SMTP errors from web server

I am having issues with SMTP from one of my web servers. I've verified firewall connectivity over port25 to the SMTP relay and the exchange servers is good to go. I can hit the SMTP relays and exchange server from my web server via telnet. Whenever I drop a mail in Pickup it sits in the queue.

In Event Viewer I get: Message delivery to the host 'IPADDDRESS' failed while delivering to the remote domain 'MYDOMAIN' for the following reason: The connection was dropped by the remote host.

I checked SMTPDiag and it comes back: Error: Expecting "220". Server is not accepting connections. Failed to submit mail to "server.domain.com"

I checked and my connection control is set to allow and the domains are listed in SMTP.. I am losing my mind trying to figure out why mail is failing at this point..