc., an online retailer of
toys, Lycos, Inc., an online portal, MapQuest.com, Inc., an online mapping
company, and Ask Jeeves, Inc., an Internet question answering service company.
Mr. Nova received a B.S. in Computer Science and Marketing with honors from
Boston College and an M.B.A. from Harvard Business School.

   Jeffrey Rayport has been a director since December 1998. He has been a
faculty member at Harvard Business School in the Service Management Unit since
1991. He is currently on leave from Harvard and is working at Monitor Company,
a management consulting firm, as the founder and executive director of Monitor
Marketplace Center, an e-commerce research and media unit established in 1998.
Dr. Rayport is a director of Global Sports, Inc., a sporting goods company.
Dr. Rayport earned an A.B., A.M. and Ph.D. from Harvard University and an
M. Phil. from the University of Cambridge (U.K.).

   Our board of directors is divided into three classes, with the members of
each class serving for a staggered three-year term. Our board currently
consists of two Class I directors, two Class II directors and two Class III
directors. At each annual meeting of stockholders, a class of directors will be
elected for a three-year term to succeed the directors of the same class whose
terms are then expiring. The term of the Class I directors (              )
expires at the annual meeting of stockholders to be held in 2000. The term of
the Class II directors (              ) expires at the annual meeting of
stockholders to be held in 2001. The term of the Class III directors
(              ) expires at the annual meeting of stockholders to be held in
2002.

   Each officer serves at the discretion of our board of directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal.

   Messrs. Dintersmith, S. Gerace, Humphreys and Nova were elected to the board
of directors pursuant to an agreement among us and some of our stockholders.
The agreement obligating the stockholders to vote in favor of them as directors
will terminate upon the closing of this offering.

Committees of the Board of Directors

   Our board of directors has established a compensation committee and an audit
committee. The compensation committee makes recommendations concerning salaries
and incentive compensation for our employees and consultants and administers
our employee incentive plans. The current members of the compensation committee
are Messrs. Dintersmith, Humphreys and Nova. The audit committee reviews the
results and scope of the audit and other services provided by our independent
public accountants. The current members of the audit committee are Messrs.
Dintersmith, Nova and Rayport.

Director Compensation

   We have no present plans to pay cash compensation to directors but intend to
reimburse directors for reasonable out-of-pocket expenses incurred in
connection with attendance at meetings of the board of directors or committees
of the board. We have granted Mr. Rayport an option under the

                                       49
<PAGE>

1998 Stock Incentive Plan to purchase 75,000 shares of common stock that vests
over four years. In addition, we may issue additional options to directors
under our 1998 Stock Incentive Plan, which options would vest and become
exercisable over time.

Compensation Committee Interlocks and Insider Participation

   Prior to the appointment of the compensation committee in July 1999, Be
Free's full board of directors and Thomas A. Gerace were responsible for the
functions of a compensation committee. Thomas A. Gerace previously was a
director and Chief Executive Officer of Be Free and board members Gordon B.
Hoffstein and Samuel P. Gerace, Jr. are both executive officers of Be Free.
During 1998, none of our executive officers served as a member of the
compensation committee, or a committee serving an equivalent function, of any
entity whose executive officers served as a director of Be Free or otherwise
had compensation committee responsibilities.

Executive Compensation

   The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 to our chief executive officer and to Mr.
Thomas A. Gerace, an Executive Vice President, Business Development, who served
as our Chief Executive Officer from January 1998 through August 1998. Neither
has been granted an option to buy shares of Be Free. No other executive
officers received compensation in excess of $100,000 in 1998.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                    Annual
                                                                 Compensation
                                                                ---------------
Name and Principal Position                                     Salary   Bonus
<S>                                                             <C>     <C>
Gordon B. Hoffstein(1)......................................... $49,573 $16,589
 President and Chief Executive Officer
Thomas A. Gerace(2)............................................ $77,916      --
 Executive Vice President, Business Development
</TABLE>
---------------------
(1)  Mr. Hoffstein's current annual salary is $175,000.
(2)  Mr. Thomas Gerace was Chief Executive Officer until August, 1998. His
     current annual salary is $120,000.

   We have never granted any stock options to Mr. Hoffstein or Mr. Thomas A.
Gerace. Mr. Hoffstein purchased         shares of restricted stock for a
purchase price of $     per share under the 1998 Stock Incentive Plan on
December 31, 1998. See "Transactions with Related Parties."

Employment Agreements

   On August 28, 1998 we entered into employment agreements with Samuel P.
Gerace, Jr. and Thomas A. Gerace that provide for an annual base salary of not
less than $110,000 and annual merit bonuses as may be determined by the board
of directors. These agreements contain customary noncompetition and
nonsolicitation provisions, and have an initial term of two years with a one
year renewal subject to the parties' agreement.

                                       50
<PAGE>

Change of Control Arrangements

   Shares subject to options or restricted stock awards granted under our 1998
Stock Incentive Plan generally vest over four years, with 25% of the shares
vesting after one year and the remaining shares vesting in equal monthly
installments over the next 36 months. The option agreements under this plan
generally provide accelerated vesting of 25% of the shares subject to the
option upon a change of control, and full acceleration upon the termination of
employment within two years after a change of control without "cause" or for
"good reason" as defined in the agreement. In general terms, change of control
would occur where any person acquires ownership of more than 50% of our voting
shares or upon any merger or acquisition where our stockholders before the
transaction hold less than a majority of the voting stock of the surviving
entity outstanding after the transaction. We have issued shares of restricted
stock to Gordon Hoffstein that provide for accelerated vesting of 50% of these
shares of restricted stock upon a change in control, and full acceleration upon
the termination of employment within two years after a change of control
without "cause" or for "good reason" as defined in the agreement.

1998 Stock Incentive Plan

   Our 1998 Stock Incentive Plan was adopted by our board of directors and
stockholders in November 1998. The plan authorizes the issuance of up to
          shares of our common stock. As of June 30, 1999, shares of restricted
stock and options to purchase an aggregate of           shares of common stock
at a weighted average restricted stock purchase price of $         per share
and a weighted average exercise price of $      per share were outstanding
under the plan.

   The stock incentive plan provides for the grant of incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code and
nonstatutory stock options.

   Our officers, employees, directors, consultants and advisors are eligible to
receive awards under the stock incentive plan. Under present law, however,
incentive stock options may only be granted to employees. No employee may
receive any award for more than           shares in any calendar year.

   Optionees receive the right to purchase a specified number of shares of
common stock at a specified option price and subject to other terms and
conditions as are specified in connection with the option grant. We may grant
options at an exercise price less than, equal to or greater than the fair
market value of our common stock on the date of grant. Under present law,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code may not be
granted at an exercise price less than the fair market value of the common
stock on the date of grant or less than 110% of the fair market value in the
case of incentive stock options granted to optionees holding more than 10% of
the voting power of the company. The stock incentive plan permits our board of
directors to determine how optionees may pay the exercise price of their
options, including by cash, check or in connection with a "cashless exercise"
through a broker, by surrender to us of shares of common stock, by delivery to
us of a promissory note, or by any combination of the permitted forms of
payment.

   As of June 30, 1999, approximately 124 persons were eligible to receive
awards under the stock incentive plan, including eight executive officers and
four non-employee directors.

                                       51
<PAGE>

   Our board of directors administers the stock incentive plan. Our board of
directors has the authority to adopt, amend and repeal the administrative
rules, guidelines and practices relating to the plan and to interpret its
provisions. It may delegate authority under the stock incentive plan to one or
more executive officers or committees of the board of directors. Our board of
directors has authorized the compensation committee to administer the stock
incentive plan, including the granting of options to our executive officers.
Subject to any applicable limitations contained in the stock incentive plan,
our board of directors, our compensation committee or any other committee to
whom our board of directors delegates authority, as the case may be, selects
the recipients of awards and determines:

  .  the number of shares of common stock covered by options and the dates
     upon which the options become exercisable;

  .  the exercise price of options; and

  .  the duration of options.

   In the event of a merger, liquidation or other acquisition event, our board
of directors is authorized to take one or more of the following actions:

  .  provide that outstanding options be assumed or substituted for by the
     acquirer;

  .  in the event of an acquisition in which the holders of common stock
     would receive a cash payment for each share surrendered, provide for a
     cash payment to each option holder equal to the amount by which the
     amount paid to common stock holders exceeds the option's exercise price,
     multiplied by the total number of shares of common stock subject to the
     option;

  .  provide that any or all outstanding options become fully exercisable as
     of a specified time prior to the event; and

  .  provide that all unexercised options terminate immediately prior to the
     event unless exercised before that time.

   No award may be granted under the stock incentive plan after November 2008,
but the vesting and effectiveness of awards previously granted may extend
beyond that date. Our board of directors may at any time amend, suspend or
terminate the stock incentive plan.

401(k) Plan

   We have adopted an employee savings and retirement plan qualified under
Section 401 of the Internal Revenue Code and covering employees who are at
least 21 years of age and who have completed three months of service. Employees
may elect to reduce their current compensation by up to the statutorily
prescribed annual limit and have the amount of the reduction contributed to the
401(k) plan. Although not required, we may make matching or additional
contributions to the 401(k) plan in amounts to be determined annually by our
board of directors. To date we have not made any matching or additional
contributions.

                                       52
<PAGE>

                       TRANSACTIONS WITH RELATED PARTIES

Preferred Stock and Related Transactions

   Sale of Preferred Stock. We sold preferred stock pursuant to the following
transactions:

  .  On August 28, 1998, we sold an aggregate of 10,500,000 shares of Series
     A preferred stock at a price of $1.00 per share and issued warrants to
     purchase      shares of common stock at an exercise price of $   per
     share.

  .  On September 29, 1998, we sold 100,000 shares of Series A preferred
     stock at a price of $1.00 per share and issued a warrant to purchase
          shares of common stock at an exercise price of $   and warrants to
     purchase up to 700,000 shares of Series A preferred stock at an exercise
     price of $1.00 per share; and

  .  On March 31, 1999, we sold an aggregate of 13,196,522 shares of Series B
     preferred stock at a price of $1.89443 per share.

   The following directors, executive officers, holders of more than 5% of a
class of voting securities and members of that person's immediate family
purchased these shares or received these warrants to purchase common stock or
Series A preferred stock. Upon the closing of this initial public offering,
each share of Series A preferred stock will be converted into      shares of
common stock and each share of Series B preferred stock will be converted into
   shares of common stock.

<TABLE>
<CAPTION>
                                                           Warrants to
                                     Shares of Warrants to  Purchase   Shares of
                                     Series A   Purchase    Series A   Series B
                                     Preferred   Common     Preferred  Preferred
Purchaser(1)                           Stock      Stock       Stock      Stock
<S>                                  <C>       <C>         <C>         <C>
Gordon B. Hoffstein(2)..............   500,000                  --           --
Charles River Partnership(2)(3)..... 5,000,000                  --     2,322,598
Highland Capital(2)(4)..............       --       --          --     5,070,139
Matrix Partners(2)(5)............... 5,000,000                  --     2,322,598
</TABLE>
---------------------

(1) See Notes to Table of Beneficial Ownership in "Principal Stockholders" for
    information relating to the beneficial ownership of the referenced shares.

(2) A holder of more than 5% of Be Free's Common Stock.
(3) Of the securities listed, Charles River Partnership VIII owns 4,909,475
    shares of Series A preferred stock, warrants to purchase      shares of
    common stock and 2,280,547 shares of Series B preferred stock, and Charles
    River VIII-A owns 90,525 shares of Series A preferred stock, warrants to
    purchase      shares of common stock and 42,051 shares of Series B
    preferred stock. Mr. Dintersmith, a director of Be Free, is a general
    partner of Charles River Partnership VIII, the general partner of Charles
    River Partnership VIII, L.P. and an officer of Charles River VII Friends,
    Inc., the manager of Charles River VIII- A, LLC.

(4) Of the securities listed, Highland Capital Partners IV owns 4,867,333
    shares of Series B preferred stock and Highland Entrepreneurs' Fund IV owns
    202,806 shares of Series B preferred stock. Mr. Nova, a director of Be
    Free, is a managing member of Highland Management Partners IV, LLC, the
    general partner of Highland Capital Partners IV, LP and a managing member
    of Highland Entrepreneurs' Fund IV LLC, the general partner of Highland
    Entrepreneurs' Fund IV, LP.
(5) Of the securities listed above, Matrix Partners V, L.P. owns 4,500,000
    shares of Series A preferred stock, warrants to purchase      shares of
    common stock and 2,090,338 shares of Series B preferred stock, and Matrix V
    Entrepreneurs Fund, L.P. owns 500,000 shares of Series A Preferred Stock,
    warrants to purchase      shares of common stock and 232,260 shares of
    Series B preferred stock. Mr. Humphreys, a director of Be Free, is a
    general partner of Matrix V Management Co., LLC, the general partner of
    both Matrix Partners V, L.P. and Matrix V Entrepreneurs' Fund.

                                       53
<PAGE>


   In connection with the sale of Series A preferred stock, the following
transactions also occurred which involved executive officers, directors and/or
holders of more than 5% of a class of voting securities, including persons and
entities related to those listed:

   Contribution Transactions. Samuel P. Gerace, Jr., a director and executive
officer, Thomas A. Gerace, an executive officer, their father Samuel P. Gerace,
Sr. and a limited partnership for the benefit of members of the Gerace family,
contributed to us shares of affiliated companies under common control and
management, in exchange for shares of our common stock, as follows:

<TABLE>
<CAPTION>
                                                                         Shares
      Contributor                                                       Received
      <S>                                                               <C>
      Samuel P. Gerace, Jr.............................................
      Samuel P. Gerace, Sr.............................................
      Gerace Family L.P................................................
      Thomas A. Gerace.................................................
</TABLE>

   Redemption of Shares of Freedom of Information. On August 28, 1998, Be Free
redeemed for a price of $   per share a portion of the outstanding common
stock, including the following shares of its common stock from executive
officers of Be Free, including related persons and entities, as well as other
stockholders of Be Free:

<TABLE>
<CAPTION>
                                                               Number
                                                                 of   Purchases
      Seller                                                   Shares   Price
      <S>                                                      <C>    <C>
      Samuel P. Gerace, Jr....................................        $1,002,202
      Samuel P. Gerace, Sr....................................           189,047
      Gerace Family L.P.......................................         3,703,528
      Thomas A. Gerace........................................         1,002,202
</TABLE>

   Be Free paid the purchase price for the redeemed shares by issuing a
promissory note, which was paid in full on August 28, 1998 with a portion of
the proceeds from the sale of the Series A preferred stock.

   Transfer Agreement. On August 28, 1998, the following executive officers,
including related persons and entities, of Be Free transferred shares of common
stock to a group of employees and advisors, including        shares to Kristin
L. Gerace, who is the sister of Samuel P. Gerace, Jr. and Thomas A. Gerace, and
        shares to Jeffrey Rayport, a director of Be Free, in consideration for
services rendered to us.

<TABLE>
<CAPTION>
                                                                      Number of
                                                                       Shares
      Transferor                                                     Transferred
      <S>                                                            <C>
      Gerace Family L.P.............................................
      Samuel P. Gerace, Jr..........................................
      Thomas A. Gerace..............................................
      Samuel P. Gerace, Sr..........................................
</TABLE>

   Upon the closing of this initial public offering, all outstanding shares of
Series A preferred stock, Series B preferred stock and warrants to purchase
Series A preferred stock will automatically convert into shares or warrants to
purchase shares of common stock on a one-for-    basis.

                                       54
<PAGE>

Restricted Stock Awards

   On December 30, 1998 Gordon B. Hoffstein, President and Chief Executive
Officer, and Stephen M. Joseph, Chief Financial Officer, purchased restricted
stock under the 1998 Stock Incentive Plan. Mr. Hoffstein purchased
shares of common stock and Mr. Joseph purchased        shares of common stock
each at a purchase price of $     per share. See "Compensation Committee
Interlocks and Insider Participation."

   Mr. Joseph paid for this restricted stock by paying $26,119 and by executing
a promissory note in the amount of $78,359 in favor of Be Free. The note is due
on June 30, 2003 and accrues interest at 7% per annum. The terms of the note
provide that interest accrues beginning on January 1, 1999, and payments of
interest commence on July 15, 1999. As of June 30, 1999, $78,360 in principal
was outstanding with respect to Mr. Joseph's promissory note.

Other

   On August 28, 1998 Be Free entered into employment agreements with Samuel P.
Gerace, Jr. and Thomas A. Gerace that provide for an annual base salary of not
less than $110,000 and annual merit bonuses as may be determined by the board
of directors. These agreements contain customary noncompetition,
confidentiality and nonsolicitation provisions, and have an initial term of two
years with a one year renewal subject to the parties' agreement.

   Be Free is a party to indemnification agreements with Ted R. Dintersmith,
Samuel P. Gerace, Jr., W. Michael Humphreys and Daniel J. Nova pursuant to
which it has agreed to indemnify these directors to the fullest extent possible
under Delaware Law from liabilities arising out of their respective service as
a director of Be Free.

   All future transactions between us and our officers, directors, principal
stockholders and their affiliates will be approved by a majority of the board
of directors, including a majority of the disinterested directors, and will be
on terms no less favorable to us than could be obtained from unaffiliated third
parties.

                                       55
<PAGE>

                             PRINCIPAL STOCKHOLDERS

   The following table sets forth information regarding the beneficial
ownership of our common stock as of June 30, 1999 and as adjusted to reflect
the sale of the shares of common stock in this offering, by:

  .  each person we know to own beneficially more than 5% of our common
     stock;

  .  each of our directors;

  .  the Named Executive Officers; and

  .  all directors and executive officers as a group.

   Unless otherwise indicated, each person named in the table has sole voting
power and investment power, or shares this power with his or her spouse, with
respect to all shares of capital stock listed as owned by such person. The
address of each of our executive officers and directors is c/o Be Free, Inc.,
154 Crane Meadow Road, Marlborough, Massachusetts 01752.

   The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission. The
information is not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership includes any shares as to
which the individual has sole or shared voting power or investment power and
any shares as to which the individual has the right to acquire beneficial
ownership within 60 days after June 30, 1999 through the exercise of any stock
option or other right. The fact that we have included these shares, however,
does not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of the shares. Percentage of beneficial ownership is
based on           shares of common stock, assuming that all preferred stock
has converted to common, outstanding as of June 30, 1999 and             shares
of common stock outstanding after completion of this offering, assuming no
exercise of the over-allotment option.

<TABLE>
<CAPTION>
                                                         Percent of Ownership
                                                       -------------------------
                                      Voting Shares      Prior to      After
Name of Beneficial Owner            Beneficially Owned the Offering the Offering
<S>                                 <C>                <C>          <C>
Five Percent Stockholders:
Charles River Partnership VIII, LP
 (1)(5)...........................                        20.85%
Matrix Partners V, LP (2)(6)......                        20.85%
Highland Capital Partners IV, LP
 (3)(7)...........................                        12.25%

Directors and Named Executive
 Officers:
Thomas A. Gerace..................                         8.23%
Samuel P. Gerace, Jr..............                         8.23%
Gordon B. Hoffstein (4)...........                         9.05%
Ted R. Dintersmith (5)............                        20.85%
W. Michael Humphreys (6)..........                        20.85%
Daniel Nova (7)...................                        12.25%
Jeffrey Rayport...................                            *
All directors and executive
 officers as a group (12 persons).                        77.97%
</TABLE>
---------------------
 *  Less than 1%

                                       56
<PAGE>

(1)  Includes         shares owned by Charles River VIII-A, LLC, an affiliate
     of Charles River Partnership VIII, LP,         shares issuable upon
     exercise of a warrant in the name of Charles River VIII-A, LLC and
              shares issuable upon exercise of a warrant in the name of Charles
     River Partnership VIII, LP. The address of Charles River Partnership VIII,
     LP is 1000 Winter Street, Suite 3300, Waltham, MA 02451.
(2)  Includes         shares owned by Matrix V Entrepreneurs' Fund IV, LP, an
     affiliate of Matrix Partners V, LP,         shares issuable upon exercise
     of a warrant in the name of Matrix V Entrepreneurs' Fund IV, LP and
             shares issuable upon exercise of a warrant in the name of Matrix
     Partners V, LP. Matrix Partners V, LP is located at 1000 Winter Street,
     Suite 4500, Waltham, MA 02451.
(3)  Includes         shares owned by Highland Entrepreneurs' Fund IV, LP, an
     affiliate of Highland Capital Partners IV, LP. Highland Capital Partners
     IV, LP is located at Two International Place, Boston, MA 02110.
(4)  Includes         shares issuable upon exercise of a warrant.

(5)  Mr. Dintersmith, a member of the board of directors, is a general partner
     of Charles River VIII GP, the general partner of Charles River Partnership
     VIII, LP, and an officer of Charles River VII Friends, Inc., the manager
     of Charles River VIII-A, LLC, and may be deemed to have beneficial
     ownership of         shares. Mr. Dintersmith has shared voting power with
     respect to these shares and disclaims beneficial ownership of these
     shares, except to the extent of his pecuniary interest in the shares.

(6)  Mr. Humphreys, a member of the board of directors, is a general partner of
     Matrix V Management Co., LLC, the general partner of both Matrix Partners
     V, L.P. and Matrix V Entrepreneurs' Fund and may be deemed to have
     beneficial ownership of         shares. Mr. Humphreys has shared voting
     and investment power over these shares and disclaims beneficial ownership
     of these shares, except to the extent of his pecuniary interest in the
     shares.

(7)  Mr. Nova, a member of the board of directors, is a managing member of
     Highland Management Partners IV, LLC, the general partner of Highland
     Capital Partners IV, LP and a managing member of Highland Entrepreneurs'
     Fund IV, LLC, the general partner of Highland Entrepreneurs' Fund IV, LP
     and may be deemed to have beneficial ownership of         shares. Mr. Nova
     has shared voting and investment power over these shares and disclaims
     beneficial ownership of these shares, except to the extent of his
     pecuniary interest in the shares.

                                       57
<PAGE>

                          DESCRIPTION OF CAPITAL STOCK

General

   We will file our amended and restated certificate of incorporation at the
closing of this offering. It authorizes the issuance of up to     million
shares of common stock, par value $0.01 per share, and     million shares of
preferred stock, par value $0.01 per share. The rights and preferences of the
preferred stock may be established from time to time by our board of directors.
As of July   , 1999, giving effect to the conversion of all preferred stock
into common stock,            shares of common stock were outstanding. As of
July   , 1999, we had         stockholders.

Common Stock

   Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any dividends as may be declared by our board of directors,
subject to any preferential dividend rights of outstanding preferred stock.
Upon our liquidation, dissolution or winding up, the holders of common stock
are entitled to receive proportionately our net assets available after the
payment of all debts and other liabilities and subject to the prior rights of
any outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. Our outstanding shares of common
stock are, and the shares offered by us in this offering will be, when issued
and paid for, fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock which we may designate and issue in the future.

Preferred Stock

   Under the terms of our certificate of incorporation, our board of directors
is authorized to issue shares of preferred stock in one or more series without
stockholder approval. Our board of directors has the discretion to determine
the rights, preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, of each series of preferred stock.

   The purpose of authorizing our board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock may
provide desirable flexibility in connection with possible acquisitions and
other corporate purposes, but could have the effect of making it more difficult
for a third party to acquire, or could discourage a third party from acquiring,
a majority of our outstanding voting stock. We have no present plans to issue
any shares of preferred stock.

                                       58
<PAGE>

Warrants

   As of July   , 1999, Be Free had outstanding warrants to purchase
shares of common stock at an exercise price of $      and, giving effect to the
conversion of all preferred stock into common stock, additional warrants to
purchase         shares at an exercise price of $    . The warrants have a net
exercise provision under which the holder may, in lieu of payment of the
exercise price in cash, surrender the warrant and receive a net amount of
shares, based on the fair market value of Be Free's stock at the time of the
exercise of the warrant, after deducting the aggregate exercise price. Of the
warrants to purchase          shares of common stock, warrants to purchase
       shares of common stock will expire on September 29, 2008 and the balance
will expire on August 28, 2008. The additional warrants to purchase
shares of common stock will expire on the fifth anniversary of the initial
public offering of the common stock of Be Free.

Registration Rights

   Pursuant to a Registration Rights Agreement, dated as of March 31, 1999, the
holders of approximately         shares of common stock, warrants to purchase
       shares of common stock and options to purchase         shares of common
stock have the right to register those shares under the Securities Act of 1933.
Subject to limitations in the Rights Agreement, some of the holders, whose
shares total at least 33 1/3% of all shares of common stock then-held by the
holders, or any lesser percentage with a price to the public reasonably
expected to exceed $5,000,000, may require, at any time 180 days after this
offering, that Be Free register these shares for public resale; furthermore,
the holders of shares with sale proceeds of at least $1,000,000 may require Be
Free to register all or a portion of their registrable securities on Form S-3
after this offering. Be Free shall not be required to effect more than two of
these demand registrations. In addition, if Be Free registers any of its common
stock for its own account or for the account of other security holders, the
parties to the Rights Agreement are entitled to include their shares of common
stock in the registration, subject to the ability of the underwriters to limit
the number of shares included in the offering.

   Pursuant to a Stock Purchase and Shareholders Agreement dated as of August
28, 1998, the holders of approximately         shares of common stock and
warrants to purchase            shares, have the right to demand that Be Free
register those shares under the Securities Act of 1933. All of these shares and
warrants, other than         shares of common stock and warrants to purchase
         shares, are also entitled to be registered under the Rights Agreement.
Subject to limitations in the Stock Purchase and Shareholders Agreement, at any
time 180 days after this offering, any of these holders holding 33 1/3% of the
common stock then-held by these holders may require Be Free to register at
least 33 1/3% of the shares on Form S-1. In addition, at any time after the
closing of this offering, any of these holders may require Be Free to register
any of these shares with proceeds of at least $1,000,000 on Form S-3. Be Free
shall not be required to effect more than two of these demand registrations. In
addition, if Be Free registers any of its common stock for its own account or
for the account of other securityholders, the holders of approximately
           shares of common stock, of which all but       shares are entitled
to be registered under the Rights Agreement, are entitled to include their
shares of common stock in the registration, subject to the ability of the
underwriters to limit the number of shares included in the offering.

   Finally, pursuant to a Stock Purchase Agreement dated as of September 29,
1998, if Be Free registers any of its common stock for its own account or for
the account of other securityholders, a

                                       59
<PAGE>

holder of       shares of common stock and warrants to purchase       shares
has the right to include those shares in the registration, subject to the
ability of the underwriters to limit the number of shares issued in the
offering. All of these shares are entitled to be registered under the
Registration Rights Agreement.

   Be Free will bear all fees, costs and expenses of these registrations, other
than underwriting discounts and commissions. Upon the effectiveness of any
registration statement filed to register our common stock, these shares would
become freely tradable, without any restrictions imposed by the Securities Act.

Delaware Law and Our Charter and By-Law Provisions

   We are subject to the provisions of Section 203 of the General Corporation
Law of Delaware. Section 203 prohibits a publicly held Delaware corporation
from engaging in a business combination with an interested stockholder for a
period of three years after the person became an interested stockholder, unless
the business combination is approved in a prescribed manner. A business
combination includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. An interested stockholder
generally is a person who, together with affiliates and associates, owns, or
within the prior three years did own, 15% or more of the corporation's voting
stock.

   Our certificate of incorporation divides our board of directors into three
classes with staggered three-year terms. In addition, our certificate of
incorporation provides that directors may be removed only for cause by the
affirmative vote of the holders of two-thirds of our shares of capital stock
entitled to vote. Under our certificate of incorporation, any vacancy on our
board of directors, including a vacancy resulting from an enlargement of our
board of directors, may only be filled by vote of a majority of our directors
then in office. The classification of our board of directors and the
limitations on the removal of directors and filling of vacancies could make it
more difficult for a third party to acquire, or discourage a third party from
acquiring, control of the company.

   Our certificate of incorporation also provides that any action required or
permitted to be taken by our stockholders at an annual meeting or special
meeting of stockholders may only be taken if it is properly brought before the
meeting and may not be taken by written action in lieu of a meeting. Our
certificate of incorporation further provides that special meetings of the
stockholders may only be called by our Chairman of the Board, President or
board of directors. Under our by-laws, in order for any matter to be considered
properly brought before a meeting, a stockholder must comply with advance
notice requirements. These provisions could have the effect of delaying until
the next stockholders' meeting stockholder actions which are favored by the
holders of a majority of our outstanding voting securities. These provisions
may also discourage a third party from making a tender offer for our common
stock, because even if it acquired a majority of our outstanding voting
securities, the third party would be able to take action as a stockholder (such
as electing new directors or approving a merger) only at a duly called
stockholders' meeting, and not by written consent.

   The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case

                                       60
<PAGE>

may be, requires a greater percentage. Our certificate of incorporation and
by-laws require the affirmative vote of the holders of at least 75% of the
shares of our capital stock issued and outstanding and entitled to vote to
amend or repeal any of the provisions described in the prior two paragraphs.

   Our amended and restated certificate of incorporation contains provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions that involve intentional misconduct or a knowing violation
of law. Further, our amended and restated certificate of incorporation
contains provisions to indemnify our directors and officers to the fullest
extent permitted by the General Corporation Law of Delaware. We believe that
these provisions will assist us in attracting and retaining qualified
individuals to serve as directors.

Transfer Agent and Registrar

   The transfer agent and registrar for our common stock is Continental Stock
Transfer & Trust.

                                      61
<PAGE>

                        SHARES ELIGIBLE FOR FUTURE SALE

   Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of common stock in the public
market could adversely affect the market price of our common stock.

   Upon completion of this offering, we will have outstanding an aggregate of
              shares of common stock, assuming the issuance of
shares of common stock offered hereby and no exercise of options after
            , 1999. Of these shares, the            shares sold in this
offering will be freely tradable without restriction or further registration
under the Securities Act, except for any shares purchased by Affiliates of Be
Free as that term is defined in Rule 144 under the Securities Act. Sales of
shares purchased by affiliates would be subject to the limitations and
restrictions described below.

   The remaining            shares of common stock held by existing
stockholders were issued and sold by us in reliance on exemptions from the
registration requirements of the Securities Act. Of these shares,
shares will be subject to lock-up agreements described below on the effective
date of this offering. Upon expiration of the lock-up agreements 180 days after
the effective date of this offering,            shares will become eligible for
sale pursuant to Rule 144(k), and the remaining shares will become eligible for
sale subject in most cases to the limitations of either Rule 144 or Rule 701.
In addition, holders of stock options could exercise the options and sell some
or all of the shares issued upon exercise as described below.

<TABLE>
<CAPTION>
Number
  of
Shares                                Date
<S>     <C>
        After the date of this prospectus
        After 180 days from the date of this prospectus (subject, in
         some cases, to volume limitations)
        At various times after 180 days from the date of this prospectus
</TABLE>

   As of           , 1999 there were a total of            shares of common
stock subject to outstanding options under our 1998 Stock Incentive Plan,
approximately            of which were vested and exercisable. However, all of
these shares are subject to lock-up agreements. All options held by officers
and directors of Be Free are subject to 180 day lock-up agreements described
below. Immediately after the completion of this offering, we intend to file
registration statements on Form S-8 under the Securities Act to register all of
the shares of common stock issued or reserved for future issuance under the
1998 Stock Incentive Plan. Based on the options outstanding as of           ,
1999, within 180 days after the effective date of this offering, a total of
approximately            shares of common stock subject to outstanding options
will be vested and exercisable. After the effective dates of the registration
statements on Form S-8, shares purchased upon exercise of options granted
pursuant to the 1998 Stock Incentive Plan generally would be available for
resale in the public market.

   All officers and directors and substantially all of our existing
stockholders agreed not to sell or otherwise dispose of any of their shares for
a period of 180 days after the date of this offering. Donaldson, Lufkin &
Jenrette Securities Corporation, however, may in its sole discretion, at any
time without notice, release all or any portion of the shares subject to lock-
up agreements.

                                       62
<PAGE>

Rule 144

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

  . 1% of the number of shares of common stock then outstanding; or

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

1% of the number of shares of common stock outstanding immediately after this
offering will equal approximately    shares. Sales under Rule 144 are generally
subject to the availability of current public information about Be Free.

Rule 144(k)

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

Rule 701

   In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of this offering is entitled to sell those shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with the holding period and notice filing requirements of Rule 144 and,
in the case of non-affiliates, without having to comply with the public
information, volume limitation or notice filing provisions of Rule 144.

   The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of those options, including options exercised after the issuer becomes
subject to the reporting requirements. Securities issued in reliance on Rule
701 are restricted securities and, subject to the contractual restrictions
described above, beginning 90 days after the date of this prospectus, may be
sold by persons other than affiliates, as that term is defined in Rule 144,
subject only to the manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with its one year minimum holding period
requirements.

                                       63
<PAGE>

                                  UNDERWRITING

   Subject to the terms and conditions contained in an underwriting agreement,
dated        , 1999, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Hambrecht & Quist LLC,
Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, and DLJdirect
Inc. have severally agreed to purchase from us the number of shares opposite
their names below:

<TABLE>
<CAPTION>
                                                                         Number
                                                                           of
Underwriters                                                             Shares
<S>                                                                      <C>
Donaldson, Lufkin & Jenrette Securities Corporation.....................
Hambrecht & Quist LLC...................................................
Dain Rauscher Wessels...................................................
DLJdirect Inc...........................................................
                                                                         -------
  Total.................................................................
                                                                         =======
</TABLE>

   The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of the legal matters and to other conditions
specified in the underwriting agreement. The underwriters are obligated to
purchase and accept delivery of all the shares, other than those shares covered
by the over-allotment option described below, if they purchase any of the
shares.

   The underwriters propose to offer initially some of the shares directly to
the public at the initial public offering price on the cover page of this
prospectus and some of the shares to certain dealers at the initial public
offering price less a concession not in excess of $   per share. The
underwriters may allow, and those dealers may re-allow, a concession not in
excess of $   per share on sales to other dealers. After the initial offering
of the shares to the public, the representatives may change the public offering
price and those concessions. The underwriters do not intend to confirm sales to
any accounts over which they exercise discretionary authority.

   The following table shows the underwriting fees to be paid to the
underwriters by us in connection with this offering. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of our common stock.

<TABLE>
<CAPTION>
                                                                  No      Full
                                                               Exercise Exercise
<S>                                                            <C>      <C>
Per share.....................................................  $        $
Total.........................................................
</TABLE>

   We will pay the offering expenses, estimated to be $      million.

                                       64
<PAGE>

   We have granted to the underwriters an option, exercisable for 30 days after
the date of this prospectus, to purchase up to            additional shares at
the initial public offering price minus the underwriting fees. The underwriters
may exercise this option solely to cover over-allotments, if any, made in
connection with this offering. To the extent that the underwriters exercise
this option, each underwriter will become obligated, subject to certain
conditions, to purchase a number of additional shares approximately
proportionate to that underwriter's initial purchase commitments.

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

   We, our executive officers and directors, and substantially all of our
stockholders have agreed, for a period of 180 days from the date of this
prospectus, not to, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation:

  . 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 to purchase or otherwise transfer or dispose of,
    directly or indirectly, any shares of our common stock or any securities
    convertible into or exercisable or exchangeable for our common stock; or

  . enter into any swap or other arrangement that transfers all or a portion
    of the economic consequences associated with the ownership of any common
    stock, regardless of whether any of these transactions is to be settled
    by the delivery of common stock, or other securities, in cash or
    otherwise.

   However, we may:

  . grant stock options under the 1998 Stock Incentive Plan; and

  . issue shares of our stock upon the exercise of options, warrants or
    rights or the conversion of currently outstanding securities.

   In addition, during this period, we have agreed not to file any registration
statement with respect to, and each of our executive officers, directors and
substantially all of our stockholders have agreed not to make any demand for,
or exercise any right with respect to, the registration of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation.

   At the request of Be Free, the underwriters have reserved at the initial
public offering price up to       additional shares of common stock for sale to
directors, employees and associates of Be Free. There can be no assurance that
any of the reserved shares will be purchased by those persons. The number of
shares available for sale to the general public in the offering will be reduced
by the number of reserved shares sold. Any reserved shares not purchased by
those persons will be offered to the general public on the same basis as the
other shares offered hereby.

   Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of our common
stock included in this offering in any

                                       65
<PAGE>


jurisdiction where action for that purpose is required. The shares included in
this offering may not be offered or sold, directly or indirectly, nor may this
prospectus or any other offering material or advertisement in connection with
the offer and sale of any of these shares be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with
the applicable rules and regulations of that jurisdiction. Persons who receive
this prospectus are advised to inform themselves about and to observe any
restrictions relating to the offering of our common stock and the distribution
of this prospectus. This prospectus is not an offer to sell or a solicitation
of an offer to buy any shares of our common stock included in this offering in
any jurisdiction where that would not be permitted or legal.

   In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of our
common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. In addition, the underwriters may bid for
and purchase shares of our common stock in the open market to cover syndicate
short positions or to stabilize the price of our common stock. These activities
may stabilize or maintain the market price of our common stock above
independent market levels. The underwriters are not required to engage in these
activities and may end any of these activities at any time.

   Prior to this offering, there has been no established public market for our
common stock. The initial public offering price for the shares of our common
stock offered by this prospectus will be determined by negotiation between us
and the representatives of the underwriters. The factors to be considered in
determining the initial public offering price include:

  . our history and the prospects for the industry in which we compete;

  . our past and present operations;

  . our historical results of operations;

  . our prospects for future earnings;

  . the recent market prices of securities of generally comparable companies;
    and

  . the general conditions of the securities market at the time of the
    offering.

   We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol BFRE.

                                 LEGAL MATTERS

   The validity of the shares of common stock offered by us hereby will be
passed upon for us by Hale and Dorr LLP, Boston, Massachusetts. Legal matters
will be passed upon for the underwriters by Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts.

                                       66
<PAGE>

                                    EXPERTS

   The consolidated financial statements as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 included in
this prospectus and the registration statement relating to this prospectus have
been included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on their authority as experts in auditing and
accounting.

                      WHERE YOU CAN FIND MORE INFORMATION

   We have filed a registration statement on Form S-1 with the SEC for the
common stock we are offering by this prospectus. This prospectus does not
include all of the information contained in the registration statement. You
should refer to the registration statement and its exhibits for additional
information. Whenever we make reference in this prospectus to any of our
contracts, agreements or other documents, the references are not necessarily
complete and you should refer to the exhibits attached to the registration
statement for copies of the actual contract, agreement or other document. When
we complete this offering, we will also be required to file annual, quarterly
and special reports, proxy statements and other information with the SEC.

   You can read our SEC filings, including the registration statement, over the
Internet at the SEC's Web site at www.sec.gov. You may also read and copy any
document we file with the SEC at its public reference facilities at 450 Fifth
Street, N.W., Washington, D.C. 20549; Seven World Trade Center, Suite 1300, New
York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-
0330 for further information on the operation of the public reference
facilities.

                                       67
<PAGE>

                                 BE FREE, INC.

                       CONSOLIDATED FINANCIAL STATEMENTS

                                    CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
<S>                                                                        <C>
Report of Independent Accountants........................................  F-2

Consolidated Balance Sheets as of December 31, 1997 and 1998 and as of
 June 30, 1999 (unaudited) and pro forma as of June 30, 1999 (unaudited).  F-3

Consolidated Statements of Operations for the years ended December 31,
 1996, 1997 and 1998, and for the six months ended June 30, 1998 and 1999
 (unaudited).............................................................  F-4

Consolidated Statements of Stockholders' Equity (Deficit) for the years
 ended December 31, 1996, 1997 and 1998 and for the six months ended June
 30, 1999 (unaudited)....................................................  F-5

Consolidated Statements of Cash Flows for the years ended December 31,
 1996, 1997 and 1998 and for the six months ended June 30, 1998 and 1999
 (unaudited).............................................................  F-6

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

   All share and per share data included in these consolidated financial
statements and related notes do not reflect the contemplated reverse stock
split of our common stock.

                                      F-1
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Be Free, Inc. and Subsidiaries:

   In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of Be
Free, Inc. and its subsidiaries (the "Company") at December 31, 1997 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards, which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Boston, Massachusetts
July 2, 1999

                                      F-2
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     Pro Forma
                                 December 31,                        (Note B)
                            ------------------------    June 30,     June 30,
                               1997         1998          1999         1999
          ASSETS                                            (Unaudited)
 <S>                        <C>          <C>          <C>           <C>
 Current assets:
 Cash and cash equiva-
  lents...................  $    75,843  $ 4,327,090  $ 21,374,504  $21,374,504
 Marketable securities....          --           --      2,950,312    2,950,312
 Accounts receivable, net
  of allowance for
  doubtful accounts of
  $0, $14,000, $27,700
  and $27,700 at December
  31, 1997, 1998, June
  30, 1999, and June 30,
  1999 pro forma,
  respectively............       80,390      118,955       647,916      647,916
 Prepaid expenses.........          --       144,517       826,856      826,856
 Other current assets.....          343       23,222           --           --
                            -----------  -----------  ------------  -----------
    Total current assets..      156,576    4,613,784    25,799,588   25,799,588
 Property and equipment,
  net (Note D)............       96,902      961,702     3,869,859    3,869,859
 Deposits.................          550      384,991       423,932      423,932
 Other assets.............          --        10,359        89,231       89,231
                            -----------  -----------  ------------  -----------
    Total assets..........  $   254,028  $ 5,970,836  $ 30,182,610  $30,182,610
                            ===========  ===========  ============  ===========
 LIABILITIES, CONVERTIBLE
       PARTICIPATING
    PREFERRED STOCK AND
    STOCKHOLDERS' EQUITY
         (DEFICIT)
 Current liabilities:
 Accounts payable.........      431,756      533,524       583,013      583,013
 Accrued expenses.........      106,360      349,725     1,078,798    1,078,798
 Deferred revenue.........          --       121,667     1,173,571    1,173,571
 Current portion of long-
  term debt...............      120,226      187,139     1,932,355    1,932,355
                            -----------  -----------  ------------  -----------
    Total current liabili-
     ties.................      658,342    1,192,055     4,767,737    4,767,737
 Notes payable to related
  parties.................    1,159,938          --            --           --
 Long-term debt, net of
  current portion.........      333,040    4,949,198     6,018,464    6,018,464
                            -----------  -----------  ------------  -----------
    Total liabilities.....    2,151,320    6,141,253    10,786,201   10,786,201
 Commitments and contin-
  gencies (Note G)
 Series A Convertible
  Participating Preferred
  Stock; $0.01 par value;
  11,300,000 shares
  authorized, 10,600,000
  shares issued and
  outstanding at December
  31, 1998, and June
  30,1999; none issued and
  outstanding on a pro
  forma basis (liquidation
  preference $10,600,000
  at December 31, 1998 and
  June 30, 1999), net of
  issuance costs of
  $152,592................          --     9,219,047     9,367,007          --
 Series A Convertible Par-
  ticipating Preferred
  Stock Warrants..........          --       540,000       540,000          --
 Series B Convertible Par-
  ticipating Preferred
  Stock; $0.01 par value;
  13,196,522 shares autho-
  rized, issued, and out-
  standing at June 30,
  1999; none issued and
  outstanding on a pro
  forma basis (liquidation
  preference $25,503,465
  at June 30, 1999), net
  of issuance costs of
  $55,253.................          --           --     25,450,975          --
 Stockholders' equity
  (deficit) (Note H):
 Common stock, $0.01 par
  value; 55,000,000
  shares authorized;
  17,613,013 shares
  issued and outstanding
  at December 31, 1997;
  19,500,000 shares
  issued at December 31,
  1998 and June 30, 1999;
  43,296,522 issued on a
  pro forma basis.........      176,130      195,000       195,000      432,965
 Additional paid-in capi-
  tal.....................      345,678    3,277,199     4,272,433   39,392,450
 Unearned compensation....          --    (4,188,200)   (5,164,250)  (5,164,250)
 Stockholders' notes re-
  ceivable................          --      (779,558)     (309,659)    (309,659)
 Accumulated deficit......   (2,419,100)  (6,748,710)  (13,361,858) (13,361,858)
                            -----------  -----------  ------------  -----------
                             (1,897,292)  (8,244,269)  (14,368,334)  20,989,648
 Treasury stock, at cost
  (1,685,195 shares at
  December 31, 1998;
  1,922,157 shares at
  June 30, 1999 and on a
  pro forma basis)........          --    (1,685,195)   (1,593,239)  (1,593,239)
                            -----------  -----------  ------------  -----------
    Total stockholders'
     equity (deficit).....   (1,897,292)  (9,929,464)  (15,961,573)  19,396,409
                            -----------  -----------  ------------  -----------
     Total liabilities,
      convertible
      participating
      preferred stock and
      stockholders' equity
      (deficit)...........  $   254,028  $ 5,970,836  $ 30,182,610  $30,182,610
                            ===========  ===========  ============  ===========
</TABLE>

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

                                      F-3
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                 Six Months Ended June
                                Year Ended December 31,                   30,
                          -------------------------------------  -----------------------
                             1996         1997         1998         1998        1999
                                                                      (Unaudited)
<S>                       <C>          <C>          <C>          <C>         <C>
Revenue:
  Performance marketing
   services.............  $       --   $   216,286  $ 1,319,183  $  617,413  $ 1,396,149
  Other.................      196,069       60,424        7,580       2,697          --
                          -----------  -----------  -----------  ----------  -----------
    Total revenue.......      196,069      276,710    1,326,763     620,110    1,396,149
                          -----------  -----------  -----------  ----------  -----------
Operating expenses:
  Cost of revenue.......          --       272,585      423,811     155,711      238,033
  Sales and marketing...      397,819      180,108    1,453,706     146,310    4,496,110
  Development and
   engineering..........      505,509      426,329      728,538     292,143    1,481,817
  General and
   administrative.......      557,760      332,376      875,153     230,785      854,160
  Equity related
   compensation.........          --           --     1,951,322         --       770,985
                          -----------  -----------  -----------  ----------  -----------
    Total operating
     expenses...........    1,461,088    1,211,398    5,432,530     824,949    7,841,105
                          -----------  -----------  -----------  ----------  -----------
    Operating loss......   (1,265,019)    (934,688)  (4,105,767)   (204,839)  (6,444,956)
  Interest income.......        1,324        6,293       34,577       6,139      276,946
  Interest expense......      (27,566)    (105,215)    (258,420)    (67,014)    (445,138)
                          -----------  -----------  -----------  ----------  -----------
Net loss................   (1,291,261)  (1,033,610)  (4,329,610)   (265,714)  (6,613,148)
Accretion of preferred
 stock to redemption
 value..................          --           --       (98,639)        --      (654,301)
                          -----------  -----------  -----------  ----------  -----------
Net loss attributable to
 common stockholders....  $(1,291,261) $(1,033,610) $(4,428,249) $ (265,714) $(7,267,449)
                          ===========  ===========  ===========  ==========  ===========
Basic and diluted net
 loss per share.........  $     (0.07) $     (0.04) $     (0.28) $    (0.02) $     (0.57)
Shares used in computing
 basic and diluted net
 loss per share.........   19,543,204   27,138,512   16,018,258  17,613,013   12,695,148
Unaudited pro forma
 basic and diluted net
 loss per share.........                            $     (0.22)             $     (0.22)
Shares used in computing
 pro forma basic and
 diluted net loss per
 share..................                             19,639,628               29,878,553
</TABLE>

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

                                      F-4
<PAGE>

                        BE FREE, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

  for the years ended December 31, 1996, 1997 and 1998 and for the six months
                        ended June 30, 1999 (unaudited)

<TABLE>
<CAPTION>
                        Common Stock                                                                 Treasury Stock
                    ---------------------                                            Retained    ------------------------
                                  $0.01    Additional                Stockholders'   Earnings
                                   Par      Paid-in      Unearned        Notes     (Accumulated
                      Shares      Value     Capital    Compensation   Receivable     Deficit)      Shares       Value
<S>                 <C>          <C>       <C>         <C>           <C>           <C>           <C>         <C>
Balance at January
1, 1996...........    3,522,601  $ 35,226  $   15,774  $        --    $      --    $    116,578         --   $        --
  Issuance of
  Common Stock....   24,658,215   246,582     (15,774)          --           --        (210,807)        --            --
  Net loss........          --        --          --            --           --      (1,291,261)        --            --
                    -----------  --------  ----------                              ------------
Balance at
December 31, 1996.   28,180,816   281,808         --            --           --      (1,385,490)
  Contribution of
  capital by
  stockholders....          --        --      250,000           --           --             --          --            --
  Acquisition and
  retirement of
  treasury stock..  (10,567,803) (105,678)     95,678           --           --             --          --            --
  Net loss........          --        --          --            --           --      (1,033,610)        --            --
                    -----------  --------  ----------                              ------------
Balance at
December 31, 1997.   17,613,013   176,130     345,678           --           --      (2,419,100)        --            --
  Stock issuance
  in connection
  with warrant
  exercise........    1,886,987    18,870     356,130           --           --             --          --            --
  Acquisition of
  treasury stock..          --        --          --            --           --             --   (6,176,881)   (6,176,881)
  Issuance of
  restricted stock
  to employees by
  controlling
  stockholders....          --        --    1,694,550      (251,616)         --             --          --            --
  Issuance of
  warrants to
  purchase Common
  Stock in
  connection with
  Series A
  Convertible
  Participating
  Preferred Stock
  financing.......          --        --    1,327,000           --           --             --          --            --
  Exercise of call
  option on Common
  Stock...........          --        --          --            --           --             --     (705,364)     (705,364)
  Forfeiture of
  unvested shares
  of restricted
  stock...........          --        --     (142,448)      142,448          --             --          --            --
  Issuance of
  restricted
  stock...........          --        --   (1,091,380)   (3,326,112)    (779,558)           --    5,197,050     5,197,050
  Unearned
  compensation
  related to
  option
  grants..........          --        --      886,308      (886,308)         --             --          --            --
  Amortization of
  unearned
  compensation....          --        --          --        133,388          --             --          --            --
  Net loss........          --        --          --            --           --      (4,329,610)        --            --
  Accretion to
  redemption value
  of Series A
  Preferred Stock.          --        --      (98,639)          --           --             --          --            --
                    -----------  --------  ----------  ------------   ----------   ------------  ----------  ------------
Balance at
December 31, 1998.   19,500,000   195,000   3,277,199    (4,188,200)    (779,558)    (6,748,710) (1,685,195)   (1,685,195)
  Acquisition of
  treasury stock..          --        --     (253,847)      253,847       58,044            --     (386,962)      (58,044)
  Acceleration of
  vesting of
  restricted
  stock...........          --        --       91,324           --           --             --          --            --
  Issuance of
  restricted
  stock...........          --        --          --        (97,500)     (52,500)           --      150,000       150,000
  Repayment of
  receivable from
  stockholder.....          --        --          --            --       464,355            --          --            --
  Unearned
  compensation
  related to
  option grants...          --        --    1,812,058    (1,812,058)         --             --          --            --
  Amortization of
  unearned
  compensation....          --        --          --        679,661          --             --          --            --
  Net loss........          --        --          --            --           --      (6,613,148)        --            --
  Series B
  Preferred Stock
  dividend........          --        --     (503,578)          --           --             --          --            --
  Accretion to
  redemption value
  of Series A and
  B Preferred
  Stock...........          --        --     (150,723)          --           --             --          --            --
                    -----------  --------  ----------  ------------   ----------   ------------  ----------  ------------
Balance at June
30, 1999
(unaudited).......   19,500,000  $195,000  $4,272,433  $ (5,164,250)  $ (309,659)  $(13,361,858) (1,922,157) $ (1,593,239)
                    ===========  ========  ==========  ============   ==========   ============  ==========  ============
<CAPTION>
                       Total
<S>                 <C>
Balance at January
1, 1996...........  $    167,578
  Issuance of
  Common Stock....        20,001
  Net loss........    (1,291,261)
                    -------------
Balance at
December 31, 1996.    (1,103,682)
  Contribution of
  capital by
  stockholders....       250,000
  Acquisition and
  retirement of
  treasury stock..       (10,000)
  Net loss........    (1,033,610)
                    -------------
Balance at
December 31, 1997.    (1,897,292)
  Stock issuance
  in connection
  with warrant
  exercise........       375,000
  Acquisition of
  treasury stock..    (6,176,881)
  Issuance of
  restricted stock
  to employees by
  controlling
  stockholders....     1,442,934
  Issuance of
  warrants to
  purchase Common
  Stock in
  connection with
  Series A
  Convertible
  Participating
  Preferred Stock
  financing.......     1,327,000
  Exercise of call
  option on Common
  Stock...........      (705,364)
  Forfeiture of
  unvested shares
  of restricted
  stock...........           --
  Issuance of
  restricted
  stock...........           --
  Unearned
  compensation
  related to
  option
  grants..........           --
  Amortization of
  unearned
  compensation....       133,388
  Net loss........    (4,329,610)
  Accretion to
  redemption value
  of Series A
  Preferred Stock.       (98,639)
                    -------------
Balance at
December 31, 1998.    (9,929,464)
  Acquisition of
  treasury stock..           --
  Acceleration of
  vesting of
  restricted
  stock...........        91,324
  Issuance of
  restricted
  stock...........           --
  Repayment of
  receivable from
  stockholder.....       464,355
  Unearned
  compensation
  related to
  option grants...           --
  Amortization of
  unearned
  compensation....       679,661
  Net loss........    (6,613,148)
  Series B
  Preferred Stock
  dividend........      (503,578)
  Accretion to
  redemption value
  of Series A and
  B Preferred
  Stock...........      (150,723)
                    -------------
Balance at June
30, 1999
(unaudited).......  $(15,961,573)
                    =============
</TABLE>

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

                                      F-5
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                Year Ended December 31,                June 30,
                          -------------------------------------  ----------------------
                             1996         1997         1998        1998        1999
                                                                      (Unaudited)
<S>                       <C>          <C>          <C>          <C>        <C>
Cash flows for operating
 activities:
 Net loss...............  $(1,291,261) $(1,033,610) $(4,329,610) $(265,714) $(6,613,148)
 Adjustments to
  reconcile net loss to
  net cash used in
  operating activities:
  Depreciation and
   amortization.........       42,067       56,999      285,794     45,139      482,387
  Compensation charge
   and amortization of
   unearned
   compensation.........          --           --     1,951,322        --       770,985
  Loss on disposal on
   fixed assets.........          --         3,304          --         --           --
  Acquisition of fixed
   assets in exchange
   for services.........          --           --      (202,688)  (202,688)         --
  Provisions for
   doubtful accounts....          --           --        14,000        --        13,700
  Changes in operating
   assets and
   liabilities:
  Accounts receivable...      118,072      (54,717)     (52,565)  (156,201)    (542,661)
  Prepaid expenses......          --           --       (75,991)       --      (533,625)
  Deposits..............          --           --      (384,441)    (2,231)     (38,941)
  Accounts payable......      329,044       94,570      101,768    186,848       49,489
  Accrued expenses......       25,261       46,085      243,365    (23,095)     729,073
  Deferred revenue......       24,508      (24,508)     121,667    466,667    1,051,904
  Other, net............         (123)        (343)     (33,238)    (1,534)     (55,650)
                          -----------  -----------  -----------  ---------  -----------
Net cash provided by
 (used in) operating
 activities.............     (752,432)    (912,220)  (2,360,617)    47,191   (4,686,487)
                          -----------  -----------  -----------  ---------  -----------
Cash flows for investing
 activities:
 Purchases of property
  and equipment.........      (71,232)     (67,726)    (610,064)   (32,235)    (597,636)
 Purchases of marketable
  securities............          --           --           --         --    (2,932,150)
                          -----------  -----------  -----------  ---------  -----------
Net cash used in
 investing activities...      (71,232)     (67,726)    (610,064)   (32,235)  (3,529,786)
                          -----------  -----------  -----------  ---------  -----------
Cash flows from
 financing activities:
 Proceeds from issuance
  of Series A
  Convertible
  Participating
  Preferred Stock, net
  of issuance costs.....          --           --     9,120,408        --           --
 Issuance of warrants
  for Common Stock in
  connection with Series
  A Preferred Stock.....          --           --     1,327,000        --           --
 Proceeds from issuance
  of Series B
  Convertible
  Participating
  Preferred Stock, net
  of issuance costs.....          --           --           --         --    24,944,635
 Proceeds from issuance
  of Common Stock.......       20,001      250,000          --         --           --
 Acquisition of common
  stock and treasury
  shares................          --       (10,000)  (6,882,245)       --           --
 Payments on notes
  payable to related
  parties...............          --           --    (1,159,938)    (3,880)         --
 Proceeds from notes
  receivable from
  stockholders..........          --           --           --         --       464,355
 Proceeds from
  sales/leaseback.......          --           --           --         --       240,818
 Proceeds from long-term
  debt..................      738,795      791,080    5,000,000        --           --
 Payments on long-term
  debt..................          --           --      (183,297)   (61,588)    (386,121)
                          -----------  -----------  -----------  ---------  -----------
Net cash provided by
 (used in) financing
 activities.............      758,796    1,031,080    7,221,928    (65,468)  25,263,687
                          -----------  -----------  -----------  ---------  -----------
Net increase (decrease)
 in cash and cash
 equivalents............      (64,868)      51,134    4,251,247    (50,512)  17,047,414
Cash and cash
 equivalents at
 beginning of period....       89,577       24,709       75,843     75,843    4,327,090
                          -----------  -----------  -----------  ---------  -----------
Cash and cash
 equivalents at end of
 period.................  $    24,709  $    75,843  $ 4,327,090  $  25,331  $21,374,504
                          ===========  ===========  ===========  =========  ===========
Supplemental disclosure
 of cash flow
 information:
 Cash paid during the
  period for interest...  $    22,823  $    53,819  $   284,561  $ 121,589  $   305,139
Supplemental disclosures
 of noncash
 transactions:
 Notes receivable for
  Common Stock sold.....          --           --   $   779,558        --   $    52,500
 Elimination of note
  receivable for
  restricted stock......          --           --           --         --   $    58,044
 Issuance of warrants in
  connection with
  subordinated debt
  agreement.............          --           --   $   540,000        --           --
 Purchases of property
  and equipment under
  capital lease
  obligations and
  equipment financing...          --           --   $   285,000        --   $ 2,675,386
</TABLE>

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

                                      F-6
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

A. The Company and Basis of Presentation:

   Be Free, Inc. (the "Company") is a provider of services that enable
electronic commerce merchants and Internet portals to promote their products
and services on the Internet. As such, the Company is subject to a number of
risks similar to other companies in the Internet industry, including rapid
technological change, uncertainty of market acceptance of services, competition
from substitute services and larger companies, protection of proprietary
technology and dependence on key individuals.

   The Company has a single operating segment, performance marketing services.
The Company has no organizational structure dictated by product lines,
geography or customer type. Revenue has been primarily derived from services
provided through the Company's BFAST technology, which have been provided to
domestic companies to date.

   The Company was incorporated on January 25, 1996 as "Freedom of Information,
Inc." On March 31, 1999, the Company changed its name to Be Free, Inc.

   Prior to August 28, 1998, the Company and two affiliated companies, PCX
Information Systems, Inc. ("PCX") and FOI, Inc. ("FOI"), were under common
ownership and management by members of the same immediate family. On August 28,
1998, stockholders of the affiliated companies exchanged their shares of
capital stock of the affiliated companies for shares of the Company's common
stock which resulted in the affiliated companies becoming wholly owned
subsidiaries of the Company (Note H). This combination was accounted for at
historical cost due to the common control of the entities.

B. Summary of Significant Accounting Policies:

Cash and Cash Equivalents

   The Company considers all highly liquid investments with remaining
maturities of three months or less at the time of acquisition to be cash
equivalents. Cash equivalents, which consist of money market accounts and
commercial paper, are stated at cost, which approximates market value.

Marketable Securities

   The Company's marketable securities are comprised entirely of commercial
paper which are classified as available for sale at the date of purchase.
Marketable securities with remaining maturities of less than twelve months from
the balance sheet date are classified as short-term. Marketable securities with
remaining maturities of more than twelve months from the balance sheet date are
classified as long-term. These securities are carried at amortized cost, which
approximates fair value.

Concentrations of Credit Risk

   Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash and cash equivalents,
marketable securities and accounts receivable. At

                                      F-7
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

December 31, 1998, June 30, 1999, substantially all of the Company's cash was
invested in money market accounts and commercial paper at one and four
financial institutions, respectively, which the Company believes to be of high
credit quality. The Company had one customer in 1996 totaling 74% of revenue,
two customers in 1997 totaling 78% and 12% of revenue, respectively, one
customer in 1998 totaling 73% of revenue and two customers in the six-month
period ended June 30, 1999 totaling 40% and 15% of revenue, respectively. The
Company had two customers that accounted for 40% and 11%, respectively, of
accounts receivable at December 31, 1998.

Property and Equipment

   Property and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which are five years for furniture and office
equipment and three to five years for computer equipment and software.
Leasehold improvements are depreciated over the shorter of related lease terms
or the estimated useful lives. The cost of maintenance and repairs is charged
to expense as incurred. When assets are retired or disposed, the assets and
related accumulated depreciation are eliminated from accounts and any related
gains or losses are reflected in income or loss for the period.

Revenue Recognition

   The Company derives revenue primarily from providing performance marketing
services to customers. Customer contracts generally provide for fees on a per
transaction basis with a monthly or annual minimum. Revenue under service
contracts is recognized monthly over the contract period based on the
contractual minimum service fee or transaction volume when such transaction
volume exceeds monthly minimum requirements. The Company also charges a one
time integration fee for certain services. Revenue for integration fees is
recognized up to the cost of providing such service when the integration is
complete and the service is available to the customer. Revenue for integration
fees in excess of the cost is deferred and recognized ratably over the initial
term of the service contract. Costs related to performing integration services
are expensed as incurred. Other revenue consists of customized software
development and support services which were recognized when the services were
provided.

   The Company may discount the BFAST service fee by 5% for any calendar day
that Be Free's system response time did not meet the contractual performance
level for greater than 60 minutes during any calendar day. Any discounts
granted will be recorded as a reduction of revenue in the period issued.

   Revenue under arrangements where multiple services are sold together under
one contract is allocated to each element based on the relative fair value of
each element, with fair value being determined using the price charged when the
element is sold separately.

                                      F-8
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)


Cost of Revenue

   Cost of Revenue represents direct expenses relating to delivering
performance marketing services to customers. Expenses included primarily
represent depreciation for servers and storage equipment, costs for a third-
party data center facility and costs for Internet connectivity.

Development and Engineering

   Development and Engineering costs are expensed as incurred and include labor
and related costs for product development and maintenance and support of system
infrastructure.

   On January 1, 1999, the Company adopted American Institute of Certified
Public Accountants Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1").
Accordingly, the Company's policy is to capitalize costs associated with the
design and implementation of its operating systems, including internally and
externally developed software. To date, internal costs eligible for
capitalization under SOP 98-1 have been immaterial.

   During the years ended December 31, 1996, 1997 and 1998, certain engineering
and development personnel performed software development services for third
parties. The cost of those services were approximately $221,000, $40,000 and $0
for the years ended December 31, 1996, 1997 and 1998, respectively.

Advertising Costs

   Advertising costs are expensed as incurred. Advertising expense of
approximately $265,100, $3,100, $34,900, $2,200 and $927,100 were charged to
sales and marketing expenses for the years ended December 31, 1996, 1997, 1998
and the six-month period ended June 30, 1998 and 1999, respectively.

Income Taxes

   The Company provides for income taxes using the liability method whereby
deferred tax liabilities and assets are recognized based on temporary
differences between the amounts presented in the financial statements and the
tax bases of assets and liabilities using current statutory tax rates. A
valuation allowance is established against net deferred tax assets, if based on
the weighted available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.

Accounting for Stock-Based Compensation

   Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," encourages but does not require companies to record
compensation cost for stock-based employee compensation at fair value. The
Company has chosen to account for stock-based compensation granted to employees
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, compensation cost for stock options granted to
employees is measured

                                      F-9
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

as the excess, if any, of the fair value of the Company's stock at the date of
the grant over the amount that must be paid to acquire the stock. Stock-based
compensation issued to nonemployees is measured and recorded using the fair
value method prescribed in SFAS No. 123.

Treasury Stock

   The Company has delivered treasury shares upon issuance of restricted stock
and may deliver treasury shares upon the exercise of stock options. The
difference between the cost of the treasury shares, on a first-in, first-out
basis, and the exercise price of the options or purchase price of restricted
stock is reflected in additional paid in capital. Repurchase of treasury stock
is accounted for by using the cost method of accounting.

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 consolidated
financial statements and the reported amounts of revenue and expenses during
the reporting period. Estimates include accrued expenses and the valuation
allowance for deferred tax assets. Actual results could differ from those
estimates.

Recent Accounting Pronouncements

   In June 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company, to
date, has not engaged in derivative and hedging activities, and accordingly
does not believe that the adoption of SFAS No. 133 will have a material impact
on the financial reporting and related disclosures of the Company. The Company
will adopt SFAS No. 133 as required by SFAS No. 137, "Deferral of the effective
date of FASB Statement No. 133," in fiscal year 2000.

Interim Financial Information

   The consolidated financial statements of the Company as of June 30, 1999 and
for the six months ended June 30, 1998 and 1999 are unaudited. All adjustments
(consisting only of normal recurring adjustments) have been made, which in the
opinion of management, are necessary for a fair presentation. Results of
operations for the six months ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999 or for any other future period.

Pro Forma Balance Sheet (Unaudited)

   Upon the closing of the Company's initial public offering, all of the
outstanding shares of Series A and B convertible participating preferred stock
will automatically convert to an equivalent number

                                      F-10
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

of shares (approximately 23,796,522 shares) of the Company's common stock
assuming an offering price of greater than $3.98 per share. Upon the closing of
the Company's initial public offering, warrants for the purchase of 700,000
shares of preferred stock will become exercisable for an equivalent number of
shares of common stock. The unaudited pro forma presentation of the balance
sheet has been prepared assuming the conversion of the convertible preferred
stock into common stock at June 30, 1999.

C. Net Loss Per Share and Pro Forma Loss Per Share:

   Basic loss per share is computed using the weighted average number of common
shares outstanding during the period. Diluted loss per share is computed using
the weighted average number of common shares outstanding during the period,
plus the effect of any dilutive potential common shares. Dilutive potential
common shares consist of stock options, preferred stock and warrants. Potential
common shares were excluded from the calculation of net loss per share for the
periods presented since their inclusion would be antidilutive. During the year
ended December 31, 1996, there were no dilutive potential common shares. During
the year ended December 31, 1997, there were no options to purchase common
shares, no shares of preferred stock convertible into shares of common stock
and 1,886,987 warrants to purchase shares of common stock. During the year
ended December 31, 1998, there were 1,402,407 options to purchase common stock,
10,600,000 shares of preferred stock convertible into common stock and warrants
to purchase 4,198,000 shares of common stock. During the six-month period ended
June 30, 1999, there were 2,638,791 options to purchase common stock,
23,796,522 shares of preferred stock convertible into common stock and warrants
to purchase 4,198,000 shares of common stock.

   Pro forma basic and diluted loss per share have been calculated assuming the
conversion of all outstanding shares of preferred stock into common stock, as
if the shares had converted immediately upon their issuance. Accordingly, net
loss has not been adjusted for the accrued dividends for preferred stock in the
calculation of pro forma loss per share.

                                      F-11
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)


   The following is a calculation of pro forma net loss per share (unaudited):

<TABLE>
<CAPTION>
                                                                    For the Six
                                                                      Months
                                                       Year Ended      Ended
                                                      December 31,   June 30,
                                                          1998         1999
<S>                                                   <C>           <C>
Pro forma net loss:
  Net loss attributable to common stockholders....... $(4,428,249)  $(7,267,449)
  Accretion of preferred stock to redemption value...      98,639       654,301
                                                      -----------   -----------
  Pro forma net loss................................. $(4,329,610)  $(6,613,148)
                                                      ===========   ===========
Shares used in computing pro forma basic and diluted
 net loss per share:
  Weighted average number of common shares
   outstanding.......................................  16,018,258    12,695,148
  Weighted average impact of assumed conversion of
   preferred stock on issuance.......................   3,621,370    17,183,405
                                                      -----------   -----------
  Shares used in computing pro forma basic and
   diluted net loss per share........................  19,639,628    29,878,553
                                                      ===========   ===========
  Basic and diluted pro forma net loss per common
   share............................................. $     (0.22)  $     (0.22)
                                                      ===========   ===========
</TABLE>

D. Property and Equipment:

   Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                  December 31,
                                              ---------------------   June 30,
                                                1997        1998        1999
<S>                                           <C>        <C>         <C>
Furniture and office equipment............... $   1,803  $   27,778  $  402,589
Computer equipment and software..............   213,906   1,285,683   3,994,002
Leasehold improvements.......................       --          --      189,892
                                              ---------  ----------  ----------
                                                215,709   1,313,461   4,586,483
Accumulated depreciation.....................  (118,807)   (351,759)   (716,624)
                                              ---------  ----------  ----------
Property and equipment, net.................. $  96,902  $  961,702  $3,869,859
                                              =========  ==========  ==========
</TABLE>

   At December 31, 1998, cost and accumulated depreciation relating to computer
equipment under a long-term financing arrangement totaled $285,000 and $47,500,
respectively. At June 30, 1999, cost and accumulated depreciation relating to
furniture and office equipment under long-term financing arrangements totaled
$416,593 and $36,855, respectively. At June 30, 1999, cost and accumulated
depreciation relating to computer equipment and software under long-term
financing arrangements totaled $2,676,312 and $190,188, respectively. At June
30, 1999, cost and accumulated depreciation relating to leasehold improvements
totaled $108,299 and $4,961, respectively. Depreciation expense totaled
$42,067, $56,999 and $232,952 for the years ended December 31, 1996, 1997 and
1998, respectively, and for the six months ended June 30, 1998 and 1999 was
$45,139 and $364,865, respectively.

                                      F-12
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)


E. Accrued Expenses:

   Accrued expenses include the following:

<TABLE>
<CAPTION>
                                                      December 31,
                                                    -----------------  June 30,
                                                      1997     1998      1999
      <S>                                           <C>      <C>      <C>
      Accrued interest............................. $ 56,140 $ 50,000 $   50,000
      Professional fees............................   42,500  135,395    420,683
      Commissions..................................      --       --     175,780
      Salaries and benefits........................      --    27,876    208,924
      Rent.........................................      --    67,644     42,143
      Other........................................    7,720   68,810    181,268
                                                    -------- -------- ----------
        Accrued expenses........................... $106,360 $349,725 $1,078,798
                                                    ======== ======== ==========
</TABLE>

F. Long-Term Debt:

   The following table summarizes the Company's long-term borrowings:

<TABLE>
<CAPTION>
                                                December 31,
                                            ---------------------   June 30,
                                              1997        1998        1999
      <S>                                   <C>        <C>         <C>
      Subordinated debt, net............... $     --   $4,490,000  $ 4,580,000
      Obligations under capital leases and
       equipment financing.................       --      332,510    3,370,819
      Term loans...........................   453,266     313,827          --
                                            ---------  ----------  -----------
                                              453,266   5,136,337    7,950,819
      Less current portion.................  (120,226)   (187,139)  (1,932,355)
                                            ---------  ----------  -----------
        Long-term debt..................... $ 333,040  $4,949,198  $ 6,018,464
                                            =========  ==========  ===========
</TABLE>

   The Company entered into term loans during 1996 and 1997 that accrued
interest based on the lender's published prime rate, which was 9% and 8.5% at
December 31, 1997 and 1998, respectively. These loans were paid in full in
March 1999.

   On August 25, 1998, the Company entered a software and support financing
arrangement with a lender totaling $376,368. Borrowings under this arrangement
have an implied interest rate of 13%. The repayment period for borrowings
outstanding under this arrangement concludes in September 2001.

   On September 29, 1998, the Company entered into a subordinated debt
agreement totaling $5,000,000 which bears interest at 12% per annum. The
Company borrowed the full amount available under this agreement on October 23,
1998. The repayment period on this agreement

                                      F-13
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

concludes in November 2001. In connection with the subordinated debt financing,
the Company also granted warrants to purchase 700,000 shares of the Company's
Series A Preferred Stock at $1.00 per share. The fair value of the warrants,
estimated to be approximately $540,000 at issuance, has been recorded as a
discount on the carrying value of the debt to be amortized to interest expense
over the term of the debt. The value of the warrants was estimated assuming a
weighted average risk free interest rate of 4.51%, an expected life from date
of grant of four years, a volatility of 100% and no expected dividends. The
amount of expense recognized for the year ended December 31, 1998 and the six-
month period ended June 30, 1999 totaled $30,000 and $90,000, respectively.

   On September 29, 1998, the Company established a capital equipment line of
credit totaling $2,000,000 which is available through September 29, 1999 and is
collateralized by the asset purchases made under the line. At December 31,
1998, no amounts had been borrowed under this line. At June 30, 1999, the
Company borrowed $1,824,228 under this line which bears interest at 6.8%.
Purchases under this line are financed as capital leases with terms of four
years.

   During 1999, the Company entered into a sale/leaseback agreement with a
vendor for $240,818 in fixed assets. There was no gain or loss on the
transaction and the equipment has been accounted for as a capital lease.

   The weighted average interest rate of outstanding long-term debt at December
31, 1997, 1998 and June 30, 1999 was 9%, 11.9% and 11.0%, respectively.

   Principal payments on long-term debt are as follows:

<TABLE>
<CAPTION>
                                                                     Long-Term
                                                                        Debt
      Year ended December 31,                                         Payments
      <S>                                                            <C>
      1999.......................................................... $  367,139
      2000..........................................................  2,563,314
      2001..........................................................  2,582,551
      2002..........................................................     57,143
      2003..........................................................     57,143
      2004 and thereafter...........................................     19,047
                                                                     ----------
        Total minimum debt payments................................. $5,646,337
                                                                     ==========
</TABLE>

G. Commitments and Contingencies:

   The Company leases facilities and computer equipment under operating lease
agreements that expire on various dates through January 31, 2004. The Company
pays all insurance and pro-rated portions of certain operating expenses for
certain leases. Rent expense was $72,687, $113,025 and $307,575 for the years
ended December 31, 1996, 1997 and 1998, respectively, and $101,905 and $207,298
for the six months ended June 30, 1998 and 1999, respectively.

                                      F-14
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)


   The future minimum lease payments at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                                                     Operating
      Year ended December 31,                                          Leases
      <S>                                                            <C>
      1999.......................................................... $  449,944
      2000..........................................................    605,377
      2001..........................................................    662,361
      2002..........................................................    694,545
      2003..........................................................    706,421
      2004 and thereafter...........................................    142,202
                                                                     ----------
        Total minimum lease payments................................ $3,260,850
                                                                     ==========
</TABLE>

H. Capital Structure:

   The authorized capital stock of the Company consists of (i) 55,000,000
shares of voting common stock ("Common Stock") authorized for issuance with a
par value of $0.01 and (ii) 24,496,522 shares of preferred stock with a par
value of $0.01, of which 11,300,000 shares are designated as Series A
Convertible Participating Preferred Stock ("Series A Preferred Stock") and
13,196,522 shares are designated as Series B Convertible Participating
Preferred Stock ("Series B Preferred Stock").

Common Stock

   Prior to August 28, 1998, the Company and its affiliated companies, FOI,
Inc. and PCX were under common control and management by immediate members of
one family. On August 28, 1998, stockholders of the affiliated companies
exchanged their shares of capital stock of the affiliated companies for shares
of the Company's Common Stock which resulted in the affiliated companies
becoming wholly owned subsidiaries of the Company. The financial statements for
the Company, FOI and PCX are presented on a combined basis for the years ended
December 31, 1996, 1997 and 1998.

   On August 28, 1998, the holders of warrants to purchase shares of Common
Stock exercised their warrants for 1,886,987 shares of Common Stock. Of these
shares, 705,364 shares were subject to a call option at the discretion of the
Company for $1.00 per share. On October 27, 1998, the Company exercised its
call option in full for $705,364.

   On August 28, 1998, the Company repurchased 6,176,881 shares of Common Stock
from founders and employees of the Company in exchange for notes payable issued
by the Company for $6,176,881. These notes were paid in full on August 31,
1998.

   On August 28, 1998, certain controlling stockholders of the Company
transferred 2,145,000 shares of Common Stock to employees in consideration of
past performance and as an incentive for continuing employment with the
Company. The stock was transferred subject to certain vesting

                                      F-15
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

restrictions and for no cash consideration. The fair value of these restricted
stock awards at the date of transfer totaled $1,694,550, which the Company is
recognizing as compensation expense over the defined vesting period. The
vesting for the transferred shares occurs over 4 years commencing with the
recipients date of hire. The remaining unearned compensation will vest at
various dates through 2002. Upon the transfer of these shares, the Company
recorded a charge of $1,442,934 representing fully vested shares. In addition,
the Company recorded unearned compensation related to unvested shares totaling
$251,616. The Company recorded amortization of the unearned compensation
totaling $27,051 and $16,990 for the year ended December 31, 1998 and for the
six months ended June 30, 1999, respectively.

   On August 28, 1998, the Company's Board of Directors authorized a 35,226.01-
for-1 Common Stock split effected in the form of a stock dividend.
Stockholders' equity (deficit) has been restated for all periods presented to
give retroactive recognition to the split in prior periods by reclassifying
from additional paid-in capital to Common Stock the par value of the additional
shares arising from the split. In addition, all references in the consolidated
financial statements to the number of Common Stock shares and per share amounts
have been adjusted to reflect this split.

Preferred Stock

   On August 28, 1998, the Company issued 10,500,000 shares of Series A
Preferred Stock for cash proceeds of $10,355,408, net of issuance costs of
$144,592. On September 29, 1998, the Company issued 100,000 shares of Series A
Preferred Stock for cash proceeds of $92,000, net of issuance costs of $8,000.

   Each share of Series A Preferred Stock is convertible, at the option of the
holder, into one share of Common Stock, adjusted for certain events. The Series
A Preferred Stock automatically converts to Common Stock upon the closing of a
public offering raising an amount greater than $10,000,000 at a price per share
of at least $3.98. In addition, the Company can elect to convert the Series A
Preferred Stock to Common Stock if less than 25% of the original shares are
outstanding. The Company has reserved 11,300,000 shares of Common Stock for the
conversion of Series A Preferred Stock.

   The holders of the Series A Preferred Stock are entitled to voting rights
equal to the number of shares of Common Stock into which the Series A Preferred
Stock could be converted at the time. Two of the holders of Series A Preferred
Stock have the right to elect one member each to the Board of Directors.

   On or after March 31, 2004, the Company shall, at the written election of
the holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, (i) redeem on the date specified by such holders one-third of
all the shares of Series A Preferred Stock outstanding on the date of such
election and (ii) redeem on the first anniversary of such date up to an
additional one-third of the shares of the Series A Preferred Stock outstanding
on such date (and not previously called for redemption) and (iii) redeem on the
second anniversary of such date all remaining shares

                                      F-16
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

of Series A Preferred Stock outstanding on such date (and not previously called
for redemption). The redemption price is equal to the sum of the original
purchase price (adjusted appropriately for any stock dividend, stock split or
similar event affecting the Series A Preferred Stock) plus the amount of any
declared but unpaid dividends.

   In the event of liquidation of the Company, the holders of the Series A
Preferred Stock are entitled to be paid a liquidation amount equal to $1.00
(adjusted appropriately for any stock dividend, stock split or similar event
affecting the Series A Preferred Stock) plus any declared but unpaid dividends.
In addition, after the liquidation preferences of the Series A and Series B
Preferred Stock have been paid, the holders of Series A Preferred Stock are
entitled to share in the remaining proceeds, if any, as if their shares had
been converted into shares of Common Stock.

   In connection with the issuance of Series A Preferred Stock, the Company
issued warrants to the holders of the Series A Preferred Stock, for the
purchase of up to 3,498,000 shares of Common Stock at $1.50 per share. Of these
warrants, 3,465,000 are exercisable from the date of issuance through August
28, 2008 and 33,000 are exercisable from the date of issuance through September
29, 2008. The fair value of these warrants at the date of issue was $1,327,000.
This amount has been recorded as a reduction of Series A Preferred Stock and an
increase to paid-in-capital. The value of the warrants was estimated assuming a
weighted average risk free interest rate of 4.51%, an expected life from date
of grant of four years, a volatility of 100% and no expected dividends.

   On March 31, 1999, the Company issued 13,196,522 shares of Series B
Preferred Stock for cash proceeds of $24,944,635, net of issuance costs of
$55,253.

   Each share of Series B Preferred Stock is convertible, at the option of the
holder, into one share of Common Stock, adjusted for certain events. The Series
B Preferred Stock automatically converts to Common Stock upon the closing of a
public offering raising an amount greater than $10,000,000 at a price per share
of at least $3.98. In addition, the Company can elect to convert the Series B
Preferred Stock to Common Stock if less than 25% of the original shares of
Series B Preferred Stock are outstanding. The Company has and will continue to
reserve a sufficient number of its Common Stock to satisfy the conversion
rights of the holders of the Series B Preferred Stock. The holders of the
Series B Preferred Stock are entitled to receive cumulative dividends at a rate
of 8% per annum.

   The holders of the Series B Preferred Stock are entitled to voting rights
equal to the number of shares of Common Stock into which the Series B Preferred
Stock could be converted at the time. One of the holders of Series B Preferred
Stock has the right to elect one member to the Board of Directors.

   On or after March 31, 2004, the Company shall, at the written election of
the holders of at least majority of the then outstanding shares of Series B
Preferred Stock, (i) redeem on the date specified by such holders one-third of
all the shares of Series B Preferred Stock outstanding on the date of such
election (the "Election Date") and (ii) redeem on March 31, 2005 one-third of
the shares of the Series B Preferred Stock outstanding on the Election Date
(and not previously called for redemption)

                                      F-17
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

and (iii) redeem on March 31, 2006 all remaining shares of Series B Preferred
Stock outstanding on such date (and not previously called for redemption). The
redemption price is equal to the sum of the original purchase price (adjusted
appropriately for any stock dividend, stock split or similar event affecting
the Series B Preferred Stock) plus the amount of any declared or accrued but
unpaid dividends.

   In the event of liquidation of the Company, the holders of the Series B
Preferred Stock are entitled to be paid a liquidation amount equal to $1.89
(adjusted appropriately for any stock dividend, stock split or similar event
affecting the Series B Preferred Stock) per share plus any declared or accrued
but unpaid dividends. In addition, after the liquidation preference of the
Series A and B Preferred Stock has been paid, the holders of Series B Preferred
Stock are entitled to share in the remaining proceeds, if any, as if their
shares had been converted into Common Stock.

I. Stock Options and Restricted Stock Awards:

   On November 19, 1998, the Company adopted its 1998 Stock Incentive Plan (the
"Option Plan"). The Option Plan is administered by the Company's Board of
Directors (the "Board"), and allows for the granting of awards in the form of
incentive stock options to employees and nonqualified options and restricted
stock to officers, employees, consultants, directors and advisors. The exercise
prices for awards and options granted were determined by the Board of Directors
of the Company to be equal to the fair value of the Common Stock on the date of
grant. In reaching this determination at the time of each such grant, the Board
considered a broad range of factors including the illiquid nature of an
investment in the Common Stock, the Company's historical financial performance
and financial position and the Company's future prospects and opportunity for
liquidity events. The option plan allows for the Company to grant up to
9,534,506 options for common shares and restricted stock. Stock options may not
be exercised after ten years from the date of grant. Options and restricted
stock awards normally vest over 48 months as follows: 25% after 12 months from
the date of grant, thereafter, an additional 2.0833% of shares vest at the end
of each month until all shares are fully vested. In the event of a change of
control of the Company (as defined by the Option Plan), the vesting for each
option and restricted stock award will automatically be accelerated with
respect to 25% of the shares subject to such options or restricted stock
awards.

   During the year ended December 31, 1998, the Company granted incentive stock
options for the purchase of 1,402,407 shares with an exercise price of $0.15
per share. During 1998, the Company sold 5,197,050 shares of restricted stock
to certain employees for $0.15 per share. The weighted-average grant-date fair
value of these shares of restricted stock was $0.79 per share. There were
17,550 stock option cancellations during the year ended December 31, 1998.

   During the six months ended June 30, 1999, the Company granted incentive
stock options for the purchase of 1,184,934 shares and nonqualified stock
options for the purchase of 75,000 shares at a weighted average exercise price
of $0.71. There were 6,000 stock option cancellations during the

                                      F-18
<PAGE>

                        BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                              1999 is unaudited)

six months ended June 30, 1999. During the six months ended June 30, 1999, the
Company issued 150,000 shares of restricted stock for $0.35 per share in
exchange for a note receivable totaling $52,500. The weighted-average grant-
date fair value of these shares of restricted stock was $1.00 per share.

   The following table summarizes option activity under the Option Plan:

<TABLE>
<CAPTION>
                           Year ended December 31,   Six months ended June 30,
                                     1998                       1999
                          -------------------------- --------------------------
                                    Weighted-average           Weighted-average
                           Shares    Exercise Price   Shares    Exercise Price
<S>                       <C>       <C>              <C>       <C>
Outstanding at beginning
 of period...............       --         --        1,384,857      $0.15
Granted.................. 1,402,407      $0.15       1,259,934       0.71
Cancelled................    17,550       0.15           6,000       0.56
                          ---------                  ---------
Outstanding at end of
 period.................. 1,384,857       0.15       2,638,791       0.41
Options exercisable at
 end of period...........       --         --           75,000       0.35
</TABLE>

   All options granted during the year ended December 31, 1998 and the six
months ended June 30, 1999 had exercise prices which were below the estimated
fair value of the Company's common stock at the date of grant. The weighted
average fair values of options granted for the year ended December 31, 1998
and the six months ended June 30, 1999 were $0.68 and $1.65, respectively.

   The following table summarized information about stock options outstanding
at June 30, 1999:

<TABLE>
<CAPTION>
                                                     Weighted
                                                     Average
                                                    Remaining
      Exercise                                     Contractual                    Shares
       Price              Shares                   Life (Years)                 Exercisable
      <S>                <C>                       <C>                          <C>
      $0.15              1,384,857                      9.3                          --
      $0.35                427,106                      9.5                       75,000
      $0.60                219,914                      9.7                          --
      $0.95                541,914                      9.9                          --
      $1.40                 65,000                     10.0                          --
                         ---------
                         2,638,791                      9.5                          --
                         =========
</TABLE>

   No options were exercisable at December 31, 1998. The weighted average
remaining contractual life of the options at December 31, 1998 was 9.8 years.

   During the year ended December 31, 1998 and the six months ended June 30,
1999 the Company recorded unearned compensation for restricted stock and
options granted to employees below fair value of $4,212,420 and $1,909,558
respectively. The Company is recognizing the compensation expense over the
vesting period. The Company recorded equity compensation expense including
amortization expense relating to unearned compensation of $106,337 and
$662,671 for the year ended December 31, 1998 and the six months ended June
30, 1999, respectively.

                                     F-19
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)

   On April 30, 1999, the Company also accelerated the vesting with respect to
77,393 shares of restricted stock held by a former employee. The Company has
recorded a charge of $91,324 in connection with this acceleration.

   Had compensation cost for the stock option grants been calculated based on
the fair value at the date of grant for options granted in 1998 consistent with
SFAS 123, the Company's net loss for the year ended December 31, 1998 would
have been increased to the pro forma amounts indicated below:

<TABLE>
      <S>                                                          <C>
      Net loss--as reported....................................... $(4,329,610)
      Net loss--pro forma under SFAS 123.......................... $(4,333,550)
</TABLE>

   The following table presents the significant assumptions used to estimate
the fair values of the options:

<TABLE>
      <S>                                                               <C>
      Weighted average risk free interest rate.........................    4.85%
      Expected life from the date of grant............................. 7 years
      Volatility.......................................................    None
      Expected dividends...............................................    None
</TABLE>

   The weighted average fair value of options on the date of grant for the
options granted in 1998 was $0.68.

   The pro forma effects of applying SFAS 123 are not indicative of future
impacts. Additional grants in future years are anticipated.

J. Income Taxes:

   Deferred income taxes include the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

   The components of the Company's deferred tax assets (liabilities) are as
follows:

<TABLE>
<CAPTION>
                                                December 31,
                                            ----------------------   June 30,
      Net deferred tax assets                 1997        1998         1999
      <S>                                   <C>        <C>          <C>
      Temporary differences................ $ 656,576  $   518,421  $   795,865
      Net operating losses.................   261,896    1,563,194    3,655,766
                                            ---------  -----------  -----------
      Total net deferred tax asset.........   918,472    2,081,615    4,451,631
      Valuation allowance..................  (918,472)  (2,081,615)  (4,451,631)
                                            ---------  -----------  -----------
        Net deferred taxes................. $     --   $       --   $       --
                                            =========  ===========  ===========
</TABLE>

                                      F-20
<PAGE>

                         BE FREE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 (the information presented relating to the six months ended June 30, 1998 and
                               1999 is unaudited)


   A valuation allowance is established if it is more likely than not that all
or a portion of the deferred tax asset will not be realized. Accordingly, a
valuation allowance has been established for the full amount of the deferred
tax asset due to the uncertainty of realization.

   The Company had net operating loss carryforwards of approximately $650,000,
$3,882,000 and $9,078,000 at December 31, 1997, 1998 and June 30, 1999,
respectively. These net operating loss carryforwards begin to expire in 2010.

   Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may have limited, or may limit in the
future, the amount of net operating loss carryforwards which could be utilized
annually to offset future taxable income and income tax liabilities. The amount
of any annual limitation is determined based upon the Company's value prior to
an ownership change.

K. Employee Benefit Plan:

   In January 1999, the Company established a savings plan for its employees
which it designed to be qualified under Section 401(k) of the Internal Revenue
Code. Eligible employees are permitted to contribute to the 401(k) plan through
payroll deduction within statutory and plan limits. The Company may make
contributions to the 401(k) plan in its discretion. No Company contributions
have been made to the savings plan to date.

L. Related Party Transactions:

   The Company had amounts due from related parties totaling $343, $813,139 and
$398,890 at December 31, 1997, 1998 and June 30, 1999, respectively. Amounts
due from related parties at December 31, 1997 related to employee advances.
Amounts due from related parties at December 31, 1998 was composed of $779,558
related to notes receivable from stockholders for restricted stock and $33,581
related to employee advances. The notes receivable from stockholders for
restricted stock are due in June 2003 and accrue interest monthly at 7% per
annum. The terms of the notes provide that interest accrues beginning January
1, 1999 and payments of interest commence on July 15, 1999. Amounts due from
related parties at June 30, 1999 was composed of $309,659 related to notes
receivable from stockholders executed in connection with the issuance of
restricted stock and $89,231 related to employee advances.

                                      F-21
<PAGE>

                              [Inside Back Cover]

[Be Free logo]

     This page contains the logos of several of Be Free's e-merchant and portal
customers.
<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
     , 1999

                          [Be Free logo appears here]


                               Shares of Common Stock

                            ----------------------
                            PROSPECTUS
                            ----------------------

                          Donaldson, Lufkin & Jenrette

                               Hambrecht & Quist

                             Dain Rauscher Wessels
                    a division of Dain Rauscher Incorporated

                                 DLJdirect Inc.

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

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the company
have not changed since the date hereof.

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

Until   , 1999 (25 days after the date of this prospectus), all dealers that
affect transactions in these securities may be required to deliver a prospectus
when acting as an underwriter in this offering and when selling previously
unsold allotments or subscriptions.

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

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

   The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts. All amounts
shown are estimates except for the Securities and Exchange Commission
registration fee and the NASD filing fee.

<TABLE>
      <S>                                                              <C>
      SEC registration fee............................................ $ 16,625
      NASD filing fee.................................................    6,480
      Nasdaq National Market listing fee..............................     *
      Blue Sky fees and expenses......................................     *
      Transfer Agent and Registrar fees...............................     *
      Accounting fees and expenses....................................     *
      Legal fees and expenses.........................................     *
      Printing and mailing expenses...................................     *
      Miscellaneous...................................................     *
                                                                       --------
        Total......................................................... $   *
                                                                       ========
</TABLE>
---------------------
 * to be filed by amendment

Item 14. Indemnification of Directors and Officers

   Article Seventh of the Registrant's Amended and Restated Certificate of
Incorporation provides that no director of the Registrant shall be personally
liable for any monetary damages for any breach of fiduciary duty as a director,
except to the extent that the Delaware General Corporation Law prohibits the
elimination or limitation of liability of directors for breach of fiduciary
duty.

   Article Eighth of the Registrant's Amended and Restated Certificate of
Incorporation provides that a director or officer of the Registrant (a) shall
be indemnified by the Registrant against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred in connection
with any litigation or other legal proceeding (other than an action by or in
the right of the Registrant) brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without

                                      II-1
<PAGE>

limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.

   Indemnification is required to be made unless the Registrant determines that
the applicable standard of conduct required for indemnification has not been
met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.

   Article Eighth of the Registrant's Amended and Restated Certificate of
Incorporation further provides that the indemnification provided therein is not
exclusive, and provides that in the event that the Delaware General Corporation
Law is amended to expand the indemnification permitted to directors or officers
the Registrant must indemnify those persons to the fullest extent permitted by
such law as so amended.

   Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and other persons serving at the request of the corporation
in related capacities against amounts paid and expenses incurred in connection
with an action or proceeding to which he is or is threatened to be made a party
by reason of such position, if such person shall have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the corporation unless and only
to the extent that the adjudicating court determines that such indemnification
is proper under the circumstances.

   Under Section       of the Underwriting Agreement, the underwriters are
obligated, under circumstances, to indemnify directors and officers of the
Registrant against liabilities, including liabilities under the Securities Act.
Reference is made to the form of Underwriting Agreement to be filed as Exhibit
1 hereto.

   The Registrant carries Directors and Officers liability insurance. Through
an agreement dated as of March 31, 1999 with Daniel J. Nova, and agreements
with Ted R. Dintersmith, W. Michael Humphreys and Samuel P. Gerace, Jr. dated
as of August 28, 1999 the Registrant has agreed to indemnify each director
against litigation risks and expenses arising out of his service to the
Registrant.

   Finally, Ted Dintersmith, a director of the Registrant, is indemnified by
Charles River Partnership VIII for actions he takes on its behalf.

                                      II-2
<PAGE>

Item 15. Recent Sales of Unregistered Securities

   Set forth is information regarding shares of common stock and preferred
stock issued, and warrants issued and options granted by the Company since
January 1, 1996 (without giving effect to the Company's     -for-       reverse
stock split to be effected prior to the closing of this offering). Further
included is the consideration, if any, received by the Company for such shares,
warrants and options and information relating to the section of the Securities
Act of 1933, as amended (the "Securities Act"), or rule of the Securities and
Exchange Commission under which exemption was claimed.

   On August 28, 1998, we issued 399 shares of Freedom of Information, Inc.
("FOI") (the immediate predecessor of Be Free) common stock and $6,176,881 in
promissory notes (the "Redemption Notes") of FOI in consideration for the
exchange of all of the shares of Be Free, Inc. (an unrelated corporation, "Old
Be Free") and PCX Systems, Inc. by shareholders of such entities.

   On August 28, 1998 we issued a total of 10,500,000 shares of Series A
Preferred Stock to five private investors (including three venture capitalist
firms, a bank and an individual investor) for an aggregate capital contribution
of $10,500,000 and warrants to purchase a total of      shares of common stock
at a purchase price of $   per share.

   On September 29, 1998, we issued 100,000 shares of Series A Convertible
Preferred Stock to Comdisco, Inc. for an aggregate capital contribution of
$100,000 and a warrant to purchase      shares of common stock at a purchase
price of $   per share.

   On September 29, 1998, we issued to Comdisco two warrants, one to purchase
100,000 shares of Series A Preferred Stock at a purchase price of $1.00 and the
other to purchase up to 600,000 shares of Series A Convertible Preferred Stock
at a purchase price of $1.00 per share. We issued these warrants as partial
consideration for certain financing transactions between Comdisco and the
Company.

   On March 31, 1999, we issued a total of 13,196,522 shares of Series B
Convertible Preferred Stock to sixteen private investors for an aggregate
capital contribution of $24,999,888.06.

   At various times since November 1998, we issued      shares of restricted
common stock, at a purchase price of $  , and options to purchase    shares of
common stock to employees, consultants, advisors and a director pursuant to our
1998 Stock Incentive Plan.

   No underwriters were involved in the foregoing sale of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of restricted common stock or options to purchase
common stock, Rule 701 under the Securities Act. All foregoing securities are
deemed restricted securities for the purpose of the Securities Act.

                                      II-3
<PAGE>

Item 16. Exhibits and Financial Statement Schedules

   (a) Exhibits

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
   *1    Form of Underwriting Agreement.
  **3.1  Restated Certificate of Incorporation of the Registrant, as amended
         and as currently in effect.
    3.2  Form of Amended and Restated Certificate of Incorporation of the
         Registrant to be filed on or immediately subsequent to the date of the
         closing of the Offering contemplated by this Registration Statement.
  **3.3  By-Laws of the Registrant, as amended to date
    3.4  Form of Amended and Restated By-Laws of the Registrant to be effective
         on the date of the closing of the Offering.
   *4    Specimen certificate for shares of Common Stock, $.01 par value per
         share, of the Registrant.
  **5    Form of Opinion of Hale and Dorr LLP.
 **10.1  1998 Stock Incentive Plan
 **10.2  Stock Purchase and Shareholders Agreement, as amended, dated as of
         August 28, 1998
 **10.3  Form of Warrant dated as of August 28, 1998
 **10.4  Stock Purchase Agreement, as amended, dated as of September 29, 1998
 **10.5  Warrant Certificate for the purchase of shares of common stock issued
         to Comdisco, Inc.
 **10.6  Warrant Certificate A-1 for the purchase of shares of Series A
         Preferred Stock issued to Comdisco, Inc.
 **10.7  Warrant Certificate A-2 for the purchase of shares of Series A
         Preferred Stock issued to Comdisco, Inc.
 **10.8  Subordinated Loan and Security Agreement dated as of September 29,
         1998
 **10.9  Registration Rights Agreement dated as of March 31, 1999
 **10.10 Employment Agreement with Samuel P. Gerace, Jr., dated August 28, 1998
 **10.11 Employment Agreement with Thomas A. Gerace dated August 28, 1998
 **10.12 Lease dated as of November 9, 1998 with Southwestern Pennsylvania
         Corporation
 **10.13 Lease dated October 20, 1998 with LSOF Pooled Equity L.P.
  +10.14 License and Services Agreement, effective January 13, 1999, with
         GeoCites
  +10.15 BFAST Service Order Form, as amended, with barnesandnoble.com, Inc.
         dated January 31, 1998
 **10.16 Director Indemnification Agreement dated as of March 31, 1999 with Dan
         Nova
 **10.17 Form of Indemnification Agreement dated August 28, 1998
 **21    List of Subsidiaries
   23.1  Consent of Independent Accountants.
 **23.2  Consent of Hale and Dorr LLP (included in Exhibit 5).
 **24    Power of Attorney (see page II-5)
   27    Financial Data Schedule
</TABLE>
---------------------

 *To be filed by amendment

 +Confidential Treatment Requested

**Filed with the initial filing of the Registration Statement on August 5,
 1999.

                                      II-4
<PAGE>

Item 17. Undertakings

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

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

   The undersigned Registrant hereby undertakes that:

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

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

                                      II-5
<PAGE>

                                   SIGNATURE

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to this Registration Statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in Boston, Massachusetts, on this 13th day of September, 1999.

                                          Be Free, Inc.

                                              /s/ Gordon B. Hoffstein
                                          By:__________________________________
                                             Gordon B. Hoffstein
                                             President and Chief Executive
                                              Officer


   Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<S>  <C> <C>
              Signature                      Title                   Date

      /s/ Gordon B. Hoffstein
                                     President and Chief       September 13,
                                      Executive Officer             1999
-----------------------------------   (Principal Executive
        Gordon B. Hoffstein           Officer) and Director

                 *
                                     Executive Vice            September 13,
                                      President, Research &         1999
-----------------------------------   Technology and
       Samuel P. Gerace, Jr.          Director

                 *
                                     Chief Financial           September 13,
                                      Officer, Secretary and        1999
-----------------------------------   Treasurer (Principal
         Stephen M. Joseph            Financial and
                                      Accounting Officer)

                 *
                                     Director                  September 13,
                                                                    1999
-----------------------------------
        Ted R. Dintersmith

                 *
                                     Director                  September 13,
                                                                    1999
-----------------------------------
       W. Michael Humphreys

                 *
                                     Director                  September 13,
                                                                    1999
-----------------------------------
          Jeffrey Rayport

                                     Director
-----------------------------------
            Daniel Nova

*By: /s/ Gordon B. Hoffstein
  --------------------------------
       Gordon B. Hoffstein
         Attorney-in-Fact
</TABLE>

                                      II-6
<PAGE>

                                 Exhibit Index

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
   *1    Form of Underwriting Agreement.
  **3.1  Restated Certificate of Incorporation of the Registrant, as amended
         and as currently in effect.
    3.2  Form of Amended and Restated Certificate of Incorporation of the
         Registrant to be filed on or immediately subsequent to the date of the
         closing of the Offering contemplated by this Registration Statement.
  **3.3  By-Laws of the Registrant, as amended to date
    3.4  Form of Amended and Restated By-Laws of the Registrant to be effective
         on the date of the closing of the Offering.
   *4    Specimen certificate for shares of Common Stock, $.01 par value per
         share, of the Registrant.
  **5    Form of Opinion of Hale and Dorr LLP.
 **10.1  1998 Stock Incentive Plan
 **10.2  Stock Purchase and Shareholders Agreement, as amended, dated as of
         August 28, 1998
 **10.3  Form of Warrant dated as of August 28, 1998
 **10.4  Stock Purchase Agreement, as amended, dated as of September 29, 1998
 **10.5  Warrant Certificate for the purchase of shares of common stock issued
         to Comdisco, Inc.
 **10.6  Warrant Certificate A-1 for the purchase of shares of Series A
         Preferred Stock issued to Comdisco, Inc.
 **10.7  Warrant Certificate A-2 for the purchase of shares of Series A
         Preferred Stock issued to Comdisco, Inc.
 **10.8  Subordinated Loan and Security Agreement dated as of September 29,
         1998
 **10.9  Registration Rights Agreement dated as of March 31, 1999
 **10.10 Employment Agreement with Samuel P. Gerace, Jr., dated August 28, 1998
 **10.11 Employment Agreement with Thomas A. Gerace dated August 28, 1998
 **10.12 Lease dated as of November 9, 1998 with Southwestern Pennsylvania
         Corporation
 **10.13 Lease dated October 20, 1998 with LSOF Pooled Equity L.P.
  +10.14 License and Services Agreement, effective January 13, 1999, with
         GeoCites
  +10.15 BFAST Service Order Form, as amended, with barnesandnoble.com, Inc.
         dated January 31, 1998
 **10.16 Director Indemnification Agreement dated as of March 31, 1999 with Dan
         Nova
 **10.17 Form of Indemnification Agreement dated August 28, 1998
 **21    List of Subsidiaries
   23.1  Consent of Independent Accountants.
 **23.2  Consent of Hale and Dorr LLP (included in Exhibit 5).
 **24    Power of Attorney (see page II-5)
   27    Financial Data Schedule
</TABLE>
---------------------

 *To be filed by amendment

 +Confidential Treatment Requested

**Filed with the initial filing of the Registration Statement on August 5,
 1999.