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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 2001

REGISTRATION NO. 333-55104

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------

AMENDMENT NO. 1
TO
FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

USINTERNETWORKING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 52-2078325
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)

ONE USI PLAZA
ANNAPOLIS, MARYLAND 21401-7478
(410) 897-4400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

WILLIAM T. PRICE, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ONE USI PLAZA
ANNAPOLIS, MARYLAND 21401-7478
(410) 897-4400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,OF
AGENT FOR SERVICE)

WITH A COPY TO:
JOHN D. WATSON, JR., ESQ.
LATHAM & WATKINS

555 ELEVENTH STREET, N.W., SUITE 1000

WASHINGTON, D.C. 20004
(202) 637-2200
------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement as determined by
market conditions.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, please check the following
box. [X]

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE

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- - ----------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED OFFERING PRICE PER SHARE
- - ----------------------------------------------------------------------------------------------------------

Common Stock ($0.001 par value)....................... 36,029,352 $3.65625(1)
Common Stock issuable upon exercise of warrants....... 12,610,295 $4.08(2)
Common Stock issuable upon exercise of warrants....... 18,394 $3.00(2)
Warrants to purchase Common Stock..................... 36(3) (3)
Total.........................................
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- - ------------------------------------------------------ -------------------------------------------------
- - ------------------------------------------------------ -------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF REGISTRATION
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE FEE
- - ------------------------------------------------------ -------------------------------------------------

Common Stock ($0.001 par value)....................... $131,732,318.30 $32,933.08
Common Stock issuable upon exercise of warrants....... $ 51,450,003.60 $12,862.50
Common Stock issuable upon exercise of warrants....... $55,182.00 $11.04
Warrants to purchase Common Stock..................... (3) (3)
Total......................................... $45,806.62(4)
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(1) Estimated solely for the purpose of computing the amount of registration
fee, based on the average of the high and low prices for the common stock
for the registrant's common stock as reported on Nasdaq National Market on
February 2, 2001, in accordance with Rule 457(c) promulgated under the
Securities Act of 1933.

(2) The exercise price of the warrants, used for the purpose of calculating the
amount of the registration fee in accordance with Rule 457(g) promulgated
under the Securities Act of 1933.

(3) The warrants registered hereby are exercisable for an aggregate of
12,610,295 shares of common stock. Pursuant to the terms of the warrants,
the selling securityholders may subdivide the warrants in a greater number
of warrants but in no event shall the cumulative number of warrants be
exercisable for more than the aggregate amount of 12,610,295 shares of
common stock. Pursuant to Rule 457(g) promulgated under the Securities Act,
no registration fee is required for the registration of the warrants.

(4)$45,795.63 of the Registration Fee was paid on February 5, 2001.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.

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2

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
AMENDED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE RELATED REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY
APPLICABLE STATE SECURITIES COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED APRIL , 2001

PROSPECTUS

[USI LOGO]

USINTERNETWORKING, INC.

COMMON STOCK
WARRANTS TO PURCHASE COMMON STOCK
------------------------------
The selling securityholders listed in this prospectus are offering from
time to time:

- 36,029,352 shares of our common stock;

- warrants to purchase 12,610,295 shares of our common stock at an exercise
price of $4.08 per share; and

- 12,628,689 shares of our common stock that are issuable upon exercise of
the warrants, 18,394 shares of which are issuable upon exercise of
warrants held by consultants to the Company.

The securities being offered by the selling securityholders and their
pledgees, donees, transferees, or other successors-in-interest may be sold from
time to time in transactions on the Nasdaq National Market, in the
over-the-counter market or in negotiated transactions. The selling
securityholders directly, or through agents or dealers designated from time to
time, may sell the offered securities at fixed prices, which may change, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices.

This prospectus is part of a registration statement that we are filing at
this time to fulfill our contractual obligations with the selling
securityholders. We will not receive any of the proceeds from the sale of the
common stock by the selling securityholders. We may receive proceeds from the
exercise of the warrants. We will bear the expenses of the offering of the
common stock, except that the selling securityholders will pay any applicable
underwriting discounts, brokerage fees or commissions and transfer taxes.

Our common stock is quoted on The Nasdaq National Market under the symbol
"USIX." On April , 2001, the last reported sale price of the common stock
was $ per share.

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

INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.

------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------

The date of this prospectus is April , 2001.

TABLE OF CONTENTS

PAGE
----

Summary............................... 3
Risk Factors.......................... 4
Special Note Regarding Forward-Looking
Statements Contained in this
Prospectus.......................... 13
Use of Proceeds....................... 13
Selling Securityholders............... 14

PAGE
----

Description of Securities............. 15
Plan of Distribution.................. 15
Legal Matters......................... 16
Experts............................... 17
Where You Can Find More Information... 17
Incorporation of Documents by
Reference........................... 18

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

This prospectus references and depicts certain trademarks, service marks and
trade names of other companies. "USinternetworking" and "USi" are our registered
trademarks. We have applied for federal registration of the marks "Internet
Managed Application Provider," "iMAP," "Making Software Simple,"
"PriorityPeering," "USiView," "AppHost," "Global Enterprise Management Center,"
"USiLink," "USiConnects," "USiMirror," "USiAccelerate," "USi Global Services
Platform," "USiGSP" and "GEMC."
4

SUMMARY

USINTERNETWORKING

USi's service offerings combine leading packaged software applications with
computing hardware, network connectivity, security, integration into other
applications, and the ongoing operational support to meet the needs of Global
1000 and middle market companies for business functions such as e-commerce,
human resource and financial management, customer relationship management,
procurement, and messaging and collaboration. We deploy these applications in
our data centers and enable our clients to access and utilize the applications
over the Internet or a private network connection. We take full responsibility
for providing these services to our clients, freeing them from the need to own
and manage the related computer systems, networks and software. In addition to
the iMAP solution, we also provide applications management and technical support
services in our data centers for those clients who have already developed a
solution. Our clients benefit from an accelerated time to market for the use of
these applications, predictable monthly costs, a scalable infrastructure and a
lower total cost of ownership.

We are able to deliver these benefits to our clients in part because we
have designed and implemented Enterprise Data Centers located in Annapolis, and
Silicon Valley, with redundant data center capabilities in Amsterdam and Tokyo.
The data centers are linked by a dedicated network and by robust transit
connections to twelve major Internet backbones -- eight in North America, two in
Europe and two in Asia. Our data centers comprise standardized hardware
environments to support our applications, embedded security, EMC disk arrays for
storage and real-time back-up and significant levels of infrastructure
redundancy. Our network is monitored and managed through USiView, which enables
a client engineer to see all hardware, software and network elements of a client
application in a single view. Cisco assisted in the design of our network and
has designated it as a Cisco Powered Network.

We believe that controlling all elements of the network from the client's
Internet backbone provider or LAN enables us to deliver superior response time,
reliability and security for our clients. We can substantially reduce
implementation time because we implement our applications in a consistent and
pre-configured environment. Moreover, our clients do not need to mediate among
disparate vendors, because we take total responsibility for application support
and system performance and availability.

We implement and manage applications that are developed by others. To
execute this strategy, we have established agreements with leading software
vendors in key application areas, including:

- BroadVision and Microsoft in e-commerce;

- Ariba in business-to-business e-commerce;

- Siebel in customer relationship management;

- Lawson and PeopleSoft in human resources and financial management; and

- Microsoft in enterprise messaging and collaboration.

Our iMAP clients sign contracts that provide for fixed monthly service
fees, typically for a three- to five-year term, in exchange for the service we
provide. Once a client signs an iMAP contract, we invest in the additional
hardware, software and implementation needed to deliver that client's service.
This requires a substantial investment in the early years to build our client
base. Since we own or provide most of the elements and operational support for a
client's implementation, we anticipate that we will experience a high level of
client retention, even at the end of the contract's term. We also benefit from
our ability to cross-sell clients on additional applications and our clients'
desire to add additional functionality and users to existing solutions we have
implemented for them. We believe that our demonstrated ability to cross-sell and
upsell our clients will generate substantial growth and future positive cash
flow.

USinternetworking was incorporated in Delaware in January 1998. Our
executive offices are located at One USi Plaza, Annapolis, Maryland 21401-7478;
and our telephone number is (410) 897-4400.

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5

RISK FACTORS

Investing in our common stock involves risk. You should carefully consider
the risks and uncertainties described below before making an investment
decision. These risks and uncertainties are not the only ones that we face or
that may adversely affect our business. If any of the following risks or
uncertainties actually occur, our business, financial condition or results of
operations could be materially adversely affected. This prospectus also contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ from those described in the forward-looking statements. This
could occur because of the risks described below and elsewhere in this
prospectus. Dollar amounts herein are in thousands.

WE EXPECT TO CONTINUE TO INCUR LOSSES AND EXPERIENCE NEGATIVE CASH FLOW.

We expect to have significant operating losses and to record significant
net cash outflow before financing in the near term. Our business has not
generated sufficient cash flow to fund our operations without resorting to
external sources of capital. Starting up our company and building our network as
well as expanding our infrastructure and work force to service our growing
customer base required substantial capital and other expenditures. As a result,
we reported a net loss of $174,960 for the year ended December 31, 2000 and
EBITDA of negative $71,179 for the same period. For the year ended December 31,
1999, we reported a net loss of $103,318 and EBITDA of negative $65,533 for the
same period. Further developing our business and expanding our network will
require significant additional capital and other expenditures.

WE MAY NEED ADDITIONAL CAPITAL TO FUND OUR OPERATIONS AND FINANCE OUR GROWTH,
AND WE MAY NOT BE ABLE TO OBTAIN IT ON TERMS ACCEPTABLE TO US OR AT ALL.

We may need additional capital to fund our operations and finance our
growth. While we have recently raised a significant amount of additional
capital, there can be, however, no assurance that we will not need to raise
additional capital or that such efforts will be successful. If we raise
additional funds by selling our common stock or securities convertible into
common stock, the relative ownership of our existing investors could be diluted
or the new investors could obtain terms more favorable than those of our
existing investors. If we cannot obtain financing on terms acceptable to us or
at all, we may be forced to curtail our planned business expansion.

OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY IN A RELATIVELY NEW MARKET.

We began operating in January 1998. Our limited operating history makes
predicting future results difficult. Since our inception, we have focused on
developing our business and only since September 1998 have we begun to contract
with customers for our iMAP offerings. Because of our limited operating history
and the emerging nature of our markets, our historical financial information is
of limited value in projecting our future results. Additionally, our market, the
Application Service Provider (or "ASP") market is relatively new and has not yet
received universal acceptance by the enterprises we target. Therefore, it is
difficult to evaluate our business and prospects.

OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.

Our debt leverage is indicated in the chart below.

DECEMBER 31, 2000
-------------------------
ACTUAL PRO FORMA

Total long term liabilities................... $193,425 $186,720
Stockholders' equity.......................... $116,983 $201,495
Debt to equity ratio.......................... 1.65:1 0.93:1

Our leverage could have important consequences to you. For example, it
could:

- limit our ability to fund future working capital, capital expenditures,
acquisitions and other general corporate requirements;

4
6

- limit our ability to borrow additional funds;

- require us to dedicate a substantial portion of our cash flow from
operations to repaying indebtedness, thereby reducing the availability of
our cash flow to fund working capital, capital expenditures, acquisitions
and other general corporate purposes;

- make it more difficult for us to satisfy our obligations with respect to
our indebtedness;

- increase our vulnerability to general adverse economic and industry
conditions; and

- limit our flexibility in planning for, or reacting to, changes in our
business and industry.

Any additional borrowings would further increase the amount of our leverage
and the associated risks.

WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS.

Our ability to make payments on our indebtedness, and to fund planned
capital expenditures, development and operating costs will depend on our ability
to generate cash in the future through sales of our services. We cannot assure
you that our available liquidity will be sufficient to service our indebtedness,
or to fund our other cash needs. We may need to refinance all or a portion of
our indebtedness, on or before maturity, but we may not be able to do so on
commercially reasonable terms, or at all. Without sufficient funds to service
our indebtedness, we would have serious liquidity constraints and would need to
seek additional financing from other sources, but we may not be able to do so on
commercially reasonable terms, or at all.

IF WE FAIL TO MEET COVENANTS OR DEFAULT UNDER OUR EQUIPMENT LEASES OR REVOLVING
LINE OF CREDIT, OUR ABILITY TO SERVICE OUR CLIENTS COULD BE HARMED.

We have financed a large percentage of our hardware purchases under various
lease and sale-leaseback agreements. We have also entered into a revolving line
of credit with General Electric Credit Corp. which is secured by the majority of
our unencumbered assets. Some of these agreements and the credit line contain
financial covenants and cross-default provisions which, if triggered, could have
a material adverse effect on our business and our ability to service our
clients.

OUR SUCCESS DEPENDS ON THE ACCEPTANCE AND INCREASED USE OF INTERNET-BASED
BUSINESS SOFTWARE SOLUTIONS, AND WE CANNOT BE SURE THAT THIS WILL HAPPEN.

Our business model depends on the adoption of Internet-based business
software solutions by commercial users. Our business could suffer dramatically
if Internet-based solutions are not accepted or not perceived to be effective.
The market for Internet services, private network management solutions and
widely distributed Internet-enabled packaged application software has only
recently begun to develop and is now evolving rapidly.

The growth of Internet-based business software solutions could also be
limited by:

- concerns over transaction security and user privacy;

- inadequate network infrastructure for the entire Internet; and

- inconsistent performance of the Internet.

We cannot be certain that this market will continue to grow or to grow at
the rate we anticipate.

THE GROWTH IN DEMAND FOR OUTSOURCED BUSINESS SOFTWARE APPLICATIONS IS NOW
BEGINNING, BUT THE FUTURE IS STILL UNCERTAIN.

Future demand for and acceptance of outsourced business software
applications, including our iMAP offerings is uncertain. While there has been a
significant level of initial adoption of the ASP model, we believe that many of
our potential customers are still not fully aware of the benefits of outsourced
solutions. In addition, the rate of initial adoption may be slowed by
performance or financial problems among Application

5
7

Service Providers. It is possible that our iMAP offerings may never achieve
broad market acceptance. If the market for our offerings does not grow or grows
more slowly than we currently anticipate, our business, financial condition and
operating results would be materially adversely affected.

OUR BUSINESS STRATEGY MAY NOT EFFECTIVELY ADDRESS OUR MARKET AND WE MAY NEVER
REALIZE A RETURN ON THE RESOURCES WE HAVE INVESTED TO EXECUTE OUR STRATEGY.

We have made substantial investments to pursue our strategy. These
investments include:

- building a global network of data centers;

- allying with particular software providers;

- expanding our work force;

- investing to develop unique service offerings; and

- developing and acquiring implementation resources around specific
applications.

These investments may not be successful. More cost-effective strategies may
be available to compete in this market. We may have chosen to focus on the wrong
application areas or to work with the wrong partners. Potential customers may
not value the specific product features in which we have invested. There is no
assurance that our strategy will prove successful.

THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE
MUCH GREATER RESOURCES.

Our competitors may include such companies as Accenture, AT&T, Corio,
Digex, EDS, IBM, Oracle, Qwest Communications, SAP and Sprint. While we believe
that our GSP environment, together with our level of service, support and
targeted business focus distinguish us from these competitors, some of these
competitors have significantly greater market presence, brand recognition, and
financial, technical and personnel resources than we do, and have extensive
coast-to-coast Internet networks.

Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
We cannot be sure that we will have the resources or expertise to compete
successfully in the future. Our competitors may be able to:

- more quickly develop and expand their network infrastructures and service
offerings;

- better adapt to new or emerging technologies and changing customer needs;

- take advantage of acquisitions and other opportunities more readily;

- negotiate more favorable licensing agreements with software application
vendors;

- devote greater resources to the marketing and sale of their products; and

- adopt more aggressive pricing policies.

- hire our employees

Some of our competitors may also be able to provide customers with
additional benefits at lower overall costs. We cannot be sure that we will be
able to match cost reductions by our competitors. In addition, we believe that
there is likely to be consolidation in our markets. Consolidation could increase
price competition and other competitive forces in ways that materially adversely
affect our business, results of operations and financial condition. Finally,
there are few substantial barriers to entry, and we have no patented technology
that would bar competitors from our market.

6
8

OTHERS MAY SEIZE THE MARKET OPPORTUNITY WE HAVE IDENTIFIED BECAUSE WE MAY NOT
EFFECTIVELY EXECUTE OUR STRATEGY.

If we fail to execute our strategy in a timely or effective manner, our
competitors may be able to seize the marketing opportunities we have identified.
Our business strategy is complex and requires that we successfully and
simultaneously complete many tasks. In order to be successful, we will need to:

- build and operate a highly reliable, complex global network;

- negotiate effective partnerships and develop economically attractive
service offerings;

- attract and retain iMAP clients;

- attract and retain highly skilled employees;

- integrate acquired companies into our operations;

- evolve our business to gain advantages in an increasingly competitive
environment; and

- expand our international operations.

In addition, although most of our management team has worked together for
approximately two years, there can be no assurance that we will be able to
successfully execute all elements of our strategy.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE DUE TO THE NATURE OF OUR ASP
BUSINESS AND OTHER FACTORS AFFECTING OUR REVENUES AND COSTS, WHICH COULD CAUSE
OUR STOCK PRICE TO FALL.

Our financial results will also vary over time as our ASP business matures.
For our iMAP clients, we recognize all fees, including upfront and monthly fees,
over the balance of the contractual relationship. Important factors that could
cause our quarterly results and stock price to fluctuate materially include:

- the number of clients we obtain in order to scale our business;

- the level of service we provide to our clients;

- cost of capital associated with the services we provide to our clients;

- the loss of or change in our relationship with important clients;

- the timing and magnitude of expanding our operations and of other capital
expenditures;

- changes in our pricing policies or those of our competitors;

- potential changes in the accounting standards associated with accounting
or stock or warrant issuances and for revenue recognition; and

- the loss of key members of, or other changes in, our management.

WE PLAN TO EXPAND VERY RAPIDLY, AND MANAGING OUR GROWTH MAY BE DIFFICULT.

We have rapidly expanded our operations since USi was founded in January
1998. In addition, we expect our business to continue to grow in geographic
scope, number of customers and in terms of the number of products and services
we offer. We cannot be sure that we will successfully manage our growth. In
order to successfully manage our growth we must:

- enlarge our network and infrastructure;

- maintain a high level of client service and support;

- improve our management, financial and information systems and controls;
and

- train, manage and integrate our employee base effectively.

There will be additional demands on our customer service support and sales,
marketing and administrative resources as we increase our service offerings and
expand our target markets. The strains
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9

imposed by these demands are magnified by our limited operating history. Any
inability to expand our network or services or to effectively manage our
employee base commensurate with the demand for our services could adversely
affect our revenues.

NETWORK OUTAGES COULD NEGATIVELY AFFECT OUR REVENUES.

We have built and currently maintain a very sophisticated data center
network to provide availability to our clients' applications over the Internet
and private connections. Complex networks are subject to the risk of outages.
Over the course of our operating history, portions of our network have
experienced network outages lasting from minutes to hours. Each of our clients'
contracts contain service level guarantees which initially provide for revenue
credits, and eventually termination of the contract, if access to the client's
application is compromised. The total amount of service fee credits provided to
our clients during our operating history due to network outages has not been
material.

Factors both in and outside of our control could cause additional outages
to our network which could cause a loss in revenue.

OUR GROWTH COULD BE LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL.

We believe that our short- and long-term success depends largely on our
ability to attract and retain highly skilled technical, managerial and marketing
personnel. Depending upon our growth, we may require additional management
personnel in the areas of application integration and technical support.
Individuals with information technology skills are in short supply and
competition for application integration personnel is particularly intense. We
may not be able to hire the necessary personnel to implement our business
strategy, or we may need to pay higher compensation for employees than we
currently expect. We cannot be sure that we will succeed in attracting and
retaining the personnel we need to continue to grow, especially if our stock
price declines or remains low.

WE DEPEND ON A LIMITED NUMBER OF KEY PERSONNEL WHO WOULD BE DIFFICULT TO
REPLACE.

Our success also depends in significant part on the continued services of
our key technical, sales and senior management personnel. Losing one or more of
our key employees could have a material adverse effect on our business, results
of operations and financial condition. We have employment agreements with most
of our vice presidents and other key employees, including our Chief Executive
Officer, Andrew A. Stern.

WE MAY NOT BE ABLE TO DELIVER OUR IMAP OFFERINGS IF THIRD-PARTIES DO NOT PROVIDE
US WITH KEY COMPONENTS OF OUR INFRASTRUCTURE.

We depend on other companies to supply key components of our
telecommunications infrastructure and systems and network management solutions.
Any failure to obtain needed products or services in a timely fashion and at an
acceptable cost could have a material adverse effect on our business, results of
operations and financial condition. Although we lease redundant capacity from
multiple suppliers, a disruption in telecommunications capacity could prevent us
from maintaining our standard of service. Some of the key components of our
system and network are available only from sole or limited sources in the
quantities and quality we demand. We buy these components from time to time, do
not carry significant inventories of them and have no guaranteed supply
arrangements with our vendors.

OUR ABILITY TO PROVIDE OUR IMAP OFFERINGS DEPENDS ON STRATEGIC RELATIONSHIPS
WITH SOFTWARE VENDORS THAT WE MAY NOT BE ABLE TO MAINTAIN.

Our iMAP offerings are central to our business strategy. We obtain software
licenses, marketing and maintenance under agreements with Ariba, BroadVision,
Lawson, Microsoft, Oracle, PeopleSoft, Plumtree, and Siebel and package them as
part of our iMAP offerings. The license agreements are for terms ranging from
one to four years. All the agreements may be terminated upon a breach of the
agreement, subject to cure periods. We cannot be sure that one or more of our
agreements with software vendors will not be terminated in the future. If these
agreements were to be terminated or not renewed or we otherwise could not
continue
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to use this software, we might have to discontinue products or services, delay
or reduce their introduction unless we could find, license and package
equivalent technology or require our clients to purchase software licenses
directly from vendors.

All but one of our agreements with software vendors are non-exclusive. Our
agreement with SiebelNet, Inc., a wholly-owned subsidiary of Siebel Systems,
Inc., gives us exclusivity as the Application Service Provider of Siebel
enterprise relationship management applications for direct customers of
SiebelNet headquartered in North America. This exclusivity could be terminated
or altered in the future. Our vendors may choose to compete with us directly or
to enter into strategic relationships with our competitors. These relationships
may take the form of strategic investments or marketing or other contractual
arrangements. Our competitors may also license and utilize the same technology
in competition with us. We cannot be sure that the vendors of technology used in
our products will continue to support this technology in its current form. Nor
can we be sure that we will be able to adapt our own products to changes in this
technology. In addition, we cannot be sure that the financial or other
difficulties of our vendors will not have a material adverse effect upon the
technologies incorporated in our products, or that, if these technologies become
unavailable, we will be able to find suitable alternatives.

WE WILL NEED TO PERFORM SOFTWARE UPGRADES FOR OUR CUSTOMERS, AND ANY INABILITY
TO SUCCESSFULLY PERFORM THESE UPGRADES COULD CAUSE INTERRUPTIONS OR ERRORS IN
OUR CUSTOMERS' SOFTWARE APPLICATIONS, WHICH COULD INCREASE OUR COSTS AND DELAY
MARKET ACCEPTANCE OF OUR SERVICES.

Our software vendors from time to time will upgrade their software
applications, and at such time we will be required to implement these software
upgrades for our customers. Implementing software upgrades can be a complicated
and costly process, particularly implementation of an upgrade simultaneously
across multiple customers. Accordingly, we cannot assure you that we will be
able to perform these upgrades successfully or at a reasonable cost. We may also
experience difficulty implementing software upgrades to a large number of
customers, particularly if different software vendors release upgrades
simultaneously. If we are unable to perform software upgrades successfully and
to a large customer base, our customers could be subject to increased risk of
interruptions or errors in their business-critical software, our reputation and
business would likely suffer and the market would likely delay the acceptance of
our services. It will also be difficult for us to predict the timing of these
upgrades, the cost to us of these upgrades and the additional resources that we
may need to implement these upgrades. Additionally, if we evolve our business
model to charge customers for the cost of software upgrades, we may lose
prospective customers who choose not to pay for these upgrades. Therefore, any
such upgrades could strain our development and engineering resources, require
significant unexpected expenses and cause us to miss our financial forecasts or
those of securities analysts. Any of these problems could impair our customer
relations and our reputation and subject us to litigation.

TECHNOLOGY MAY CHANGE FASTER THAN WE CAN UPDATE OUR NETWORK AND TECHNOLOGY.

The markets we serve are characterized by rapidly changing technology,
evolving industry standards, emerging competition and the frequent introduction
of new services, software and other products. Our success depends partly on our
ability to enhance existing or develop new products, software and services that
meet changing customer needs in a timely and cost-effective way. We cannot be
sure, however, that we will do some or all of these things. For example, if
software application architecture changes in significant ways, the software for
which we have licenses could become obsolete, we may be forced to update our
hardware and network configurations or we may be forced to replace our mirroring
technology. This may require substantial time and expense, and even then we
cannot be sure that we will succeed in adapting our businesses to these and
other technological developments.

WE COULD BE HARMED IF OUR SYSTEMS ARE NOT COMPATIBLE WITH OTHER PRODUCTS AND
SERVICES.

We believe that our ability to compete successfully also depends on the
continued compatibility of our services with products, services and
architectures offered by various vendors. Our failure to conform to a prevailing
standard, or the failure of a common standard to emerge, could have a material
adverse effect on our business, results of operations and financial condition.
Although we will work with vendors to test new

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products, we cannot be sure that their products will be compatible with ours or
that they will adequately address changing customer needs. Although we currently
plan to support emerging standards, we cannot be sure what new industry
standards will develop. We also cannot be sure that we will be able to conform
to these new standards quickly enough to stay competitive. In addition, we
cannot be sure that products, services or technologies developed by others will
not make ours noncompetitive or obsolete.

THE LOSS OF A KEY CUSTOMER COULD DECREASE OUR REVENUES.

For the year ended December 31, 2000, sales to SiebelNet accounted for
approximately 10.2% of our revenues. We expect sales to SiebelNet to continue to
constitute a significant portion of our revenues in the near term. During that
period, if our sales to SiebelNet decrease, our business may suffer.

IF WE CANNOT OBTAIN ADDITIONAL APPLICATION SOFTWARE, WE WILL BE UNABLE TO EXPAND
OR ENHANCE OUR IMAP OFFERINGS.

Our business strategy also depends on obtaining additional application
software. We cannot be sure, however, that we will be able to obtain the new or
enhanced applications we may need to keep our iMAP offerings competitive. If we
cannot obtain these applications and as a result must discontinue, delay or
reduce the availability of our iMAP offerings or other products or services, our
business, results of operations and financial condition may be materially
adversely affected.

DEVELOPING AND EXPANDING OUR OPERATIONS WILL DEPEND, AMONG OTHER THINGS, ON OUR
MANAGEMENT'S ABILITY TO SUCCESSFULLY INTEGRATE NEWLY ACQUIRED OPERATIONS.

In August 2000, we acquired the assets of EnableVision, LLC. We cannot be
sure that our integration of EnableVision will result in the EnableVision
business performing as we expect. In addition, we cannot be sure that we will be
able to successfully integrate any business acquired in the future into our own.
Our failure to successfully integrate an acquired company or its subsequent
under performance could have a material adverse effect on our business, results
of operations and financial condition.

WE MAY UNDERTAKE ADDITIONAL ACQUISITIONS WHICH POSE RISKS TO OUR BUSINESS.

From time to time, we may undertake additional acquisitions. If we do, our
risks may increase because:

- we may pay more for the acquired company than the value we realize from
the acquisition;

- we may not fully understand the business we acquire;

- we may be entering markets in which we have little or no direct prior
experience;

- our ongoing business may be disrupted and resources and management time
diverted; and

- our accounting for acquisitions could require us to amortize substantial
goodwill, adversely affecting our reported results of operations.

In addition, once we have made an acquisition we will face additional
risks:

- it may be difficult to assimilate acquired operations and personnel;

- we may not be able to retain the management and other key personnel of
the acquired business;

- we may not be able to maintain uniform standards, controls, procedures
and policies; and

- changing management may impair relationships with an acquired business's
employees or customers.

WE MAY MAKE INVESTMENTS IN ENTITIES THAT WE DO NOT CONTROL.

In August 2000, we invested $5 million in C3i, Inc., a customer
relationship management service company in New York City. In the future, we may
make additional investments in joint ventures or other entities over which we do
not exercise control. We may make these investments in connection with entering
into strategic partnerships with software vendors, systems integrators or
Internet Service Providers or as strategic investments. Our inability to control
the entity in which we may invest may have consequences on our ability to
receive distributions from such entity or to implement our business plan. Debt
agreements, if entered into by a non-controlled entity, may restrict or prohibit
such entity from paying distributions to us. Applicable state or local law may
also limit the amount that a non-controlled entity is permitted to pay a

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distribution on its equity interest, and we may not be able to influence the
payment of dividends. If any of the other investors in a non-control entity fail
to observe their commitments, that entity may not be able to operate according
to its business plans or we may be required to increase our level of commitment
to give effect to the plan. In addition, our ability to implement a business
plan for a non-controlled entity may be limited or non-existent.

BECAUSE WE HAVE INTERNATIONAL OPERATIONS, WE FACE ADDITIONAL RISKS RELATED TO
FOREIGN POLITICAL AND ECONOMIC CONDITIONS.

We have established redundant EDC capabilities in Europe and Asia. We
intend to expand further into international markets. We cannot be sure that we
will be able to obtain the necessary telecommunications infrastructure in a
cost-effective manner or compete effectively in international markets. In
addition, there are risks inherent in conducting business internationally. These
include:

- unexpected changes in regulatory requirements;

- export restrictions;

- tariffs and other trade barriers;

- challenges in staffing and managing foreign operations;

- differing technology standards;

- employment laws and practices in foreign countries;

- political instability;

- fluctuations in currency exchange rates;

- imposition of currency exchange controls; and

- potentially adverse tax consequences.

Any of these could adversely affect our international operations. We cannot
be sure that one or more of these factors will not have a material adverse
effect on our current or future international operations and, consequently, on
our business, results of operations and financial condition.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET AND COULD LIMIT OUR CLIENTS' USE OF THE
INTERNET.

Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. The adoption or modification of laws
or regulations relating to the Internet could adversely affect our business. In
recent sessions, the United States Congress has enacted Internet laws regarding
children's privacy, copyrights, taxation and the transmission of sexually
explicit material and other similar proposals are continuously being considered.
The European Union recently enacted its own privacy regulations. The law of the
Internet, however, remains largely unsettled, even in areas where there has been
some legislative action. 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. In addition, the growth and development of the market for
online 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 online. For example, Germany and the European
Union have enforced laws and regulations on content distributed over the
Internet that are more strict than those currently in place in the United
States.

THE OUTCOME OF PROPOSALS PUT TO A VOTE OF STOCKHOLDERS WILL BE DETERMINED BY OUR
EXISTING PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS.

As of March 23, 2001, our executive officers, directors, existing 5% or
greater stockholders and their affiliates, in the aggregate, own shares
representing approximately 52% of our outstanding voting capital stock. As a
result, these persons, acting together, are able to control all matters
submitted to our stockholders for approval and to control our management and
affairs. For example, these people, acting together, control the election and
removal of directors and any merger, consolidation or sale of all or
substantially all of our assets.

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THE TRADING PRICE OF OUR COMMON STOCK COULD BE SUBJECT TO SIGNIFICANT
FLUCTUATIONS.

The trading price of our common stock has been volatile. Factors such as
announcements of fluctuations in our or our competitors' operating results and
market conditions for Internet related and other technology stocks in general
have had and could continue to have a significant impact on the trading price of
our common stock. In particular, the trading price of the common stock of many
Internet related and other technology companies has experienced extreme price
and volume fluctuations, which have at times been unrelated to the operating
performance of such companies whose stocks were affected. In addition, the
trading prices of our common stock could be subject to significant fluctuations
in response to variations in our prospects and operating results, which may in
turn be affected by changes in interest rates and other factors. There can be no
assurance that these factors will not have an adverse effect on the trading
prices of our common stock.

THE MARKET PRICE OF OUR COMMON STOCK COULD BE AFFECTED BY THE SUBSTANTIAL NUMBER
OF SHARES THAT ARE ELIGIBLE FOR FUTURE SALE.

As of March 23, 2001, we had 143,958,315 shares of common stock issued and
outstanding, excluding 13,882,691 shares issuable upon the exercise of warrants
and 20,459,553 shares issuable upon the exercise of options granted under our
Stock Option Plans and 7,545,272 shares issuable upon conversion of 7%
Convertible Subordinated Promissory Notes. We cannot predict the effect, if any,
that future sales of the notes or shares of common stock, including common stock
issuable upon conversion of the notes, or the availability of the notes or
shares of common stock for future sale, will have on the market price of common
stock prevailing from time to time.

INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US, EVEN WITHOUT MERIT, COULD
COST A SIGNIFICANT AMOUNT OF MONEY TO DEFEND AND DIVERT MANAGEMENT'S ATTENTION
AWAY FROM OUR BUSINESS.

As the number of software and hardware products in our target markets
increases and the functionality of these products further overlap, software and
hardware industry participants may become increasingly subject to infringement
claims. Someone may even claim that our technology infringes their proprietary
rights. Any infringement claims, even if without merit, can be time consuming
and expensive to defend. They may divert management's attention and resources
and could cause service implementation delays. They also could require us to
enter into costly royalty or licensing agreements. If successful, a claim of
product infringement against us and our inability to license the infringed or
similar technology could adversely affect our business.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS PROSPECTUS

This prospectus includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements relate
to, among other things, analyses and other information that are based on
forecasts of future results and estimates of amounts not yet determinable. These
statements also relate to our future prospects, developments and business
strategies.

These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" or the negative of those
or other variations, or comparable expressions, including references to
assumptions. These statements are contained in sections entitled "Prospectus
Summary," "Risk Factors," "Business" and other sections of this prospectus and
the documents incorporated by reference into this prospectus.

The forward-looking statements in this prospectus, including statements
concerning projections of our future results, operating profits and earnings,
are based on current expectations and are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed or
implied by those statements.

Our risks are more specifically described in "Risk Factors." If one or more
of these risks or uncertainties materializes, or if underlying assumptions prove
incorrect, our actual results may vary materially from those expected, estimated
or projected. Given these uncertainties, you should not place undue reliance on
forward-looking statements.

We undertake no obligation to update forward-looking statements or risk
factors other than as required by applicable law, whether as a result of new
information, future events or otherwise. You are advised, however, to consult
any additional disclosures we make in our Form 10-Q, 8-K and 10-K reports to the
SEC. Also note that we provide a cautionary discussion of risks and
uncertainties under "Risk Factors" on page 4 of this prospectus. These are
factors that we think could cause our actual results to differ materially from
expected results.

USE OF PROCEEDS

We will receive the exercise price of any warrants to purchase shares of
our common stock that are being registered pursuant to the Registration
Statement to which this prospectus relates that may be exercised by the selling
securityholders, but they are under no obligation to exercise. Although certain
of the selling securityholders have a cashless exercise option associated with
the exercise of their warrants, the selling securityholders may elect to make
cash payments in connection with their exercise of the warrants. Assuming
exercise of all of the warrants and the selling securityholders' election of a
cash payment in connection with their exercise of all of such warrants, the
estimated net proceeds from the exercise of such warrants to purchase shares of
our common stock that are being registered pursuant to the registration
statement to which this prospectus relates would be $51.4 million. We intend to
use any proceeds, if any, from the exercise of the warrants for general
corporate purposes and working capital.

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SELLING SECURITYHOLDERS

The following table identifies each selling securityholder and sets forth
information to our knowledge as of the date of this prospectus with respect to
the number of shares of common stock which may be offered under this prospectus
from time to time by each selling stockholder or their donees, transferees,
distributees or other successors in interest, including shares obtainable upon
exercise of warrants, which are currently exercisable for shares of common
stock. Because the selling securityholders may sell all, some or none of the
shares covered by this prospectus, and there are currently no agreements,
arrangements or understandings with respect to the sale of any shares, we cannot
estimate the number of shares or the percentage or outstanding shares of common
stock, that will be held by any of them upon termination of any of the sales.
Except as otherwise indicated, to our knowledge, the persons named in the table
below have sole voting and investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Percentage ownership is based on 143,958,315 shares of common stock outstanding
on March 23, 2001.

NUMBER OF SHARES WARRANTS NUMBER OF SHARES PERCENTAGE OF
COMMON STOCK HEREBY HEREBY REGISTERED COMMON STOCK COMMON STOCK
SELLING SECURITYHOLDER (1) REGISTERED FOR SALE FOR SALE (2) BENEFICIALLY OWNED (3) OUTSTANDING (3)
- - ----------------------------- ------------------- ----------------- ---------------------- ---------------

Grotech Partners V, L.P. .... 5,469,883 1,418,118 13,384,366 9.2%
Grotech V Maryland Fund,
L.P. ...................... 88,942 23,059 88,942 *
Grotech Partners VI, L.P. ... 5,558,823 1,441,176 5,558,823 3.8%
Ensign Peak Advisors,
Inc. ...................... 1,191,117 308,824 1,222,234 *
Blue Chip Capital Fund III,
L.P. ...................... 3,970,588 1,029,412 3,970,588 2.7%
Aether Systems, Inc. ........ 3,970,588 1,029,412 3,970,588 2.7%
Castellini Management
Company, L.P............... 1,985,294 514,706 1,985,294 1.4%
CFE, Inc. (wholly owned
subsidiary of GE
Capital)................... 1,985,294 514,706 1,985,294 1.4%
Pita Management LLC.......... 1,191,177 308,824 1,191,177 *
McCleary Capital Group LLC... 794,117 205,882 9,900,811 6.6%
Benjamin Diesbach............ 79,412 20,588 104,724 *
Stein Partners LLP........... 476,470 123,529 476,470 *
Andrew A. Stern.............. 397,059 102,941 4,177,727 2.9%
W. August Hillenbrand........ 397,058 102,941 397,058 *
Stephen E. Kaufmann.......... 39,706 10,294 191,045 *
Venrock Associates........... 515,965 133,769 1,871,544 1.3%
Venrock Associates II, LP.... 675,212 175,055 2,437,532 1.7%
Microsoft, Inc. ............. 19,852,942 5,147,059 19,852,942 13.3%
Brian A. Nejmeh.............. 8,606 0 8,606 *
Michael Ian Thomas........... 3,400 0 3,400 *
TCG Holdings, LLC............ 2,118 0 2,118 *
Michael Tanner............... 4,270 0 4,270 *
---------- ---------- ---------- -----
Total Selling
Securityholders............ 48,658,041 12,610,295 72,785,553 52.3%

- - ---------------
(1) The following selling securityholders have held a position or office or have
a material relationship with USi within the past three years: Andrew A Stern
is the CEO of USi; Benjamin Diesbach, Frank Adams of Grotech, Michael Brooks
and Ray Rothrock of Venrock, and Jack Wyant of Blue Chip are all on the USi
Board of Directors; and Chris McCleary is the Chairman and former CEO of
USi. The selling securityholders identified in the table above may sell,
transfer, distribute or otherwise dispose of some or all of their shares in
one or more transactions exempt from the registration requirements of the
Securities Act occurring after the date on which the information in the
table is presented. Any such donee, distributee, transferee or successor in
interest is included as a selling stockholder under this prospectus. Certain
information concerning the selling securityholders may change from time to
time and, if and to the extent necessary, the company will supplement this
prospectus accordingly.

(2) In this table, the warrants are denominated by the number of shares of
common stock issuable to the securityholder upon exercise of the warrant.

(3) Beneficial ownership is determined in accordance with the SEC's rules and
generally includes voting or investment power with respect to the
securities. Under the SEC's rules, shares of common stock subject to options
and warrants which are currently exercisable, or will become exercisable
within 60 days of March 23, 2001, are deemed outstanding for computing the
percentage of the person or entity holding such securities but are not
outstanding for computing the percentage of any other person or entity.
Accordingly, for the purposes of determining the beneficial ownership of
common stock of a holder of warrants, such warrants are exercisable, but no
other derivative securities would be treated as having been converted into
common stock for purposes of the calculation. As a result, given the
significant number of derivative securities that we have outstanding, each
holder's percentage of common stock outstanding set forth above will
overstate the percentage that such holder would have of all of our common
stock on a fully diluted basis.

* Less than 1%.

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DESCRIPTION OF SECURITIES

The selling securityholders are selling under this prospectus warrants to
purchase up to 12,610,294 shares of common stock, the common stock issuable upon
the exercise of the warrants and 36,029,412 additional shares of common stock.

The description of our common stock is contained in our registration
statement filed with the SEC on Form 8-A on April 8, 1999.

The warrants covered by this prospectus are exercisable at $4.08 per share
of common stock, subject to adjustment described below. Warrants to purchase
3,152,574 shares of common stock expire on November 13, 2005, and warrants to
purchase 9,457,721 shares of commons stock will expire on December 28, 2005.

The exercise price of the warrants is subject to adjustment in the event we
effect a stock dividend, subdivision of stock and certain other distributions
described in the warrant. Copies of the warrants are filed as exhibits to the
registration statement of which this prospectus is a part and are incorporated
herein by reference. The determination of when and whether to exercise the
warrants is within the sole discretion of each selling securityholder.

Warrants to purchase up to 2,882,353 shares of common stock contain a
"cashless exercise" provision. This provision allows the warrant holder to pay
the exercise price of the warrant by accepting a number of shares of common
stock equal to the number of shares of common stock appearing on the face of the
warrant multiplied by a fraction, the numerator of which is the excess of the
current market price of the common stock over the exercise price of the warrant,
and the denominator of which is the current market price of the common stock.

PLAN OF DISTRIBUTION

Shares of our common stock and warrants to purchase common stock held by
the selling securityholders and covered by this prospectus may be sold or
distributed at any time or from time to time by the selling securityholders,
their donees, transferees, distributees or other successors in interest, in one
or more transactions. The selling securityholders will act independently of us
in making decisions with respect to the timing, manner and size of each sale.
The selling securityholders may sell their securities at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at such other prices as the selling
securityholders may determine from time to time.

The selling securityholders may offer their securities at various times in
transactions involving cross or block trades or otherwise on any of the United
States securities exchanges or quotation services where the common stock is
listed or quoted at the time of the sale, including the Nasdaq National Market
where our common stock is listed, in the over-the-counter market, and in
connection with transactions to cover short sales. In addition, the selling
securityholders from time to time may also offer and sell the shares and
warrants in one or more of the following transactions:

- in a distribution by one or more underwriters on a firm commitment or
best efforts basis;

- in ordinary brokers' transactions and transactions in which the broker
solicits purchasers;

- in transactions other than on the exchanges or services described above;

- in privately negotiated transactions;

- by pledge or by grant of a security interest in the shares or warrants to
secure debts and other obligations;

- through the writing of options, whether the options are listed on an
option exchange or otherwise;

- in connection with the writing of non-traded and exchange traded-call
options or put options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter options;

- through the distribution of the shares by any selling securityholder to
its partners, members or securityholders; or

- in a combination of any of the above transactions.

The selling securityholders have sole discretion not to accept any purchase
offer or make any sale of shares or warrants offered by this prospectus if they
deem the purchase price to be unsatisfactory. Any broker

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or dealer participating in any such sale may be deemed to be an "underwriter"
within the meaning of the Securities Act and will be required to deliver a copy
of this prospectus to any person who purchases any of the shares or warrants
offered by this prospectus from or through such broker or dealer. The
compensation of such broker-dealers may be deemed underwriting discounts and
commissions. In addition, the shares covered by this prospectus may be sold by
the selling securityholders in market transactions under Rule 144 or Rule 144A,
provided that the selling stockholder meets the applicable criteria of Rule 144
or Rule 144A, as the case may be, and otherwise conforms to the requirements of
Rule 144 or Rule 144A, as the case may be.

The selling securityholders may enter into hedging transactions with
broker-dealers or other financial institutions in connection with distribution
of the shares or otherwise. In such transactions, broker-dealers or other
financial institutions may engage in short sales of the shares in the course of
hedging the positions they assume with selling securityholders. The selling
securityholders may also sell shares short and redeliver the shares to close out
such short positions. The selling securityholders may enter into option or other
transactions with broker-dealers or other financial institutions which require
the delivery to the broker-dealer or other financial institutions of the shares.

The broker-dealer or other financial institutions may then resell or
otherwise transfer such shares pursuant to this prospectus. The selling
securityholders also may loan or pledge the shares to a broker-dealer. The
broker-dealer may sell the shares so loaned, or upon a default the broker-dealer
may sell the pledged shares pursuant to this prospectus.

To comply with the securities laws of certain jurisdictions, if applicable,
the shares or warrants offered by this prospectus will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In certain
states, the shares and warrants offered by this prospectus may not be sold
unless (1) the shares or warrants offered by this prospectus have been
registered or qualified for sale in such state or an exemption from registration
exists or (2) qualification is available and is complied with. Also, each
selling stockholder will be subject to the applicable provisions of the
Securities Act and Exchange Act and the rules and regulations of both acts,
including Regulation M. The provisions of Regulation M may limit the timing of
purchases and sales of shares and warrants by the selling securityholders.

We will make copies of this prospectus available to the selling
securityholders and we have informed them of the need for delivery of copies of
this prospectus to purchasers at or prior to the time of any sale of the shares
and warrants offered hereby. Should any transferee of a selling securityholder
wish to exercise a warrant for cash, we shall deliver a copy of this prospectus
in connection with such exercise. The selling securityholders may indemnify any
broker-dealer that participates in transactions involving the sale of the shares
and warrants against certain liabilities, including liabilities arising under
the Securities Act of 1933.

At the time a particular offer of shares or warrant exercise is made, if
required, a prospectus supplement will be distributed that will set forth the
number of shares or warrants being offered and the terms of the offering,
including the name of any underwriter, dealer or agent, the purchase price paid
by any underwriter, any discount, commission and other item constituting
compensation, any discount, commission or concession allowed or reallowed or
paid to any dealer, and the proposed selling price to the public.

Pursuant to the terms of the registration rights agreements between us and
the selling securityholders, we will pay all expenses of the registration of the
common stock and warrants, except that the selling securityholders will pay any
applicable underwriting discounts and commissions. The selling securityholders
will be indemnified by us against certain civil liabilities, including certain
civil liabilities under the Securities Act. We will be indemnified by the
selling securityholders against certain civil liabilities, including certain
liabilities under the Securities Act.

LEGAL MATTERS

The validity of the issuance of common stock and the validity of the
warrants offered in this prospectus will be passed upon for USi by Latham &
Watkins, Washington, D.C. Partners of Latham & Watkins own in total shares of
our common stock representing less than 1% of the total number of shares of
common stock outstanding.

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EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and the consolidated financial statements of I.I.T.
Holdings, Inc. and subsidiaries included in our Annual Report on Form 10-K for
the year ended December 31, 2000, as set forth in their reports, which are
incorporated by reference in this prospectus and elsewhere in the registration
statement. These financial statements are incorporated by reference in reliance
on Ernst & Young LLP's reports, given on their authority as experts in
accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We are currently subject to the periodic reporting and other requirements
of the Securities Exchange Act of 1934. You may read and copy any document we
file or incorporate by reference into this prospectus at the Commission's public
reference rooms located at 450 5th Street, N.W., Washington, D.C. 20549. Please
call the Commission at 1-800-SEC-0330 for further information on the public
reference rooms. Our Commission filings are also available to the public from
commercial document retrieval services and at the web site maintained by the
Commission at: http://www.sec.gov. Our common stock trades on The Nasdaq
National Market.

You may request a copy of any of this information, at no cost, by writing
or telephoning us at the following address or phone number:

USinternetworking, Inc.

One USi Plaza
Annapolis, Maryland 21401-7478
(410) 897-4400

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INCORPORATION OF DOCUMENTS BY REFERENCE

The Commission allows us to incorporate by reference the information
contained in documents that we file with them. This means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. Information in this prospectus supercedes information incorporated
by reference that we filed with the Commission prior to the date of this
prospectus, while information that we file later with the Commission will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings we will make with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934:

- Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000, filed on April 2, 2001, including all material incorporated by
reference therein;

- Our Current Reports on Form 8-K, dated February 18, 2000, March 6, 2000,
April 24, 2000, July 26, 2000, October 26, 2000, November 22, 2000 and
January 17, 2001; and

- The description of our common stock contained in our registration
statement on Form 8-A filed on April 8, 1999.

All documents we file under Section 13(a), 13(c), 14 of 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus and before the
termination of the offering of the shares shall be deemed to be incorporated by
reference in this prospectus and to be a part hereof from their dates of filing.
Any statement contained in a document incorporated or deemed to be incorporated
by reference in this prospectus is deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any subsequently filed document which also is or is deemed to
be incorporated by reference in this prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.

Upon request, you may obtain without charge a copy of any or all of the
documents incorporated by reference in this prospectus (other than exhibits to
such documents which are not specifically incorporated by reference therein).
Upon request, you may also obtain without charge copies of this prospectus, as
amended or supplemented from time to time, and any other documents (or parts of
documents) that constitute part of this prospectus under Section 10(a) of the
Securities Act of 1933. Requests for such copies should be addressed to William
T. Price, Vice President, Secretary and General Counsel, USinternetworking,
Inc., One USi Plaza, Annapolis, Maryland 21401 (telephone number (410)
897-4400).

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USINTERNETWORKING, INC.

[USI LOGO]
21

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below is an estimate of the amount of fees and expenses to be
incurred and paid by the Company in connection with the issuance and
distribution of the common stock and warrants registered under this prospectus:

SEC Registration Fee........................................ $45,806.62
Printing and Mailing Costs.................................. $10,000.00
Legal Fees and Expenses..................................... $20,000.00
Accounting Fees and Expenses................................ $10,000.00
Miscellaneous Expenses...................................... $10,000.00
Total............................................. $95,806.62

ITEM 15. LIMITATION OF LIABILITY AND INDEMNIFICATION

Section 145 of the General Corporation Law of the State of Delaware
("Section 145") permits a Delaware corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit, or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.

In the case of an action by or in the right of the corporation, Section 145
permits the corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interest of the corporation. No indemnification may be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

To the extent that a present or former director or officer of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding two paragraphs, Section 145 requires
that such person be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.

Section 145 provides that expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative, or
investigative action, suit or proceeding may be paid the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in Section 145.

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The Company's Certificate provides that an officer or director of the
Company will not be personally liable to the Company or its securityholders for
monetary damages for any breach of his fiduciary duty as an officer or director,
except in certain cases where liability is mandated by the DGCL. The provision
has no effect on any non-monetary remedies that may be available to the Company
or its securityholders, nor does it relieve the Company or its officers or
directors from compliance with federal or state securities laws. The Certificate
also generally provides that the Company shall indemnify, to the fullest extent
permitted by law, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit, investigation,
administrative hearing or any other proceeding (each, a "Proceeding") by reason
of the fact that he is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another entity, against expenses incurred by him in connection with such
Proceeding. An officer or director shall not be entitled to indemnification by
the Company if (i) the officer or director did not act in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
the Company, or (ii) with respect to any criminal action or proceeding, the
officer or director had reasonable cause to believe his conduct was unlawful.

The Bylaws of the Company provide that it shall indemnify any person who is
made a party to any threatened, pending or completed action, suit or proceeding
by reason of the fact that he or she is or was a director or officer of the
Company, and may indemnify any employee or agent of the Company in such
circumstances, against expenses, including attorneys fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding. No indemnification may be
provided for any person who shall have been finally adjudicated not to have
acted honestly or in the reasonable belief that his or her action was in or not
opposed to the best interests of the Company or who had reasonable cause to
believe that his or her conduct was unlawful. Indemnification must be provided
to any director, officer, employee or agent of the Company to the extent such
person has been successful, on the merits or otherwise, in defense of any action
or claim described above. Any indemnification under this provision of the
Bylaws, unless required under the Bylaws or ordered by a court, can be made only
as authorized in each specific case upon a determination by a majority of
disinterested directors or by independent legal counsel or by the stockholders
that such indemnification is appropriate under the standard set forth in the
preceding sentence.

ITEM 16. EXHIBITS

(a) Exhibits

EXHIBIT NO. DESCRIPTION
- - ----------- -----------

4.1(a) Second Amended and Restated Certificate of Incorporation of
the Company
4.2(a) Amended and Restated Bylaws of the Company.
4.3(b) First Amendment to the Company's Second Amended and Restated
Certificate of Incorporation
4.4(c) Specimen Certificate for shares of Common Stock, $.001 par
value, of the Company
4.5(#) Form of Warrant to Purchase Common Stock of the Company
4.6(#) Form of Warrant to Purchase Common Stock of the Company
(including Net Issuance Election)
5.1(*) Opinion of Latham & Watkins with respect to the validity of
the Common Stock.
23.1(*) Consent of Ernst & Young LLP, independent auditors
(regarding the Company's financial statements).
23.2(*) Consent of Bassan & Asociados S.C., independent auditors
(regarding IIT financial statements).
23.3(*) Consent of Ernst & Young LLP, independent auditors
(regarding IIT financial statements).

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EXHIBIT NO. DESCRIPTION
- - ----------- -----------

23.5(*) Consent of Latham & Watkins (included in Exhibit 5.1).

- - ---------------
* Filed herewith.

#Previously filed.

(a) Incorporated by reference to the Company's Registration Statement on Form
S-3, as amended (Reg. No. 333-93299).

(b) Incorporated by reference to Company's Registration Statement on Form S-1,
as amended (Reg. No. 333-95543).

(b) Schedules

All schedules have been omitted because they are not required or because
the required information is given in the Consolidated Financial Statements or
Notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. However, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;

(iii) To include any material information about the plan of distribution
not previously disclosed in this registration statement or any material
change to this information in this registration statement;

i.e., provided, however, subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.

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

(3) To remove from registration by means of a post-effective amendment any
of the Securities being registered which remain unsold at the termination of the
offering.

The undersigned Registrant hereby further undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the Securities offered herein, and the offering of such Securities
at that time shall be deemed to be the initial bona fide offering thereof.

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As far as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant under the provisions of this registration statement, or otherwise
(other than insurance), the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in such 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 such Act and
will be governed by the final adjudication of such issue.

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25

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Annapolis, State of Maryland on April 20, 2001.

USINTERNETWORKING, INC.

By: /s/ WILLIAM T. PRICE
------------------------------------
William T. Price
Vice President, Secretary and
General Counsel

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Pursuant to the requirements of the Securities Act of 1933, the
registration statement has been signed below on April 20, 2001 by the following
persons in the capacities indicated.

SIGNATURE TITLE
--------- -----

* Chairman of the Board
- - --------------------------------------------------------
Christopher R. McCleary

* Chief Executive Officer and Director
- - --------------------------------------------------------
Andrew A. Stern

President -- E-Commerce Business Unit and
- - -------------------------------------------------------- Director
Stephen E. McManus

* Senior Vice President and Chief Financial
- - -------------------------------------------------------- Officer
Mark J. McEneaney

Director
- - --------------------------------------------------------
R. Dean Meiszer

* Director
- - --------------------------------------------------------
Benjamin Diesbach

Director
- - --------------------------------------------------------
Ray A. Rothrock

* Director
- - --------------------------------------------------------
Frank A. Adams

* Director
- - --------------------------------------------------------
William F. Earthman

* Director
- - --------------------------------------------------------
John H. Wyant

Director
- - --------------------------------------------------------
Joseph R. Zell

Director
- - --------------------------------------------------------
Michael C. Brooks

* Director
- - --------------------------------------------------------
David J. Poulin

Director
- - --------------------------------------------------------
Cathy M. Brienza

Director
- - --------------------------------------------------------
Kenneth E. Sichau

*By: /s/ WILLIAM T. PRICE
------------------------------------------------------
William T. Price
Attorney-in-Fact

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EXHIBIT NO. DESCRIPTION
- - ----------- -----------

- - ---------------
* Filed herewith.

#Previously filed.

(a) Incorporated by reference to the Company's Registration Statement on Form
S-3, as amended (Reg. No. 333-93299).

(b) Incorporated by reference to Company's Registration Statement on Form S-1,
as amended (Reg. No. 333-95543).

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