There are many variants of the story but here's what I found by googling which is as good an account as any other: 

>At the urging of my host, Douglas Clark, I asked Edwards what he knew about the origin of the term "exact sequence." Edwards was sure the term was invented by Eilenberg and/or Steenrod. He re- called reading or hearing that, as Eilenberg and Steenrod were writing their book but before they de- vised a satisfactory term, they left a blank everywhere the term "exact" would later appear.

> During the week of my return to Berkeley, Saunders Mac Lane turned up and gave a delightful colloquium talk on "Mathematics for sixty years: What has changed?" I cornered him before the talk and pumped him for information. He told me the same story as Edwards and said he heard it directly from Eilenberg.

> Two days later Eilenberg phoned in response to my letter. Indeed, he related, during about the first year he and Steenrod worked on their book, they wrote "blank sequence" everywhere for Hurewicz's concept, with the intention of replacing the word "blank" by the "right word" once they found it. They refrained from using a provisional term in fear that would dis- tract them from their search for the "right" term. Once they hit upon the term "exact" they shared it with anyone interested. Eilenberg used it in a course at the University of Michigan in the spring of 1946.

> I did not press Eilenberg on whether it was he or Steenrod who originally dreamed up the term. At the time it seemed a rude thing to ask, and the question seemed unimportant.


Copied from <a href="http://www.springerlink.com/content/547362g31881q7rq/fulltext.pdf">The Exact Answer to a Question of Shields</a> by Donald Sarason, Mathematical Intelligencer, Vol. 12, No. 2, 1990.