LYCOS INC, S-3, 1998-05-15

LYCOS INC
S-3, 1998-05-15
ADVERTISING

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

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

DELAWARE 04-3277338
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)

400-2 TOTTEN POND ROAD, WALTHAM, MASSACHUSETTS 02154-2000
(781) 370-2700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

ROBERT J. DAVIS
LYCOS, INC.
400-2 TOTTEN POND ROAD
WALTHAM, MASSACHUSETTS 02154-2000
(781) 370-2700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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

COPIES TO:

MICHAEL J. RICCIO, JR., ESQ. TIMOTHY C. MAGUIRE, ESQ.
HUTCHINS, WHEELER & DITTMAR TESTA, HURWITZ & THIBEAULT, LLP
A PROFESSIONAL CORPORATION HIGH STREET TOWER
101 FEDERAL STREET 125 HIGH STREET
BOSTON, MASSACHUSETTS 02110 BOSTON, MASSACHUSETTS 02110
(617) 951-6600 (617) 248-7000

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, other than securities offered only in connection with dividend or
interest investment plans, 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, 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
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share........ 3,450,000 shares $60.0315 $207,108,675 $61,098
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 450,000 shares which the Underwriters have the option to purchase
from the Company to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the registration fee, based
upon the average of the high and low prices of the Company's Common Stock
as reported on the Nasdaq National Market on May 12, 1998 in accordance
with Rule 457 under the Securities Act of 1933.

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

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, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 15, 1998

3,000,000 SHARES

LOGO
COMMON STOCK
($.01 PAR VALUE)

--------

Of the shares of Common Stock ("Common Stock") offered hereby (the "Offering"),
2,000,000 shares are being sold by Lycos, Inc. ("Lycos" or the "Company") and
1,000,000 shares are being sold by the Selling Stockholder named herein under
"Principal and Selling Stockholders" (the "Selling Stockholder"). The
Company will not receive any of the proceeds of shares sold by the Selling
Stockholder. The Company's Common Stock is listed on The Nasdaq Stock
Market's National Market ("The Nasdaq National Market") under the symbol
"LCOS." On May 13, 1998, the last reported sale price of the Company's
Common Stock on The Nasdaq National Market was $68 7/16 per share. See
"Price Range of Common Stock."

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGE 6 HEREIN.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDER
-------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
Total(2)......................... $ $ $ $
</TABLE>

(1) Before deduction of expenses payable by the Company, estimated at $350,000.
(2) The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase a maximum of 450,000
additional shares of Common Stock to cover over-allotments of shares. If
the option is exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ , and Proceeds to
Company will be $ .

The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by the Underwriters and subject to their right
to reject orders in whole or in part. It is expected that the shares of Common
Stock will be ready for delivery on or about , 1998, against payment in
immediately available funds.

CREDIT SUISSE FIRST BOSTON
HAMBRECHT & QUIST
MERRILL LYNCH & CO.
-----------
BEAR, STEARNS & CO. INC.
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
VOLPE BROWN WHELAN & COMPANY
WASSERSTEIN PERELLA SECURITIES, INC.

Prospectus dated , 1998
<PAGE>

SEARCH & NAVIGATION

Lycos offers its users
the ability to quickly
and easily find
information on the Web.
A user may enter a
search term and review a
list of the best matches
from all indexed Web
pages. Additionally,
Lycos also allows a user
to browse within
specific topical
subcategories related to
the user's search.

[INSIDE FRONT COVER]
PERSONAL GUIDES

The Personal Guide by
Lycos automatically
delivers a personalized
view of the Lycos
service, including news,
weather, stock quotes,
sports scores, calendar
and address book, all
based on the user's
personal specifications.
The Personal Guide
enhances and
personalizes the user's
Internet experience by
eliminating unwanted
information and quickly
filtering the most
relevant Information to
the user.
WEB GUIDES

In order to give users
an easy-to-use framework
in which to efficiently
explore and utilize the
wealth of content on the
Internet, Lycos
maintains a series of
Web Guides and
directories. Lycos'
topic-based Web Guides
provide categorized
areas of Interest that
enable users to browse
through groupings of
related information.

ADVERTISING/SPONSORSHIP

Lycos provides its
advertisers and sponsors
with the opportunity to
directly target and
customize their message
to the user. Both
keyword and Web Guide
advertising permit
advertisers to
effectively target
advertisements to
selected audiences and
demographics.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK IN
CONNECTION WITH THE OFFERING, INCLUDING OVER-ALLOTMENT, STABILIZING
TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS, AND PENALTY BIDS. IN
ADDITION, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS, IF ANY) MAY ALSO
ENGAGE IN PASSIVE MARKET-MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES EXCHANGE ACT OF 1934. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere in this Prospectus or
incorporated by reference herein. Unless otherwise indicated, all information
in this Prospectus assumes no exercise of the Underwriters' over-allotment
option.

THE COMPANY

Since its inception in June 1995, the Company has rapidly expanded into a
global Internet resource used daily by millions of people throughout the world.
The rapidly increasing number of Web users and ubiquitous worldwide access to
the Internet have resulted in the emergence of the Web as a new mass medium.
Jupiter Communications estimates that the Web viewer population will grow from
approximately 49 million viewers in 1997 to approximately 116 million viewers
by 2002, and that online advertising revenues will grow from approximately $940
million in 1997 to approximately $7.7 billion in 2002. Further, a growing
number of users are transacting business over the Web, including trading
securities, buying goods, purchasing airline tickets and paying bills. Jupiter
Communications estimates that the value of goods and services purchased over
the Internet will increase from $2.6 billion in 1997 to $37.5 billion in 2002.

The Company is one of the leading online media services in terms of traffic,
revenues and user reach, serving millions of information requests per day.
According to RelevantKnowledge, the Company's Websites attracted over 15
million unique users during March 1998 and, according to Media Metrix,
approximately 25% of all Web users visited the Company's Websites in such
month. The Company generates revenues primarily through selling advertising and
sponsorships, electronic commerce and by licensing its products and technology.
The Company's Websites have become a widely accepted advertising medium for
several prominent companies, including Coca-Cola, Disney, General Motors,
Hilton, IBM and Visa. The Company has established electronic commerce and
sponsorship relationships with several companies, including AT&T, Barnes &
Noble, CDnow and Preview Travel and, since the beginning of fiscal 1998, has
entered into electronic commerce and sponsorship arrangements providing for
minimum contract revenues of more than $60 million over a three year period. In
addition, Lycos has established strategic licensing and technological alliances
with some of the world's leading corporations, including such companies as
Bertelsmann, Microsoft and Viacom.

The Company's objective is to continue to draw a large number of viewers to
its New Generation Online Service by providing a network of globally branded
media properties and aggregated content to users free of charge and making them
easily accessible throughout the world. The Company is heavily focused on
building its brand, both on and off the Web, and enhancing its product
offerings with additional content, features, and functionality in order to
maintain its position as one of the most popular destinations on the Web. The
Company has aggressively pursued a strategy of partnering with industry
leaders, which enables the Company to increase traffic and revenues and to
extend the Lycos brand internationally and to develop new media properties by
leveraging the promotion, marketing, distribution capabilities and sales
strengths of its partners.

The Company's ability to easily adapt its technology in a variety of
languages has made its service a popular global Internet destination, easily
accessible to users throughout the world. In order to expand the international
distribution of the Company's services, in May 1997, the Company entered into a
joint venture with Bertelsmann AG to launch local versions of the Lycos service
throughout Europe, and, in March 1998, the Company entered

3
<PAGE>

into a joint venture with Sumitomo Corp. and Internet Initiative Japan, Inc.
("IIJ") to offer a localized version of the Lycos service in Japan. The Company
has also recently entered into a license agreement with LG Internet, Inc. to
offer a localized version of the Company's services in Korea. The Company
currently offers localized versions of the Lycos service in Austria, Belgium,
France, Germany, Italy, Japan, Korea, Luxembourg, Spain, Sweden, Switzerland,
the Netherlands and the United Kingdom.

RECENT DEVELOPMENTS

As part of its strategy to enhance its product offerings and to expand its
community product offering, the Company completed two acquisitions during the
quarter ended April 30, 1998. In February 1998, the Company acquired Tripod,
Inc. ("Tripod"), a leading community-based Website. Focused on the 18-34 year
old user demographic, Tripod is one of the largest and fastest growing
communities on the Internet. Tripod, through its Website located at
www.tripod.com, allows its over 1.4 million registered members to easily create
free personalized Web-based homepages. Members can also link their homepages to
one or more community "pods" that are organized around a variety of themes and
areas of interest. These community pods combine both professional and user-
created content and are maintained by the Tripod editorial staff. Both the
personal nature of the user-created homepages and the sense of community
developed by the community pod structure provide Tripod with one of the largest
and most active membership bases currently found on the Internet.

In April 1998, Lycos completed the acquisition of WiseWire Corporation
("WiseWire"), a leader in delivering targeted content to Websites. WiseWire
finds, filters and organizes content on the Internet using proprietary
intelligent agent technology while building online communities through content
personalization. WiseWire offers a series of products which personalize content
to specific customer needs. For instance, WiseWire's Community Directory
product offers a dynamic online directory of continually updated content,
hierarchically organized allowing end-users to contribute to the evolution and
quality of information. WiseWire's automated processing and categorization of
Websites into a directory format offers more current listings to users and a
less expensive ongoing cost structure for the Company compared to traditional
manually created directories.

On May 14, 1998, the Company announced its financial results for the third
quarter ended April 30, 1998. Revenues for the quarter were $15.1 million,
representing an increase of 20% over the previous quarter ended January 31,
1998 and a 158% increase over the comparable period for the previous fiscal
year. The Company reported a net loss (before amortization and one-time
acquisition-related expenses) of $2.4 million or $0.15 per share for the
quarter ended April 30, 1998, as compared to net income of $301,000 or $0.02
per share for the quarter ended January 31, 1998. Net loss per share for the
quarter ended April 30, 1998 after amortization and one-time charges was $5.90
per share.

The Company is a Delaware corporation incorporated in June 1995. The
Company's principal executive offices are located at 400-2 Totten Pond Road,
Waltham, Massachusetts 02154, and its telephone number is (781) 370-2700. The
Company's homepage is located at www.lycos.com.

THE OFFERING

Common Stock offered by the 2,000,000 shares
Company............................

Common Stock offered by the Selling 1,000,000 shares
Stockholder........................

Common Stock outstanding after the 18,530,772
Offering(1)........................

Use of Proceeds..................... General corporate purposes, including
potential acquisitions.

Nasdaq National Market Symbol....... LCOS
- --------
(1) Based on number of shares outstanding on April 30, 1998. Assumes no
exercise of the Underwriters' over-allotment option. Does not include
2,539,646 shares issuable upon exercise of options outstanding on April 30,
1998.

4
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD YEAR ENDED JULY 31,
FROM INCEPTION ---------------------------
(JUNE 1, 1995) PRO FORMA
TO JULY 31, 1995 1996 1997 1997(1)
---------------- ------- ------- ---------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues................... $ 5 $ 5,257 $22,273 $ 22,798
Cost of revenues................. 28 3,225 4,732 5,262
------- ------- ------- --------
Gross profit..................... (23) 2,032 17,541 17,536
Operating expenses:
Research and development........ 16 907 4,304 6,543
In-process research and
development(2)................. -- 452 -- --
Sales and marketing............. 29 4,749 19,130 20,649
General and administrative...... 37 1,726 2,857 8,192
------- ------- ------- --------
Total operating expenses........ 82 7,834 26,291 35,384
Operating loss................... (105) (5,802) (8,750) (17,848)
Interest income.................. -- 714 2,130 2,201
------- ------- ------- --------
Net loss......................... $ (105) $(5,088) $(6,620) $(15,647)
======= ======= ======= ========
Net loss per share--basic and
diluted......................... $ (0.01) $ (0.42) $ (0.48) $ (0.99)
======= ======= ======= ========
Shares used in computing net loss
per share--basic and diluted.... 11,013 11,992 13,795 15,796
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
---------------------------
PRO FORMA
1997 1998 1998(1)
------- ------- ---------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues..................................... $ 8,667 $21,906 $22,849
Cost of revenues................................... 1,928 4,695 5,812
------- ------- -------
Gross profit....................................... 6,739 17,211 17,037
Operating expenses:
Research and development.......................... 1,944 3,171 5,751
Sales and marketing............................... 9,372 12,790 14,749
General and administrative........................ 1,317 1,945 5,336
------- ------- -------
Total operating expenses(2)....................... 12,633 17,906 25,836
Operating loss..................................... (5,894) (695) (8,799)
Interest income.................................... 1,123 1,105 1,031
------- ------- -------
Net income (loss).................................. $(4,771) $ 410 $(7,768)
======= ======= =======
Basic earnings (loss) per share.................... $ (0.35) $ 0.03 $ (0.48)
======= ======= =======
Diluted earnings (loss) per share.................. $ (0.35) $ 0.03 $ (0.48)
======= ======= =======
Shares used in computing basic earnings (loss) per
share............................................. 13,793 14,175 16,176
Shares used in computing diluted earnings (loss)
per share......................................... 13,793 14,708 16,176
</TABLE>

<TABLE>
<CAPTION>
AT JANUARY 31, 1998
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1)(3) AS ADJUSTED(4)
------- --------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $41,351 $45,924 $175,947
Working capital......... 38,960 41,676 171,699
Total assets............ 71,701 96,079 226,102
Long-term portion of
deferred revenues...... 5,966 6,009 6,009
Long-term debt, net of
current portion........ -- 230 230
Stockholders' equity.... 39,083 60,926 190,950
</TABLE>
- --------
(1) Pro forma to give effect to the acquisitions of Tripod as if such
transaction had occurred on August 1, 1996 and WiseWire as if such
transaction had occurred on June 1, 1996 for the consolidated statements of
operations data and on January 31, 1998 for the consolidated balance sheet
data.
(2) Excludes $87.6 million of in-process research and development expense
recorded in the quarter ended April 30, 1998 in connection with the
Company's acquisitions of Tripod in February 1998 and WiseWire in April
1998. Also excluded are approximately $1.0 million of intangible assets
expensed in the quarter ended April 30, 1998 in connection with the
WiseWire acquisition.
(3) Pro forma to give effect to the Company's issuance of Common Stock for its
$4.0 million minority investment in Globecomm, Inc. in March 1998 and its
$2.5 million minority investment in Sage Enterprises, Inc. in April 1998 as
if such transactions had occurred on January 31, 1998.
(4) Adjusted to give effect to the application of the net proceeds of this
Offering, as described under "Use of Proceeds."

5
<PAGE>

RISK FACTORS

The following risk factors should be considered in conjunction with the
other information included and incorporated by reference in this Prospectus
before purchasing the Common Stock offered hereby. This Prospectus (including
the documents incorporated by reference herein) may include forward-looking
statements that involve risks and uncertainties. In addition to those risk
factors discussed elsewhere in this Prospectus, the Company identifies the
following risk factors which could affect the Company's actual results and
cause actual results to differ materially from those in the forward-looking
statements.

Limited Operating History; Anticipation of Continued Losses. The Company was
founded in June 1995 and for the year ended July 31, 1997 and six months ended
January 31, 1998 generated revenues of $22.3 million and $21.9 million,
respectively. Accordingly, the Company has a limited operating history upon
which an evaluation of the Company and its prospects can be based. The Company
and its prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets. These
risks include the Company's ability to continue to develop and extend the
"Lycos" brand; the Company's ability to maintain premier positions on high
traffic Web access points such as its arrangements with Netscape
Communications Corp. ("Netscape") and Microsoft Corporation ("Microsoft") or
to enter into additional distribution relationships and strategic alliances;
the ability of the Company to maintain and increase levels of traffic on its
Websites; the ability of the Company to continue to develop or acquire
content, features and functionality for its services; the development of equal
or superior services or products by competitors; the failure of the market to
adopt the Web as an advertising or commercial medium; the reduction in market
prices for Web-based advertising as a result of competition or otherwise; the
Company's ability to effectively generate commerce-related revenues through
sponsored services and placements in Lycos services; and the Company's success
in attracting, retaining and motivating qualified personnel. There can be no
assurance that the Company will be successful in addressing such risks. The
limited operating history of the Company makes the prediction of future
results of operations difficult or impossible, and therefore, the recent
revenue growth experienced by the Company should not be taken as indicative of
the rate of growth, if any, that can be expected in the future. The Company
has incurred significant losses since inception. Although the Company was
profitable in the six months ended January 31, 1998, the Company reported a
loss of $5.90 per share (a $0.15 loss per share before amortization and one-
time acquisition related charges) for the quarter ended April 30, 1998 and
there can be no assurance that the Company will sustain revenue growth or
return to profitability in the future. As of April 30, 1998, the Company had
an accumulated deficit of $102.9 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Consolidated
Financial Statements.

Potential Fluctuations in Quarterly Results. As a result of the Company's
limited operating history, the Company does not have historical financial data
for any significant period of time on which to base planned operating
expenses. The Company's expense levels are based in part on its expectations
as to future revenues and to a certain extent are fixed. Quarterly sales and
operating results generally depend on the advertising, electronic commerce,
license fees and other revenues received within the quarter, which are
difficult to forecast. Because the Company's expense levels are based upon
anticipated advertising, electronic commerce and licensing revenue, the
Company may not be able to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. Accordingly, any significant shortfall
in relation to the Company's expectations would have an immediate adverse
impact on the Company's business, results of operations and financial
condition. In addition, the Company plans to significantly increase its
operating expenses to fund greater levels of research and development,
increase its sales and marketing operations, develop new distribution
channels, broaden its customer support capabilities, maintain brand identity
and pursue strategic alliances. In the future, leading Websites, browser
providers and other distribution channels may require payments or other
consideration in exchange for providing access to the Company's products and
services, such as the Company's current agreement with Netscape, which expires
on May 31, 1998. Additionally, the Company may incur costs pertaining to the
introduction or enhancement of services offered by the Company or the
acquisition of businesses or technologies. To the extent that such expenses
precede or are not subsequently followed by increased revenues, the Company's
business, results of operations and financial condition could be materially
adversely affected.

6
<PAGE>

The Company's operating results may fluctuate significantly in the future as
a result of a variety of factors, some of which are outside of the Company's
control. These factors include general economic conditions, specific economic
conditions in the Internet industry, usage of the Internet, the level of
traffic to the Company's Websites, demand for Internet advertising and
electronic commerce, the addition or loss of advertisers or electronic
commerce sponsors, seasonal trends in advertising sales, the advertising
budgeting cycles of individual advertisers, capital expenditures and other
costs relating to the expansion of operations, incurrence of costs relating to
acquisitions like Tripod and WiseWire, the introduction of new products or
services by the Company or its competitors, the mix of the services sold, the
channels through which those services are sold, and pricing changes. As a
strategic response to a changing competitive environment, the Company may
elect from time to time to make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on the
Company's business, results of operations and financial condition. Due to the
nascent nature of the Internet industry, the Company believes that period to
period comparisons of its operating results are not meaningful and should not
be relied upon for an indication of future performance. The Company also has
experienced, and expects to continue to experience, seasonality in its
business, with user traffic on the Company's Websites and the Websites of its
partners being lower during the summer and year-end vacation and holiday
periods, when usage of the Web and the Company's services has typically
declined. Due to all of the foregoing factors and others that the Company
cannot predict, it is possible that in some future quarter, the Company's
operating results may be below the expectations of analysts and investors. In
such event, the price of the Company's Common Stock would likely be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Reliance on Advertising Revenues; Risks Related to Sponsorships. The Company
derives a significant portion of its revenues from the sale of advertisements
on its Web pages. For the six months ended January 31, 1998, advertising
revenues represented approximately 73% of the Company's total revenues. The
Company's strategy is to continue to develop advertising and other methods of
generating revenues through the use of its products and services. The
Company's ability to increase its advertising revenues will depend, among
other things, on advertisers' acceptance of the Internet as an attractive and
sustainable medium, the development of a large base of users of the Company's
products and services possessing demographic characteristics attractive to
advertisers, the expansion of the Company's advertising sales force and the
development of the Internet as an attractive platform for electronic commerce.
In addition, there is fluid and intense competition in the sale of advertising
on the Internet, resulting in a wide range of rates quoted and a variety of
pricing models offered by different vendors for a variety of advertising
services, which makes it difficult to project future levels of advertising
revenues that will be realized generally or by any specific company. It is
also difficult to predict which pricing models will be adopted by the industry
or advertisers. For example, advertising rates based on the number of "click
throughs" from the Company's network to advertisers' pages, instead of rates
based solely on the number of impressions, could materially adversely affect
the Company's revenues. In addition, "filter" software programs that limit or
remove advertising from the Web user's desktop are available. The widespread
adoption of such software by users could have a material adverse effect on the
viability of advertising on the Web. Accordingly, there can be no assurance
that the Company will be successful in generating significant future
advertising revenues, and the failure to do so would have a material adverse
effect on the Company's business, results of operations and financial
condition. Further, significant and consistent investment on the Internet by
many advertisers is dependent upon validation that the Internet is an
effective advertising medium, which validation has not yet occurred and which
is essential to the achievement of steady and predictable advertising
revenues. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Advertising Revenue."

The Company has recently entered into sponsorship arrangements with third
parties to provide sponsored services and placements on the Company's Websites
in addition to traditional banner advertising. In connection with these
arrangements, the Company may receive sponsorship fees as well as a portion of
transaction revenues received by such third party sponsors from users
originated through the Company's Websites, in return for minimum levels of
user impressions or click throughs to be provided by the Company. To the
extent implemented, these arrangements expose the Company to potentially
significant financial risks, including the risk that the Company fails to
deliver required minimum levels of user impressions or click throughs (in
which case,

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these agreements typically provide for adjustments to the fees payable
thereunder or "make good" periods) and that third party sponsors do not renew
the agreements at the end of their terms. Certain of these arrangements also
require the Company to integrate sponsors' content with the Company's
services, which requires the dedication of resources and significant
programming and design efforts to accomplish. There can be no assurance that
the Company will be able to attract additional sponsors or that it will be
able to renew existing sponsorship arrangements when they expire. In addition,
the Company has granted exclusivity provisions to certain of its sponsors, and
may in the future grant additional exclusivity provisions. Such exclusivity
provisions may have the effect of preventing the Company, for the duration of
such exclusivity arrangements, from accepting advertising or sponsorship
arrangements within a particular subject matter in the Company's Websites or
across the Company's entire service. The inability of the Company to enter
into further sponsorship or advertising arrangements as a result of its
exclusivity arrangements could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business--
Advertising Revenue" and "--Electronic Commerce Revenue."

The Internet as a commercial endeavor has been in existence for a short
period of time. The costs of establishing a Website are low, and new online
service providers, content providers and advertisers are being launched
regularly. Many of these companies are funded with venture capital and other
forms of financing before they have proven both that their particular industry
segment and their business strategy will be successful. Those companies that
are unable to prove themselves successful before their initial funding is
depleted may find it difficult or impossible to secure additional funding. The
failure of any of the Company's advertisers or electronic commerce sponsors to
pay amounts due to the Company on a timely basis could have a material adverse
effect on the Company's business, results of operations and financial
condition.

Dependence on Netscape, Microsoft and Other Third Party Relationships. The
Company is dependent on a number of third party relationships, including its
relationships with Netscape and Microsoft, to create traffic on the Company's
Websites and consequently generate revenues. These relationships include
arrangements relating to the positioning of the Company's products and
services on Web browsers such as those offered by Netscape and Microsoft, and
on other sites through license agreements in which Internet sites are linked
to or otherwise utilize the Company's services. For the six months ended
January 31, 1998, a material portion of the traffic to the Company's Websites
was derived through the Netscape browser. The Company's "Premier Provider"
Agreement with Netscape, pursuant to which the Company was designated one of
four "Premier Providers" of search and navigation services accessible from the
"Net Search" button on the Netscape browser (the "Netscape Agreement"), was
scheduled to expire on April 30, 1998, but has been extended through May 31,
1998. Although the Company is currently in discussions with Netscape about
renewing this agreement, there can be no assurance that the Company will be
able to enter into a new arrangement on terms and conditions similar to those
contained in the existing agreement, if at all. Netscape has expressed its
intention to limit the number of companies whose search and navigation
services are accessible through the Net Search button on the Netscape browser
and there can be no assurance that the Company will be selected as one of
those companies. Moreover, Netscape has recently announced a two year
agreement with Excite, Inc. in which Netscape will commit an aggregate of 50%
of its search referrals during the first year of the agreement to Excite's
search services and Netscape's own branded search service (which will be
powered by Excite) and Netscape will commit an aggregate of 75% of its search
referrals during the second year of the agreement to Netscape's branded search
service and Excite's search services. This agreement will limit the number of
search referrals which Netscape may make available to other providers of
search services, including the Company. If the Company were unable to renew
its agreement with Netscape, the Company's Websites would lose a material
portion of their traffic, traffic on competing services could substantially
increase, and the Company's Websites could otherwise become less attractive to
advertisers, which would have a material adverse effect on the Company's
business, results of operations and financial condition. In addition, if any
replacement agreement with Netscape is on materially worse terms than those of
the Company's existing Netscape Agreement, there could be a material adverse
effect on the Company's business, results of operations and financial
condition. A traffic reduction could, in turn, result in advertisers on the
Company's Websites, including sponsors and partners, terminating their
contracts with the

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<PAGE>

Company, as such contracts are typically of short duration and terminable on
relatively short notice, or reducing the number of impressions purchased.
Furthermore, the Company's contracts with advertisers and sponsors generally
guarantee a minimum number of page views, and a failure to achieve the minimum
page views could result in a reduction in payments to the Company or compel
the Company to provide "make good" impressions if such minimums are not met.
If the Company is unable to develop viable alternative distribution channels
to Netscape or is otherwise unable to offset a reduction in traffic,
advertising revenues would be materially adversely affected, resulting in a
material adverse affect on the Company's business, results of operations and
financial condition. See "Business--Strategic Alliances."

The Company is also dependent on Website operators that provide links to the
Company's Websites and, for certain elements of the Company's properties, the
Company licenses technology and related databases from third parties,
including telephone directories, e-mail, chat, street mapping and other
similar services. The Company believes that certain of its third party
relationships are important to its ability to attract traffic and advertisers.
Any errors, failures or delays experienced in connection with these third
party technologies and information services could alienate the Company's users
and adversely affect the Company's brand and its business. Although the
Company views these relationships as important direct and indirect factors in
the generation of revenues, most of the Company's arrangements do not include
minimum commitments to use the Company's services or to provide access or
links to the Company's products or services in the future, are not exclusive
and generally have a term of only one to three years. In addition, there can
be no assurance that the Company's partners regard their relationship with the
Company as important to their own respective businesses and operations, that
they will not reassess their commitment to the Company's products or services
at any time in the future, or that they will not develop their own competitive
products or services. There can be no assurance that the Company's existing
relationships will result in sustained business partnerships, successful
product or service offerings or the generation of significant revenues for the
Company. Failure of one or more of the Company's partnering relationships to
achieve or maintain market acceptance or commercial success, or the
termination of one or more successful partnering relationships, could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the termination of the Company's position on
a Web browser, or the grant to a competitor of an exclusive arrangement with
respect to positioning on a Web browser, would significantly reduce traffic on
the Company's Websites, which would have a material adverse effect on the
Company's business, results of operations and financial condition.

Intense Competition. The market for Internet products and services is highly
competitive. In addition, the market for Internet advertising and electronic
commerce arrangements is intensely competitive and the Company expects that
competition will continue to intensify. Although the Company believes that the
diverse segments of the Internet market will provide opportunities for more
than one supplier of products and services similar to those of the Company, it
is possible that a single supplier may dominate one or more market segments.
The Company believes that the principal competitive factors in this market are
name recognition, distribution arrangements, performance, ease of use, a
variety of value-added services, functionality and features, and quality of
support. A number of companies offer competitive products addressing certain
of the Company's target markets. The primary competitors of the Company's
products and services are other companies providing online services, including
America Online (including CompuServe), Digital Equipment Corporation's Alta
Vista, Excite, Inc. (including WebCrawler), Infoseek Corporation, Prodigy
Services, Inc. and Yahoo! Inc. In addition, a number of companies offering
Internet products and services, including direct competitors of the Company,
recently have begun to integrate multiple features within the products and
services they offer to consumers. Integration of Internet products and
services is occurring through development of competing products and through
acquisitions of, or entering into joint ventures and/or licensing arrangements
involving, competitors of the Company. For example, the Web browsers offered
by Netscape and Microsoft, which are the two most widely-used browsers and
substantial sources of traffic for the Company, may incorporate and promote
information search and retrieval capabilities in future releases or upgrades
that could make it more difficult for Internet viewers to find and use the
Company's products and services. Microsoft recently licensed products and
services from Inktomi Corporation ("Inktomi"), a direct competitor of the
Company, and has announced that it will feature and

9
<PAGE>

promote Inktomi services in the Microsoft Network and other Microsoft online
properties. The Company expects that such search services may be tightly
integrated into the Microsoft operating system, the Internet Explorer browser,
and other software applications, and that Microsoft will promote such services
within the Microsoft Network or through other Microsoft-affiliated end-user
services such as MSNBC or WebTV Networks, Inc. In addition, Microsoft and
Netscape have announced an intention to introduce Websites offering services
which are similar to those currently offered by the Company in combination
with Internet navigation features. Specifically, Microsoft has introduced its
own Internet search and navigation product offering under the name "Start".
Furthermore, Netscape has recently announced its intention to launch its own
"portal" Website, which will offer services similar to those currently offered
by the Company and which is expected to compete with the Company's services.
In addition, many large media companies have announced that they are
contemplating developing Internet navigation services and are attempting to
become "gateway" sites for Web users. In the event these companies develop
such "portal" sites, the Company could lose a substantial portion of its user
traffic, which would have a material adverse effect on the Company's business,
results of operations and financial condition. Further, entities that sponsor
or maintain high-traffic Websites or that provide an initial point of entry
for Internet viewers, such as the Regional Bell Operating Companies or
Internet Service Providers ("ISPs") such as Microsoft and America Online,
Inc., currently offer and can be expected to consider further development,
acquisition or licensing of Internet search and navigation functions
competitive with those offered by the Company, or could take actions that make
it more difficult for viewers to find and use the Company's products and
services. Consolidations, integration and strategic relationships involving
competitors of the Company could have a material adverse effect on the
Company's business, results of operations and financial condition.

The Company also competes with metasearch services that allow a user to
search the databases of several catalogs and directories simultaneously. The
Company also competes indirectly with database vendors that offer information
search and retrieval capabilities with their core database products. Tripod
competes with other community-based Websites, including GeoCities, Inc. and
Angelfire Communications, Inc. In the future, the Company may encounter
competition from providers of Web browser software and other Internet products
and services that incorporate search and retrieval features into their
offerings. Many of the Company's existing competitors, as well as a number of
potential new competitors, have significantly greater financial, technical and
marketing resources than the Company. There can be no assurance that the
Company's competitors will not offer Internet products and services that are
superior to those of the Company or that achieve greater market acceptance
than the Company's offerings. Moreover, a number of the Company's current
advertising customers and partners have established relationships with certain
of the Company's competitors, and future advertising customers and partners
may establish similar relationships. The Company competes with online services
and other Website operators as well as traditional off-line media, such as
print and television, for a share of advertisers' total advertising budgets.
There can be no assurance that the Company will be able to compete
successfully against its current or future competitors or that competition
will not have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business--Competition."

Developing Market; Unproven Acceptance of the Company's Products and
Services; Uncertain Adoption of the Internet as an Advertising Medium. The
market for the Company's products and services has only recently begun to
develop, is rapidly evolving and is characterized by an increasing number of
market entrants who have introduced or developed products and services for use
on the Internet. The Company's market is highly dependent upon the increased
use of the Internet for information publication and distribution, commerce,
and on the development of the Internet as an advertising medium. The Company's
future operating results will depend upon the growth of the Internet
advertising and commerce markets, the successful implementation of the
Company's advertising program and the Company's ability to establish
electronic commerce and licensing relationships and other strategic alliances.
There can be no assurance, however, that the Internet advertising or commerce
market will develop as an attractive and sustainable medium, that the Company
will achieve or sustain market acceptance of its products and services or that
the Company will be able to execute its business plan successfully. As is
typical in the case of a new and rapidly evolving industry, demand and market
acceptance for recently introduced products and services are subject to a high
level of uncertainty. The industry is young and

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<PAGE>

has few proven products. Moreover, critical issues concerning the commercial
use of the Internet (including security, reliability, cost, ease of use and
access, quality of service and acceptance of advertising and electronic
commerce) remain unresolved and may impact the growth of the Internet, or the
placement of advertisements on the Internet or the growth of the Internet as a
means of electronic commerce. If commercial use of the Internet does not grow,
if the Internet does not develop as an attractive medium for advertising or
electronic commerce, or if the Internet infrastructure does not effectively
support growth that may occur, the Company's business, results of operations
and financial condition would likely be materially adversely affected.

Because the market for the Company's products and services is new and
evolving, it is difficult to predict the size of this market and growth rate,
if any. There can be no assurance that the market for the Company's products
and services will develop or that demand for the Company's products or
services will emerge or become sustainable. If the market fails to develop,
develops more slowly than expected or becomes saturated with competitors, or
if the Company's products and services do not achieve or sustain market
acceptance, the Company's business, results of operations and financial
condition would likely be materially adversely affected.

Risks Associated with Brand Development. The Company believes that
establishing and maintaining the "Lycos" brand is a crucial aspect of its
efforts to continue to expand and attract its Internet audience and that the
importance of brand recognition will increase in the future due to the growing
number of Internet sites. Promotion and enhancement of the "Lycos" brand will
depend largely on the Company's ability to provide consistently high-quality
products and services, which cannot be assured. If consumers do not perceive
the Company's existing products and services to be of high quality, or if the
Company introduces new products and services or enters into new business
ventures that are not favorably received by consumers, the Company's brand
could be diluted, thereby decreasing the attractiveness of its audiences to
advertisers. See "Business--Strategy."

Risks Associated with Potential Acquisitions and Investments. The Company
has completed, and may in the future pursue, acquisitions of companies,
technologies or assets that complement the Company's business, such as the
recent Tripod and WiseWire acquisitions. There can be no assurance that the
Company will be able to identify additional suitable acquisition candidates
available for sale at reasonable prices, consummate any acquisition or
successfully integrate any acquired business (including Tripod and WiseWire)
into the Company's operations. Acquisitions may result in the potentially
dilutive issuance of equity securities, the incurrence of additional debt, the
write-off of in-process research and development or software acquisition and
development costs, and the amortization of expenses related to goodwill and
other intangible assets, any of which could have a material adverse effect on
the Company's business, results of operations and financial condition. For
example, for the quarter ended April 30, 1998, the Company recorded an in-
process research and development expense of approximately $87.6 million and
goodwill and other intangible assets of approximately $11.0 million in
connection with the acquisitions of Tripod and WiseWire. Acquisitions would
involve numerous additional risks, including difficulties in the assimilation
of the operations, services, products and personnel of the acquired company,
the diversion of management's attention from other business concerns along
with the risks involved in entering markets in which the Company has little or
no experience. Problems with an acquired business could have a material
adverse effect on the performance of the Company. The Company has made, and
may in the future make, investments in companies involved in the development
of technologies or services that are complementary or related to the Company's
operations. The Company has recently made investments in GlobeComm, Inc.
(iName) and Sage Enterprises, Inc. (PlanetAll). These companies are in an
early stage of development and may be expected to incur substantial losses.
There can be no assurance that any investments in such companies will result
in any return, nor can there be any assurance as to the timing of any such
return, or that the Company will not suffer the loss of its entire investment.
See "Business--Recent Acquisitions" and "--Strategic Alliances."

Management of Growth; Need to Establish Infrastructure; Additional
Personnel. The rapid execution necessary for the Company to successfully offer
its products and services and implement its business plan in a

11
<PAGE>

rapidly evolving market requires an effective planning and management process.
The Company's rapid growth has placed, and is expected to continue to place, a
significant strain on the Company's managerial and operational resources. To
manage its growth, the Company must continue to implement and improve its
operational and financial systems and to expand, train and manage its employee
base. Further, the Company will be required to manage multiple relationships
with various customers and other third parties. There can be no assurance that
the Company has made adequate allowances for the costs and risks associated
with this expansion and transition, that the Company's systems, procedures or
controls will be adequate to support the Company's operations, or that the
Company's management will be able to achieve the rapid execution necessary to
offer successfully the Company's products and services and implement its
business plan. The Company's future operating results will also depend on many
factors, including its ability to expand its advertising sales and business
development organizations and expand its support organization commensurate
with the growth of its business. If the Company is unable to manage growth
effectively, the Company's business, results of operations and financial
condition could be materially adversely affected. See "Management."

Risks Associated with International Expansion. International sales,
primarily from licensing the Company's products and services, accounted for
less than 10% of the Company's revenues for the fiscal year ended July 31,
1997 and the six months ended January 31, 1998. As part of its business
strategy, the Company is seeking opportunities to expand its products and
services into international markets. In this regard, in May 1997, the Company
formed Lycos Bertelsmann GmbH & Co. KG in conjunction with Bertelsmann AG to
offer Lycos search services in Europe; in January 1998, the Company licensed
its search technology to LG Internet to offer search services in Korea; and in
March 1998, the Company entered into a joint venture with Sumitomo Corp. and
Internet Initiative Japan, Inc. ("IIJ") to offer search services in Japan. The
Company believes that this expansion is important to the Company's ability to
continue to grow and to market its products and services. In marketing its
products and services internationally, however, the Company will face new
competitors. In addition, the ability of the Company to enter international
markets will be dependent upon the Company's ability to create localized
versions of its products and services. There can be no assurance that the
Company will be successful in creating localized versions of its products and
services, marketing or distributing its products abroad or that, if the
Company is successful, its international revenues will be adequate to offset
the expense of establishing and maintaining international operations. To date,
the Company has limited experience in marketing and distributing its products
internationally. In addition to the uncertainty as to the Company's ability to
establish an international presence, there are certain difficulties and risks
inherent in doing business on an international level, such as compliance with
regulatory requirements and changes in those requirements, export
restrictions, export controls relating to technology, tariffs and other trade
barriers, protection of intellectual property rights, difficulties in staffing
and managing international operations, longer payment cycles, problems in
collecting accounts receivable, political instability, fluctuations in
currency exchange rates and potentially adverse tax consequences. There can be
no assurance that one or more of such factors will not have a material adverse
effect on any international operations established by the Company and,
consequently, on the Company's business, results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Consolidated Financial Statements.

Dependence on the Internet. The use of the Company's products and services
will depend in large part upon the development by others of an infrastructure
for providing Internet access and services. Because global commerce and online
exchange of information on the Internet and other similar open wide area
networks are new and evolving, it is difficult to predict with any certainty
whether the Internet will prove to be a viable commercial marketplace. The
Internet may not prove to be a viable commercial marketplace for a number of
reasons, including lack of acceptable security technologies, potentially
inadequate development of the necessary infrastructure, such as a reliable
network backbone, or timely development and commercialization of performance
improvements, including high speed modems. In addition, to the extent that the
Internet continues to experience significant growth in the number of users and
level of use, there can be no assurance that the Internet infrastructure will
continue to be able to support the demands placed upon it by such potential
growth or that the performance or reliability of the Web will not be adversely
affected by this continued growth. In addition, the Internet could lose its
commercial viability due to delays in the development or adoption of new
standards

12
<PAGE>

and protocols (for example, the next generation Internet Protocol) to handle
increased levels of Internet activity. There can be no assurance that the
infrastructure or complementary services necessary to make the Internet a
viable commercial marketplace will be developed or, if developed, that the
Internet will become a viable commercial marketplace for products and services
such as those offered by the Company. In particular, the Internet has only
recently become a medium for advertising and electronic commerce. If the
necessary infrastructure or complementary services or facilities are not
developed, or if the Internet does not become a viable commercial marketplace
or platform for advertising and electronic commerce, the Company's business,
results of operations and financial condition will be materially adversely
affected.

Risk of Capacity Constraints and System Failure; Advertising Management
System. A key element of the Company's strategy is to generate a high volume
of traffic to its products and services, which the Company makes available
free of charge to users of the Internet. Accordingly, the performance of the
Company's products and services is critical to the Company's reputation, its
ability to attract advertisers to the Company's Websites and the market
acceptance of these products and services. Any system failure that causes
interruptions in the availability, or increases response time, of the
Company's products and services could result in less traffic to the Company's
Websites and, if sustained or repeated, could reduce the attractiveness of the
Company's products and services to advertisers and partners. An increase in
the volume of searches conducted through the Company's products and services
could strain the capacity of the software or hardware deployed by the Company
or the capacity of the Company's network infrastructure, which could lead to
slower response time or system failures. Any failure to expand the capacity of
the Company's hardware or network infrastructure on a timely basis or on
commercially reasonable terms could have a material adverse effect on the
Company's business, results of operations and financial condition. In
addition, as the number of Web pages and users increases, there can be no
assurance that the Company's products and services will be able to scale
proportionately.

The Company is dependent upon Web browsers and Internet and online service
providers for access to its products and services, and users have experienced
difficulties due to browser and provider system failures unrelated to the
Company's systems, products and services. The Company is also dependent on
hardware suppliers for prompt delivery, installation and service of servers
and other equipment and services used to provide its products and services.
Substantially all of the Company's hardware operations are located at its
computer facility located in Pittsburgh, Pennsylvania. The Company also
outsources a portion of its hardware operations to third parties. There can be
no assurance that a system failure at any of these locations would not
adversely affect the performance of the Company's products and services. This
system is vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events. The Company does
not presently have a comprehensive disaster recovery plan. Despite the
implementation of network security measures by the Company, its servers are
also vulnerable to computer viruses, break-ins and similar disruptive
problems. Computer viruses, break-ins or other problems caused by third
parties could lead to interruptions, delays or cessation in service to users
of the Company's products and services. The occurrence of any of these risks
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business--Properties."

The process of managing advertising within large, high traffic Websites such
as the Company's is an increasingly important and complex task. The Company
licenses from a third party an advertising management system. To the extent
that the Company encounters system failures or material difficulties in the
operation of this system, the Company could be unable to deliver banner
advertisements and sponsorships through its Websites. Any extended failure of,
or material difficulties encountered in connection with, the Company's
advertising management system may expose the Company to "make good"
obligations with its advertising customers, which, by displacing advertising
inventory, among other consequences, would reduce revenue and would have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business--Advertising Revenue."

Technological Change and New Products. The market for Internet products and
services is characterized by rapidly changing technology, evolving industry
standards and customer demands, and frequent new product

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<PAGE>

introductions and enhancements. These market characteristics are exacerbated
by the emerging nature of this market and the fact that many companies are
expected to introduce new Internet products in the near future. The Company's
future success will depend in significant part on its ability to continually
improve the performance, features and reliability of the Lycos search and
navigation services in response to both evolving demands of the marketplace
and competitive product offerings, and there can be no assurance that the
Company will be successful. In addition, a key element of the Company's
business strategy is the development, introduction and integration of new
products that capitalize on the increasing use of the Internet. There can be
no assurance that the Company will be successful in developing or integrating
such products or services or that such products and services will meet with
market acceptance. In addition, new product releases by the Company may
contain undetected errors that require significant design modifications,
resulting in a loss of customer confidence and viewer support, which will
adversely affect the use of the Company's products and services and,
consequently, the Company's business, results of operations and financial
condition. See "Business--Strategy" and "--Technology; Intellectual Property
and Property Rights."

Intellectual Property and Proprietary Rights. The Company's success depends
significantly upon its proprietary technology. The Company currently relies on
a combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect its proprietary rights. The
Company generally enters into confidentiality agreements with its employees
and with its consultants and partners. The Company has registered and applied
for registration of certain service marks and trademarks, and will continue to
evaluate the registration of additional service marks and trademarks, as
appropriate. In addition, Carnegie Mellon University ("CMU") has been issued a
patent in the United States relating to Lycos' search and indexing technology,
which has been licensed to the Company on a perpetual basis. There can be no
assurance that such patent will not be challenged, and if such challenges are
brought, that the patent will not be invalidated. There also can be no
assurance that the Company will develop proprietary products or technologies
that are patentable, that any issued patent will provide the Company with any
competitive advantages or will not be challenged by third parties, or that the
patents of others will not have a material adverse effect on the Company's
ability to do business. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's products or services or to obtain and use information that the
Company regards as proprietary. The laws of some foreign countries do not
protect proprietary rights to as great an extent as do the laws of the United
States and the Company does not currently have any patents or patent
applications pending in any foreign country. There can be no assurance that
the Company's means of protecting its proprietary rights will be adequate or
that the Company's competitors will not independently develop similar
technology or duplicate the Company's products or design around patents issued
to the Company or other intellectual property rights of the Company.

There have been substantial amounts of litigation in the computer industry
regarding intellectual property rights. There can be no assurance that third
parties will not in the future claim infringement by the Company with respect
to current or future products, trademarks or other proprietary rights, that
the Company will counterclaim against any such parties in such actions or that
if the Company makes claims against third parties with respect thereto, that
any such party will not counterclaim against the Company in such actions. Any
such claims or counterclaims could be time-consuming, result in costly
litigation, diversion of management's attention, cause product release delays,
require the Company to redesign its products or require the Company to enter
into royalty or licensing agreements, any of which could have a material
adverse effect upon the Company's business, results of operations and
financial condition. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to the Company, or at all. See
"Business--Technology; Intellectual Property and Proprietary Rights."

Government Regulation and Legal Uncertainties. The Company is not currently
subject to direct regulation by any government agency, other than regulations
applicable to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Web. However,
due to the increasing popularity and use of the Web, it is possible that a
number of laws and regulations may be adopted with respect to the Web,
covering issues such as user privacy, pricing, characteristics and quality of
products

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<PAGE>

and services. For example, the Company may be subject to the provisions of the
recently enacted Communications Decency Act (the "CDA"). Although the manner
in which the CDA will be interpreted and enforced and its effect on the
Company's operations cannot be determined, it is possible that the CDA could
expose the Company to substantial liability. The CDA could also dampen the
growth in the use of the Web generally and decrease the acceptance of the Web
as a communications and commercial medium, and could, thereby, have a material
adverse effect on the Company's business, results of operations and financial
condition. The adoption of any additional laws or regulations may decrease the
growth of the Web, which could in turn decrease the demand for the Company's
services and products or increase the Company's cost of doing business or
otherwise have a material adverse effect on the Company's business, results of
operations or financial condition.

Due to the global nature of the Web, it is possible that, although
transmission of the Company's services originate from its operations centers
in New Jersey and Pennsylvania, the governments of other states and foreign
countries might attempt to regulate the Company's transmissions or prosecute
the Company for violations of their laws. There can be no assurance that
violations of local laws will not be alleged or charged by state or foreign
governments, that the Company might not unintentionally violate such law or
that such laws will not be modified, or new laws enacted, in the future. It is
also possible that states or foreign countries may seek to impose sales taxes
on out of state companies that engage in commerce over the Internet. In the
event that states or foreign countries succeed in imposing sales or other
taxes on Internet commerce, the growth of the use of the Internet for commerce
could slow substantially. Any of the foregoing developments could have a
material adverse effect on the Company's business, results of operations or
financial condition.

Dependence on Key Personnel. The Company's performance is substantially
dependent on the performance of its executive officers and key employees, all
of whom have worked together for only a short period of time. The Company does
not have in place key person life insurance policies on any of its employees.
The loss of the services of any of its executive officers or other key
employees could have a material adverse effect on the business, results of
operations or financial condition of the Company. The Company is heavily
dependent upon its ability to attract, retain and motivate skilled technical
and managerial personnel. The Company's future success also depends on its
continuing ability to identify, hire, train and retain other highly qualified
technical and managerial personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will be able to attract, hire,
assimilate or retain other highly qualified technical and managerial personnel
in the future. The inability to attract, hire, assimilate or retain the
necessary technical and managerial personnel could have a material adverse
effect upon the Company's business, results of operations or financial
condition. See "Management."

Liability for Information Retrieved from the Internet. Because material may
be downloaded by the online or Internet services operated or facilitated by
the Company or the Internet access providers with which the Company has
relationships, and be subsequently distributed to others, it is possible that
claims will be made against the Company on the basis of defamation,
negligence, copyright or trademark infringement or other theories based on the
nature and content of such materials, including claims based on the Company
providing access to obscene, lascivious or indecent information. Although the
Company carries general liability insurance, the Company's insurance may not
cover potential claims of this type, or may not be adequate to indemnify the
Company for all liability that may be imposed. Any imposition of liability
that is not covered by insurance or is in excess of insurance coverage could
have a material adverse effect on the Company's business, results of
operations or financial condition.

Year 2000 Compliance. The "Year 2000" issue concerns the potential exposures
related to the automated generation of business and financial misinformation
resulting from the application of computer programs which have been written
using two digits, rather than four, to define the applicable year of business
transactions. The Company does not anticipate any significant costs, problems
or uncertainties associated with becoming Year 2000 compliant. Failure of the
Company or its software providers to adequately address the Year 2000 issue
could result in misstatement of reported financial information or otherwise
adversely affect the Company's business operations.

15
<PAGE>

Volatility of Stock Price. The price of the Company's Common Stock has been
and may continue to be subject to wide fluctuations in response to a number of
events and factors, such as quarterly variations in results of operations,
announcements of new technological innovations or new products and media
properties by the Company or its competitors, changes in financial estimates
and recommendations by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable to the
Company, and news relating to trends in the Company's markets. In addition,
the stock market in general, and the market prices for Internet-related
companies in particular, have experienced extreme volatility that often has
been unrelated to the operating performance of such companies. These broad
market and industry fluctuations may adversely affect the price of the
Company's Common Stock, regardless of the Company's operating performance. See
"Price Range of Common Stock."

16
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby, assuming a public offering price
of $68.4375 (the last reported sales price of the Common Stock on May 13,
1998), are estimated to be $130,023,438 million (or approximately $159,357,461
million assuming the Underwriters' over-allotment option is exercised in
full), after deducting the estimated underwriting discounts and commissions
and Offering expenses payable by the Company. The Company anticipates that the
net proceeds from the sale of Common Stock offered hereby will be utilized for
general corporate purposes. The Company may use a portion of the net proceeds
of this offering to acquire businesses, products or technologies complementary
to the Company's business. Although the Company actively engages in
discussions with respect to possible acquisitions, it has no present
commitments or agreements with respect to any material transaction.

The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholder. See "Principal and Selling Stockholders."

PRICE RANGE OF COMMON STOCK

The Common Stock is listed on The Nasdaq National Market under the symbol
"LCOS." As of April 30, 1998, there were approximately 450 registered holders
of record of Common Stock and the Company believes that as of such date, there
were approximately 6,000 beneficial owners of Common Stock, based upon
information provided by the Company's Transfer Agent. The following table sets
forth, for the periods indicated, the high and low sales prices per share as
reported by The Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year ended July 31, 1998
Fourth Quarter (through May 13, 1998)....................... $70.50 $56.69
Third Quarter............................................... 79.13 35.19
Second Quarter.............................................. 42.00 25.25
First Quarter............................................... 42.00 16.25
Year ended July 31, 1997
Fourth Quarter.............................................. 19.25 11.19
Third Quarter............................................... 22.75 12.00
Second Quarter.............................................. 18.75 9.50
First Quarter............................................... 12.75 5.75
Year ended July 31, 1996
Fourth Quarter.............................................. 19.25 5.88
Third Quarter (commencing April 2, 1996).................... 29.25 14.00
</TABLE>

The last reported sales price of the Common Stock on The Nasdaq National
Market on May 13, 1998 was $68.4375 per share.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on shares of its
Common Stock. The Company currently intends to retain all of its earnings to
finance the development and expansion of its business and therefore does not
intend to declare or pay cash dividends on its Common Stock in the foreseeable
future. Any future declaration and payment of dividends will be subject to the
discretion of the Board of Directors of the Company, will be subject to
applicable law and will depend upon the Company's results of operations,
earnings, financial condition, contractual limitations, cash requirements,
future prospects and other factors deemed relevant by the Company's Board of
Directors.

17
<PAGE>

CAPITALIZATION

The following table sets forth: (i) the capitalization of the Company at
January 31, 1998; (ii) the pro forma capitalization of the Company at January
31, 1998 to give effect to the acquisitions of Tripod and WiseWire and the
investments in GlobeComm, Inc. and Sage Enterprises, Inc.; and (iii) the
adjusted pro forma capitalization of the Company at January 31, 1998 to give
effect to the sale of the 2,000,000 shares of Common Stock offered by the
Company hereby, assuming a public offering price of $68.4375 (the last
reported sales price of the Common Stock on May 13, 1998) and after deducting
estimated underwriting discounts and commissions and estimated Offering
expenses payable by the Company. See "Use of Proceeds."

<TABLE>
<CAPTION>
AT JANUARY 31, 1998
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Long-term debt, less current
portion............................. -- $ 230,302 $ 230,302
Stockholders' equity:
Preferred stock, $.01 par value per
share, 5,000,000 shares
authorized; no shares issued and
outstanding....................... -- -- --
Common Stock, $.01 par value per
share, 40,000,000 shares
authorized;
14,443,638 shares issued and
outstanding, actual;
16,595,582 shares issued and
outstanding, pro forma;
18,595,582 shares issued and
outstanding, pro forma as
adjusted(1)....................... $ 144,436 165,955 185,955
Additional paid-in capital......... 50,484,069 159,905,587 289,909,024
Treasury stock..................... (1,747) (1,747) (1,747)
Deferred compensation.............. (139,606) (139,606) (139,606)
Accumulated deficit................ (11,403,810) (99,003,810) (99,003,810)
------------ ------------ ------------
Total stockholders' equity....... 39,083,342 60,926,379 190,949,817
------------ ------------ ------------
Total capitalization........... $ 39,083,342 $ 61,156,681 $191,180,119
============ ============ ============
</TABLE>
- --------
(1) Does not include an aggregate of 2,733,987 shares of Common Stock issuable
upon exercise of options and warrants outstanding on January 31, 1998.

18
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below under the caption
Consolidated Statements of Operations Data with respect to the years ended
July 31, 1997 and 1996 and for the period from inception (June 1, 1995) to
July 31, 1995 and under the caption Consolidated Balance Sheet Data at July
31, 1997, 1996 and 1995 are derived from the consolidated financial statements
of the Company and its subsidiary, which financial statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants.
The selected consolidated financial data presented below under the caption
Consolidated Statements of Operations Data with respect to the six months
ended January 31, 1998 and January 31, 1997, and under the caption
Consolidated Balance Sheet Data at January 31, 1998 and January 31, 1997, are
derived from the unaudited consolidated financial statements of the Company.
In the opinion of management, the unaudited consolidated financial statements
have been prepared on the same basis as the audited consolidated financial
statements and include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the financial position and
results of operations for such periods. The results of operations for the six
month period ended January 31, 1998 are not necessarily indicative of the
results that may be expected for the fiscal year ending July 31, 1998. The
following selected consolidated financial data should be read in conjunction
with the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus or incorporated by reference
herein.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
INCEPTION JULY 31, JANUARY 31,
(JUNE 1, 1995) TO ---------------- ------------------
JULY 31, 1995 1996 1997 1997 1998
----------------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues:
Advertising ........... $ -- $ 4,478 $17,417 $ 7,112 $ 15,984
License, product and
other................. 5 779 4,856 1,555 5,922
------ ------- ------- -------- --------
Total revenues....... 5 5,257 22,273 8,667 21,906
Cost of revenues........ 28 3,225 4,732 1,928 4,695
------ ------- ------- -------- --------
Gross profit............ (23) 2,032 17,541 6,739 17,211
Operating expenses:
Research and
development........... 16 907 4,304 1,944 3,171
In-process research
and development....... -- 452 -- -- --
Sales and marketing.... 29 4,749 19,130 9,372 12,790
General and
administrative........ 37 1,726 2,857 1,317 1,945
------ ------- ------- -------- --------
Total operating
expenses............ 82 7,834 26,291 12,633 17,906
------ ------- ------- -------- --------
Operating loss.......... (105) (5,802) (8,750) (5,894) (695)
Interest income......... -- 714 2,130 1,123 1,105
------ ------- ------- -------- --------
Net income (loss)....... $ (105) $(5,088) $(6,620) $ (4,771) $ 410
====== ======= ======= ======== ========
Basic earnings (loss)
per share(1)........... $(0.01) $ (0.42) $ (0.48) $ (0.35) $ 0.03
====== ======= ======= ======== ========
Diluted earnings (loss)
per share.............. $(0.01) $ (0.42) $ (0.48) $ (0.35) $ 0.03
====== ======= ======= ======== ========
Shares used in computing
basic earnings (loss)
per share.............. 11,013 11,992 13,795 13,793 14,175
====== ======= ======= ======== ========
Shares used in computing
diluted earnings (loss)
per share.............. 11,013 11,992 13,795 13,793 14,708
====== ======= ======= ======== ========
<CAPTION>
AT JULY 31, AT JANUARY 31,
----------------------- ------------------
1995 1996 1997 1997 1998
------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash
equivalents............ $ -- $44,142 $40,766 $38,467 $ 41,351
Working capital......... 329 39,974 38,129 35,799 38,960
Total assets............ 1,317 53,661 65,419 53,754 71,701
Long-term debt, net of
current portion........ -- -- -- -- --
Total stockholders'
equity................. 1,145 44,106 37,647 39,422 39,083
</TABLE>
- --------
(1) Net earnings (loss) per share is calculated using the weighted average
number of Common Stock and common stock equivalent shares outstanding
during the respective periods. See Note 1 of Notes to Consolidated
Financial Statements.

19
<PAGE>

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

The matters discussed in this Prospectus contain forward-looking statements
that involve risks and uncertainties. The forward-looking statements contained
herein are based on current expectations and entail various risks and
uncertainties that could affect the Company's actual results and cause actual
results to differ materially from those discussed herein. For a more detailed
discussion of these and other business risks, see "Risk Factors."

OVERVIEW

Lycos, "Your Personal Internet Guide," is a "New Generation Online Service"
that offers a network of globally branded media properties and aggregated
content distributed primarily through the World Wide Web. Under the "Lycos"
brand, the Company provides guides to online content, aggregated third party
content, Web search and directory services and community and personalization
features. The Company was formed in June 1995 by CMG@Ventures, a strategic
investment and development partnership of CMG Information Services, Inc.
("CMGI"), to license on an exclusive basis (with certain limited exceptions)
from Carnegie Mellon University ("CMU") the Lycos Internet search and indexing
technology, developed primarily by Dr. Michael L. Mauldin, and associated
intellectual property rights. From inception (June 1, 1995) to July 31, 1995
(the "Inception Period"), the Company's operating activities related primarily
to the negotiation and execution of the License Agreement with CMU in
connection with the license of the Lycos search and indexing technology and
related intellectual property rights from CMU, recruiting personnel, raising
capital, purchasing operating assets and performing product development. The
Company recognized its initial license revenues in July 1995.

In October 1995, the Company acquired Point Communications, the publisher of
Point Reviews, an online review and rating guide, in exchange for the issuance
of 526,316 shares of Common Stock and options to acquire 343,248 shares of
Common Stock to the sole stockholder of Point Communications. In February
1998, the Company acquired Tripod, Inc., a leading new generation online
community service, in exchange for the issuance of 1,278,758 shares of Common
Stock and the assumption of options and warrants to acquire an additional
284,605 shares of Common Stock. In April 1998, the Company acquired WiseWire,
a leader in delivering targeted content to Websites, in exchange for the
issuance of 722,672 shares of Common Stock and the assumption of options to
acquire an additional 101,583 shares of Common Stock.

Since its inception, the Company has rapidly expanded into a global Internet
resource used daily by millions of people throughout the world. For the fiscal
year ended July 31, 1997 and the six months ended January 31, 1998, the
Company had revenues of $22.3 million and $21.9 million, respectively,
representing increases of 324% and 153% as compared to prior periods. The
Company generates revenues primarily through selling advertising and
sponsorships, electronic commerce and by licensing its products and technology
to businesses seeking to enhance the value of their Internet products and
services.

The Company has a limited operating history upon which an evaluation of the
Company and its prospects can be based. The Company and its prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets. There can be no assurance that
the Company will be successful in addressing such risks. The limited operating
history of the Company makes the prediction of future results of operations
difficult or impossible, and therefore the recent revenue growth experienced
by the Company should not be taken as indicative of the rate of growth, if
any, that can be expected in the future. The Company has incurred significant
net losses since inception. Although the Company was profitable in the six
months ended January 31, 1998, the Company reported a loss of $5.90 per share
(a $0.15 loss per share before amortization and one-time acquisition related
charges) for the quarter ended April 30, 1998 and there can be no assurance
that the Company will sustain revenue growth or return to profitability in the
future.

As a result of the Company's limited operating history, the Company does not
have historical financial data for any significant period of time on which to
base planned operating expenses. The Company's expense levels

20
<PAGE>

are based in part on its expectations as to future revenues and to a large
extent are fixed. Quarterly sales and operating results generally depend on
the advertising, electronic commerce, license fees and other revenues received
within the quarter, which are difficult to forecast. Because the Company's
expense levels are based upon anticipated advertising, electronic commerce and
licensing revenue, the Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in relation to the Company's expectations would have an
immediate adverse impact on the Company's business, results of operations and
financial condition. In addition, the Company plans to significantly increase
its operating expenses to fund greater levels of research and development,
increase its sales and marketing operations, develop new distribution
channels, broaden its customer support capabilities, maintain brand identity
and pursue strategic alliances. In the future, leading Websites, browser
providers and other distribution channels may require payments or other
consideration in exchange for providing access to the Company's products and
services, such as the Company's agreement with Netscape, which expires on May
31, 1998. Additionally, the Company may incur costs pertaining to the
introduction or enhancement of services by the Company or the acquisition of
businesses or technologies. To the extent that such expenses precede or are
not subsequently followed by increased revenues, the Company's business,
results of operations and financial condition could be materially adversely
affected.

The Company's operating results may fluctuate significantly in the future as
a result of a variety of factors, some of which are outside of the Company's
control. These factors include general economic conditions, specific economic
conditions in the Internet industry, usage of the Internet, the level of
traffic to the Company's Websites, demand for Internet advertising and
electronic commerce, the addition or loss of advertisers or electronic
commerce sponsors, seasonal trends in advertising sales, the advertising
budgeting cycles of individual advertisers, capital expenditures and other
costs relating to the expansion of operations, incurrence of costs relating to
acquisitions like Tripod and WiseWire, the introduction of new products or
services by the Company or its competitors, the mix of services sold, the
channels through which those services are sold, and pricing changes. As a
strategic response to a changing competitive environment, the Company may
elect from time to time to make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on the
Company's business, results of operations and financial condition. Due to the
nascent nature of the Internet industry, the Company believes that period to
period comparisons of its operating results are not meaningful and should not
be relied upon for an indication of future performance. The Company also has
experienced, and expects to continue to experience, seasonality in its
business, with user traffic on the Company's Websites and the Websites of its
partners being lower during the summer and year-end vacation and holiday
periods, when usage of the Web has typically declined. Due to all of the
foregoing factors, it is likely that in some future quarter, the Company's
operating results may be below the expectations of analysts and investors. In
such event, the price of the Company's Common Stock would likely be materially
adversely affected.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JANUARY 31, 1998 COMPARED TO SIX MONTHS ENDED JANUARY 31,
1997

Total revenues. Total revenues for the six months ended January 31, 1998
were $21.9 million versus $8.7 million for the six months ended January 31,
1997, as a result of the growth in the number of advertisers as well as an
increase in the average contract value. As of January 31, 1998, deferred
revenues, including billings in excess of revenues, increased to $20.5
million, compared to $17.0 million at July 31, 1997 attributable to
advertising contracts and guaranteed commitments under license and electronic
commerce agreements for which there are significant obligations of the Company
remaining.

Advertising revenues. The Company's advertising revenues are derived from
the sale of advertising on its Websites, primarily through banner
advertisements and sponsorships. Advertising contracts generally have a term
of one to twelve months and are primarily sold as: (i) a "run of site"
contract under which a customer is guaranteed a number of impressions; (ii) a
"key word" contract in which a customer purchases the right to advertise in
connection with specific word searches; or (iii) a "targeted" contract in
which the customer purchases a specified number of impressions in one of the
Web Guides or on a specific page or service.

21
<PAGE>

Advertising revenues were $16.0 million for the six months ended January 31,
1998, representing 73% of total revenues, as compared to advertising revenues
of $7.1 million for the six months ended January 31, 1997, which represented
82% of total revenues. The top ten customers accounted for 27.4% of
advertising revenues in the six months ended January 31, 1998 as compared to
31.8% of advertising revenues in the six months ended January 31, 1997. The
increase in advertising revenues is primarily the result of an increase in the
number of advertisers and an increase in average contract size.

License, product and other revenues. The Company's license, product and
other revenues are derived principally from (i) license and maintenance fees
associated with the license of its search technology, and (ii) placement or
"slotting" fees as well as royalties on the sale of goods and services
originating from its Websites from electronic commerce customers.

License, product and other revenues were $5.9 million for the six months
ended January 31, 1998, representing 27% of total revenues, as compared to
license, product and other revenues of $1.6 million for the six months ended
January 31, 1997, which represented 18% of total revenues. The increase in
license, product and other revenue is attributable primarily to the addition
of several new electronic commerce agreements.

Cost of revenues. Cost of revenues consists primarily of expenses associated
with the ongoing maintenance and support of the Company's products and
services, including compensation, consulting fees, equipment costs, networking
and other related indirect costs, as well as royalty payments to the Company's
content providers. Cost of revenues were $4.7 million for the six months ended
January 31, 1998, representing 21% of total revenues, as compared to cost of
revenues of $1.9 million for the six months ended January 31, 1997, which
represented 22% of total revenues.

Research and development. Research and development expenses consist
primarily of equipment and salary costs for the Company's research and
development staff. Research and development expenses were $3.2 million for the
six months ended January 31, 1998, representing 15% of total revenues, as
compared to research and development expenses of $1.9 million for the six
months ended January 31, 1997, which represented 22% of total revenues. The
overall increase in research and development expenses was primarily due to
increased engineering staffing to continue to develop and enhance the
Company's expanded product offerings, including local language versions of the
Company's products and services.

To date, all research and development costs have been expensed as incurred.
The Company believes that significant investments in research and development
are required to remain competitive. As a consequence, the Company expects to
continue to commit substantial resources to research and development in the
future.

Sales and marketing. Sales and marketing expenses consist primarily of
compensation, advertising, promotions, public relations, trade shows, travel
and costs of marketing literature. Sales and marketing expenses also include
the expense of the Company's "Premier Provider" Agreements with Netscape, as
further described below. Sales and marketing expenses were $12.8 million for
the six months ended January 31, 1998, representing 58% of total revenues, as
compared to sales and marketing expenses of $9.4 million for the six months
ended January 31, 1997, which represented 108% of total revenues. The
increases in sales and marketing expenses in absolute terms were due to the
addition of sales and marketing personnel, increased commissions associated
with higher sales, and expenses pertaining to the Company's expanded
advertising, marketing and public relations campaign. The Company expects
continued increases in sales and marketing expenses in future periods.

In March 1997, the Company renewed its one year "Premier Provider" Agreement
(the "1997 Agreement") with Netscape pursuant to which the Company was
designated one of four "Premier Providers" of search and navigation services
accessible from the "Net Search" button on the Netscape browser. Under the
terms of the 1997 Agreement, the Company was obligated to make installment
payments totaling $4.7 million over the term

22
<PAGE>

of the 1997 Agreement, subject to adjustments under certain circumstances. The
Company recognizes the cost of the 1997 Agreement ratably over the term of the
1997 Agreement with the cost included in sales and marketing expense.

General and administrative. General and administrative expenses consist
primarily of compensation, rent expenses and fees for professional services.
General and administrative expenses were $1.9 million for the six months ended
January 31, 1998, representing 9% of total revenues, as compared to general
and administrative expenses of $1.3 million for the six months ended January
31, 1997, which represented 15% of total revenues. The increases in spending
were primarily due to the expansion of the Company's corporate infrastructure,
including the addition of finance and administrative personnel and increased
costs for professional services.

Interest income. Interest income was approximately $1.1 million for six
months ended January 31, 1998, as compared to interest income of $1.1 million
for the six months ended January 31, 1997. Interest income was generated from
investment of the Company's cash equivalents.

Income taxes. The Company has not recorded an income tax benefit because it
has incurred net operating losses since Inception. As of January 31, 1998, the
Company had approximately $500,000 in Federal and State net operating loss
carryforwards. Of this amount, approximately $276,000 relates to the
acquisition of Point Communications and will reduce goodwill when utilized.
The Federal net operating losses will expire beginning in 2010 if not
utilized. The State net operating losses will expire beginning in 2000 if not
utilized. A portion or all of net operating loss carryforwards which can be
utilized in any year may be limited by changes in ownership of the Company,
pursuant to Section 382 of the Internal Revenue Code and similar statutes.

FISCAL 1997 COMPARED TO FISCAL 1996

Total revenues. Total revenues for the year ended July 31, 1997 increased
$17.0 million, or 324%, to $22.3 million from $5.3 million for the year ended
July 31, 1996, as a result of the growth in the number of advertisers as well
as an increase in the average contract size and value. As of July 31, 1997,
deferred revenues increased 371% to $14.6 million attributable to license
agreements for which there are significant obligations of the Company
remaining, compared to $3.1 million at July 31, 1996. Billings in excess of
revenues increased $1.0 million, or 71%, to $2.4 million attributable to
billings in excess of revenues on advertising contracts, compared to $1.4
million at July 31, 1996.

Advertising revenues. Advertising revenues increased $12.9 million, or 287%,
to $17.4 million for the year ended July 31, 1997, representing 78% of total
revenues. For the year ended July 31, 1996, advertising revenues were $4.5
million, representing 85% of total revenues. The increase in advertising
revenue is primarily the result of an increase in the number of advertisers
and an increase in the average contract size.

License, product and other revenues. License, product and other revenues
increased $4.1 million, or 529%, to $4.9 million for the year ended July 31,
1997, representing 22% of total revenues. For the year ended July 31, 1996,
license, product and other revenues were $779,000, representing 15% of total
revenues. For the year ended July 31, 1997, the increase in license, product
and other revenue is attributable primarily to the addition of several new
partners during the year, including, among others, Bertelsmann, Blockbuster
Entertainment and GTE.

Cost of revenues. Cost of revenues increased $1.5 million, or 47%, to $4.7
million for the year ended July 31, 1997, representing 21% of total revenues.
Cost of revenues for the year ended July 31, 1996 were $3.2 million,
representing 60% of total revenues. The increase in cost of revenues is
primarily attributable to increased network, bandwidth and related expenses
associated with the increased traffic to the Company's Website.

23
<PAGE>

Research and development. Research and development expenses increased $3.4
million, or 374%, to $4.3 million for the year ended July 31, 1997,
representing 19% of total revenues for the year. For the year ended July 31,
1996, research and development expenses were $907,000, or 17% of total
revenues. The overall increase in research and development expenses was
primarily due to increased engineering staffing to continue to develop and
enhance all of the Company's different product lines.

Sales and marketing. Sales and marketing expenses increased $14.4 million,
or 306%, to $19.1 million for the year ended July 31, 1997, representing 86%
of total revenues for the year. For the year ended July 31, 1996, sales and
marketing expenses were $4.7 million, representing 89% of total revenues. The
spending increases were due to the addition of sales and marketing personnel,
increased commissions, and expenses associated with the Company's expanded
advertising, marketing and public relations campaign.

General and administrative. General and administrative expenses increased
$1.2 million, or 71%, to $2.9 million for the year ended July 31, 1997,
representing 13% of total revenues. For the year ended July 31, 1996, general
and administrative expenses were $1.7 million, representing 32% of total
revenues. The increases in spending were primarily due to the expansion of the
Company's corporate infrastructure, including the addition of finance and
administrative personnel, installation of information systems and increased
costs for professional services.

Interest income. Interest income increased $1.4 million, or 194%, to $2.1
million for the year ended July 31, 1997, representing 9% of total revenues.
Interest income was approximately $714,000 for the year ended July 31, 1996,
representing 14% of total revenues. Interest income was generated from the
investment of net proceeds received upon the closing of the Company's initial
public offering in April 1996.

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation" requires that companies either
recognize compensation expense for grants of stock, stock options and other
equity instruments based on fair value, or provide pro forma disclosure of net
income or loss and earnings or loss per share in the notes to the financial
statements. The Company adopted the disclosure provisions of SFAS 123 in 1997
and it has applied APB Opinion 25 and related interpretations in accounting
for its plans. Accordingly, other than compensation charges recognized for
options granted with exercise prices at less than fair market value in fiscal
1995 and fiscal 1996, no compensation expense has been recognized under SFAS
123 for the Company's stock option plans.

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which establishes standards for computing and
presenting earnings per share ("EPS") and applies to entities with publicly
held common stock or potential common stock. This statement is effective for
financial statements issued for both interim and annual periods ending after
December 15, 1997, and requires restatement of all prior period EPS data. The
Company adopted this standard in January 1998.

In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income." This statement establishes standards
for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. This statement is effective for fiscal years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. The Company believes
that this pronouncement will not have a material adverse effect on its results
of operations.

In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information."
This statement establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
This statement is effective for financial statements for periods beginning
after December 15, 1997. Because the Company operates within a single
operating segment, adoption of this statement is currently not expected to
have a material impact on the Company's consolidated financial statements and
footnote disclosures.

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LIQUIDITY AND CAPITAL RESOURCES

At January 31, 1998, the Company had cash and cash equivalents of
approximately $41.4 million. The Company regularly invests excess funds in
short-term money market funds, government securities and commercial paper.

The Company used cash from operations of approximately $172,000 during the
six months ended January 31, 1998, due primarily to increases in accounts
receivable, license fees receivable and decreases in accrued expenses and
billings in excess of revenues, offset by net income and decreases in prepaid
expenses and increases in accounts payable and deferred revenues. The
Company's primary investing activity during the year has been, and further
expenditures are anticipated to be, for the purchase of computers and office
equipment to support the Company's continued growth. During the six months
ended January 31, 1998, the Company also used approximately $1.3 million for
payments under the agreement with Netscape.

As of January 31, 1998, the Company is committed to noncancelable minimum
payments totaling $16.7 million under operating lease agreements that expire
at various times through 2003.

At January 31, 1998, the Company had deferred revenues of $19.7 million
representing primarily license fees to be earned in the future on
noncancelable license agreements. In addition, the Company had billings in
excess of revenues from advertising contracts of $782,000 at January 31, 1998.

The Company believes that the net proceeds from this Offering, together with
its available funds and cash flows expected to be generated by operations, if
any, will be sufficient to fund its working capital and capital expenditure
requirements for at least the next twelve months. Thereafter, the Company may
need to raise additional funds. The Company may need to raise additional funds
sooner in order to fund more rapid expansion, to develop new or enhanced
products and services, to respond to competitive pressures or to acquire
complementary businesses or technologies. If additional funds are raised
through the issuance of equity securities, the percentage ownership of the
stockholders of the Company will be reduced, stockholders may experience
additional dilution, and such equity securities may have rights, preferences
or privileges senior to those of the Company's Common Stock. There can be no
assurance that additional financing will be available when needed on terms
favorable to the Company or at all. If adequate funds are not available or are
not available on acceptable terms, the Company may be unable to develop or
enhance products or services, take advantage of future opportunities or
respond to competitive pressures, which could have a material adverse effect
on the Company's business, results of operations or financial condition.

Management has reviewed the Company's systems relating to Year 2000 concerns
and believes that the costs for compliance will not be material to the
Company.

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BUSINESS

Since its inception in June 1995, the Company has rapidly expanded into a
global Internet resource used daily by millions of people throughout the
world. The rapidly increasing number of Web users and ubiquitous worldwide
access to the Internet have resulted in the emergence of the Web as a new mass
medium. Jupiter Communications estimates that the Web viewer population will
grow from approximately 49 million viewers in 1997 to approximately 116
million viewers by 2002, and that online advertising revenues will grow from
approximately $940 million in 1997 to approximately $7.7 billion in 2002.
Further, a growing number of users are transacting business over the Web,
including trading securities, buying goods, purchasing airline tickets and
paying bills. Jupiter Communications estimates that the value of goods and
services purchased over the Internet will increase from $2.6 billion in 1997
to $37.5 billion in 2002.

The Company is one of the leading online media services in terms of traffic,
revenues and user reach, serving millions of information requests per day.
According to RelevantKnowledge, the Company's Websites attracted over 15
million unique users during March 1998 and, according to Media Metrix,
approximately 25% of all Web users visited the Company's Websites in such
month. The Company generates revenues primarily through selling advertising
and sponsorships, electronic commerce and by licensing its products and
technology. The Company's Websites have become a widely accepted advertising
medium for several prominent companies, including Coca-Cola, Disney, General
Motors, Hilton, IBM and Visa. The Company has established electronic commerce
and sponsorship relationships with several companies, including AT&T, Barnes &
Noble, CDnow and Preview Travel and, since the beginning of fiscal 1998, has
entered into electronic commerce and sponsorship arrangements providing for
minimum contract revenues of more than $60 million over a three year period.
In addition, Lycos has established strategic licensing and technological
alliances with some of the world's leading corporations, including such
companies as Bertelsmann, Microsoft and Viacom.

The Company's ability to easily adapt its technology in a variety of
languages has made its service a popular global Internet destination, widely
accessible to users throughout the world. In order to expand the international
distribution of the Company's services, in May 1997, the Company entered into
a joint venture with Bertelsmann AG to launch local versions of the Lycos
service throughout Europe, and, in March 1998, the Company entered into a
joint venture agreement with Sumitomo Corp. and Internet Initiative Japan,
Inc. ("IIJ") to offer a localized version of the Lycos service in Japan. The
Company has also recently entered into a license agreement with LG Internet,
Inc. to offer a localized version of the Company's services in Korea. The
Company currently offers localized versions of the Lycos service in Austria,
Belgium, France, Germany, Italy, Japan, Korea, Luxembourg, Spain, Sweden,
Switzerland, the Netherlands and the United Kingdom.

STRATEGY

Aggressively Extend Brand Name Recognition. The Company believes that
continuing to enhance its brand name recognition will be increasingly
important as greater numbers of consumers look to the Internet as a key

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source of information, entertainment and commercial activity. The Company
seeks to continue its brand expansion through advertising campaigns,
personalization of its product line, international partnerships and
distribution relationships. The Company is also extending the Lycos brand name
by licensing its products for use in other media, such as books and CD-ROMs.

Enhance, Expand and Personalize the Company's Content and Services. Lycos
intends to enhance its products and services with additional content, features
and functionality to maintain its position as a leading New Generation Online
Service. The Company's strategy is to differentiate its products and services
from competing companies and increase user loyalty and retention through the
availability of personalized offerings and by expanding the breadth and depth
of its services such that it maintains its position as one of the most popular
destinations on the Web. In order to expand the Company's product offerings,
the Company has completed acquisitions of businesses, technologies, content
and services that are complementary or related to the Company's operations and
may pursue other acquisitions in the future. The Company also incorporates
into its products and services new technologies developed internally or
licensed from other companies which it believes will further differentiate its
offerings and provide viewers with a richer, more satisfying Internet
experience.

Expand Online Community. The Company seeks to make the Lycos service the
first and most frequent stop for Internet users. The Company believes one of
the most effective ways to achieve this is through the creation of a sense of
online community which, in turn, results in increased user affinity to the
site. Products and services such as free personal homepages, personalized e-
mail, topic-based chat services, and personal homepage searches are designed
to create a sense of community among users. By establishing a sense of
community, the Company believes that users will both visit the site more
frequently and remain at the site for a longer duration. The Company believes
that community building will be a major source of traffic and brand loyalty in
the future.

Create Innovative Advertising Solutions. The Company believes that the
traffic flow generated from its products and services provides an attractive
platform for measurable, targeted, cost-effective and interactive advertising
on the Internet. The Company combines technical skills with advertising
industry expertise to provide differentiated solutions to advertisers, helping
them exploit the capabilities of the Internet as an advertising medium. The
Company actively seeks to develop innovative ways for advertisers to reach
their target audiences through the Internet. The Company designs and offers
customized packages which include the ability to change advertisements quickly
and frequently, to link a specific search advertisment to a term or topic, to
target advertisements based on user patterns and demographics, to conduct
advertising test campaigns with rapid result delivery and to track daily usage
statistics.

Pursue Value-Added Electronic Commerce Solutions. The Company believes that
Web-based electronic commerce will continue to grow as an increasing number of
businesses and consumers embrace the Internet as a viable method of purchasing
goods and services. The Company's strategy is to integrate its commerce
offerings into the Lycos service based on the user's information needs. By
integrating the commerce transaction into the online community and
navigational process, the Company believes it will be able to better target
products to potential customers and thereby achieve better results than those
achieved by non-targeted electronic commerce sites and online malls. For
example, through the Company's arrangement with Barnes & Noble, a user who
types a search query on a particular topic will be presented with a link to
the Barnes & Noble Website which contains a list of books on the related
topic.

Expand Distribution Through Strategic Alliances. In order to increase
traffic to the Company's Websites and to extend the Lycos brand
internationally, the Company seeks to enter into strategic relationships with
business partners who offer content, technology and distribution capabilities
as well as marketing and cross-promotional opportunities. In addition, the
Company seeks to partner with key aggregators of users such as AT&T, Microsoft
and Netscape in order to drive additional traffic to its sites. The Company
also seeks to broaden its offering of localized versions of its products and
services to users outside the United States. By creating sites in native
languages with local content that are hosted locally, the Company believes
that it can improve the experience for the international user. The Company has
adopted a strategy of partnering with large local

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companies when entering a new international market in order to leverage the
promotion, marketing and sales strengths of its partners and reduce the costs
associated with global expansion. In addition, the Company believes local
partners provide local expertise and infrastructure that give Lycos an
advantage over its competitors.

RECENT ACQUISITIONS

In February 1998, Lycos completed the acquisition of Tripod. Based in
Williamstown, Massachusetts, Tripod was founded in 1992 and is one of the
largest and fastest growing communities on the Internet, with a particular
emphasis on the 18-34 year-old demographic. Tripod provides its over 1.4
million registered members with the ability to utilize Tripod's personal
publishing tools to create free personal homepages on the Internet.

Tripod's proprietary Homepage Builder technology allows Tripod members to
build free personal Internet homepages in a quick and user-friendly manner.
These homepages are both built and maintained on Tripod's Website
(www.tripod.com). The user-created homepages can then be linked by the user to
any of the community "pods" maintained by Tripod. Within the interest-based
community pods, user-created homepages are combined with professional content
from Tripod's editorial staff. Tripod currently maintains over 65 community
pods and hosts over 2.7 million member-created pages on its Website. Similar
to Lycos, Tripod derives its revenues primarily from advertising, sponsorships
and electronic commerce.

In April 1998, Lycos acquired WiseWire, a leader in delivering targeted
content to Websites. WiseWire finds, filters and organizes content on the
Internet using proprietary intelligent agent technology while building online
communities through content personalization. WiseWire offers a series of
products which personalize content to specific customer needs. For instance,
WiseWire's Community Directory product offers a dynamic online directory of
continually updated content, hierarchically organized allowing end-users to
contribute to the evolution and quality of information. WiseWire's automated
processing and categorization of Websites into a directory format offers more
current listings to users and a less expensive ongoing cost structure for the
Company compared to traditional manually created directories.

PRODUCTS

The Company offers a comprehensive suite of products and services through
its network of globally branded media properties. The Company's Websites,
which can be accessed through the Lycos homepage at www.lycos.com, provide
users with premier Internet navigation functionality, personalized information
resources and online community products. These products and services are
developed internally by the Company or licensed by the Company from third
parties.

PREMIER NAVIGATION FUNCTIONALITY

Lycos offers its users the ability to quickly and easily find information on
the Web by searching through the Company's index of Web documents. Lycos'
primary search and navigation products include:

The Lycos Search. Using the Lycos Search, a user may enter a search term
or terms and review a list of the best matches from all indexed Web pages.
The search results also provide a direct hypertext link to the actual pages
matching the search. The Company believes that its proprietary Lycos Search
provides one of the most comprehensive indices of the Web and is
differentiated from other catalogs based on its speed, ability to index
non-textual information (e.g., pictures and sounds) and relevancy of search
results. In addition to searching the Web, users can search for discussion
groups and personal homepages.

Lycos Guides and Directories. In order to give users an easy-to-use
framework in which to efficiently explore and utilize the wealth of content
on the Internet, Lycos maintains a series of Web guides and directories,
including WebGuides, Top 5% Sites and CityGuide. Lycos' topic-based
WebGuides provide categorized areas of interest that enable users to browse
through groupings of related information.

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WebGuide topics include, among others, Business, Education, Entertainment,
Fashion, Sports and Travel. Each of the WebGuides contains a news briefing
on each topic area and hypertext links to topic sites that allow users to
find relevant information quickly. The WebGuides incorporate the WiseWire
technology which is an automated system of compiling data into a directory
format, enabling the Company to offer a more current directory to users.
Top 5% Sites guide is a collection of critical reviews of what the Company
considers to be among the most popular sites on the Web. Top 5% Sites
permits users to focus on high quality sites and read critical reviews to
determine if the sites are likely to be of interest. Similarly, CityGuide
is a collection of guides to more than 1,200 cities throughout the world
which gives the virtual traveler a snapshot of life in each city or town
and provides hypertext links to Websites that best reflect the hot spots,
history and day-to-day living of each city.

PERSONALIZED CONTENT AND INFORMATION RESOURCES

In order to provide the most personalized and comprehensive experience to
the Lycos user, the Company has developed and integrated a series of products
which allow the user to quickly and easily obtain relevant information. By
providing the ability for users to personalize their Lycos experience and
access personally important information, the Company believes it provides a
value-added service to users which increases their overall utilization of the
Company's Websites. Lycos' personal information resource products include the
following:

Personal Guide and Email. The Personal Guide by Lycos automatically
delivers a personalized view of the Lycos service, including news, weather,
stock quotes, sports scores, horoscopes, lottery results, local television
listings and Website reviews, all based on the user's personal
specifications. Tailored to each individual's preferences, the Personal
Guide enhances and personalizes the user's Internet experience by
eliminating unwanted information and quickly filtering the most relevant
information to the user. The Personal Guide also features a unique contact
management service which allows the Lycos Personal Guide user to maintain a
linked, self-updating address book and scheduler. Lycos also offers its
users a free personalized Web-based e-mail account which can be accessed
using an easy-to-use interface from any computer with an Internet
connection. As Lycos Email users do not need to change their e-mail
addresses when they move or change Internet service providers, the same e-
mail address can be used indefinitely.

Personal and Business News. The Lycos News service provides
comprehensive, around-the-clock coverage of news from around the world and
allows users to search news stories provided by leading news sources such
as Reuters. Personal financial information is also accessible through the
Company's StockFind product offering. StockFind provides financial
information on publicly held companies, mutual funds, money market funds
and the major financial indices and allows users to chart stock prices,
track their personal investment portfolios and receive the latest business
and company-specific news. Similarly, Lycos' Companies Online, built in
cooperation with Dun & Bradstreet, provides searchable access to a vast
amount of information on more than 100,000 public and private companies,
organized into 14 different industry groups. This service offers a way for
users to gather highly relevant information, including management, annual
sales, ownership structure, DUNS number, and provides a direct link to the
Company's Website.

Reference Services. Lycos provides a vast array of products for its users
to locate other individuals, businesses, products and places. PeopleFind, a
comprehensive home address, e-mail address and phone number directory,
assists users in locating individuals worldwide. Yellow Pages, offered in
cooperation with GTE, allows users to locate businesses throughout the
United States by searching according to category, business name, business
address or keyword. Furthermore, once the user locates a business or a
service provider, the user is able to obtain contact information as well as
directions to and a map of the business location. Lycos Classifieds offers
a convenient way for users to both buy and sell goods and services online.
Additionally, Lycos' RoadMaps product allows users to search for and obtain
driving directions to any street address in the United States and map that
address.

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ONLINE COMMUNITY PRODUCTS

Lycos believes that as the Internet continues to grow, online communities
will become an increasingly important aspect of a user's online experience.
Communities are groupings of Internet users organized around topics or areas
of interest in such a way that the user actively contributes to both the
dialogue and content within the community. Lycos believes that as users become
involved with the various Lycos online community products and services, they
become more likely to return to the site in the future. Consequently, Lycos
seeks to develop an active, loyal user base by building significant community
features into the Lycos Network through the following online products:

Chat. Chat creates a "virtual community" in which a participant can
interact in real-time group or one-on-one discussions or participate in
moderated events, buddy lists and bulletin boards. Lycos' chat rooms are
arranged around multiple topics of interest including romance,
entertainment and current events.

Homepages. Through Tripod, Lycos provides users with the ability to
create free personal homepages which are built and maintained on Tripod's
Website. Utilizing a variety of proprietary personal publishing tools,
Tripod users are able to quickly and easily create fully personalized Web-
based homepages with Tripod's proprietary Homepage Builder technology. Once
created by the user, personal homepages can be linked to any of the over 65
community pods currently maintained by Tripod. Within the community pods,
Tripod's editorial staff provides content and organization among a variety
of issues and areas of interest. Tripod's Website can be found at
www.tripod.com.

ADVERTISING REVENUE

The Company currently derives a substantial portion of its revenues from the
sale of advertisements on its Websites, primarily through banner
advertisements and sponsorships. Advertising contracts are primarily sold as:
(1) a "run of site" contract under which a customer is guaranteed a number of
impressions; (2) a "key word" contract in which a customer purchases the right
to advertise in connection with specified word searches; or (3) a "targeted"
contract where the customer purchases a specified number of impressions in one
of the Web Guides or on a specified page or service.

Advertising revenue is generated by placing banner advertisements on any of
the Web pages that are displayed on the Company's Websites. From each
advertisement banner, a viewer can link directly to the advertiser's Website,
thus affording the advertiser the opportunity to directly interact with a
potential customer. The Company's advertising revenues are derived principally
from advertising contracts, which generally have a term of one to twelve
months, in which the Company guarantees a number of impressions (an impression
is a one-on-one view of an advertisement by the end user) for a fixed fee or
on a per-impression basis with an established minimum fee. The Company also
sells advertising on a keyword basis that links an advertisement to a specific
search term or topic (for example, when "automobile" is searched, an
automotive or car manufacturer advertisement appears) and in Web Guides that
link an advertisement to a topic of interest. Keyword and Web Guide
advertising permit advertisers to target advertisements to selected audiences.

The Company advises customers on advertisement placement and design,
enabling them to develop more dynamic advertisements and monitor the
advertisements for effectiveness. To facilitate these services, the Company
provides advertisers with online reports showing advertising impressions and
the number of times users "click on" an ad to visit the advertiser's site. The
Company's standard rates for advertising range from $16 to $100 per one
thousand impressions depending on such factors as the contract length, ad
placement within the site and the targeted nature of the ads.

The Company employs an experienced, direct sales force to address the new
and evolving requirements of the Internet advertising market. The Company has
hired the majority of its sales force from the advertising industry because it
believes that an experienced sales force is critical to initiate and maintain
relationships with advertisers and advertising agencies. The Company employs
advertising sales personnel in New York, San Francisco, Boston, Pittsburgh,
Chicago, Dallas, Philadelphia and Los Angeles. International advertising

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territories are handled primarily by the Company's joint venture partners in
Europe and in Japan, and by LG Internet in Korea. See "--Strategic Alliances."

ELECTRONIC COMMERCE REVENUE

Lycos believes electronic commerce is a natural extension of the Company's
search and navigation services. Through electronic commerce, the Company
partners with merchants to integrate their products into the Lycos service,
making them available for sale to the Company's users. In its electronic
commerce arrangements, the Company generally receives a fixed fee and a share
of the proceeds from online sales. In addition, the Company benefits from
promotional and branding opportunities available from its merchant partners
which create greater demand for the Company's online services. In furtherance
of its strategy to pursue electronic commerce opportunities, during the first
quarter of fiscal 1998, the Company began selling advertising placements and
links separate from the space normally reserved for banner advertisements.
These arrangements are known as sponsorships because they typically involve
the placement of an advertisement or link in a topical Web Guide or on a
search results page as though the advertiser was sponsoring the content on a
specific page. The ad or link is programmed to appear prominently on the same
spot on the page, each time that page of the Web Guide is called for by the
user.

These electronic commerce agreements typically have one to three year terms.
In some instances, the Company has entered into exclusive sponsorship
arrangements for certain commercial categories.

The Company's electronic commerce relationships include, among others,
agreements with the following entities:

. American Greeting Corporation--providing Lycos users with the
opportunity to send traditional and electronic greeting cards;

. AT&T--providing Internet access for Lycos Online as well as the
ability for Lycos users to purchase telecommunication services over
the Internet;

. AutoConnect, LLC--providing Lycos users with the opportunity to
purchase used cars through Lycos' Auto Web Guide, the Lycos Shopping
Network and other contextually relevant areas on the Company's
Website;

. Barnes & Noble, Inc.--providing Lycos users with the opportunity to
purchase books throughout the Company's Website;

. CDnow, Inc.--providing Lycos users with the opportunity to purchase
compact discs and other music-related items;

. Preview Travel, Inc.--providing Lycos users with the opportunity to
book travel arrangements from contextually relevant areas on the
Company's Website; and

. NetSelect, Inc. (Realtor.com)--providing Lycos users with listings of
residential real estate through Lycos' Real Estate Web Guide and
other contextually relevant areas on the Company's Website.

Lycos believes that the market for electronic commerce will continue to
demonstrate significant growth and that the Company is well positioned to
offer vendors an attractive medium through which they may participate in the
electronic commerce market. The Company further believes its high-traffic
levels, established brand and favorable user demographics will allow the
Company to capture increasing portions of such electronic commerce
transactions in the future.

LICENSING REVENUE

The Company licenses its products and technology to leading corporations to
establish and promote its products and services as a ubiquitous, branded media
service. The Company's strategy is to license its products and technology to a
wide-range of companies seeking to enhance the value of their Internet
products and

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services. These companies include media companies, telecommunications
companies, online service providers, software providers and publishers. In
most partner arrangements, the Company receives a license fee, maintenance
fees for product updates and, where applicable, a share of the advertising
revenues, subscription fees or product sales received by licensees. The
partner agreements generally have terms of one to three years. The Company
generally co-brands its products with the products offered by the partner in
order to preserve and enhance Lycos brand recognition. The Company's product
offerings enable its partners to provide a comprehensive set of Internet
navigational services and to maintain the up-to-date information required by
their viewers to keep up with the rapid growth of the Internet without
incurring the extensive costs associated with the internal development of such
products. In addition, the Company's licensing arrangements enable the Company
to create multiple points of entry and alternative distribution channels for
the Company's products and services, build brand awareness, and expand without
the associated infrastructure costs. Lycos has licensed its technology and
brand to numerous partners, including Bertelsmann, GTE, Microsoft and Viacom.
See "--Strategic Alliances."

BRANDING

As one of the most popular sites on the Web, the Company believes that it
has a strong, global brand name and presence. Lycos markets itself as "Your
Personal Internet Guide" with the tagline of "Get Lycos or get lost." This
brand positioning supports Lycos' strategy of providing a contemporary "New
Generation Online Service" combining navigation and community. The Company's
strategy is to build brand awareness through an integrated plan utilizing
online and traditional media, public relations and promotions. The Company's
1997 much-publicized "Sherpa" television spot was run during prime time
network shows in New York, Seattle, San Francisco and Boston, four of the
largest Internet markets in the United States. The Company's media campaign
has also included traditional media such as local radio and print advertising
in consumer and trade magazines. The Company also significantly cross-promotes
through advertising in online media. In addition, the Company is the sponsor
of a NASCAR race car in the Busch Grand National Series and is the sponsor of
a joint marketing program with the New Line Cinema movie "Lost in Space." The
Company plans to continue to promote its brand through traditional and online
media in order to increase brand awareness and increase usage of the Lycos and
Tripod sites.

STRATEGIC ALLIANCES

In order to increase traffic to the Company's Websites and to extend the
Lycos brand internationally, the Company seeks to enter into strategic
relationships with business partners who offer content, technology and
distribution capabilities as well as marketing and cross-promotional
opportunities. In furtherance of this strategy, the Company has established
the following strategic relationships:

Lycos Europe. In May 1997, the Company entered into a joint venture
agreement with Bertelsmann Internet Services to create localized versions
of the Lycos search and navigation service throughout Europe. The joint
venture, named Lycos Bertelsmann GmbH & Co. KG ("Lycos Bertelsmann"), is
owned 50% by Lycos and 50% by Bertelsmann, and was formed to develop local
Internet navigation centers for up to 37 Eastern and Western European
countries. Bertelsmann Internet Services, a subsidiary of Bertelsmann AG
(the world's third-largest media company), has committed to provide $10
million in start-up capital, infrastructure and employees for the venture
while Lycos provides the core technology, technical expertise and the Lycos
brand name. The joint venture leverages Bertelsmann's expansive media
network to secure content, distribution and local presence with Lycos'
technology and brand to create a formidable strategic alliance.

Lycos Japan. In March 1998, Lycos established Lycos Japan KK as the basis
for a joint venture to promote and operate a Japanese version of Lycos'
Website. Lycos' joint venture partners are Sumitomo Corp., one of the
largest conglomerates in Japan, and Internet Initiative Japan ("IIJ"),
Japan's largest Internet service provider. Lycos owns 40% of the joint
venture.

Lycos Korea. In January 1998, Lycos licensed its catalog of Websites and
its search technology to LG Internet, Inc. (a member of the LG--formerly
Lucky Goldstar--group of companies, one of Korea's

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largest conglomerates) for the promotion and operation of a Korean version
of the Lycos Website. The Company will receive a portion of revenues
derived from the sale of advertising, electronic commerce and other
sources.

The Microsoft Active Channel Guide. Lycos was selected by Microsoft as
the exclusive developer and operator of the Microsoft Active Channel Guide
on Microsoft Internet Explorer 4.0. The Active Channel Guide provides users
of Microsoft Internet Explorer 4.0 easy access to a variety of Internet
channels, including news, sports, business, entertainment and lifestyle. By
utilizing Lycos' proprietary search technology, the Active Channel Guide
enables users to quickly and easily locate specific channels of interest
from the many being developed all over the world for Internet Explorer 4.0.
The Active Channel Guide prominently displays the Lycos logo, providing
brand exposure to the multitude of Microsoft Internet Explorer 4.0 users
across the world. In addition, Lycos is the provider of search services to
the World Wide Web from within the Active Channel Guide.

AT&T WorldNet. In April 1998, the Company entered into an agreement with
AT&T WorldNet to provide users of the Company's services a variety of AT&T
services through a co-branded Personal Communications Center available on
the Company's Websites. This service, co-branded as "Lycos Online Powered
by AT&T WorldNet Service," will provide users with an easily accessible
portal to the Web and will serve as the user's gateway to AT&T's
telecommunications services that can be ordered and billed electronically.
Through this alliance, Lycos will also offer various services and content
on AT&T's Websites.

Netscape Premier Search and Navigation Provider. In March 1997, the
Company renewed its one year "Premier Provider" agreement with Netscape
Communications Corporation ("Netscape") for an additional one-year term. As
a result, the Company was designated as one of four "Premier Providers" of
search and navigation services accessible from the "Net Search" button on
the Netscape browser. This premier positioning on this highly-trafficked
service provides branding and promotion as well as a source of distribution
for the Company's products and services. The agreement with Netscape was
scheduled to expire on April 30, 1998, but has been extended through May
31, 1998. There can be no assurance that the Company will be able to enter
into a new arrangement with Netscape on terms and conditions similar to
those contained in the existing agreement, if at all. See "Risk Factors--
Dependence on Netscape, Microsoft and Other Third Party Relationships."

Strategic Investments. Lycos has recently made strategic investments in
two Internet service companies whose products are integrated into the Lycos
services. In March 1998, Lycos acquired a 9.9% ownership stake in
GlobeComm, Inc. (iName), a leading global provider of free Web-based e-mail
products, in exchange for shares of the Company's Common Stock valued at
$4.0 million at the time of the transaction. Lycos utilizes GlobeComm's e-
mail products to provide free, Web-based e-mail to Lycos users.
Additionally, in April 1998, Lycos acquired a 14.8% ownership stake in Sage
Enterprises, Inc. (PlanetAll) in exchange for shares of the Company's
Common Stock valued at $2.5 million at the time of the transaction.
Launched in November 1996, PlanetAll provides through the Internet free
core contact management services to its over 1 million registered members.
PlanetAll allows its members to maintain an "Active Address Book" which is
always up-to-date because each person in an Active Address Book maintains
his or her own record over the Internet. Lycos has integrated PlanetAll's
product offering into its personalization products.

TECHNOLOGY; INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company believes that its innovative, proprietary technology favorably
differentiates Lycos from its competitors. Currently, the underlying database
for most Internet search engines is created through the use of "spiders,"
which are software programs that autonomously roam the Web by following
hypertext links, automatically identifying and collecting material to be
included in the database. The Lycos database (i.e. the Lycos Catalog) is
continually updated with the Company's proprietary spider indexing technology
that enables it to efficiently collect and organize information on millions of
Web pages and links. The Company's spider technology differentiates the Lycos
Catalog and related products and services in the following ways:

33
<PAGE>

Using Popularity to Guide the Exploration. The Company believes that the
Lycos spider technology is the only indexing technology that uses
popularity as a basis for searching Web pages. The Lycos spider determines
the most popular pages on the Web by using proprietary algorithms to track
the number of external hypertext links to each Web page. The Company also
uses popularity ranking to determine how frequently the Web pages should be
revisited, ensuring that the most popular pages in the Lycos Catalog are
updated most frequently.

Relevancy. The ability of a catalog to deliver relevant responses which
closely match the search query of the user depends upon the
comprehensiveness of the underlying database and the accuracy of the
retrieval software. The Company believes that its retrieval software, which
uses position, frequency and proximity of words to assign relevancy scores,
together with the comprehensiveness of the Lycos search engine, enables the
Lycos Catalog to deliver more relevant search results.

Ability to Index Non-Textual Pages. The Internet contains many resources
which are non-textual, such as images, sounds, movies and executable
programs. The Lycos spider extracts the addresses of Web pages while also
retaining text describing each link within those pages thereby indexing
non-textual objects. The Company believes that its spider indexing
technology differentiates its products and services with the ability to
index these non-textual, multimedia pages.

Advanced Search Functionality. Lycos offers users an advanced search
functionality which allows users to control the order in which their
results are ranked by adjusting the importance of key search metrics. Users
are guided on how to best use the array of search operators available for
adjusting searches to deliver results which specifically meet their search
needs. The Company believes it is the only major Internet navigation
service to allow users to personally rank the relevancy of key search
metrics when performing a search.

The Lycos search and indexing technology was developed at Carnegie Mellon
University ("CMU"). In June 1995, the Company entered into a license agreement
with CMU (the "License Agreement") pursuant to which CMU granted to the
Company a perpetual, worldwide right to use and sub-license the Lycos search
and indexing technology and the Lycos Catalog and other intellectual property
rights associated therewith, including the "Lycos" and "The Lycos Catalog of
the Internet" trademarks and the domain name lycos.com, subject to the payment
of certain specified royalties. The license has been granted to the Company on
an exclusive basis, but is non-exclusive with respect to certain subcomponents
of the licensed technology. The key search and indexing technology underlying
the Lycos Catalog, as well as the Lycos Catalog and Lycos trademarks and logo,
are licensed to or owned by CMU and licensed to the Company pursuant to the
License Agreement.

CMU has been issued a patent in the United States relating to Lycos' search
and indexing technology. There can be no assurance that such patent will not
be challenged, and if such challenges are brought, that the patent will not be
invalidated.

Lycos(R) is a registered trademark of CMU. All other trademarks and service
marks used in this Prospectus are the property of Lycos or their respective
owners.

The Company's success depends significantly upon its proprietary technology.
The Company currently relies on a combination of patent, copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. The Company generally enters
into confidentiality agreements with its employees and with its consultants
and partners. The Company has registered and applied for registration of
certain service marks and trademarks, and will continue to evaluate the
registration of additional service marks and trademarks, as appropriate. There
can be no assurance that the Company will develop proprietary products or
technologies that are patentable, that any issued patent will provide the
Company with any competitive advantages or will not be challenged by third
parties, or that the patents of others will not have a material adverse effect
on the Company's ability to do business. Despite the Company's efforts to

34
<PAGE>

protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's products or services or to obtain and use information
that the Company regards as proprietary. In addition, the laws of some foreign
countries do not protect proprietary rights to as great an extent as do the
laws of the United States. There can be no assurance that the Company's means
of protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology or duplicate the
Company's products or design around patents issued to the Company or other
intellectual property rights of the Company.

There have been substantial amounts of litigation in the computer industry
regarding intellectual property rights. There can be no assurance that third
parties will not in the future claim infringement by the Company with respect
to current or future products, trademarks or other proprietary rights, or that
the Company will counterclaim against any such parties in such actions. Any
such claims or counterclaims could be time-consuming, result in costly
litigation, diversion of management's attention, cause product release delays,
require the Company to redesign its products or require the Company to enter
into royalty or licensing agreements, any of which could have a material
adverse effect upon the Company's business, results of operations and
financial condition. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to the Company or at all. See "Risk
Factors--Intellectual Property and Proprietary Rights."

RESEARCH AND DEVELOPMENT

The Company believes that developing new and enhanced services and
technology is necessary to remain competitive. Accordingly, the Company
intends to continue to make investments in research and development, including
developing, licensing or acquiring new technologies. Research and development
expenses were approximately $4.3 million and $906,591 in the fiscal years
ended July 31, 1997 and 1996, respectively.

COMPETITION

The market for Internet products and services is highly competitive.
Furthermore, the Company expects the market for Internet advertising to become
intensely competitive. The Company believes the principal competitive factors
in this market are name recognition, performance, ease of use, variety of
value-added services, features and quality of support.

A number of companies currently offer competitive products in the Company's
target markets. The primary competitors of the Company's products and services
are other companies providing online services and include America Online
(including CompuServe), Digital Equipment Corporation's Alta Vista, Excite
Inc. (including WebCrawler), Infoseek Corporation, Prodigy Services, Inc. and
Yahoo! Inc. In addition, a number of companies offering Internet products and
services, including direct competitors of the Company, recently have begun to
integrate multiple features within the products and services they offer to
consumers. Integration of Internet products and services is occurring through
development of competing products and through acquisitions of, or entering
into joint ventures and/or licensing arrangements involving, competitors of
the Company. For example, the Web browsers offered by Netscape and Microsoft,
which are the two most widely-used browsers and substantial sources of traffic
for the Company, may incorporate and promote information search and retrieval
capabilities in future releases or upgrades that could make it more difficult
for Internet viewers to find and use the Company's products and services.
Microsoft recently licensed products and services from Inktomi Corporation
("Inktomi"), a direct competitor of the Company, and has announced that it
will feature and promote Inktomi services in the Microsoft Network and other
Microsoft online properties. The Company expects that such search services may
be tightly integrated into the Microsoft operating system, the Internet
Explorer browser, and other software applications, and that Microsoft will
promote such services within the Microsoft Network or through other Microsoft-
affiliated end-user services such as MSNBC or WebTV Networks, Inc. In
addition, Microsoft and Netscape have announced an intention to introduce
Websites offering services which are similar to those currently offered by the
Company in combination with Internet navigation features. Specifically,
Microsoft has introduced its own Internet search and navigation product
offering under the name "Start." Furthermore, Netscape has recently announced
its intention to launch its own "portal" Website, which will offer services
similar to those currently offered by the Company and which are expected to
compete with the

35
<PAGE>

Company's services. Also, many large media companies have announced that they
are contemplating developing Internet navigation services and are attempting
to become "gateway" sites for Web users. In the event such companies develop
such "portal" sites, the Company could lose a substantial portion of its user
traffic, which would have a material adverse effect on the Company's business,
results of operations and financial condition. Further, entities that sponsor
or maintain high-traffic Websites or that provide an initial point of entry
for Internet viewers, such as the Regional Bell Operating Companies or ISPs
such as Microsoft and America Online, Inc. currently offer and can be expected
to consider further development, acquisition or licensing of Internet search
and navigation functions competitive with those offered by the Company, or
could take actions that make it more difficult for viewers to find and use the
Company's products and services. Continued or increased competition from such
consolidations, integration and strategic relationships involving competitors
of the Company could have a material adverse effect on the Company's business,
results of operations, financial condition and prospects.

The Company also competes directly with metasearch services that allow a
user to search the databases of several catalogs and directories
simultaneously and indirectly with database vendors that offer information
search and retrieval capabilities with their core database products. Tripod
competes with other community-based Websites including GeoCities, Inc. and
Angelfire Communications, Inc. In the future, the Company may encounter
competition from providers of Web browser software and other Internet products
and services that incorporate search and retrieval features into their
offerings. Many of the Company's existing competitors, as well as a number of
potential new competitors, have significantly greater financial, technical and
marketing resources than the Company. Furthermore, the Company may also
compete with online services and other Website operators as well as
traditional offline media such as print and television for a share of
advertisers' total advertising budgets. See "Risk Factors--Intense
Competition."

EMPLOYEES

As of April 30, 1998, Lycos and its subsidiaries employed 285 persons. None
of the Company's employees are represented by a labor union and Lycos
considers its employee relations to be good.

PROPERTIES

The Company's corporate headquarters is located in an approximately 77,000
square foot office facility in Waltham, Massachusetts, under a lease which
expires in June 2003. The Company also leases facilities in Pittsburgh,
Pennsylvania under separate leases that expire in March 2000, November 2000
and April 2001, used for research and development, sales and service
operations. The Company also maintains a sales office in New York, New York
under a lease which expires in April 2002 and a sales office in San Francisco,
California under a lease which expires in March 2002. Lycos also maintains a
corporate office for Tripod in Williamstown, Massachusetts, under a lease
which expires in July 1999. Additionally, Lycos maintains a sales office for
Tripod in New York, New York under a lease which expires in October 2000. The
Company believes that its current facilities are adequate for its current
needs.

The Company maintains substantially all of its computer systems at its
Pittsburgh, Pennsylvania site. The Company's operations are dependent in part
upon its ability to protect its operating systems against physical damage from
fire, floods, earthquakes, power loss, telecommunications failures, break-ins
or other similar events. Furthermore, despite the implementation of network
security measures by the Company, its servers are also vulnerable to computer
viruses, break-ins and similar disruptive problems. The occurrence of any of
these events could result in interruptions, delays or cessations in service to
users of the Company's products and services which could have a material
adverse effect on the Company's business, results of operations and financial
condition.

LEGAL PROCEEDINGS

The Company is a party to legal proceedings from time to time in the normal
course of its business. In the opinion of management, any liability that the
Company might incur upon the resolution of these proceedings will not, in the
aggregate, have a material adverse effect on the Company's business, results
of operations and financial condition.

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<PAGE>

MANAGEMENT

The directors, executive officers, and key employees of the Company are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Davis....... 41 President, Chief Executive Officer and Director
Chief Operating Officer, Chief Financial Officer and
Edward M. Philip...... 33 Secretary
Sangam Pant........... 33 Vice President of Engineering
Mark G. Simmer........ 37 Vice President of Online Media
Jan R. Horsfall....... 38 Vice President of Marketing
David G. Peterson..... 40 Vice President of Advertising Sales
Thomas E. Guilfoile... 33 Vice President of Finance and Administration
Jeffrey J. Crown...... 39 Vice President of Business Development
Bo Peabody............ 27 Chief Executive Officer of Tripod
John M. Connors, Jr... 55 Director
Daniel J. Nova........ 36 Director
Richard H. Sabot...... 54 Director
David S. Wetherell.... 43 Director
</TABLE>

Robert J. Davis has served as President, Chief Executive Officer and
Director of the Company since its inception in June 1995. From January 1993 to
June 1995, Mr. Davis served as Vice President of Sales at Cambex Corporation,
a manufacturer of computer-related products. From January 1982 to January
1993, Mr. Davis was employed by Wang Laboratories, a computer manufacturer, in
various sales and marketing positions, including Director of United States
Commercial Sales and Marketing and Director of Worldwide Marketing. Mr. Davis
holds a Bachelor of Science degree, with highest honors, from Northeastern
University and a Master in Business Administration from Babson College.

Edward M. Philip has served as Chief Financial Officer and Secretary of the
Company since December 1995 and Chief Operating Officer since December 1996.
From July 1991 to December 1995, Mr. Philip was employed by The Walt Disney
Company where he served in various finance positions, most recently as Vice
President and Assistant Treasurer. From September 1989 to May 1991, Mr. Philip
attended Harvard Business School. From August 1987 to June 1989, Mr. Philip
was an investment banker at Salomon Brothers Inc. Mr. Philip received a
Bachelor of Science degree in Economics and Mathematics from Vanderbilt
University and a Master in Business Administration from Harvard Business
School. Mr. Philip is a director of VDI Media, Inc.

Sangam Pant has served as Vice President of Engineering of the Company since
April 1996. From December 1994 to March 1996, Mr. Pant was employed by AT&T
where he served as Director of Internet Infrastructure Development with AT&T's
New Media Services. Prior to his work with AT&T, Mr. Pant led the design and
development of database systems at Interchange Network Company, and directed
software development efforts for Ziff-Davis and Digital Equipment Corporation.
Mr. Pant received a Master of Science degree in Electrical Engineering from
the University of Florida and a Bachelor of Engineering degree in Electronics
Engineering from Maharaja Sayajirao University in Baroda, India. Mr. Pant
received a graduate degree from the Wharton School of Business in the
Executive Master of Business Administration program. Mr. Pant also holds three
patents and has published numerous papers in the area of distributed computing
and database systems.

Mark G. Simmer has served as Vice President of Online Media for the Company
since October 1996, and previously served as its Editor-in-Chief since March
1996. From 1995 to 1996, Mr. Simmer served as a consultant to Point
Communications, a Website ratings and review service acquired by Lycos in
October 1995. From 1985 to 1995, Mr. Simmer was a Managing Editor and
Executive Producer for Seattle-based King Broadcasting Company. Projects he
supervised have won awards from the Seattle Chapter of the National Academy of
Television Arts and Sciences, the Associated Press, and the Robert F. Kennedy
Foundation. Mr. Simmer holds a Bachelor of Science degree in Political Science
from Willamette University and completed the

37
<PAGE>

graduate professional program at the University of Missouri School of
Journalism. From 1987 to 1989, Mr. Simmer also served as Adjunct Professor of
Communication Studies at Whitworth College.

Jan R. Horsfall has served as Vice President of Marketing of the Company
since October 1996. Mr. Horsfall was formerly the Vice President of Brand
Strategy for The Valvoline Company. In that capacity, Mr. Horsfall directed
all consumer promotion, online interactive development, product portfolio
management, consumer research and trade marketing. Previously, Mr. Horsfall
was the Director of Marketing and Advertising for Valvoline and held various
sales and marketing positions with that company since 1982. Mr. Horsfall holds
a Bachelor of Science degree in marketing from Colorado State University and
completed the Executive Development Program for Senior Management at the
University of Indiana at Bloomington.

David G. Peterson has served as Vice President of Advertising Sales of the
Company since December 1996. From 1985 to 1996, Mr. Peterson served in various
sales positions at International Data Group ("IDG"), most recently as
Associate Publisher of Computerworld, where he was responsible for all U.S.
advertising sales operations and managed seven regional offices. Previously,
Mr. Peterson also held such positions within IDG as Vice President of Eastern
Advertising Sales, Regional Vice President of New England Advertising Sales
and District Manager. Mr. Peterson holds a Bachelor of Arts degree in
Economics from the University of New Hampshire and a Master of Business
Administration from Northeastern University.

Thomas E. Guilfoile has served as Vice President of Finance and
Administration since December 1996 and Controller since February 1996. From
July 1986 to January 1996, Mr. Guilfoile was employed by Ernst & Young LLP,
most recently as Senior Manager in the Entrepreneurial Services Group. While
at Ernst and Young, Mr. Guilfoile provided both audit and consulting services
to both privately held and publicly traded organizations, primarily in the
high-tech area with a focus on companies in the Information, Communications
and Entertainment industries. A Certified Public Accountant, Mr. Guilfoile is
a member of the American Institute of Certified Public Accountants and the
Massachusetts Society of Certified Public Accountants; and a former member of
the Board of Directors of the Smaller Business Association of New England. Mr.
Guilfoile holds a Bachelor of Business Administration degree in accounting
from the University of Notre Dame.

Jeffrey J. Crown has served as Vice President of Business Development since
July 1997 and previously served as Director of Business Development since
January 1996. Mr. Crown was formerly the Director of Sales and Marketing for
Xyvision, Inc. and has 15 years of technical sales and marketing experience at
McDonnell Douglas and Auto-trol Technology Corporation. Mr. Crown holds a
Bachelor of Science in Marketing/Industrial Sales from Penn State University.

Bo Peabody is a founder of Tripod, Inc. and has served as its Chief
Executive Officer since its inception in 1994. Mr. Peabody holds a Bachelor's
degree in Political Philosophy and Sociology from Williams College.

John M. Connors, Jr. has served as a Director of the Company since June
1996. Since 1995, Mr. Connors has served as Chairman of the Board of Directors
and, since 1968, as Chief Executive Officer of Hill, Holliday, Connors,
Cosmopulos, Inc., a leading full-service marketing communications company. Mr.
Connors is the Chairman of the Board of Partners HealthCare System, a member
of the Board of Trustees of Boston College and a member of the Board of
Directors of the John Hancock Mutual Life Insurance Company, Geerlings and
Wade, Inc. and WellSpace, Inc. He is also past Chairman of the Board of the
Wang Center for the Performing Arts, and he currently serves as a member of
the Board of Directors of the Boys and Girls Clubs of Boston. Mr. Connors is a
graduate of Boston College.

Daniel J. Nova has served as a Director of the Company since July 1995. Mr.
Nova has served as a general partner of Highland Capital Partners III Limited
Partnership, a venture capital partnership, since June 1996. Since June 1996,
Mr. Nova has also served as a managing member of the general partner of
Highland Entrepreneurs' Fund III Limited Partnership, a venture capital
partnership. From January 1995 to July 1996, Mr. Nova served as a general
partner of CMG@Ventures, a venture capital firm and a significant stockholder
of the Company,

38
<PAGE>

and as Vice President of CMG@Ventures, Inc., the managing general partner of
CMG@Ventures. From June 1991 to January 1995, Mr. Nova was a senior associate
at Summit Partners, a venture capital firm. From September 1989 to May 1991,
Mr. Nova attended Harvard Business School. From June 1983 to August 1989, Mr.
Nova was employed by Wang Laboratories, a computer manufacturer, in various
sales and management positions. Mr. Nova received a Bachelor of Science degree
with honors in Computer Science and Marketing from Boston College and a Master
in Business Administration from Harvard Business School.

Richard H. Sabot has served as Director of the Company since May 1998. Mr.
Sabot currently serves as Executive Vice President of Tripod, Inc., a wholly-
owned subsidiary of Lycos, and has been with Tripod since its inception in
1994. Mr. Sabot is the John J. Gibson Professor of Economics at Williams
College where he has taught since 1984. Previous to his tenure at Williams,
Mr. Sabot spent ten years at the World Bank researching the role of human
capital accumulation in the development process. Mr. Sabot received an
undergraduate degree from the University of Pennsylvania and a Doctorate of
Philosophy in Economics from Oxford University in England.

David S. Wetherell has served as a Director of the Company since July 1995.
Mr. Wetherell has served as Chairman of the Board, President, Chief Executive
Officer and Secretary of CMG Information Services, Inc. ("CMGI") since 1986
and as a general partner of CMG@Ventures, a venture capital firm and a
significant stockholder of the Company, and President of CMG@Ventures, Inc.,
the managing general partner of CMG@Ventures, since January 1995. He has
served as Chairman of the Board of SalesLink Corporation, a literature
fulfillment business, since it was formed in 1990. From 1982 until joining
CMGI in 1986, Mr. Wetherell was co-founder and President of Softrend, Inc., a
microcomputer software publisher. Mr. Wetherell is the founder of BookLink
Technologies, a CMGI subsidiary which was sold to America Online in 1994. Mr.
Wetherell received a Bachelor of Science degree in Mathematics and Education
from Ohio Wesleyan University.

39
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1998 (i) by each
person who is known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) by the Selling Stockholder, (iii) by each
director of the Company, (iv) by the Chief Executive Officer and the next four
most highly compensated executive officers of the Company (the "Named
Executive Officers") who beneficially held shares of the Company's Common
Stock as of such date and (v) by all executive officers and directors of the
Company as a group. Except as otherwise noted, each person maintains a
business address c/o Lycos, Inc., 400-2 Totten Pond Road, Waltham,
Massachusetts 02154, and has sole voting and investment power over the shares
shown as beneficially owned, except to the extent authority is shared by
spouses under applicable law. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage ownership
of that person, shares of Common Stock subject to options held by that person
that are currently exercisable, or become exercisable within 60 days following
April 30, 1998, are deemed outstanding. However, such shares are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. As of April 30, 1998, there were 16,530,772 shares of Common Stock
outstanding.

40
<PAGE>

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
BEFORE OFFERING NUMBER AFTER OFFERING
--------------------- OF SHARES ---------------------
NUMBER PERCENT BEING OFFERED NUMBER PERCENT
----------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
Robert J. Davis(6)...... 195,000 1.2% -- 195,000 1.0%
Edward M. Philip(7)..... 22,906 * -- 22,906 *
Jan R. Horsfall(8)...... 19,000 * -- 19,000 *
Jeffrey J. Crown(9)..... 12,000 * -- 12,000 *
David G. Peterson(10)... 6,000 * -- 6,000 *
All executive officers
and directors as a
group
(12 persons)(11)....... 6,565,897 39.0% 5,565,897 29.6%
</TABLE>
- --------
* Less than 1%.
(1) Includes 4,860,456 shares held by CMG@Ventures I, L.L.C. and 1,328,419
shares held by CMGI. Each of CMG@Ventures, Inc., the managing member of
CMG@Ventures I, L.L.C., Mr. Wetherell, Chairman of the Board, President,
Chief Executive Officer and Secretary of CMGI, an executive officer of
CMG@Ventures, Inc. and a member of CMG@Ventures I, L.L.C., also may be
deemed to be a beneficial owner of these 6,188,875 shares of Common Stock.
CMGI, the sole stockholder of CMG@Ventures, Inc., may be deemed to be the
beneficial owner of the 4,860,456 shares held by CMG@Ventures I, L.L.C.
Each of CMG@Ventures, Inc., CMGI and Mr. Wetherell disclaims beneficial
ownership except to the extent of his or its pecuniary interest. Includes
481,648 shares of Common Stock which CMG@Ventures I, L.L.C. has agreed to
sell to the Company upon the exercise of options granted under the
Company's 1995 Stock Option Plan.
(2) According to Schedule 13G filed with the Securities and Exchange
Commission in January 1998.
(3) Includes 6,975 shares held by a trust for the benefit of Mr. Wetherell's
children. Mr. Wetherell may also be deemed to be the beneficial owner of
the 4,860,456 shares of Common Stock held by CMG@Ventures I, L.L.C. and
the 1,328,419 shares of Common Stock held by CMGI, by virtue of his
interest as a member of CMG@Ventures, his positions as an executive
officer of CMGI and CMG@Ventures, Inc., as well as his stockholder
interest in CMGI. Mr. Wetherell disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest.
(4) Represents options to acquire 6,666 shares of Common Stock which are
currently exercisable or become exercisable within 60 days.
(5) Includes options to acquire 12,159 shares of Common Stock which are
currently exercisable or become exercisable within 60 days. In addition,
Mr. Sabot holds options to purchase 4,054 shares of Common Stock which
become exercisable after 60 days.
(6) Includes options to acquire 195,000 shares of Common Stock which are
currently exercisable or become exercisable within 60 days. In addition,
Mr. Davis holds options to purchase 226,500 shares of Common Stock which
become exercisable after 60 days.
(7) Includes 1,000 shares of Common Stock held by Mr. Philip and options to
acquire 21,906 shares of Common Stock which are currently exercisable or
become exercisable within 60 days. In addition, Mr. Philip holds options
to purchase 193,446 shares of Common Stock which become exercisable after
60 days.
(8) Includes options to acquire 19,000 shares of Common Stock which are
currently exercisable or become exercisable within 60 days. In addition,
Mr. Horsfall holds options to purchase 98,000 shares of Common Stock which
become exercisable after 60 days.
(9) Includes options to acquire 12,000 shares of Common Stock which are
currently exercisable or become exercisable within 60 days. In addition,
Mr. Crown holds options to purchase 92,000 shares of Common Stock which
become exercisable after 60 days.
(10) Includes options to acquire 6,000 shares of Common Stock which are
currently exercisable or become exercisable within 60 days. In addition,
Mr. Peterson holds options to purchase 98,000 shares of Common Stock
which become exercisable after 60 days.
(11) Includes 4,860,456 shares held by CMG@Ventures I, L.L.C. and 1,328,419
shares held by CMGI. Mr. Wetherell, Chairman of the Board, President,
Chief Executive Officer and Secretary of CMGI, an executive officer of
CMG@Ventures, Inc. and a member of CMG@Ventures I, L.L.C., may be deemed
to be a beneficial owner of these 6,188,875 shares of Common Stock.
Includes options to acquire 285,731 shares of Common Stock which are
currently exercisable or become exercisable within 60 days. In addition
to the shares listed, the executive officers of the Company hold options
to acquire an additional 943,946 shares of Common Stock which become
exercisable after 60 days.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock, $.01 par value per share, and 5,000,000 shares of Preferred
Stock, $.01 par value per share (the "Preferred Stock").

The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Restated
Certificate of Incorporation as amended and restated (the "Certificate of
Incorporation"), and by provisions of applicable law.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on matters to be
voted upon by the stockholders. There are no cumulative voting rights. Holders
of Common Stock are entitled to receive ratable dividends when, as and if
declared by the Board of Directors out of funds legally available therefor,
subject to any preferential dividend rights of any then outstanding Preferred
Stock. Upon the liquidation, dissolution or winding up of the Company, holders
of Common Stock share ratably in the assets of the Company available for
distribution to its stockholders, subject to the preferential rights of any
then outstanding Preferred Stock. The shares of Common Stock outstanding upon
the effective date of this Prospectus are, and the shares offered hereby 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 holders of shares of any Preferred
Stock that the Company may designate in the future.

PREFERRED STOCK

The Company's Board of Directors has the authority, without further
stockholder approval, to issue up to 5,000,000 shares of Preferred Stock in
one or more series and to fix the relative rights, preferences, privileges,
qualifications, limitations and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids for the Company's Common Stock at a premium over the market
price of the Common Stock and may adversely affect the market price of, and
the voting and other rights of the holders of, the Common Stock. No shares of
Preferred Stock will be outstanding immediately following the closing of this
offering. The Company has no present plans to issue any shares of Preferred
Stock.

CERTAIN CERTIFICATE OF INCORPORATION, BY-LAWS AND STATUTORY PROVISIONS
AFFECTING STOCKHOLDERS

Classified Board and Other Matters. The Company's Board of Directors is
divided into three classes, each of which serves for three years, with one
class being elected each year. Under the Delaware General Corporation Law, in
the case of a corporation having a classified Board, stockholders may remove a
director only for cause. Advance notice of stockholder nominations for the
election of directors and any other matter to be brought before a meeting of
stockholders will be required to be given in writing to the Secretary of the
Company within the time periods specified in the Amended and Restated By-laws.
The Certificate of Incorporation provides that special meetings of
stockholders of the Company may be called only by the Board of Directors, the
Chairman of the Board of Directors or the President. The Certificate of
Incorporation also provides that no action required or permitted to be taken
at any Annual or Special Meeting of the Stockholders of the Company may be
taken without a meeting, unless the unanimous consent of stockholders entitled
to vote thereon is obtained. The affirmative vote of the holders of at least
80% of the combined voting power of then outstanding voting stock of the
Company, voting together as a single class, will be required to alter, amend
or repeal the foregoing provisions. The classification of the Board of
Directors and the limitations on the removal of directors and filling of
vacancies could have the effect of making it more difficult for a third party
to acquire, or discouraging a third party from acquiring, control of the
Company.

42
<PAGE>

Section 203 of Delaware Law. The Company is subject to the "business
combination" statute of the Delaware General Corporation law. In general, such
statute prohibits a publicly held Delaware corporation from engaging in
various "business combination" transactions with any "interested stockholder"
for a period of three years after the date of the transaction in which the
person became an "interested stockholder," unless (i) the business combination
or the transaction which resulted in the stockholder becoming an "interested
stockholder" is approved by the Board of Directors prior to the date the
interested stockholder obtains such status, (ii) upon the consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder" owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned by (a) persons who are directors and also officers and (b)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to such date
the "business combination" is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the "interested stockholder." A "business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the stockholder. An "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years, did own) 15% of more of the corporation's voting stock. By virtue of
the Company's decision not to elect out of the statute's provision, the
statute applies to the Company. The statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to the Company and, accordingly, may discourage attempts to acquire
the Company.

Directors Liability. The Certificate of Incorporation of the Company
provides that no director shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for (i) any breach of the director's duty of loyalty to the Company or
its stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct; (iii) acts or omissions in respect of certain unlawful
dividend payments or stock redemptions or repurchases; or (iv) any transaction
from which such director derives improper personal benefit. The effect of this
provision is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care
as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(iv) above. The limitations summarized above, however, do not affect the
ability of the Company or its stockholders to seek non-monetary based
remedies, such as an injunction or rescission, against a director for breach
of his fiduciary duty nor would such limitations limit liability under the
Federal Securities Laws. The Company's Amended and Restated By-laws provide
that the Company shall, to the full extent permitted by the Delaware General
Corporation Law as currently in effect, indemnify and advance expenses to each
of its currently acting and former directors, officers, employees and agents
arising in connection with their acting in such capacities.

Certain provisions described above may have the effect of delaying
shareholder actions with respect to certain business combinations and the
election of new members to the Board of Directors. As such, the provisions
could have the effect of discouraging open market purchases of the Company's
Common Stock because they may be considered disadvantages by a stockholder who
desires to participate in a business combination or elect a new director. The
existence of these provisions may have a depressive effect on the market price
of the Common Stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Boston EquiServe
Limited Partnership.

43
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement")
among the Company, the Selling Stockholder and the underwriters named below
(the "Underwriters"), for whom Credit Suisse First Boston Corporation
("CSFBC"), Hambrecht & Quist LLC, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Bear, Stearns & Co. Inc., Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated ("Dain Rauscher Wessels"), Volpe Brown
Whelan & Company, LLC and Wasserstein Perella Securities, Inc., are acting as
the representatives (the "Representatives"), have severally but not jointly
agreed to purchase from the Company and the Selling Stockholder the following
respective number of shares of Common Stock:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Credit Suisse First Boston Corporation....................
Hambrecht & Quist LLC ....................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Bear, Stearns & Co. Inc. .................................
Dain Rauscher Wessels.....................................
Volpe Brown Whelan & Company, LLC.........................
Wasserstein Perella Securities, Inc. .....................
---------
Total................................................. 3,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the shares of Common Stock (other than those
shares covered by the over-allotment option described below) if any are
purchased. The Underwriting Agreement provides that, in the event of a default
by an Underwriter, in certain circumstances the purchase commitments of non-
defaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.

The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day after the date of this Prospectus, to purchase up
to 450,000 additional shares of Common Stock from the Company at the public
offering price less underwriting discounts and commissions, all as set forth
on the cover page of this Prospectus. Such option may be exercised only to
cover over-allotments, if any, in the sale of the shares of Common Stock. To
the extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of such additional shares of Common Stock as it was obligated to purchase
pursuant to the Underwriting Agreement.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a
concession of $ per share, and the Underwriters and such dealers may allow
a discount of $ per share on sales to certain other dealers. After the
Offering, the public offering price and concession and discount to dealers may
be changed by the Representatives.

The Company and certain of its executive officers, directors and
stockholders have agreed that they will not offer, sell, contact to sell,
announce their intention to sell, pledge or otherwise dispose of, directly or
indirectly, or, in the case of the Company, file with the Securities and
Exchange Commission (the "Commission") a registration statement under the
Securities Act relating to any additional shares of the Common Stock or
securities convertible into or exchangeable for any shares of the Common
Stock, without the prior written consent of CSFBC, for a period of 90 days
after the date of this Prospectus, except for certain permitted transfers,
issuances by the Company pursuant to the exercise of stock options granted
under its stock option plans and issuances of up to an aggregate of 1,000,000
shares of Common Stock in connection with acquisitions.

The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or to contribute to payments which the Underwriters may be
required to make in respect thereof.

44
<PAGE>

The Representatives, on behalf of the Underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act. Over-
allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase in the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases
of the Common Stock in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when
the shares of Common Stock originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Common Stock to be higher than it
would otherwise be in the absence of such transactions. These transactions may
be effected on The Nasdaq National Market or otherwise and, if commenced, may
be discontinued at any time.

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and the
Selling Stockholder prepare and file a prospectus with the securities
regulatory authorities in each province where trades of the Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made
in accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of the Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Stockholder and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities
laws to purchase such Common Stock without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent, and (iii) such
purchaser has reviewed the text above under "--Resale Restrictions."

RIGHT OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein and the Selling Stockholder may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against the issuer or such persons outside of Canada.

45
<PAGE>

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to the Offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
legislation.

LEGAL MATTERS

The validity of the Shares offered hereby will be passed upon for the
Company by Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston,
Massachusetts. Certain legal matters in connection with the Offering will be
passed upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts.

EXPERTS

The consolidated financial statements included in this Prospectus of Lycos,
Inc. at July 31, 1997 and 1996 and for each of the years in the two year
period ended July 31, 1997 and for the period from inception (June 1, 1995) to
July 31, 1995, and the financial statements of Tripod, Inc. at October 31,
1997 and December 31, 1996 and for the ten months ended October 31, 1997 have
been audited by KPMG Peat Marwick LLP, independent public accountants, as
stated in their reports appearing elsewhere herein and are included herein in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.

The balance sheets of WiseWire Corporation, a development stage enterprise,
as of May 31, 1997 and 1996 and the statements of operations, stockholders'
equity and cash flows for the year ended May 31, 1997 and for the period from
June 9, 1995 (inception) through May 31, 1996 have been audited by Coopers &
Lybrand L.L.P., independent public accountants, as stated in their report
appearing elsewhere herein, which included an explanatory paragraph concerning
WiseWire's ability to continue as a going concern, and are included herein in
reliance upon such report given on the authority of that firm as experts in
accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, NW, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: New York Regional Office, Seven World
Trade Center, Suite 1300, New York, New York 10048 and Chicago Regional
Office, Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may be obtained by mail at prescribed
rates from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, NW, Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC
at 1-800-SEC-0330. The Commission maintains a website that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the site is
http://www.sec.gov. The Common Stock of the Company is listed on The Nasdaq
National Market, and such reports, proxy and information statements and other
information concerning the Company may be inspected at the offices of Nasdaq
Operations, 1735 K Street, NW, Washington, D.C. 20006.

46
<PAGE>

This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the shares offered hereby,
reference is hereby made to the Registration Statement. The Registration
Statement may be inspected at the public reference facilities maintained by
the Commission at the addresses set forth in the preceding paragraph. The
Company has filed the Registration Statement electronically with the
Commission via the Commission's Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. Statements contained herein concerning any document
filed as an exhibit are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by
such reference. The Company intends to distribute to its stockholders annual
reports containing audited financial statements and will make available copies
of quarterly reports for the first three quarters of each fiscal year
containing unaudited interim financial information.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by the Company (File No.
0-27830) pursuant to the Exchange Act are hereby incorporated by reference in
this Prospectus:

(1) The Company's Annual Report on Form 10-K for the year ended July 31,
1997;

(2) The Company's definitive Proxy Statement dated November 17, 1997,
filed in connection with the Company's December 17, 1997 Annual Meeting of
Stockholders;

(3) The Company's Quarterly Reports on Form 10-Q for the quarters ended
October 31, 1997 and January 31, 1998;

(4) The Company's Current Reports on Form 8-K and 8-K/A, filed with the
Commission on February 17, 1998, March 10, 1998, March 24, 1998, May 1,
1998 and May 15, 1998; and

(5) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A, filed with the Commission on February
23, 1996.

All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this Offering shall be deemed to be incorporated by reference
into this Prospectus, to the extent required, and to be a part of this
Prospectus from the date of filing of such reports and documents. Any
statement contained in a document incorporated by reference into this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all
of the foregoing documents incorporated by reference into this Prospectus
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be submitted in writing to Investor Relations, Lycos, Inc., 400-2
Totten Pond Road, Waltham, Massachusetts 02154 or by telephone at (781) 370-
2700.

47
<PAGE>

LYCOS, INC.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LYCOS, INC. CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets at January 31, 1998, July 31, 1997 and 1996.. F-3
Consolidated Statements of Operations for the six months ended January
31, 1998 and 1997 and for the years ended July 31, 1997 and 1996 and for
the period from Inception (June 1, 1995) to
July 31, 1995........................................................... F-4
Consolidated Statements of Stockholders' Equity for the six months ended
January 31, 1998 and for the years ended July 31, 1997 and 1996 and for
the period from Inception (June 1, 1995) to July 31, 1995............... F-5
Consolidated Statements of Cash Flows for the six months ended January
31, 1998 and 1997 and for the years ended July 31, 1997 and 1996 and for
the period from Inception (June 1, 1995) to
July 31, 1995........................................................... F-6
Notes to Consolidated Financial Statements............................... F-8
TRIPOD, INC. FINANCIAL STATEMENTS:
Independent Auditors' Report............................................. F-20
Balance Sheets at January 31, 1998, October 31, 1997 and December 31,
1996.................................................................... F-21
Statements of Operations for the six months ended January 31, 1998 and
1997 and for the ten months ended October 31, 1997 and year ended
December 31, 1996....................................................... F-22
Statements of Stockholders' Equity for the three months ended January 31,
1998 and for the ten months ended October 31, 1997 and year ended
December 31, 1996....................................................... F-23
Statements of Cash Flows for the six months ended January 31, 1998 and
1997 and for the ten months ended October 31, 1997 and year ended
December 31, 1996....................................................... F-24
Notes to Financial Statements............................................ F-25
WISEWIRE CORPORATION FINANCIAL STATEMENTS:
Report of Independent Accountants........................................ F-33
Balance Sheets at January 31, 1998 (unaudited), May 31, 1997 and 1996.... F-34
Statements of Operations for the eight months ended January 31, 1998 and
1997 (unaudited) and for the year ended May 31, 1997 and for the period
from June 9, 1995 (Inception) through May 31, 1996 and for the period
from June 9, 1995 (Inception) through January 31, 1998 (unaudited)...... F-35
Statements of Stockholders' Equity for the eight months ended January 31,
1998 (unaudited) and for the year ended May 31, 1997 and for the period
from June 9, 1995 (Inception) through May 31, 1996...................... F-36
Statements of Cash Flows for the eight months ended January 31, 1998 and
1997 (unaudited) and for the year ended May 31, 1997 and for the period
from June 9, 1995 (Inception) through May 31, 1996 and for the period
from June 9, 1995 (Inception) through January 31, 1998 (unaudited)...... F-37
Notes to Financial Statements............................................ F-38
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION:
Unaudited Pro Forma Condensed Consolidated Balance Sheets at January 31,
1998.................................................................... F-47
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the six months ended January 31, 1998................................... F-48
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended July 31, 1997............................................ F-48
Notes to the Unaudited Pro Forma Condensed Consolidated Financial
Information............................................................. F-49
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Lycos, Inc.:

We have audited the accompanying consolidated balance sheets of Lycos, Inc.
as of July 31, 1997 and 1996 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended July 31,
1997 and 1996 and for the period from Inception (June 1, 1995) to July 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Lycos, Inc. at July 31, 1997 and 1996, and the results of its operations
and cash flows for the years ended July 31, 1997 and 1996 and for the period
from Inception (June 1, 1995) to July 31, 1995, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Boston, Massachusetts
August 23, 1997

F-2
<PAGE>

LYCOS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JANUARY 31, 1998 JULY 31, 1997 JULY 31, 1996
---------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $41,350,721 $40,766,258 $44,142,187
Accounts receivable, less
allowance for doubtful accounts
of
$718,000, $554,000 and $200,000
at January 31, 1998, July 31,
1997 and 1996, respectively.... 6,751,374 6,634,262 3,293,925
License fees receivable......... 15,243,507 9,065,806 1,032,405
Prepaid expenses................ 2,094,102 4,278,418 981,711
Other current assets............ 128,950 -- --
----------- ----------- -----------
Total current assets.......... 65,568,654 60,744,744 49,450,228
----------- ----------- -----------
Property and equipment, less accu-
mulated depreciation............. 2,092,727 2,397,600 1,405,768
Long-term license fees receiv-
able............................. 2,625,000 650,000 951,816
License agreement, net............ 928,735 1,123,645 1,513,466
Goodwill, net..................... 100,742 119,405 171,682
Other assets...................... 384,960 383,615 167,615
----------- ----------- -----------
Total assets.................. $71,700,818 $65,419,009 $53,660,575
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQ-
UITY
Current liabilities:
Accounts payable................ $ 5,582,665 $ 3,289,513 $ 2,741,879
Accrued expenses................ 6,484,371 7,387,707 1,746,418
Deferred revenues............... 13,744,258 9,541,566 3,148,422
Billings in excess of revenues.. 782,295 2,387,424 1,402,432
Due to related parties.......... 14,717 9,105 437,267
----------- ----------- -----------
Total current liabilities..... 26,608,306 22,615,315 9,476,418
----------- ----------- -----------
Long term portion of deferred rev-
enues............................ 5,962,503 5,100,000 --
Deferred income taxes............. 46,667 56,667 78,000
----------- ----------- -----------
6,009,170 5,156,667 78,000
----------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
none issued or outstanding..... -- -- --
Common stock, $.01 par value;
40,000,000 shares authorized,
14,443,624 shares at January
31, 1998, 13,796,620 shares at
July 31, 1997 and 13,792,896 at
July 31, 1996 issued and
outstanding.................... 144,436 137,966 137,929
Additional paid-in capital...... 50,484,069 49,506,906 49,537,608
Treasury stock, at cost......... (1,747) -- --
Deferred compensation........... (139,606) (185,436) (376,161)
Accumulated deficit............. (11,403,810) (11,812,409) (5,193,219)
----------- ----------- -----------
Total stockholders' equity.... 39,083,342 37,647,027 44,106,157
----------- ----------- -----------
Total liabilities and
stockholders' equity......... $71,700,818 $65,419,009 $53,660,575
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

LYCOS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED INCEPTION
JANUARY 31, YEAR ENDED YEAR ENDED (JUNE 1, 1995)
------------------------ JULY 31, JULY 31, TO JULY 31,
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Advertising........... $15,984,300 $ 7,112,594 $17,417,388 $ 4,478,474 $ --
License, product and
other................ 5,921,570 1,554,600 4,855,654 778,753 5,000
----------- ----------- ----------- ----------- ----------
Total revenues...... 21,905,870 8,667,194 22,273,042 5,257,227 5,000
Cost of revenues........ 4,694,399 1,927,865 4,731,599 3,224,842 27,576
----------- ----------- ----------- ----------- ----------
Gross profit
(loss)............. 17,211,471 6,739,329 17,541,443 2,032,385 (22,576)
Operating expenses:
Research and
development.......... 3,170,963 1,943,541 4,304,183 906,591 15,940
In process research
and development...... -- -- -- 452,000 --
Sales and marketing... 12,790,843 9,372,501 19,130,305 4,749,355 29,530
General and
administrative....... 1,945,805 1,317,278 2,856,617 1,726,646 37,335
----------- ----------- ----------- ----------- ----------
Total operating
expenses........... 17,907,611 12,633,320 26,291,105 7,834,592 82,805
----------- ----------- ----------- ----------- ----------
Operating loss.......... (696,140) (5,893,991) (8,749,662) (5,802,207) (105,381)
Interest income......... 1,104,739 1,122,934 2,130,472 714,369 --
----------- ----------- ----------- ----------- ----------
Net loss ............... $ 408,599 $(4,771,057) $(6,619,190) $(5,087,838) $ (105,381)
=========== =========== =========== =========== ==========
Net income (loss) per
share.................. $ 0.03 $ (0.35) $ (0.48) $ (0.42) $ (0.01)
=========== =========== =========== =========== ==========
Shares used in computing
net income loss per
share.................. 14,175,061 13,792,896 13,794,743 11,992,415 11,012,764
=========== =========== =========== =========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

LYCOS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN TREASURY STOCK DEFERRED ACCUMULATED
SHARES AMOUNT CAPITAL SHARES AMOUNT COMPENSATION DEFICIT TOTAL
---------- -------- ----------- ------- ------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
in connection with the
formation of the
Company................ 8,000,000 $ 80,000 $ 920,000 $ -- $ -- $ 1,000,000
Capital contribution
related to License
Agreement.............. 2,000,000 20,000 230,000 -- -- 250,000
Deferred compensation
related to grant of
stock options.......... -- -- 87,000 (87,000) -- --
Net loss................ -- -- -- -- (105,381) (105,381)
---------- -------- ----------- ------- ------- --------- ------------ -----------
Balances at July 31,
1995................... 10,000,000 $100,000 $ 1,237,000 $ (87,000) $ (105,381) $ 1,144,619
Capital contribution.... -- -- 1,000,000 -- -- 1,000,000
Capital contribution
related to License
Agreement.............. -- -- 250,000 -- -- 250,000
Issuance of common stock
in connection with
acquisition of Point
Communications......... 526,316 5,263 536,737 -- -- 542,000
Issuance of common stock
pursuant to certain
preemptive rights...... 131,580 1,316 327,634 -- -- 328,950
Issuance of common stock
in connection with
Initial Public
Offering, net of
offering costs......... 3,135,000 31,350 45,662,732 -- -- 45,694,082
Deferred compensation
related to grant of
stock options.......... -- -- 523,505 (523,505) -- --
Amortization of deferred
compensation........... -- -- -- 234,344 -- 234,344
Net loss................ -- -- -- -- (5,087,838) (5,087,838)
---------- -------- ----------- ------- ------- --------- ------------ -----------
Balances at July 31,
1996................... 13,792,896 $137,929 $49,537,608 $(376,161) $ (5,193,219) $44,106,157
Issuance of common stock
in connection with the
Employee Stock Purchase
Plan................... 3,724 37 18,365 -- -- 18,402
Cancellation of
options................ -- -- (49,067) 49,067 -- --
Amortization of deferred
compensation........... -- -- -- 141,658 -- 141,658
Net loss................ -- -- -- -- (6,619,190) (6,619,190)
---------- -------- ----------- ------- ------- --------- ------------ -----------
Balances at July 31,
1997................... 13,796,620 $137,966 $49,506,906 $(185,436) $(11,812,409) $37,647,027
Issuance of common stock
in connection with the
Employee Stock Purchase
Plan (unaudited)....... 1,609 16 24,949 -- -- -- -- 24,965
Stock option exercises
(unaudited)............ 645,395 6,454 974,776 174,757 (1,747) -- -- 979,483
Cancellation of options
(unaudited)............ -- -- (22,562) -- -- 22,562 -- --
Amortization of deferred
compensation
(unaudited)............ -- -- -- -- -- 23,268 -- 23,268
Net loss (unaudited).... 408,599 408,599
---------- -------- ----------- ------- ------- --------- ------------ -----------
Balances at January 31,
1998 (unaudited)....... 14,443,624 $144,436 $50,484,069 174,757 $(1,747) $(139,606) $(11,403,810) $39,083,342
========== ======== =========== ======= ======= ========= ============ ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

LYCOS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31, INCEPTION
------------------------ YEAR ENDED YEAR ENDED (JUNE 1, 1995)
1998 1997 JULY 31, 1997 JULY 31, 1996 TO JULY 31, 1995
----------- ----------- ------------- ------------- ----------------
(UNAUDITED)
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net income (loss)....... $ 408,599 $(4,771,057) $(6,619,190) $(5,087,838) $(105,381)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Amortization of
deferred
compensation......... 45,830 87,340 141,658 234,344 --
Depreciation and
amortization......... 744,338 563,181 1,269,064 642,218 13,817
Allowance for doubtful
accounts............. 243,314 180,000 405,000 200,000 --
In process research
and development
expense.............. -- -- -- 452,000 --
Changes in operating
assets and liabilities:
Accounts receivable... (360,426) 108,656 (3,745,337) (3,454,950) (5,000)
License fees
receivable........... (8,152,701) (5,569,190) (7,731,585) (1,984,221) --
Prepaid expenses...... 2,055,366 (443,621) (3,296,707) (981,711) --
Other assets.......... (1,345) 161,661 (216,000) (167,615) --
Accounts payable...... 2,293,152 (2,188,017) 547,634 2,600,071 44,074
Accrued expenses...... (903,336) 2,894,145 5,641,289 1,735,693 6,355
Deferred revenues..... 5,065,195 4,534,561 11,493,144 3,125,285 --
Billings in excess of
revenues............. (1,605,129) (224,261) 984,992 1,402,432 --
Due to related
parties.............. 5,612 (227,989) (428,162) 295,660 71,607
Deferred income
taxes................ (10,000) (11,333) (21,333) 28,000 --
----------- ----------- ----------- ----------- ---------
Net cash provided by
(used in) operating
activities............. (171,531) (4,905,924) (1,575,533) (960,632) 25,472
----------- ----------- ----------- ----------- ---------
INVESTING ACTIVITIES
Purchase of property and
equipment.............. (225,892) (769,358) (1,818,798) (1,632,079) (79,025)
Payments under License
Agreement.............. -- -- -- (750,000) (500,000)
Cash acquired through
acquisition of Point
Communications......... -- -- -- 17,137 --
----------- ----------- ----------- ----------- ---------
Net cash used in
investing activities... (225,892) (769,358) (1,818,798) (2,364,942) (579,025)
----------- ----------- ----------- ----------- ---------
FINANCING ACTIVITIES
Proceeds from issuance
of common stock, net of
offering costs......... 983,633 -- 18,402 46,021,314 1,000,000
Proceeds from capital
contribution........... (1,747) -- -- 1,000,000 --
----------- ----------- ----------- ----------- ---------
Cash provided by
financing activities... 981,886 -- 18,402 47,021,314 1,000,000
----------- ----------- ----------- ----------- ---------
Net increase (decrease)
in cash and cash
equivalents............ 584,463 (5,675,282) (3,375,929) 43,695,740 446,447
Cash and cash
equivalents at
beginning of period.... 40,766,258 44,142,187 44,142,187 446,447 --
----------- ----------- ----------- ----------- ---------
Cash and cash
equivalents at end of
period................. $41,350,721 $38,466,905 $40,766,258 $44,142,187 $ 446,447
=========== =========== =========== =========== =========
</TABLE>

F-6
<PAGE>

LYCOS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)

<TABLE>
<CAPTION>
INCEPTION
YEAR ENDED YEAR ENDED (JUNE 1, 1995)
JULY 31, 1997 JULY 31, 1996 TO JULY 31, 1995
------------- ------------- ----------------
<S> <C> <C> <C>
Schedule of non-cash financing and
investing activities:
Issuance of common stock for
License Agreement............... $ -- $300,000 $300,000
Recognition of deferred tax
liability related to License
Agreement....................... -- 50,000 50,000
Assets and liabilities recognized
upon acquisition of Point
Communications.................. -- -- --
Accounts receivable........... -- 33,975 --
Property and equipment........ -- 47,496 --
Goodwill...................... -- 186,633 --
Accounts payable.............. -- 97,734 --
Deferred revenues............. -- 23,137 --
Accrued expenses.............. -- 4,370 --
Due to related parties........ -- 70,000 --
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Lycos, Inc. ("Lycos" or the "Company"), which operates in one industry
segment, provides guides for finding information on the Internet's World Wide
Web. The Company was formed in June 1995 by CMG@Ventures, L.P.
("CMG@Ventures") to license on an exclusive basis (with certain limited
exceptions) from Carnegie Mellon University ("CMU" or the "Licensor") the
Lycos Internet search and indexing technology (see Note 3).

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Point Communications Corporation ("Point
Communications"), from the date of acquisition. All significant intercompany
balances and transactions have been eliminated. The Company's fiscal year end
is July 31.

Joint Venture

On May 1, 1997, the Company entered into a joint venture agreement with
Bertelsmann Internet Services to create localized versions of the Lycos search
and navigation service throughout Europe. The new company, named Lycos
Bertelsmann GmbH & Co. KG ("Lycos Bertelsmann"), is owned 50% by Lycos and 50%
by Bertelsmann and is scheduled to develop local Internet navigation centers
for up to 37 Eastern and Western European countries. Bertelsmann Internet
Services, a subsidiary of Bertelsmann AG, has committed to provide $10.0
million in start-up capital, infrastructure and employees for the venture
while Lycos will provide the core technology and brand name. The carrying
value of the Company's investment in Lycos Bertelsmann was not material at May
1, 1997. The investment is accounted for under the equity method and
accordingly, the Company will recognize 50% of the net profits of Lycos
Bertelsmann when realized.

Initial Public Offering

On April 2, 1996, the Company completed an initial public offering of its
common stock in which 3,000,000 shares of common stock were issued at a price
of $16.00 per share. On April 12, 1996, pursuant to the exercise of an over-
allotment option granted to the underwriters of the Company's initial public
offering, the Company issued an additional 135,000 shares of its common stock
at a price of $16.00 per share.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original
or remaining maturities of three months or less to be cash equivalents. At
July 31, 1997 and 1996, the Company had no investments with maturities greater
than three months.

Property and Equipment

Property and equipment are stated at cost, net of accumulated amortization
and depreciation. Property and equipment are depreciated on a straight-line
basis over the estimated useful lives of the assets (three to five years).
Leasehold improvements are amortized on a straight-line basis over the lesser
of the estimated useful life of the asset or the lease term.

Intangibles

In connection with an acquisition accounted for as a purchase (see Note 4),
the Company recorded goodwill based on the excess of the purchase price over
the identifiable tangible and intangible net assets of the acquiree on the
date of purchase. Goodwill is reported at cost, net of accumulated
amortization, and is being amortized over its estimated useful life of five
years.

F-8
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Licensed technology, included in the accompanying balance sheets under
"License Agreement", is being amortized on a straight-line basis over its
estimated five-year economic life.

Revenue Recognition

The Company's advertising revenues are derived principally from short-term
advertising contracts in which the Company guarantees a number of impressions
for a fixed fee or on a per impression basis with an established minimum fee.
Revenues from advertising are recognized as the services are performed.

The Company's license, product and other revenues are derived principally
from product licensing fees and fees from maintenance and support of its
products. License, product and other revenues are generally recognized upon
delivery provided that no significant Company obligations remain and
collection of the receivable is probable. In cases where there are significant
remaining obligations, the Company defers such revenue until those obligations
are satisfied. Fees from maintenance and support of the Company's products
including revenues bundled with the initial licensing fees are deferred and
recognized ratably over the service period.

Research and Development Costs

Research and development expenditures are expensed as incurred. Software
development costs are required to be capitalized when a product's
technological feasibility has been established by completion of a working
model of the product and ending when a product is available for general
release to consumers. To date, completion of a working model of the Company's
products and general release have substantially coincided. As a result, the
Company has not capitalized any software development costs since such costs
have not been significant.

Advertising Costs

The Company expenses advertising production costs as incurred. Advertising
expense was approximately $4,427,000 and $567,000 for the years ended July 31,
1997 and July 31, 1996, respectively. There was no advertising expense for the
period from Inception (June 1, 1995) to July 31, 1995.

Income Taxes

The Company records income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and the tax effect of net operating loss carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

Concentration of Credit Risk

Substantially all of the Company's excess cash has been invested in highly
liquid investments with maturities of three months or less.

The Company performs ongoing credit evaluations of its customers' financial
conditions and generally does not require collateral on accounts receivable.
The Company maintains allowances for credit losses and such losses have been
within management's expectations. Direct write-offs of accounts receivable
were $51,000 for the year ended July 31, 1997. There were no direct write-offs
of accounts receivable for the year ended July 31, 1996. No single customer
accounted for greater than 10% of total revenues during the years ended July
31, 1997 and 1996.

F-9
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company's services are provided to customers in several industries
primarily in North America. Sales to foreign customers for the years ended
July 31, 1997 and 1996 were approximately $1,700,000 and $385,000,
respectively. Accounts receivable, license fees receivable and deferred
revenue from foreign customers at July 31, 1997 were approximately $151,000,
$972,000 and $29,000, respectively.

Financial Instruments

The recorded amounts of financial instruments, including cash equivalents,
receivables, accounts payable, accrued expenses and deferred revenues,
approximate their fair market values as of July 31, 1997. The Company has no
investments in derivative financial instruments.

Per Share Amounts

Net loss per share is computed using the weighted average number of shares
of common stock and dilutive common equivalent shares outstanding during the
period. Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletins, such computations include all common and common equivalent shares
issued at less than the initial public offering price within twelve months of
the filing date of the Company's initial public offering in April 1996 as if
they were outstanding for all periods presented using the treasury stock
method and the anticipated initial public offering price. Fully diluted and
primary earnings per share are the same for all periods presented.

Accounting for Impairment of Long-Lived Assets

In accordance with Financial Accounting Standards Board Statement No. 121,
the Company records impairment losses on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount.

Use of Estimates

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

License Fees Receivable

License fees receivable are comprised of fees to be received in the future
on licensing agreements existing at the balance sheet date.

Deferred Revenues

Deferred revenues are comprised of license fees to be earned in the future
on noncancelable license agreements existing at the balance sheet date.

Reclassifications

Certain amounts in 1997 and 1996, which were previously included in the
consolidated income statement under the caption "Cost of revenues", have been
reclassified as "Sales and marketing" expense for all periods presented. This
change in classification has no effect on previously reported net loss or net
loss per share.

F-10
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

New Accounting Pronouncements

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123") requires that companies either recognize
compensation expense for grants of stock, stock options, and other equity
instruments based on fair value, or provide pro forma disclosure of net income
or loss and earnings or loss per share in the notes to the financial
statements. The Company has adopted the disclosure provisions of SFAS 123 in
1997 and has applied APB Opinion 25 and related interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized under
SFAS 123 for the Company's stock option plans.

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("SFAS 128") "Earnings per Share", which establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities
with publicly held common stock or potential common stock. This Statement is
effective for financial statements issued for both interim and annual periods
ending after December 15, 1997 and requires restatement of all prior-period
EPS data. Earlier application of this standard is not permitted. The Company
believes that this pronouncement will not have a material adverse effect on
its earnings per share.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130
"Reporting Comprehensive Income". This Statement establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. This Statement is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier
periods is required. The Company believes that this pronouncement will not
have a material adverse effect on its results of operations.

2. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consist of the following:

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1997 1996
---------- ----------
<S> <C> <C>
Computers and equipment........................ $2,234,012 $1,495,481
Furniture and fixtures......................... 563,756 79,290
Leasehold improvements......................... 585,912 89,644
Purchased software............................. 141,096 46,690
---------- ----------
3,524,776 1,711,105
Less accumulated depreciation and
amortization.................................. (1,127,176) (305,337)
---------- ----------
$2,397,600 $1,405,768
========== ==========
</TABLE>

F-11
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. LICENSE AGREEMENT

In connection with the formation of the Company, the Company, CMU,
CMG@Ventures and CMG Information Services, Inc. ("CMGI") entered into a
license agreement ("License Agreement") pursuant to which CMU granted the
Company a perpetual, exclusive (with certain limited exceptions), worldwide
license to use the Lycos Internet search and indexing technology and the Lycos
Catalog. The Company paid licensing fees and additional payments equal to 50%
of certain cash receipts, as defined, totaling approximately $1,250,000. All
amounts due under the License Agreement were paid as of July 31, 1996. The
Company also issued 2,000,000 shares of common stock in connection with this
Agreement. Accumulated amortization under the License Agreement at July 31,
1997 and 1996 was $726,000 and $337,000, respectively.

On February 9, 1996, the Company sold 91,580 shares and 40,000 shares of
common stock and options to acquire 59,726 shares and 26,086 shares of Common
Stock to CMU and Dr. Michael Mauldin, respectively, for an aggregate purchase
price of $328,950, pursuant to the exercise of preemptive rights granted to
these parties in the License Agreement. These preemptive rights were exercised
in connection with the issuance of shares of common stock pertaining to the
Company's acquistion of Point Communications Corporation ("Point
Communications") on October 12, 1995 (see Note 4). The options granted to Dr.
Mauldin and CMU have an exercise price of $2.00 per share and became fully
vested upon completion of the Company's initial public offering in April 1996.

4. ACQUISITION OF POINT COMMUNICATIONS CORPORATION

On October 12, 1995, the Company acquired all of the outstanding shares of
Point Communications, a development stage company involved in developing
systems design and creating database software and the related database for
purposes of reviewing and ranking sites on the Internet. In connection with
such acquisition, accounted for as a purchase, the Company issued 526,316
shares valued at $542,000 (based on an independent valuation). The former
owner of Point Communications also received an option to purchase an
additional 343,248 shares at an exercise price of $2.00 per share. The option
has a ten-year term and became vested upon the closing of the Company's
initial public offering in April 1996. At July 31, 1997, all of these options
remained outstanding.

The purchase price was allocated as follows:

<TABLE>
<S> <C>
In process research and development............................ $ 452,000
Goodwill....................................................... 186,000
Other assets, principally cash and receivables................. 99,000
Liabilities assumed............................................ (195,000)
---------
$ 542,000
=========
</TABLE>

Purchased research and development expensed at the time of acquisition
represents the estimated current fair value (using the Cost-to-Create
valuation method) of a specifically identifiable project under development
which did not meet the accounting criteria for capitalization. Accumulated
amortization on goodwill was approximately $67,000 and $14,000 at July 31,
1997 and 1996, respectively. The unaudited pro forma operating results
assuming the acquisition took place at the Company's Inception date (June 1,
1995) are presented below.

F-12
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The operating results of Point Communications during the year ended July 31,
1996 reflect the operating results of Point Communications through October 12,
1995, the date of acquisition.

<TABLE>
<CAPTION>
LYCOS POINT COMBINED
----------- -------- -----------
YEAR ENDED JULY 31, 1996
------------------------
<S> <C> <C> <C>
Revenues............................... $ 5,257,227 $ 35,517 $ 5,292,744
Operating expenses..................... 10,345,065 166,442 10,511,507
----------- -------- -----------
Net loss............................... $ 5,087,838 $130,925 $ 5,218,763
=========== ======== ===========
INCEPTION (JUNE 1, 1995) TO JULY 31,
1995
------------------------------------
Revenues............................... $ 5,000 -- $ 5,000
Operating expenses..................... 110,381 71,937 182,318
----------- -------- -----------
Net loss............................... $ 105,381 $ 71,937 $ 177,318
=========== ======== ===========
</TABLE>

5. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1997 1996
---------- ----------
<S> <C> <C>
Compensation and benefits.......................... $ 942,749 $ 677,080
Advertising and promotion.......................... 4,238,361 300,000
Professional fees.................................. 627,884 166,366
Non-income taxes................................... 407,401 300,000
Other.............................................. 1,171,312 302,972
---------- ----------
$7,387,707 $1,746,418
========== ==========
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain other equipment under
operating lease agreements expiring through 2002. Future noncancelable minimum
payments as of July 31, 1997 under these leases for each fiscal year end are
as follows:

Rent expense under noncancellable operating leases was $2,094,774 and
$318,500 for the years ended July 31, 1997 and 1996, respectively.

In April 1996, the Company entered into a one year "Premier Provider"
Agreement ("the 1996 Agreement") with Netscape pursuant to which the Company
was designated one of five "Premier Providers" of search and navigation
services accessible from the "Net Search" button on the Netscape browser.
Under the terms of the Agreement, the Company is obligated to make installment
payments totaling $5 million over the term of the Agreement. The Company
recognizes the cost of this agreement ratably over the term of the Agreement,
with the cost included in sales and marketing expense.

F-13
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In March 1997, the Company renewed its one year "Premier Provider" agreement
(the "1997 Agreement") with Netscape pursuant to which the Company was
designated one of four "Premier Providers" of search and navigation services
accessible from the "Net Search" button on the Netscape browser. Under the
terms of the 1997 Agreement, the Company is obligated to make installment
payments totaling $4.7 million over the term of the 1997 Agreement, subject to
adjustments under certain circumstances. The Company recognizes the cost of
the 1997 Agreement ratably over the term of the Agreement, with the cost
included in sales and marketing expense.

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect
the business, results of operations or financial condition of the Company.

7. STOCKHOLDERS' EQUITY

1995 Stock Option Plan

During 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan") under which nonqualified stock options to purchase common stock may be
granted to officers and other key employees. Under the Plan, options to
purchase 1,000,000 shares of common stock may be granted at an exercise price
determined by the Board of Directors. Options granted under the 1995 Plan are
exercisable in five equal annual installments beginning one year after date of
grant, except that the vesting of certain options are subject to acceleration
upon the occurrence of certain events. Options under the 1995 Plan expire six
years from date of grant. The total weighted average contractual life of
options outstanding at July 31, 1997 was 4.5 years.

A summary of option activity under the 1995 Plan is as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE RANGE OF
OPTIONS EXERCISE PRICE EXERCISE PRICES
-------- -------------- ------------------
<S> <C> <C> <C>
Outstanding at June 1,
1995....................... -- -- --
Granted.................... 560,000 $ 0.01 $ 0.01
Exercised.................. -- -- --
Terminated................. -- -- --
--------
Outstanding at July 31,
1995....................... 560,000 $ 0.01 $ 0.01
========
Granted.................... 589,776 $ 4.82 $ 0.01 - $16.00
Exercised.................. -- -- --
Terminated................. (195,304) $ 0.13 $ 0.01 - $ 9.60
--------
Outstanding at July 31,
1996....................... 954,472 $ 2.95 $ 0.01 - $16.00
========
Granted.................... 210,000 $14.39 $ 11.38 - $15.88
Exercised.................. (50,800) $ 0.05 $ 0.01 - $ 2.32
Terminated................. (122,868) $ 3.44 $ 0.01 - $16.00
--------
Outstanding at July 31,
1997....................... 990,804 $ 5.46 $ 0.01 - $15.88
========
Exercisable at July 31,
1997....................... 269,646 $ 1.87 $ 0.01 - $ 9.60
========
</TABLE>

F-14
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ------------------------
1995 STOCK WEIGHTED-
OPTION AVERAGE WEIGHTED- WEIGHTED-
PLAN RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING AT CONTRACTUAL EXERCISE EXERCISABLE AT EXERCISE
PRICES JULY 31, 1997 LIFE (YEARS) PRICE JULY 31, 1997 PRICE
-------------- -------------- ------------ --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.01--$ 2.32 533,580 4.05 $ 0.03 217,316 $0.01
$ 9.60--$ 9.60 247,224 4.47 $ 9.60 52,330 $9.60
$11.38--$15.88 210,000 5.77 $14.39 -- --
------- -------
990,804 269,646
======= =======
</TABLE>

Pursuant to the License Agreement, CMG@Ventures has agreed to sell to the
Company a number of shares of common stock equal to the shares issuable upon
exercise of options granted under the 1995 Plan and the 1996 Plan (as defined
below) prior to the initial public offering at a price equal to the exercise
price of the options as such options are exercised.

The Company has recorded deferred compensation expense of approximately
$610,000 for the difference between the grant price and the estimated fair
value (determined by independent valuations or by reference to third party
transactions) of certain of the Company's stock options granted. This amount
is being amortized over the vesting period of the individual options on a
straight-line basis, determined separately for each portion of the options
that vest in each year. Deferred compensation expense recognized for the year
ended July 31, 1997 and July 31, 1996 was approximately $142,000 and $234,000,
respectively.

1996 Stock Option Plan

On February 2, 1996, the 1996 Stock Option Plan (the "1996 Plan") was
adopted by the Board of Directors. A maximum of 1,000,000 shares of common
stock may be issued pursuant to the 1996 Plan upon exercise of options. On
June 27, 1997, the Company's Board of Directors voted to authorize an
additional 200,000 shares for grant under the 1996 Plan. Under the 1996 Plan,
incentive stock options may be granted to employees and officers of the
Company and non-qualified stock options may be granted to consultants,
employees and officers of the Company. The exercise price of such incentive
stock options cannot be less than the fair market value of the common stock on
the date of grant, or less than 110% of fair market value in the case of
employees or officers holding 10% or more of the voting stock of the Company.
The Compensation Committee of the Board of Directors has the authority to
select optionees and to determine the terms of the options granted. Options
granted under the 1996 Plan are exercisable in five equal annual installments
commencing on the first anniversary of the date of grant, except that vesting
of certain options are subject to acceleration upon the occurrence of certain
events. Options under the 1996 Plan expire ten years from the date of grant.
The total weighted average contractual life of options outstanding at July 31,
1997, was 9.4 years.

F-15
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A summary of option activity under the 1996 Plan is as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE RANGE OF
OPTIONS EXERCISE PRICE EXERCISE PRICES
--------- -------------- ---------------
<S> <C> <C> <C>
Outstanding at July 31, 1995.......... -- -- -
Granted............................. 120,750 $13.03 $ 6.00 - $17.75
Exercised........................... -- -- -- - --
Terminated.......................... (31,000) $14.77 $13.00 - $17.00
---------
Outstanding at July 31, 1996.......... 89,750 $12.42 $ 6.00 - $17.75
Granted............................. 1,084,922 $11.63 $ 5.81 - $21.50
Exercised........................... -- -- -- - --
Terminated.......................... (149,400) $13.12 $ 7.13 - $21.50
---------
Outstanding at July 31, 1997 ......... 1,025,272 $11.44 $ 5.81 - $21.50
=========
Exercisable at July 31, 1997.......... 2,850 $ 6.73 $ 6.00 - $ 7.13
=========
</TABLE>

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ --------------------------
WEIGHTED-
1996 STOCK OPTION NUMBER AVERAGE WEIGHTED- WEIGHTED-
PLAN RANGE OF OUTSTANDING REMAINING AVERAGE NUMBER AVERAGE
EXERCISE AT CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
PRICES JULY 31, 1997 LIFE (YEARS) PRICE AT JULY 31, 1997 PRICE
----------------- ------------- ------------ --------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
$ 5.81--$ 9.63 333,422 9.15 $ 8.62 2,850 $6.73
$10.38--$11.13 297,500 9.16 $11.06 -- --
$11.25--$15.75 235,750 9.66 $12.76 -- --
$15.88--$21.50 158,600 9.70 $16.69 -- --
--------- -----
1,025,272 2,850
========= =====
</TABLE>

In September 1996, the Company canceled 84,732 options previously granted to
employees under the 1995 Plan and 1996 Plan at various exercise prices and
granted an equivalent number of additional options to those same employees
pursuant to the 1996 Plan at an exercise price of $9.60 per share. No
compensation expense was recognized by the Company as the exercise price of
these options on the date of grant was at or above fair market value.

1996 Non-Employee Director Stock Option Plan

On February 2, 1996, the 1996 Non-Employee Director Stock Option Plan (the
"Director Plan") was approved by the Board of Directors. The Director Plan
authorizes the issuance of a maximum of 100,000 shares of common stock. The
Director Plan is administered by the Board of Directors. Under the Director
Plan each non-employee director first elected to the Board of Directors after
the completion of the initial public offering will receive an option for
10,000 shares on the date of his or her election. The exercise price per share
for all options granted under the Director Plan will be equal to the fair
market value of the common stock as of the date of grant. All options vest in
three equal installments beginning on the first anniversary of the date of
grant. Options under the Director Plan, will expire 10 years from the date of
grant and are exercisable only while the optionee is serving as a director of
the Company. As of July 31, 1997, 10,000 options had been granted at an
exercise price of $11.50 per share and remained outstanding under the Director
Plan, of which 3,333 were exercisable.

F-16
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1996 Employee Stock Purchase Plan

On February 2, 1996, the 1996 Employee Stock Purchase Plan ("1996 Purchase
Plan") was adopted by the Company's Board of Directors. The 1996 Purchase Plan
authorizes the issuance of a maximum of 250,000 shares of common stock and is
administered by the Compensation Committee of the Board of Directors. All
employees of the Company who have completed six months of service with the
Company are eligible to participate in the 1996 Purchase Plan with the
exception of those employees who own 5% or more of the Company's stock and
directors who are not employees of the Company may not participate in this
plan. Employees elect to have deducted from 1%-10% of their base compensation.
The exercise price for the option is the lesser of 85% of the fair market
value of the common stock on the first or last business day of the purchase
period (6 months). An employee's rights under the 1996 Purchase Plan terminate
upon his or her voluntary withdrawal from the Plan at any time or upon
termination of employment.

Stock-Based Compensation

The Company has granted options to purchase shares of common stock to key
employees and directors. These options vest over periods of up to five years
and expire at various dates through 2007. The Company has adopted the
disclosure provisions of SFAS No. 123 with respect to its stock-based
compensation. The effects of applying SFAS No. 123 in this pro forma
disclosure may not be representative of the effects on reported income or loss
for future years. SFAS 123 does not apply to awards prior to 1995. The Company
anticipates additional awards in future years. Had compensation cost for the
Company's stock-based compensation plans been determined based on the grant
date fair value in accordance with SFAS 123, the Company's net loss and net
loss per share for the years ended July 31, 1997 and 1996 would have been
increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1997 1996
--------------------------- ---------------------------
NET LOSS LOSS PER SHARE NET LOSS LOSS PER SHARE
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
As Reported............. $(6,619,190) $(0.48) $(5,087,838) $(0.42)
Pro Forma............... $(7,548,626) $(0.55) $(5,191,133) $(0.43)
</TABLE>

The grant date fair value of each stock option is estimated using the Black-
Scholes option-pricing model with the following assumptions: an expected life
of four years for both the 1996 plan and the 1995 plan, expected volatility of
70% for both plans, a dividend yield of 0% for both plans and a weighted
average risk-free interest rate of 6.50% for the 1996 plan and 5.75% for the
1995 plan. The weighted average grant date fair values of options granted in
1997 and 1996 were $4.87 and $1.62, respectively. The weighted-average
remaining contractual life of options outstanding at July 31, 1997 was 7.1
years.

8. INCOME TAXES

As of July 31, 1997, the Company had approximately $4.0 million in Federal
and State net operating loss carryforwards. Of this amount, approximately
$276,000 relates to the acquisition of Point Communications and will reduce
goodwill when utilized. The Federal net operating losses will expire beginning
in 2010 if not utilized. The State net operating losses will expire beginning
in 2000 if not utilized.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities used for financial
reporting purposes and those used for income tax purposes. As of July 31, 1997
and 1996, the Company had gross deferred tax assets of $4.0 and $2.2 million,
respectively, which have been offset in total by a valuation allowance.
Deferred tax assets consist primarily of net operating loss carryforwards,
deferred revenues and accrued expenses of $1.6 million, $1.8 million and $0.6
million, respectively, at July 31, 1997 and net operating loss carryforwards
of $2.2 million at July 31, 1996. The

F-17
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's deferred tax liability relates solely to the difference in bases of
acquired assets. A portion or all of net operating loss carryforwards which
can be utilized in any year may be limited by changes in ownership of the
Company, pursuant to Section 382 of the Internal Revenue Code and similar
statutes.

9. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth selected quarterly financial and stock price
information for the years ended July 31, 1997 and 1996. The operating results
for any given quarter are not necessarily indicative of results for any future
period. The Company's common stock is traded on the Nasdaq National Market
System ("Nasdaq/NMS") under the symbol LCOS. Included below are the high and
low sales prices (adjusted for a 2-for-1 stock split effected as of February
9, 1996) during each quarterly period for the shares of common stock as
reported by Nasdaq/NMS.

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
----------------------------------------------------------------------
FISCAL 1996 QUARTER ENDED FISCAL 1997 QUARTER ENDED
---------------------------------- ----------------------------------
OCT. 31 JAN. 31 APR. 30 JUL. 31 OCT. 31 JAN. 31 APR. 30 JUL. 31
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues.......... $ 215 $ 826 $ 1,552 $ 2,663 $ 3,663 $ 5,004 $ 5,853 $7,753
Cost of revenues (1).... 184 483 1,194 1,364 838 1,090 1,219 1,585
------- ------- ------- ------- ------- ------- ------- ------
Gross profit............ 31 343 358 1,299 2,825 3,914 4,634 6,168
Research and development
expense................ 30 258 226 392 967 976 1,167 1,193
In-process research &
development expense.... -- 452 -- -- -- -- -- --
Sales and marketing
(1).................... 132 308 1,332 2,976 4,618 4,754 4,538 5,220
General and
administrative
expenses............... 153 345 500 730 581 737 682 857
------- ------- ------- ------- ------- ------- ------- ------
Operating loss.......... (284) (1,020) (1,700) (2,799) (3,341) (2,553) (1,753) (1,102)
Interest income......... 4 6 112 592 582 541 480 527
Net loss................ $ (280) $(1,014) $(1,588) $(2,207) $(2,759) $(2,012) $(1,273) $ (575)
======= ======= ======= ======= ======= ======= ======= ======
Net loss per share...... $ (0.03) $ (0.09) $ (0.13) $ (0.16) $ (0.20) $ (0.15) $ (0.09) $(0.04)
Market Price:
High................... n/a n/a $ 29.25 $ 19.25 $ 12.75 $ 18.75 $ 22.75 $19.25
Low.................... n/a n/a $ 14.00 $ 5.88 $ 5.75 $ 9.50 $ 12.00 $11.19
</TABLE>
- --------
(1) Reconciliation of amounts previously reported on SEC Form 10-Q.

<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1997
QUARTER ENDED QUARTER ENDED
------------- ------------------------------------
APR. 30 OCT. 31 JAN. 31 APR. 30
------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cost of revenues as
previously reported on
SEC Forms 10-Q........... $1,472,012 $ 2,088,183 $ 2,339,681 $2,190,981
Reclassification.......... (277,779) (1,250,000) (1,250,000) (972,221)
---------- ----------- ----------- ----------
Cost of revenues reported
above.................... $1,194,233 $ 838,183 $ 1,089,681 $1,218,760
========== =========== =========== ==========
Sales and marketing as
previously reported on
SEC Forms 10-Q........... $1,055,228 $ 3,368,209 $ 3,504,290 $3,565,490
Reclassification.......... 277,779 1,250,000 1,250,000 972,221
---------- ----------- ----------- ----------
Sales and marketing as
reported above........... $1,333,007 $ 4,618,209 $ 4,754,290 $4,537,711
========== =========== =========== ==========
</TABLE>

F-18
<PAGE>

LYCOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. RELATED PARTY TRANSACTIONS

CMGI has provided the Company certain services for which $48,000 in fees
were charged at estimated fair market value in the year ended July 31, 1996.
No fees were charged to the Company by CMGI in the year ended July 31, 1997.
These services have included, among other things, administration of the
Company's 401(k) plan and the purchase of certain insurance coverage. Amounts
due CMGI are included in due to related parties on the consolidated balance
sheets.

In addition to amounts paid to CMU in connection with the License Agreement
(see Note 3), the Company was also required to pay to CMU an additional
$525,000 pursuant to two licenses granted by CMU which were assigned to the
Company. As of July 31, 1997, the Company had paid an aggregate of $400,000 to
CMU pursuant to these licenses.

11. SUBSEQUENT EVENT

Subsequent to July 31, 1997, the Board of Directors approved an amendment to
the Company's 1996 Stock Option Plan to increase the number of shares of
common stock reserved for grant thereunder from 1,000,000 to 3,200,000. This
amendment was approved by the Company's stockholders at the annual meeting of
stockholders held on December 17, 1997.

In February 1998, the Company acquired Tripod, Inc. in exchange for the
Company's common stock and options and warrants to acquire common stock valued
at approximately $63.2 million at the time of the acquisition. Tripod is a
leading community building Internet company which provides its users with
easy-to-use homepage building tools.

In March 1998, Lycos acquired a 9.9% ownership stake in GlobeComm, Inc.
(iName), a leading global provider of free Web-based e-mail products, in
exchange for shares of the Company's common stock valued at $4 million at the
time of the transaction. The Company utilizes GlobeComm's e-mail products to
provide free, Web-based e-mail to Lycos users.

In April 1998, Lycos acquired a 14.8% ownership stake in Sage Enterprises,
Inc. (PlanetAll) in exchange for shares of the Company's common stock valued
at $2.5 million at the time of the transaction. Launched in November 1996,
PlanetAll provides through the Internet free core contact management services
to its over one million registered members. PlanetAll allows its members to
maintain an "Active Address Book" which is always up-to-date because each
person in an Active Address Book maintains his or her own record over the
Internet. Lycos has integrated PlanetAll's product offering into its
personalization products.

In April 1998, the Company acquired WiseWire Corporation in exchange for the
Company's common stock and options to acquire common stock valued at
approximately $39.7 million at the time of acquisition. WiseWire's directory-
building technology finds, filters, organizes and delivers targeted content to
Internet users.

F-19
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of Tripod, Inc.:

We have audited the accompanying balance sheets of Tripod, Inc. as of
October 31, 1997 and December 31, 1996 and the related statements of
operations, stockholders' equity and cash flows for the ten months ended
October 31, 1997 and year ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tripod, Inc. as of October
31, 1997 and December 31, 1996, and the results of its operations and its cash
flows for the ten months ended October 31, 1997 and year ended December 31,
1996, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Boston, Massachusetts
February 3, 1998

F-20
<PAGE>

TRIPOD, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31, DECEMBER 31,
1998 1997 1996
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 3,849,928 $ 5,871,589 $ 46,128
Accounts receivable, less allowance
for doubtful accounts of $119,000,
$110,000 and $34,000 at January 31,
1998, October 31, 1997 and
December 31, 1996, respectively...... 300,730 111,128 114,870
Prepaid expenses...................... -- 17,567 8,000
----------- ----------- -----------
Total current assets................ 4,150,658 6,000,284 168,998
----------- ----------- -----------
Property and equipment, less accumulated
depreciation........................... 1,279,528 916,552 263,728
Other assets............................ -- 24,650 14,625
----------- ----------- -----------
Total assets........................ $ 5,430,186 $ 6,941,486 $ 447,351
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable......................... $ -- $ -- $ 600,000
Accounts payable...................... 828,784 53,199 111,821
Accrued expenses...................... 494,593 695,457 84,684
Deferred revenues..................... 92,780 92,520 31,594
----------- ----------- -----------
Total current liabilities........... 1,416,157 841,176 828,099
Deferred compensation................... -- 169,183 147,930
Redeemable preferred stock, Series D and
E, $0.01 par value: Authorized: 291,921
shares at January 31, 1998, October 31,
1997 and December 31, 1996; Issued and
outstanding: 239,872 at January 31,
1998, October 31, 1997 and 40,669 at
December 31, 1996. Involuntary
liquidation value and redemption value
of 11,749,978 at January 31, 1998...... 11,475,850 11,475,850 1,535,898
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
500,000 shares authorized, 69,025
shares at January 31, 1998,
October 31, 1997 and 69,025 at
December 31, 1996 issued and
outstanding. Involuntary liquidation
value of $1,126,940 at January 31,
1998................................. 690 690 690
Common stock, $.01 par value;
1,000,000 shares authorized, 83,510
shares at January 31, 1998,
October 31, 1997 and 83,372 at
December 31, 1996 issued and
outstanding.......................... 847 835 834
Additional paid-in capital.............. 1,541,311 1,466,143 1,313,882
Deferred compensation................... (198,469) (141,548) --
Accumulated deficit..................... (8,806,200) (6,870,843) (3,379,982)
----------- ----------- -----------
Total stockholders' equity.......... (7,461,821) (5,544,723) (2,064,576)
----------- ----------- -----------
Total liabilities and stockholders'
equity............................. $ 5,430,186 $ 6,941,486 $ 447,351
=========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-21
<PAGE>

TRIPOD, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
------------------------
TEN MONTHS ENDED YEAR ENDED
1998 1997 OCTOBER 31, 1997 DECEMBER 31, 1996
----------- ----------- ---------------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Advertising........... $ 490,580 $ 159,638 $ 450,980 $ 347,191
Other................. 165,474 53,847 113,749 5,032
----------- ----------- ----------- -----------
Total revenues...... 656,054 213,485 564,729 352,223
Cost of revenues........ 705,593 248,204 497,746 443,252
----------- ----------- ----------- -----------
Gross profit........ (49,539) (34,719) 66,983 (91,029)
Operating expenses:
Research and
development.......... 1,685,987 712,062 1,814,486 804,359
Sales and marketing... 1,610,553 479,044 1,301,143 903,325
General and
administrative....... 601,824 192,351 542,044 279,146
----------- ----------- ----------- -----------
Total operating
expenses........... 3,898,364 1,383,457 3,657,673 1,986,830
----------- ----------- ----------- -----------
Operating loss.......... (3,947,903) (1,418,176) (3,590,690) (2,077,859)
Interest income
(expense).............. 158,827 (14,189) 99,829 (9,734)
----------- ----------- ----------- -----------
Net loss................ $(3,789,076) $(1,432,365) $(3,490,861) $(2,087,593)
=========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-22
<PAGE>

TRIPOD, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
---------------- -------------
ADDITIONAL
PAID-IN DEFERRED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT TOTAL
-------- ------- ------ ------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1995................... 69,025 $ 690 79,500 $795 $1,139,750 $ -- $(1,292,389) $ (151,154)
Issuance of preferred
stock warrants......... -- -- -- -- 158,683 -- -- 158,683
Issuance of common stock
in connection with the
exercise of common
stock options.......... -- -- 3,872 39 15,449 -- -- 15,488
Net loss................ -- -- -- -- -- -- (2,087,593) (2,087,593)
-------- ------ ------ ---- ---------- --------- ----------- -----------
Balances at December 31,
1996................... 69,025 $ 690 83,372 $834 $1,313,882 $ -- $(3,379,982) $(2,064,576)
Issuance of common stock
in connection with the
exercise of common
stock options.......... -- -- 138 1 551 -- -- 552
Deferred compensation
related to grant of
stock options.......... -- -- -- -- 151,710 (151,710) -- --
Amortization of deferred
compensation........... -- -- -- -- -- 10,162 -- 10,162
Net loss................ -- -- -- -- -- -- (3,490,861) (3,490,861)
-------- ------ ------ ---- ---------- --------- ----------- -----------
Balances at October 31,
1997................... 69,025 $ 690 83,510 $835 $1,466,143 $(141,548) $(6,870,843) $(5,544,723)
Issuance of common stock
in connection with the
exercise of common
stock options
(unaudited)............ -- -- 1,210 12 3,630 -- -- 3,642
Deferred compensation
related to grant of
stock options
(unaudited)............ -- -- -- -- 71,538 (71,538) -- --
Amortization of deferred
compensation
(unaudited)............ -- -- -- -- -- 14,617 -- 14,617
Net loss (unaudited).... -- -- -- -- -- -- (1,935,357) (1,935,357)
-------- ------ ------ ---- ---------- --------- ----------- -----------
Balances at January 31,
1998 (unaudited)....... 69,025 $690 84,720 $847 $1,541,311 $(198,469) $(8,806,200) $(7,461,821)
======== ====== ====== ==== ========== ========= =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-23
<PAGE>

TRIPOD, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
------------------------ TEN MONTHS ENDED YEAR ENDED
1998 1997 OCTOBER 31, 1997 DECEMBER 31, 1996
----------- ----------- ---------------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................ $(3,789,076) $(1,432,365) $(3,490,861) $(2,087,593)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Amortization of
deferred
compensation......... 24,779 -- 10,162 --
Depreciation and
amortization......... 248,693 42,621 209,744 63,020
Allowance for doubtful
accounts............. 86,218 34,495 75,131 34,495
Changes in operating
assets and liabilities:
Accounts receivable... (219,753) (52,775) (71,389) (147,665)
Prepaid expenses...... 177,725 11,036 (9,567) (7,177)
Other assets.......... 20,573 (15,900) (10,025) (14,625)
Accounts payable...... 728,666 38,972 (58,622) 44,624
Accrued expenses...... 372,155 50,713 610,773 43,767
Deferred revenues..... 16,514 (16,233) 60,926 (34,031)
Deferred
compensation......... (160,965) 19,585 21,253 24,114
----------- ----------- ----------- -----------
Net cash used in
operating activities... (2,494,471) (1,319,851) (2,652,475) (2,081,071)
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of property and
equipment.............. (798,328) (164,585) (862,568) (256,009)
----------- ----------- ----------- -----------
Net cash used in
investing activities... (798,328) (164,585) (862,568) (256,009)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from sale of
redeemable preferred
stock.................. -- 250,004 9,999,991 1,591,304
Proceeds from sale of
preferred stock
warrants............... -- -- -- 158,683
Payment of issuance
costs for redeemable
preferred stock........ -- -- (60,039) (55,406)
Proceeds from borrowings
on notes payable....... -- 800,000 975,000 600,000
Payments on notes
payable................ -- -- (1,575,000) --
Proceeds from exercise
of stock options....... 5,140 4,800 552 15,488
----------- ----------- ----------- -----------
Net cash provided by
financing activities... 5,140 1,054,804 9,340,504 2,310,069
----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents............ (3,287,659) (429,632) 5,825,461 (27,011)
----------- ----------- ----------- -----------
Cash and cash
equivalents at
beginning of period.... 7,137,589 510,809 46,128 73,139
----------- ----------- ----------- -----------
Cash and cash
equivalents at end of
period................. $ 3,849,930 $ 81,177 $ 5,871,589 $ 46,128
=========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-24
<PAGE>

TRIPOD, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Tripod, Inc. ("Tripod" or the "Company"), which operates in one industry
segment, maintains a community oriented website on the Internet's World Wide
Web. The Company provides content for members of Tripod and provides software
applications that allow members to publish their personal homepage on the
Internet's World Wide Web. The Company was formed in September 1992 and is
incorporated in the state of Delaware.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original
or remaining maturities of three months or less to be cash equivalents. At
October 31, 1997 and December 31, 1996, the Company had no investments with
original or remaining maturities greater than three months.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Computer equipment is depreciated on a straight-line basis
over the estimated useful lives of the assets (generally three years).
Leasehold improvements are amortized on a straight-line basis over the lesser
of the estimated useful life of the asset or the lease term.

Revenue Recognition

The Company's internet advertising revenues are derived principally from
short-term advertising contracts in which the Company guarantees a number of
impressions for a fixed fee or on a per impression basis with an established
minimum fee. Revenues from internet advertising are recognized as the services
are performed.

The Company's other revenue includes subscription fees from members for
premium memberships, which include enhanced homepage building tools.
Subscription fees are recognized ratably over the term of the subscription.

Deferred Revenues

Deferred revenues are comprised of subscription fees to be earned in the
future on noncancelable premium member subscriptions.

Research and Development Costs

Research and development expenditures are expensed as incurred. Software
development costs are required to be capitalized when a product's
technological feasibility has been established by completion of either a
detailed program design or a working model of the product and ending when a
product is available for general release to consumers. To date, completion of
a detailed program design or a working model of the Company's products and
general release have substantially coincided. As a result, the Company has not
capitalized any software development costs since such costs have not been
significant.

Advertising Costs

The Company expenses advertising production costs as incurred. Advertising
expenses were approximately $563,000 and $458,000 for the ten-month period
ended October 31, 1997 and the year ended December 31, 1996, respectively.

F-25
<PAGE>

TRIPOD, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Income Taxes

Concentration of Credit Risk

Substantially all of the Company's excess cash has been invested in highly
liquid investments with remaining maturities of three months or less.

The Company performs ongoing credit evaluations of its customers' financial
conditions and generally does not require collateral on accounts receivable.
The Company maintains allowances for credit losses and such losses have been
within management's expectations. Direct write-offs of accounts receivable
were $11,750 for the ten month period ended October 31, 1997. There were no
direct write-offs of accounts receivable for the year ended December 31, 1996.
No single customer accounted for greater than 10% of total revenues during the
ten month period ended October 31, 1997 and two customers each accounted for
more than 10% of total revenue for the year ended December 31, 1996.

Financial Instruments

The recorded amounts of financial instruments, including cash equivalents,
accounts receivable, accounts payable, accrued expenses and deferred revenues,
approximate their fair market values as of October 31, 1997. The Company has
no investments in derivative financial instruments.

Use of Estimates

Stock Based Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123") requires that companies either recognize
compensation expense for grants of stock, stock options, and other equity
instruments based on fair value, or provide pro forma disclosure of net income
or loss and earnings or loss per share in the notes to the financial
statements. The Company applies the disclosure provisions of SFAS 123 and
applies APB Opinion 25 and related interpretations in accounting for its stock
option plan. Accordingly, no compensation cost has been recognized under SFAS
123 for the Company's stock option plans.

New Accounting Pronouncements

F-26
<PAGE>

TRIPOD, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
OCTOBER 31, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
Computers and equipment....................... $ 863,330 $348,792
Leasehold improvements........................ 348,030 --
---------- --------
1,211,360 348,792
Less accumulated depreciation and
amortization................................. (294,808) (85,064)
---------- --------
$ 916,552 $263,728
========== ========
</TABLE>

3. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
OCTOBER 31, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
Compensation and benefits........................ $203,300 $ 4,927
Advertising and promotion........................ 170,444 --
Professional fees................................ 146,049 50,000
Taxes............................................ 100,000 --
Other............................................ 75,664 29,757
-------- -------
$695,457 $84,684
======== =======
</TABLE>

4. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain other equipment under
operating lease agreements expiring through 2000. Future noncancelable minimum
payments as of October 31, 1997 under these leases for each fiscal year end
are as follows:

Rent expense under noncancelable operating leases was $79,950 for the ten
month period ended October 31, 1997 and $45,061 for the year ended December
31, 1996.

5. NOTES PAYABLE

On November 1, 1996, the Company entered into a loan agreement with a bank
which provided for borrowings of up to $1,750,000 to finance operations. Any
such borrowings were subject to an interest rate equal to the bank's prime
rate plus 1 1/2%. Borrowings made under this agreement were due on July 30,
1997, or at the closing of the Series E Preferred stock offering (see Note 8),
whichever event occurred sooner. The loan was secured by all the assets of the
Company. At December 31, 1996, there was $600,000 outstanding under the
facility and on May 23, 1997 the loan was paid in full.

F-27
<PAGE>

TRIPOD, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

6. DEFERRED COMPENSATION

As of October 31, 1997 the Company was indebted to its Chairman and its
President for certain wages that had been earned during 1994 through October
31, 1997 for which the related cash payment had been deferred. Deferred
compensation does not accrue interest nor is there a pre-determined date on
which the liability is to be paid.

7. STOCKHOLDERS' EQUITY

Common Stock

In connection with the formation of the Company in September 1992, the
Company's founding stockholders contributed $79.50 for 79,500 shares of common
stock.

Preferred Stock

During the year ended December 31, 1994, the Company issued 27,000 shares of
Series A Convertible Preferred Stock ("Series A Preferred Stock") at $4.67 per
share to private investors for $126,090.

The Series A Preferred Stock is voting. Dividends do not accrue. In the
event a dividend is declared the dividend must be paid to the Series A
Preferred Stock holders before any dividend can be paid to the common stock
holders. The Series A Preferred Stock is convertible at any time into common
stock on a one for one ratio. Upon the closing of a sale of common stock at a
price of at least $20.00 per share pursuant to an effective registration
statement under the Securities Act of 1933, as amended, resulting in at least
$10,000,000 of gross proceeds to the Company, all outstanding shares of Series
A Preferred Stock shall automatically be converted into common stock, at the
then effective conversion rate. The Series A Preferred Stock is not redeemable
at the option of the holder. At any time after January 1, 2000, the Company
may, at the option of the Board of Directors, redeem the Series A Preferred
Stock in whole or in part by paying $4.17 per share in cash to the holders of
the Series A Preferred Stock. Upon voluntary or involuntary liquidation, after
the payment of all preferences on the Series C Preferred Stock, Series D
Preferred Stock, and Series E Preferred Stock (the "Senior Preferred"),
holders of Series A Preferred Stock are entitled to receive, out of generally
available funds, the greater of $4.17 per share, or such amount per share as
would be payable had each such share been converted into Common Stock
immediately prior to such liquidation. In the event of a liquidation, Series B
Preferred Stock and Series A Preferred Stock rank on parity. In the event the
proceeds are not sufficient to liquidate the holders of Series A Preferred
Stock and Series B Preferred Stock, the Series A Preferred Stock and the
Series B Preferred Stock shall share the proceeds on a pro-rata weighted-
average basis.

During the six month period ended June 30, 1995, the Company issued 26,500
shares of Series B Convertible Preferred Stock ("Series B Preferred Stock") at
$12.50 per share to private investors for $331,250.

The Series B Preferred Stock is voting. Dividends do not accrue. In the
event a dividend is declared, the dividend must be paid to the Series B
Preferred Stock holders before any dividend can be paid to the Series A
Preferred Stock and common stock holders. The Series B Preferred Stock is
convertible at any time into common stock on a one for one ratio. Upon the
closing of a sale of common stock at a price of at least $20.00 per share
pursuant to an effective registration statement under the Securities Act of
1993, as amended, resulting in at least $10,000,000 of gross proceeds to the
Company, all outstanding shares of Series B Preferred Stock shall
automatically be converted into common stock, at the then effective conversion
rate. The Series B Preferred Stock is not redeemable at the option of the
holder. At any time after January 1, 2000, the Company may, at the option of
the Board of Directors, redeem the Series B Preferred Stock in whole or in
part by paying $12.50 per share in cash to the holders of the Series B
Preferred Stock. Upon voluntary or involuntary liquidation, after the payment
of all preferences on the Senior Preferred, holders of Series B Preferred
Stock are entitled to receive,

F-28
<PAGE>

TRIPOD, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

out of generally available funds, the greater of $12.50 per share or such
amount per share as would be payable had each such share been converted into
Common Stock immediately prior to such liquidation. In the event of a
liquidation, Series B Preferred Stock and Series A Preferred Stock rank on
parity. In the event the proceeds are not sufficient to liquidate the holders
of Series A Preferred Stock and Series B Preferred Stock, the Series A
Preferred Stock and the Series B Preferred Stock shall share the proceeds on a
pro-rata weighted-average basis.

In October 1995, the Company issued 15,525 shares of Series C Convertible
Preferred Stock ("Series C Preferred Stock") at $44.00 per share to private
investors for $683,100.

The Series C Preferred Stock is voting. Dividends do not accrue. In the
event a dividend is declared, the dividend must be paid to the Series C
Preferred Stock holders before any dividend can be paid to the Series A
Preferred Stock, Series B Preferred Stock (collectively the "Junior Preferred
Stock") and common stock holders. The Series C Preferred Stock is convertible
at any time into common stock on a one for one ratio. Upon the closing of a
sale of common stock at a price of at least $50.00 per share pursuant to an
effective registration statement under the Securities Act of 1993, as amended,
resulting in at least $10,000,000 of gross proceeds to the Company, all
outstanding shares of Series C Preferred Stock shall automatically be
converted into common stock, at the then effective conversion rate. The Series
C Preferred Stock is not redeemable at the option of the holder. At any time
after January 1, 2001, the Company may, at the option of the Board of
Directors, redeem the Series C Preferred Stock in whole or in part by paying
$44.00 per share in cash to the holders of the Series C Preferred Stock. Upon
voluntary or involuntary liquidation, holders of Series C Preferred Stock are
entitled to receive, out of generally available funds, the greater of $44.00
per share or such amount per share as would be payable had each such share
been converted into Common Stock immediately prior to such liquidation. The
Senior Preferred ranks on parity. In the event that the proceeds from
liquidation are not sufficient to pay amounts due to the Senior Preferred, the
Senior Preferred shall share the proceeds based on a pro-rata weighted-average
basis.

1995 STOCK OPTION PLAN

During 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan") under which incentive stock options and nonqualified stock options to
purchase common stock may be granted to officers, key employees and advisors.
Under the Plan, options to purchase 100,000 shares of common stock may be
granted at an exercise price determined by the Board of Directors. Options
under the 1995 Plan are generally exercisable in eight semi-annual
installments beginning six months after date of grant. Options under the 1995
Plan expire ten years from the date of grant. The total weighted average
contractual life of options outstanding at October 31, 1997 was 8.91 years.

A summary of option activity under the 1995 Plan is as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE RANGE OF
OPTIONS EXERCISE PRICE EXERCISE PRICE
------- -------------- --------------
<S> <C> <C> <C>
Outstanding at December 31,
1995........................... 17,907 $4.00 $ 4.00
Granted........................ 16,400 $4.00 $ 4.00
Exercised...................... (3,872) $4.00 $ 4.00
Terminated..................... (1,283) -- --
------
Outstanding at December 31,
1996........................... 29,152 $4.00 $ 4.00
Granted........................ 31,400 $4.11 $4.00--$10.00
Exercised...................... (138) $4.00 $ 4.00
Terminated..................... (2,498) -- --
------
Outstanding at October 31,
1997........................... 57,916 $4.06 $4.00--$10.00
======
Exercisable at October 31,
1997........................... 24,462 $4.00 $ 4.00
======
</TABLE>

F-29
<PAGE>

TRIPOD, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- --------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF OPTIONS REMAINING AVERAGE OPTIONS AVERAGE
EXERCISE OUTSTANDING AT CONTRACTUAL EXERCISE EXERCISABLE AT EXERCISE
PRICES OCTOBER 31, 1997 LIFE (YEARS) PRICE OCTOBER 31, 1997 PRICE
-------- ---------------- ------------ --------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
$4.00 57,366 8.90 $ 4.00 24,462 $4.00
$10.00 550 9.92 $10.00 -- --
------ ------
57,916 24,462
====== ======
</TABLE>

The Company has recorded deferred compensation of approximately $152,000 for
the difference between the exercise price and the estimated fair value of
certain stock option grants. This amount is being amortized over the vesting
period of the individual options on a straight-line basis, determined
separately for each portion of the options that vest each year. Deferred
compensation expense recognized for the ten month period ended October 31,
1997 and the year ended December 31, 1996 was approximately $10,000 and $0,
respectively.

Stock-Based Compensation

The Company has granted options to purchase shares of common stock to key
employees and directors. These options vest over periods of up to four years
and expire at various dates through 2007. The Company has adopted the
disclosure provisions of SFAS No. 123 with respect to stock-based
compensation. The effects of applying SFAS No. 123 in this pro forma
disclosure may not be representative of the effects on net loss for future
years. Had compensation cost for the Company's stock-based compensation plans
been determined based on the grant date fair value in accordance with SFAS
123, the Company's net loss for the ten month period ended October 31, 1997
and for the year ended December 31, 1996 would have been increased to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
TEN MONTH
PERIOD ENDED
OCTOBER 31, YEAR ENDED
1997 DECEMBER 31, 1996
------------ -----------------
NET LOSS NET LOSS
------------ -----------------
<S> <C> <C>
As Reported................................ $(3,490,861) $(2,087,593)
Pro Forma.................................. $(3,504,821) $(2,094,438)
</TABLE>

The grant date fair value of each stock option is estimated using the Black-
Scholes option-pricing model with the following assumptions: an expected life
of two or four years, a dividend yield of 0% and a weighted average risk-free
interest rate of 5.75%. The weighted average grant date fair values of options
were $0.76. The weighted-average remaining contractual life of options
outstanding at October 31, 1997 was 8.91 years.

8. REDEEMABLE PREFERRED STOCK

In February 1996, the Company issued 40,669 shares of Series D Convertible
Preferred Stock ("Series D Preferred Stock") at $43.03 per share to a private
investor for $1,694,581 net of issuance costs of $55,406. In connection with
the issuance of the Series D Preferred Stock, the Company issued two year
warrants to purchase 17,430 shares of Series D Preferred Stock at $43.03 per
share and five year warrants to purchase 17,429 shares of Series D Preferred
Stock at $43.03 per share. In October 1996 5,810 of two year Series D
Preferred Stock warrants were exercised at a price of $43.03. The value of the
Series D Preferred Stock warrants as determined by management of $158,683 has
been recorded as additional paid in capital.

The Series D Preferred Stock is voting. Dividends do not accrue. In the
event a dividend is declared, the dividend must be paid to the Series D
Preferred Stock holders before any dividend can be paid to the Series A

F-30
<PAGE>

TRIPOD, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Preferred Stock, Series B Preferred Stock (collectively the "Junior Preferred
Stock") and common stock holders. The Series D Preferred Stock is convertible
at any time into common stock on a one for one ratio. Upon the closing of a
sale of common stock at a price of at least $86.06 per share pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
resulting in at least $15,000,000 of gross proceeds to the Company, all
outstanding shares of Series D Preferred Stock shall automatically be
converted into common stock, at the then effective conversion rate. The Series
D Preferred Stock is redeemable at the option of the holder at a price equal
to $43.03 per share. The Series D Preferred Stock holders may redeem 33 1/3%
of their holdings on January 1, 2002, 50% of their holdings on January 1, 2003
and 100% of their holdings on January 1, 2004. At any time after January 1,
2002, the Company may, at the option of the Board of Directors redeem the
Series D Preferred Stock, in whole or in part, by paying $43.03 per share in
cash to the holders of the Series D Preferred Stock. Upon voluntary or
involuntary liquidation, holders of Series D Preferred Stock are entitled to
receive, out of generally available funds, the greater of $43.03 per share, or
such amount per share as would be payable had each such share been converted
into common stock immediately prior to such liquidation. The Senior Preferred
ranks on parity in the event of liquidation. In the event that the proceeds
from liquidation are not sufficient to pay amounts due to the Senior
Preferred, the Senior Preferred shall share the liquidation proceeds based on
a pro-rata weighted-average basis.

As a result of the Series D Preferred Stock issuance, the Series C Preferred
Stock conversion rate increased from one to one (1:1) to 1.0475:1.00.

In May 1997, the Company issued 199,203 shares of Series E Convertible
Preferred Stock ("Series E Preferred Stock") at $50.20 per share to private
investors for total consideration of $9,939,952 net of issuance costs of
$60,039.

The Series E Preferred Stock is voting. Dividends do not accrue. In the
event a dividend is declared, the dividend must be paid to the Series D
Preferred Stock and Series E Preferred Stock holders before any dividend can
be paid to the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock (collectively the "Junior Preferred Stock") and common stock
holders. The Series E Preferred Stock is convertible at any time into common
stock on a one for one ratio. Upon the closing of a sale of common stock at a
price of at least $100.40 per share pursuant to an effective registration
statement under the Securities Act of 1933, as amended, resulting in at least
$15,000,000 of gross proceeds to the Company, all outstanding shares of Series
E Preferred Stock shall automatically be converted into common stock, at the
then effective conversion rate. The Series E Preferred Stock is redeemable at
the option of the holder at a price equal to $50.20 per share. On January 1,
2003, 2004 and 2005 (the "Series E Installment Dates") holders of Series E
Preferred Stock holders can cause the Company to redeem shares of Series E
Preferred Stock in three annual installments. As a result of the issuance of
Series E Preferred Stock, the Series D Preferred Stock redemption rights, as
discussed above, have been amended to the reflect the same redemption schedule
of the Series E Preferred Stock. Upon voluntary or involuntary liquidation,
holders of Series E Preferred Stock are entitled to receive, out of generally
available funds, the greater of $52.20 per share, or such amount per share as
would be payable had each such share been converted into common stock
immediately prior to such liquidation. In the event that the proceeds from
liquidation are not sufficient to pay amounts due to the Senior Preferred, the
Senior Preferred shall share the liquidation proceeds based on a weighted-
average pro-rata allocation. The Senior Preferred rank on parity. In the event
that the proceeds from liquidation are not sufficient to pay amounts due to
the Senior Preferred, the Senior Preferred shall share the liquidation
proceeds based on a pro-rata weighted-average basis.

Following payments to holders of Senior Preferred Stock, Series B Preferred
Stock, Series A Preferred Stock and common stock, all holders of Preferred
Stock are then entitled to share in remaining available funds on an "as-if
converted" basis with holders of common stock. In the event that the proceeds
from liquidation are

F-31
<PAGE>

TRIPOD, INC.

NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)

not sufficient to liquidate amounts due to the Liquidating Preferred Stock,
the Liquidating Preferred Stock shall share the liquidation proceeds based on
a weighted average pro-rata allocation.

9. INCOME TAXES

As of October 31, 1997, the Company had approximately $5.7 million in
Federal and State net operating loss carryforwards. The Federal net operating
losses will expire beginning in 2010 if not utilized. The State net operating
losses will expire beginning in 2000 if not utilized.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities used for financial
reporting purposes and those used for income tax purposes. As of October 31,
1997 and December 31, 1996, the Company had deferred tax assets of $3.9 and
$1.8 million, respectively, which have been offset in total by a valuation
allowance. Deferred tax assets consist primarily of net operating loss
carryforwards and accrued expenses of $3.4 million and $.5 million,
respectively, at October 31, 1997 and net operating loss carryforwards of $1.8
million at December 31, 1996. A portion or all of net operating loss
carryforwards which can be utilized in any year may be limited by changes in
ownership of the Company, pursuant to Section 382 of the Internal Revenue Code
and similar statutes.

In the opinion of management, it is more likely than not that deferred tax
assets will not be realized due to the potential limitations of the
utilization of net operating loss carryforwards and the uncertainty
surrounding the Company's ability to generate future income sufficient to
realize deferred tax assets.

10. SUBSEQUENT EVENT

On February 2, 1998, the Company entered into an Agreement and Plan of
Merger (the "Agreement") by and among the Company, Lycos, Inc, a Delaware
corporation ("Lycos"), and Pod Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Lycos ("PAC"), Bo Peabody and Richard Sabot,
providing for the merger of PAC with and into the Company (the "Merger"). On
February 11, 1998, the Company completed the closing of the Merger and Tripod
became a wholly-owned subsidiary of Lycos. In accordance with the terms of the
Agreement, Richard Sabot will be elected to the Company's Board of Directors
for a term expiring at the first Annual Meeting of Lycos' stockholders held
after Lycos' fiscal year ending July 31, 2000.

In the Merger, all outstanding shares of Common Stock and Preferred Stock of
the Company and options and warrants to purchase Common Stock and Preferred
Stock of the Company were converted into 1,560,363 shares and options and
warrants to purchase Common Stock, par value $.01 per share, of Lycos at an
exchange ratio of 3.2427566. All outstanding options to purchase Common Stock
of the Company have been assumed by Lycos and converted into options to
purchase Common Stock of Lycos, and all outstanding warrants to purchase
Preferred Stock of the Company have been assumed by Lycos and converted into
warrants to purchase Common Stock of Lycos. The total value of shares,
options, and warrants exchanged is $63.2 million.

F-32
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
WiseWire Corporation:

We have audited the accompanying balance sheets of WiseWire Corporation, a
development stage enterprise, (the Company) as of May 31, 1997 and 1996, and
the related statements of operations, stockholders' equity and cash flows for
the year ended May 31, 1997 and for the period from June 9, 1995 (inception)
through May 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WiseWire Corporation as of
May 31, 1997 and 1996, and the results of its operations and its cash flows
for the year ended May 31, 1997 and for the period from June 9, 1995
(inception) through May 31, 1996 in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company has incurred losses from operations and had
negative cash flows from operations since its inception. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to this matter are also discussed in
Note 11. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Coopers & Lybrand L.L.P.

Pittsburgh, Pennsylvania
July 31, 1997, except for the first paragraph of Note 5 as to
which the date is October 13, 1997 and Note 12 as to which
the date is September 24, 1997

F-33
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

BALANCE SHEETS

<TABLE>
<CAPTION>
MAY 31,
JANUARY 31, ----------------------
1998 1997 1996
----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 722,864 $ 966,292 $1,217,619
Accounts receivable, net of allowance for
doubtful accounts of $50,000 in 1998.... 120,200 38,364 15,487
Prepaid expenses......................... 25,114 49,978 11,780
---------- ---------- ----------
Total current assets................... 868,178 1,054,634 1,244,886
Property and equipment, net of accumulated
depreciation and amortization............. 808,839 952,722 296,223
Capitalized software costs, net of
accumulated amortization of $117,877 in
1998 and $19,181 in 1997.................. 104,200 202,896 98,585
Other assets............................... 30,733 37,034 13,122
---------- ---------- ----------
Total assets........................... $1,811,950 $2,247,286 $1,652,816
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 36,339 $ 272,324 $ 80,293
Current portion of long-term debt........ 448,476 135,349 --
Accrued expenses......................... 403,623 183,596 16,311
Deferred revenue......................... -- 22,605 --
Loans and accrued interest due to
stockholder/officer..................... -- -- 12,910
---------- ---------- ----------
Total current liabilities.............. 888,438 613,874 109,514
Long-term debt............................. 230,302 417,320 --
---------- ---------- ----------
Total liabilities...................... 1,118,740 1,031,194 109,514
Commitments and contingencies ............. -- -- --
Stockholders' equity:
Series A convertible preferred stock,
$.01 par value; 187,500 shares autho-
rized, 187,500 issued and outstanding in
1998 and 1997 and 125,000 issued and
outstanding in 1996..................... 1,875 1,875 1,250
Series B convertible preferred stock,
$.01 par value; 2,000,000 shares autho-
rized, 750,000 issued and outstanding in
1998 and 1997 and none in 1996.......... 7,500 7,500 --
Series C convertible preferred stock,
$.01 par value; 2,941,403 shares autho-
rized, 2,941,403 issued and outstanding
in 1998 and none in 1997 and 1996....... 29,414 -- --
Common stock, $.01 par value; 10,000,000
shares authorized; 4,165,745, 4,110,745
and 3,835,900 issued and outstanding in
1998, 1997 and 1996, respectively....... 41,657 41,107 38,359
Additional paid-in capital............... 8,004,471 4,136,558 1,719,281
Deferred compensation.................... (773,573) -- --
Accumulated deficit during the develop-
ment stage.............................. (6,618,134) (2,970,948) (215,588)
---------- ---------- ----------
Total stockholders' equity............. 693,210 1,216,092 1,543,302
---------- ---------- ----------
Total liabilities and stockholders' eq-
uity.................................. $1,811,950 $2,247,286 $1,652,816
========== ========== ==========
</TABLE>

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

F-34
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 9,
EIGHT MONTHS ENDED YEAR 1995
JANUARY 31, ENDED (INCEPTION) CUMULATIVE
------------------------ MAY 31, TO MAY 31 THROUGH
1998 1997 1997 1996 JANUARY 31, 1998
----------- ----------- ----------- ----------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License............... $ 242,052 -- -- -- $ 242,052
Advertising........... 47,477 $ 10,000 $ 8,645 $ 4,346 60,468
--------
----------- ----------- --------- -----------
Total revenues...... 289,529 10,000 8,645 4,346 302,520
Cost of revenues........ 565,715 167,737 160,460 11,082 737,257
-------- --------
----------- --------- -----------
Gross profit (defi-
cit)............... (276,186) (157,737) (151,815) (6,736) (434,737)
Operating expenses:
Research and develop-
ment................. 1,193,628 381,889 727,738 95,096 2,016,462
Sales and marketing... 446,076 111,915 369,659 13,649 829,384
General and adminis-
trative.............. 1,488,256 989,778 1,573,411 166,031 3,227,698
---------- ----------
----------- --------- -----------
Total operating ex-
penses............. 3,127,960 1,483,582 2,670,808 274,776 6,073,544
---------- ----------
----------- --------- -----------
Operating loss.......... (3,404,146) (1,641,319) (2,822,623) (281,512) (6,508,281)
Other income (expense)
Grant income (ex-
pense)............... (193,576) 37,893 71,822 60,000 (61,754)
Interest income (ex-
pense)............... (49,464) 22,276 (4,559) 5,924 (48,099)
----------- ----------- ----------- --------- -----------
(243,040) 60,169 67,263 65,924 (109,853)
----------- ----------- ----------- --------- -----------
Net loss................ $(3,647,186) $(1,581,150) $(2,755,360) $(215,588) $(6,618,134)
=========== =========== =========== ========= ===========
</TABLE>

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

F-35
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK PREFERRED STOCK ADDITIONAL DEFICIT DURING TOTAL
------------------ ------------------ PAID-IN DEFERRED THE DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STAGE EQUITY
--------- -------- ---------- ------- ---------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 9, 1995
(inception)............ -- -- -- -- -- -- -- --
Initial capitalization
of Company............. 3,250,000 $ 9,750 -- -- -- -- -- $ 9,750
Issuance of common
stock.................. 585,900 5,859 -- -- $ 696,081 -- -- 701,940
Five-for-one stock
split.................. -- 22,750 -- -- (22,750) -- -- --
Issuance of preferred
stock--Series A........ -- -- 125,000 $ 1,250 998,750 -- -- 1,000,000
Stock compensation...... -- -- -- -- 47,200 -- -- 47,200
Net loss................ -- -- -- -- -- -- $ (215,588) (215,588)
--------- -------- ---------- ------- ---------- --------- ----------- ----------
Balance, May 31, 1996... 3,835,900 38,359 125,000 1,250 1,719,281 -- (215,588) 1,543,302
Issuance of preferred
stock
Series A............... -- -- 62,500 625 499,375 -- -- 500,000
Series B............... -- -- 750,000 7,500 1,492,500 -- -- 1,500,000
Issuance of common stock
for cash............... 257,500 2,575 -- -- 397,825 -- -- 400,400
Issuance of common stock
for services........... 17,345 173 -- -- 27,577 -- -- 27,750
Net loss................ -- -- -- -- -- -- (2,755,360) (2,755,360)
--------- -------- ---------- ------- ---------- --------- ----------- ----------
Balance, May 31, 1997... 4,110,745 $ 41,107 $ 937,500 $ 9,375 $4,136,558 -- $(2,970,948) 1,216,092
Issuance of preferred
stock--Series C
(unaudited)............ -- -- 2,941,403 29,414 2,970,586 -- -- 3,000,000
Exercise of stock
options (unaudited).... 55,000 550 -- -- 6,850 -- -- 7,400
Deferred compensation
related to grant of
stock options
(unaudited)............ -- -- -- -- 890,477 (890,477) -- --
Amortization of deferred
compensation
(unaudited)............ -- -- -- -- -- 116,904 -- 116,904
Net loss (unaudited).... -- -- -- -- -- -- (3,647,186) (3,647,186)
--------- -------- ---------- ------- ---------- --------- ----------- ----------
Balance, January 31,
1998 (unaudited)....... 4,165,745 $ 41,657 3,878,903 $38,789 $8,004,471 $(773,573) $(6,618,134) $ 693,210
========= ======== ========== ======= ========== ========= =========== ==========
</TABLE>

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

F-36
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
EIGHT MONTHS ENDED JUNE 9, 1995
JANUARY 31, YEAR ENDED (INCEPTION) CUMULATIVE
------------------------ MAY 31, TO MAY 31, THROUGH
1998 1997 1997 1996 JANUARY 31, 1998
----------- ----------- ------------ ------------ ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net loss................ $(3,647,186) $(1,581,150) $ (2,755,360) $ (215,588) $ (6,618,134)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and amor-
tization.............. 377,466 177,555 298,824 23,630 699,920
Provision for bad
debts................. 50,000 -- -- -- 50,000
Write-off of capital-
ized software costs... -- -- 98,585 -- 98,585
Settlement of grant ob-
ligation.............. 190,000 -- -- -- 190,000
Expense for stock op-
tions issued at less
than fair market val-
ue.................... 116,904 -- -- 47,200 164,104
Issuance of common
stock for services.... -- 27,750 27,750 -- 27,750
Changes in operating
assets and liabili-
ties:
Accounts receivable... (131,836) 15,477 (22,877) (15,487) (170,200)
Prepaid expenses, de-
posits and other as-
sets................. 31,165 (35,187) (64,785) (11,780) (45,400)
Accounts payable...... (235,985) (38,728) 21,244 16,877 (197,864)
Accrued expenses and
deferred revenue..... 197,422 1,564 113,890 16,311 327,623
----------- ----------- ------------ ---------- ------------
Net cash used in oper-
ating activities..... (3,052,050) (1,432,719) (2,282,729) (138,837) (5,473,616)
----------- ----------- ------------ ---------- ------------
Cash flows from invest-
ing activities:
Expenditures for prop-
erty and equipment.... (134,887) (717,700) (785,561) (247,080) (1,167,528)
Capitalization of soft-
ware development
costs................. -- -- (123,196) (98,585) (221,781)
Expenditures for intan-
gibles................ -- -- -- (13,345) (13,345)
----------- ----------- ------------ ---------- ------------
Net cash used in in-
vesting activities... (134,887) (717,700) (908,757) (359,010) (1,402,654)
----------- ----------- ------------ ---------- ------------
Cash flows from financ-
ing activities:
Proceeds from
borrowings............ -- 584,412 598,944 -- 598,944
Repayments of
borrowings............ (63,891) -- (46,275) -- (110,166)
Proceeds from issuance
of common stock....... -- 400,000 400,400 711,690 1,112,090
Proceeds from issuance
of preferred stock.... 3,000,000 500,000 2,000,000 1,000,000 6,000,000
Proceeds from exercise
of stock options...... 7,400 -- -- -- 7,400
Loans from
stockholder/officer,
net................... -- (12,910) (12,910) 3,776 (9,134)
----------- ----------- ------------ ---------- ------------
Net cash provided by
financing activi-
ties................. 2,943,509 1,471,502 2,940,159 1,715,466 7,599,134
----------- ----------- ------------ ---------- ------------
Net (decrease) increase
in cash and cash equiv-
alents................. (243,428) (678,917) (251,327) 1,217,619 722,864
Cash and cash equiva-
lents:
Beginning of period.... 966,292 1,217,619 1,217,619 -- --
----------- ----------- ------------ ---------- ------------
End of period.......... $ 722,864 $ 538,702 $ 966,292 $1,217,619 $ 722,864
=========== =========== ============ ========== ============
Supplemental non-cash
investing and financing
activities:
Purchases of furniture
and computers, and
capitalized software
development costs in-
cluded in liabili-
ties.................. -- $ 4,203 $ 246,788 $ 72,550 $ 319,338
=========== =========== ============ ========== ============
Settlement of grant ob-
ligation.............. $ 190,000 $ -- $ -- $ -- $ 190,000
=========== =========== ============ ========== ============
Issuance of common
stock for services.... -- $ 27,750 $ 27,750 $ -- $ 27,750
=========== =========== ============ ========== ============
Cash paid for interest
expense................ $ 30,000 -- $ 30,026 $ -- $ 60,026
=========== =========== ============ ========== ============
</TABLE>

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

F-37
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

WiseWire Corporation (the Company), which operates in one industry segment,
provides software that functions as an intelligent agent service that will
filter information on the Internet and World Wide Web to the specific interest
of the user. The Company was formed on June 9, 1995.

The Company is considered to be in the development stage, as defined in
Financial Accounting Standards Board Statement No. 7, therefore, the
accompanying financial statements represent that of a development stage
enterprise. The Company's product was released in April 1997; however, to date
there have been no significant revenues associated with this intelligent agent
service.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The
Company's cash equivalents are maintained in short-term commercial paper. Cash
equivalents are recorded at cost, which approximates fair value.

Property and Equipment

Property and equipment are carried at cost, net of accumulated depreciation
and amortization. Property and equipment are depreciated on the straight-line
method over the estimated useful lives of the assets, which range from 3 to 7
years. Leasehold improvements are amortized on a straight-line basis over the
lesser of the estimated useful life of the assets or the lease term.

Capitalized Software

Internally developed computer software costs and costs of product
enhancements are capitalized subsequent to the determination of technological
feasibility. Such capitalization continues until the product becomes available
for general release. Amortization is the greater of the amount computed using:
(1) the straight-line method over 18 months; or (2) the ratio of the current
year's revenue to the total anticipated revenue of the product. Amortization
expense of $19,181 was recorded for the year ended May 31, 1997 and no amounts
were recorded for the period from June 9, 1995 (inception) through the period
ended May 31, 1996. During 1997, the Company reduced capitalized software
costs to its net realizable value by writing off software costs totaling
$98,585.

The Company reviews the carrying value of capitalized software and
impairments are recognized in the results of operations when the expected cash
flows from future services using this software are less than the capitalized
value.

Intangibles

Included in other assets are trademarks and patents which are carried at
cost and amortized on the straight- line method over their estimated useful
lives of up to 5 years. Accumulated amortization was $2,898 and $223 at May
31, 1997 and 1996, respectively.

Revenue Recognition

The Company enters into license agreements for a specified period of time,
which generally consist of initial set-up fees and monthly service fees. Set-
up fees cover developmental costs and are recognized on a

F-38
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

percentage-of-completion basis based on costs incurred to date to total
estimated costs. Ongoing monthly service fees are deferred and recognized
ratably over the term of the agreement.

The Company's internet advertising revenues are derived principally from
short-term advertising contracts in which the Company guarantees a number of
impressions for a fixed fee or on a per impression basis with an established
minimum fee. Revenues from advertising are recognized as services are
performed.

Research and Development Costs

Research and development costs are expensed as incurred.

Income Taxes

The Company records income taxes using the asset and liability method.
Deferred tax assets and liabilities are determined based on temporary
differences between the financial statement and the tax basis of the assets
and the liabilities using the tax rates in effect in the years in which the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amount expected to be
realized.

Concentration of Credit Risk

The Company's customers are primarily large commercial enterprises. Sales to
date have been minimal; however, it is anticipated that future revenues will
be diversified by region and industry, and significant credit losses are not
expected. The Company's revenues through May 31, 1997 were generated
principally from two customers in the United States.

From time to time, the Company maintains cash deposits with its principal
bank in excess of the FDIC insured limits, and with a regional brokerage firm
in excess of SIPC coverage. The brokerage firm, however, provides additional
coverage through a major insurance company.

Financial Instruments

The recorded amounts of financial instruments, including cash equivalents,
accounts receivable, accounts payable, accrued expenses and deferred revenues,
approximate their fair market values. The Company has no investments in
derivative financial instruments.

Stock-based Compensation

Statement of Financial Accounting Standards No. 123 "Accounting for Stock-
Based Compensation," ("SFAS 123") requires that companies either recognize
compensation expense for grants of stock, stock options, and other equity
instruments based on fair value, or provide pro forma disclosure of net income
or loss in the notes to the financial statements. The Company applies the
disclosure provisions of SFAS 123 and applies APB Opinion 25 and related
interpretations in accounting for its stock option plan. Accordingly, no
compensation cost has been recognized under SFAS 123 for the Company's stock
option plans.

Use of Estimates

F-39
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the amounts of revenues and expenses during
the reported periods. Actual results could differ from the estimates.

3. LOAN FROM STOCKHOLDER/OFFICER

At May 31, 1996, the founder and principal stockholder had provided loans to
the Company, which were evidenced by demand notes that accrued interest at 9%.
These notes, including accrued interest, were paid during the year ended May
31, 1997.

4. PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
MAY 31, MAY 31,
1997 1996
---------- --------
<S> <C> <C>
Computers and equipment................................. $1,117,113 $264,628
Furniture............................................... 76,954 27,255
Leasehold improvements.................................. 59,030 27,747
---------- --------
1,253,097 319,630
Less: accumulated depreciation and amortization......... 300,375 23,407
---------- --------
$ 952,722 $296,223
========== ========
</TABLE>

5. LONG-TERM DEBT

Long term debt at May 31, 1997 consists of the following:

<TABLE>
<CAPTION>
1997
--------
<S> <C>
Senior loan in the original amount of $498,944 under terms of a
senior loan and security agreement in a total amount not to
exceed $750,000, collateralized by the Company's computer
equipment having an original cost of $512,000 and a net book
value of $452,669 at May 31, 1997. The existing promissory note
requires 36 monthly principal and interest payments of $16,216
through January 1, 2000, and a 37th payment equal to the then
fair market value of the collateral at that time as determined by
the lender, but not less than 10% of the original loan. Or, at
the Company's option, 6 additional monthly payments of $16,216
through July 1, 2000. Prepayments are not permitted under terms
of the loan agreement. The agreement includes certain covenants
which require the Company to furnish the lender with monthly,
quarterly and annual financial statements within specified time
periods. The Company failed to meet these reporting requirements
during 1997, and by letter dated October 13, 1997, the lender
waived these events of default for fiscal year 1997 and through
September 30, 1997............................................... $452,669
In January 1997, the Company obtained a $100,000 loan from the
Pittsburgh Urban Redevelopment Authority. The Company's assets
serve as collateral for this loan. This loan bears 5% interest
and requires the Company to make 53 monthly principal and
interest payments of $1,887 commencing in July 1997 and a final
payment of $15,553 in November 2001. Monthly payments begin in
July 1997........................................................ 100,000
--------
Total long-term debt........................................... 552,669
Less current maturities...................................... 135,349
--------
$417,320
========
</TABLE>

F-40
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Scheduled annual maturities of long-term debt for the years ending May 31,
are as follows:

<TABLE>
<S> <C>
1998................................................................ $135,349
1999................................................................ 160,336
2000................................................................ 190,393
2001................................................................ 52,434
2002................................................................ 14,157
--------
Total............................................................. $552,669
========
</TABLE>

6. STOCKHOLDERS' EQUITY

At May 31, 1997 and 1996, the Company's common $.01 par value shares are
stated after giving effect to a 5-for-1 stock split approved by the
shareholders on August 12, 1996.

Each Series A preferred share is convertible to 5 shares of common stock.
Each share of Series B preferred is convertible into one share of common
stock. As of May 31, 1997, outstanding preferred stock is convertible into
1,687,500 shares of common stock and options have been issued that, if
exercised, would require an additional 1,189,450 common shares to be issued.

Series A and B preferred stock provide upon liquidation that before any
distribution may be made on common stock that the greater of $8.00 per share
must be first paid to the Series A and $2.00 per share to the Series B
preferred shareholders, or the value per share paid to the common
shareholders, if the conversion to common stock occurred. The preferred
shareholders may convert their shares to common shares under certain
circumstances and the shares convert to common automatically upon a public
stock offering. Series A and Series B preferred shareholders may each elect
one director. Series A and Series B preferred shares also include anti-
dilution provisions that prohibit the payment of dividends on common stock and
restrict certain corporate action without 80% consent of the preferred shares
voting power.

The Company also has 10,000,000 shares of authorized, undesignated and
unissued convertible preferred stock at May 31, 1997 and 1996.

7. STOCK OPTION PLANS

The Company maintains two stock option plans for the granting of options to
purchase shares of common stock under which 1,603,875 common shares have been
reserved for issuance as of May 31, 1997. Under these plans, the Company may
grant either incentive stock options or non-qualified stock options. These
options are fully vested and are exercisable over a 5 year period from date of
grant. The employee plan was adopted in 1995 and is restricted to Company
employees. These options generally have a term of ten years from the date of
grant with 20% vesting after a brief probationary period and the remainder
vest over a four-year period. The non-employee plan was adopted in 1996 and is
intended primarily for directors or other non-employees. Options granted under
the non-employee plan typically vest immediately.

In March 1997, the exercise price for all outstanding options granted to
existing employees was reduced to $.20 and the term extended to 10 years,
which the Company's Board of Directors deemed to be the current estimated fair
market value of the Company's common stock. During the period from June 9,
1995 (inception) through May 31, 1996, non-qualified options were granted at
prices less than fair market value and compensation expense of $47,200 was
recorded in results of operations.

F-41
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. STOCK OPTION PLANS

The summary of option activity is as follows:

<TABLE>
<CAPTION>
PERIODS ENDED MAY 31,
--------------------------------------
1997 1996
------------------- ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year..... 360,000 $ .76 -- --
--------- -------
Granted.............................. 938,750 3.93 360,000 $.76
Exercised............................ (20,000) .02 -- --
Forfeited or expired................. (89,300) 2.34 -- --
Canceled for reissuance.............. (956,000) 3.24 -- --
Reissued............................. 956,000 .20 -- --
--------- -------
Outstanding at end of year........... 1,189,450 .71 360,000 .76
--------- -------
Number of options exercisable at
year-end............................ 424,080 1.02 109,000 .56
Weighted average fair value of
options granted at
year-end............................ .22 .21
</TABLE>

The following summarizes information about fixed stock options outstanding
at May 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------
WEIGHTED
NUMBER AVERAGE
RANGE OF OUTSTANDING REMAINING NUMBER
EXERCISE PRICES MAY 31, 1997 LIFE (YRS) EXERCISABLE
--------------- ------------ ---------- -----------
<S> <C> <C> <C>
$ .02 to $ .20........................ 974,050 9.9 267,980
$1.20 to $1.60........................ 118,750 2.6 97,150
$4.00 to $8.00........................ 96,650 4.0 58,950
--------- -------
1,189,450 424,080
========= =======
</TABLE>

Had the compensation cost for the Company's two stock-based compensation
plans been determined based on the fair value at the grant dates for awards
under those plans consistent with the method of SFAS No. 123, the Company's
net loss would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
PERIODS ENDED MAY 31,
----------------------
1997 1996
----------- ---------
<S> <C> <C>
Net loss as reported................................. $(2,755,360) $(215,588)
=========== =========
Pro forma............................................ $(2,860,877) $(231,979)
=========== =========
</TABLE>

The pro forma compensation of $105,517 for the year ended May 31, 1997 and
$16,391 for the period ended May 31, 1996 that would have resulted from
adoption of SFAS No. 123 is calculated using the Black-Scholes pricing model
utilizing a 6% risk free rate of return, a zero dividend rate, a zero
volatility rate (minimum value method), and zero forfeitures.

F-42
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

8. GRANTS RECEIVED

The Company was awarded grants of $60,000 and $83,000 by the Ben Franklin
Partnership of the Commonwealth of Pennsylvania in 1996 and 1997,
respectively. To receive these funds, the Company must provide matching funds
of in-kind costs of $253,683 and $297,233, respectively. At May 31, 1996, the
Company had earned all of the 1996 grant and recorded the $60,000 as grant
income. At May 31, 1997, the Company has earned and reported as grant income
approximately $72,000 of the $83,000 1997 grant. The Company recorded the
grants earned through May 31, 1997 as income, since management believes that
there is an uncertainty as to whether the project will be successful. If the
project is successful, the Company is committed to pay a royalty to the Ben
Franklin Partnership of between 2% to 3% of project gross revenues until, at a
minimum, the grant amounts and at a maximum, twice the grant amounts are
repaid over the next 10 years.

9. INCOME TAXES

The Company is in the development stage and has incurred losses since its
inception. The components of net deferred tax assets and liabilities are as
follows:

<TABLE>
<CAPTION>
MAY 31,
---------------------
1997 1996
----------- --------
<S> <C> <C>
Deferred tax asset:
Federal tax credits............................... $ 69,000 --
Net operating loss carryforwards.................. 1,238,000 $109,000
Non-qualified stock option expense, and stock
issued for services.............................. 30,000 19,000
Others............................................ 11,000 --
----------- --------
1,348,000 128,000
----------- --------
Deferred tax liability:
Capitalized software.............................. (78,000) (40,000)
Computers and equipment........................... (6,000) (2,500)
----------- --------
(84,000) (42,500)
----------- --------
Valuation allowance................................. (1,264,000) (85,500)
----------- --------
Net deferred taxes.................................. $ -- $ --
=========== ========
</TABLE>

Net operating loss carryforwards for federal income tax purposes of $272,000
will expire in 2011, and $2,776,000 in 2012. Net operating loss carryforwards
for state income tax purposes of $272,000 will expire in 1999 and $2,776,000
in the year 2000. Federal tax credits related to increasing research
activities expire in the year 2012.

The Company may be limited in the amount of its net operating loss
carryforwards and tax credits which it may use in future years. The Internal
Revenue Code limits the amount of tax benefits available to be used annually
after certain changes in ownership of more than fifty percentage points.

In the opinion of management, it is more likely than not that some or all
deferred tax assets will not be realized due to the potential limitations of
the utilization of net operating loss carryforwards and the uncertainty
surrounding the Company's ability to generate future income sufficient to
realize deferred tax assets.

F-43
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

10. COMMITMENT AND CONTINGENCIES

The Company leases office space under an agreement for its offices. This
lease is accounted for as an operating lease. The Company incurred rental
expense of $97,728 for the year ended May 31, 1997 and $20,314 for the period
ended May 31, 1996.

In July 1996, the Company modified the terms of the office lease and
extended the terms of the lease until April 30, 2001, but it may be terminated
early by the Company on October 31, 2000. The minimum annual future rental
commitments under the modified lease terms are $112,125 from 1998 through
2000, and $46,719 in 2001. Minimum rentals increase annually based on
increases in the consumer price index.

11. MANAGEMENT'S FINANCIAL PLANS

The Company incurred a net loss of $2,755,360 and $215,588 for the year
ended May 31, 1997 and for the period from June 9, 1995 (inception) through
May 31, 1996, respectively. The Company also had negative cash flows from
operations of $2,282,729 and $138,837 for the year ended May 31, 1997 and for
the period from June 9, 1995 (inception) through May 31, 1996, respectively.

Continuance of the Company as a going concern is dependent on the Company's
ability to continue marketing its intranet service and its ability to continue
to raise additional capital in order to meet its current obligations. In 1998,
management anticipates a continued growth in revenues from existing and new
customers. Additionally, as discussed in Note 12, on September 24, 1997, the
Company completed an additional round of financing for approximately $3
million.

Management continues to implement a business plan that focuses on growth of
revenues. The financial statements do not include any adjustments relating to
the net realizable value or classification of recorded assets or liabilities
should the Company be unable to continue as a going concern.

12. SUBSEQUENT EVENT

Effective September 24, 1997, the Company completed an additional round of
financing with a venture capital firm. The Company received approximately $3
million in cash in exchange for 2,941,403 shares of the Company's Series C
convertible preferred stock, par value $.01 per share, at a price of $1.02 per
share.

13. UNAUDITED INTERIM FINANCIAL INFORMATION

The unaudited balance sheet as of January 31, 1998, and the unaudited
statements of operations, changes in stockholders' equity and cash flows for
the eight month periods ended January 31, 1998 and 1997, in the opinion of
management, have been prepared on the same basis as the audited financial
statements and include all significant adjustments (consisting primarily of
normal recurring adjustments) considered necessary for a fair presentation of
the results of these interim periods. Operating results for the eight month
period ended January 31, 1998, are not necessarily indicative of the results
of the entire year.

In September 1997, the Company entered into a licensing agreement with
Lycos, Inc. ("Lycos"), whereby Lycos acquired a license to use the Company's
software products on its Internet site for an initial term of one year. Under
the terms of the agreement, the Company earned license fees based on
stipulated percentages of gross advertising revenues generated by Lycos from
the use of the Company's technology. For the eight month period ended January
31, 1998, revenues under this agreement approximated 69% of the Company's
total license revenues.

F-44
<PAGE>

WISEWIRE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

For the eight month period ended January 31, 1998, 760,900 stock options
were granted to employees and certain non employees under the Company's Stock
Option Plans at exercise prices ranging from $0.20 to $0.80. Deferred
compensation costs associated with these grants totaling $890,477 were
recorded and are being amortized to expense over the related vesting period.

Effective March 4, 1998, the Company completed an additional round of
financing with several venture capital firms. The Company received
approximately $995,000 in cash in exchange for 430,736 share of the Company's
Series D preferred stock, par value $.01, at a price of $2.31 per share.

Effective April 29, 1998, the Company entered into an agreement with the Ben
Franklin Partnership of the Commonwealth of Pennsylvania (Ben Franklin
Partnership) to satisfy in full obligations owed by the Company to the Ben
Franklin Partnership in connection with previously awarded grants for which
the Company was required to repay through royalty payments if the project were
successful. As a result of this agreement, the Company recorded a liability
and a related charge to operations of $190,000 at January 31, 1998. In the
event the Company does not maintain a material presence in Pennsylvania
through April 30, 2001, the Company is obligated to make contingent payments
to Ben Franklin Partnership ranging from $230,000 to $90,000 based on the date
its presence ceases to exist in Pennsylvania.

On April 30, 1998, the Company entered into an Agreement and Plan of Merger
(the "Agreement") by and among the Company, Lycos, Inc., a Delaware
corporation ("Lycos"), and Wise Acquisition Corp., a Pennsylvania corporation
and a wholly-owned subsidiary of Lycos ("WAC"), pursuant to which WAC merged
with and into the Company (the "Merger") and the Company became a wholly-owned
subsidiary of Lycos.

In connection with the Merger, all outstanding shares of common stock and
preferred stock of the Company and options to purchase common stock of the
Company were converted into 824,255 shares and options to purchase common
stock, par value $.01 per share, of Lycos at an exchange ratio of 0.07482. All
outstanding options to purchase common stock of the Company have been assumed
by Lycos and converted into options to purchase common stock of Lycos.

On May 1, 1998, the Company paid off the then remaining balance on the
Pittsburgh Urban Redevelopment Authority loan in the amount of $82,176.

F-45
<PAGE>

LYCOS, INC.

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

In February 1998, the Company acquired Tripod, Inc. ("Tripod") for
approximately $63.2 million, including acquisition costs. See Note 7 to the
Company's Consolidated Financial Statements for the quarter ended January 31,
1998 filed on Form 10-Q with the Securities and Exchange Commission. In April
1998, the Company acquired WiseWire Corporation ("WiseWire") for approximately
$39.7 million, including acquisition costs.

The unaudited Pro Forma Condensed Consolidated Statements of Operations (the
"Pro Forma Statements of Operations") for the year ended July 31, 1997 and the
six months ended January 31, 1998 give effect to the acquisition of Tripod as
if it had occurred on August 1, 1996 and WiseWire as if it had occurred on
June 1, 1996. The Pro Forma Statements of Operations are based on historical
results of operations of the Company and Tripod for the year ended July 31,
1997 and the six months ended January 31, 1998 and WiseWire for the year ended
May 31, 1997 and six months ended January 31, 1998. The unaudited Pro Forma
Condensed Consolidated Balance Sheets (the "Pro Forma Balance Sheets") give
effect to the acquisitions of Tripod and WiseWire as if the acquisitions had
occurred on that date. The Pro Forma Statements of Operations and Pro Forma
Balance Sheets and the accompanying notes (the "Pro Forma Financial
Information") should be read in conjunction with and are qualified by the
historical financial statements of the Company, Tripod and WiseWire and notes
thereto.

The Pro Forma Financial Information is intended for informational purposes
only and is not necessarily indicative of the future financial position or
future results of operations of the consolidated company after the
acquisitions of Tripod and WiseWire, or of the financial position or results
of operations of the consolidated company that would have actually occurred
had the acquisitions of Tripod and WiseWire been effected as of the dates
described above.

F-46
<PAGE>

LYCOS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

JANUARY 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
WISEWIRE PRO FORMA
LYCOS, INC. TRIPOD INC. CORPORATION ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash.................... $41,351 $ 3,850 $ 723 $ -- $45,924
Accounts receivable,
net.................... 6,751 301 120 7,172
License fees
receivable............. 15,244 -- -- 15,244
Other current assets.... 2,223 -- 25 2,248
------- ------- ------ -------- -------
Current assets........ 65,569 4,151 868 70,588
Property, plant, and
equipment, net......... 2,093 1,279 809 4,181
Other non current
assets................. 4,039 -- 135 10,636 (a) 14,810
------- ------- ------ -------- -------
Total assets.......... $71,701 $ 5,430 $1,812 $ 10,636 $89,579
======= ======= ====== ======== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable and
accruals............... $12,067 $ 1,321 $ 440 $ $13,828
Deferred revenues....... 13,744 93 -- 13,837
Other current
liabilities............ 798 -- 449 1,247
------- ------- ------ -------- -------
Current liabilities... 26,609 1,414 889 28,912
Non current
liabilities............ 6,009 -- 230 6,239
Redeemable preferred
stock.................. -- 11,476 -- (11,476)(b) --
Stockholders' equity.... 39,083 (7,460) 693 22,112 (a)(b) 54,428
------- ------- ------ -------- -------
Total liabilities and
stockholders'
equity............... $71,701 $ 5,430 $1,812 $ 10,636 $89,579
======= ======= ====== ======== =======
</TABLE>

F-47
<PAGE>

LYCOS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JANUARY 31, 1998
-------------------------------------------------------------------
WISEWIRE PRO FORMA
LYCOS, INC. TRIPOD, INC. CORPORATION ADJUSTMENTS(C) PRO FORMA
------------- ------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
Total revenues.......... $ 21,906 $ 656 $ 287 $ $ 22,849
Cost of revenues........ 4,694 706 412 5,812
---------- ------- ------- ------- ----------
Gross profit
(loss)............. 17,212 (50) (125) 17,037
Operating expenses:
Research and
development.......... 3,171 1,686 894 5,751
Sales and marketing... 12,791 1,610 348 14,749
General and
administrative....... 1,946 602 1,142 1,646 (a) 5,336
---------- ------- ------- ------- ----------
Total operating
expenses........... 17,908 3,898 2,384 1,646 25,836
Operating loss.......... (696) (3,948) (2,509) (1,646) (8,799)
Interest income
(expense).............. 1,105 159 (233) 1,031
---------- ------- ------- ------- ----------
Net income (loss)....... $ 409 $(3,789) $(2,742) $(1,646) $ (7,768)
========== ======= ======= ======= ==========
Basic income (loss) per
share.................. $ 0.03 $ (0.48)(d)
========== ==========
Diluted income (loss)
per share.............. $ 0.03 $ (0.48)(d)
========== ==========
Weighted average shares
used in computing basic
income (loss)
per share.............. 14,175,061 16,176,394 (d)
========== ==========
Weighted average shares
used in computing
diluted income (loss)
per share.............. 14,707,809 16,176,394 (d)
========== ==========
<CAPTION>
TWELVE TWELVE TWELVE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
JULY 31, 1997 JULY 31, 1997 MAY 31, 1997
------------- ------------- ------------ -------------- ----------
WISEWIRE PRO FORMA
LYCOS, INC. TRIPOD, INC. CORPORATION ADJUSTMENTS(C) PRO FORMA
------------- ------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
Total revenues.......... $ 22,273 $ 517 $ 8 $ 22,798
Cost of revenues........ 4,732 370 160 5,262
---------- ------- ------- ------- ----------
Gross profit........ 17,541 147 (152) 17,536
Operating expenses:
Research and
development.......... 4,304 1,511 728 6,543
Sales and marketing... 19,130 1,150 369 20,649
General and
administrative....... 2,856 478 1,573 3,285 (a) 8,192
---------- ------- ------- ------- ----------
Total operating
expenses........... 26,290 3,139 2,670 3,285 35,384
Operating loss.......... (8,749) (2,992) (2,822) (3,285) (17,848)
Interest income, net.... 2,130 4 67 2,201
---------- ------- ------- ------- ----------
Net loss................ $ (6,619) $(2,988) $(2,755) $(3,285) $ (15,647)(d)
========== ======= ======= ======= ==========
Basic and diluted loss
per share.............. $ (0.48) $ (0.99)(d)
========== ==========
Weighted average shares
used in computing basic
and diluted loss per
share.................. 13,794,743 15,796,076 (d)
========== ==========
</TABLE>

F-48
<PAGE>

LYCOS, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

(1) PRO FORMA ADJUSTMENTS AND ASSUMPTIONS

(a) The Company acquired Tripod for approximately $63.2 million in February
1998, including costs of acquisition, of which approximately $7.7 million was
allocated to intangible assets. The Company is amortizing goodwill and
developed technology over a period of five years. The Pro Forma adjustments
reflect six months and twelve months of amortization expense for the six
months ended January 31, 1998 and the year ended July 31, 1997, respectively,
assuming the transaction had occurred on August 1, 1996. The value of the
intangible assets at August 1, 1996 would have been $11.2 million.
Approximately $51.6 million of the purchase price was allocated to in-process
research and development expense which has been charged to operations during
the quarter ended April 30, 1998. This amount has not been reflected in the
Pro Forma Statements of Operations.

The Company acquired WiseWire Corporation for approximately $39.7 million in
April 1998, including costs of acquisition, of which approximately $3.0
million was allocated to intangible assets. The Company is amortizing goodwill
and developed technology over a five year period. The Pro Forma adjustments
reflect six and twelve months of amortization expense for the six months ended
January 31, 1998 and the year ended May 31, 1997, respectively, assuming the
transaction had occurred on June 1, 1996. The value of the intangible assets
at June 1, 1996 would have been $2.1 million. Approximately $36 million of the
purchase price was allocated to in-process research and development expense
which has been charged to operations during the quarter ended April 30, 1998.
In addition, at April 30, 1998 the Company has expensed approximately $1
million of intangible assets in connection with the WiseWire acquisition. This
amount has not been reflected in the Pro Forma Statements of Operations.

The following represents the allocation of the purchase price over the
historical net book values of the acquired assets and liabilities of Tripod
and WiseWire at January 31, 1998, and is for illustrative pro forma purposes
only. Actual fair values will be based on financial information as of the
acquisition date (Tripod, Inc. on February 11, 1998 and WiseWire Corporation
on April 30, 1998). Assuming the transactions occurred on January 31, 1998,
the allocation would have been as follows (in thousands):

<TABLE>
<CAPTION>
WISEWIRE
TRIPOD, INC. CORPORATION TOTAL
------------ ----------- --------
<S> <C> <C> <C>
ASSETS ACQUIRED:
Cash................................... $ 3,850 $ 723 $ 4,573
Accounts receivable, net............... 301 120 421
Property, plant and equipment.......... 1,279 809 2,088
Other assets........................... 160 160
In-process research and development.... 51,600 36,000 87,600
Developed technology................... 7,354 2,857 10,211
Goodwill............................... 305 119 424
Liabilities assumed...................... (1,415) (1,119) (2,534)
------- ------- --------
Purchase price........................... $63,274 $39,669 $102,943
======= ======= ========
</TABLE>

The Pro Forma adjustment reconciles the historical balance sheet of Tripod
and WiseWire at January 31, 1998 to the allocated purchase price assuming the
transaction had occurred on January 31, 1998.

(b) The pro forma adjustment reflects the conversion of redeemable preferred
stock into common stock of Tripod which was then exchanged for Lycos common
stock upon acquisition of Tripod by Lycos.

F-49
<PAGE>

(c) The pro forma adjustment assumes the conversion of shares of Tripod
common stock and WiseWire common stock upon acquisition of Tripod and WiseWire
by Lycos.

(d) The pro forma loss per common share is computed by dividing the net loss
by the weighted average number of common shares outstanding. The calculation
of the weighted average number of shares outstanding assumes that the
2,001,333 shares of the Company's common stock issued in its acquisitions were
outstanding for the entire period.

F-50
<PAGE>

CHAT

Chat is offered
throughout the Lycos
Network of Websites.
Chat creates a "virtual
community" in which a
participant can interact
in real-time group or
one-on-one discussions.
Chat rooms are arranged
around a variety of
topics of interest.

PERSONAL HOMEPAGES

(4/C ART) Tripod provides users
with the ability to
create personal
homepages, which are
built and maintained on
Tripod's Website.
Utilizing a variety of
proprietary personal
publishing tools, Tripod
users are able to
quickly and easily
create fully
personalized Web-based
homepages.

ELECTRONIC COMMERCE
ALLIANCES

Through electronic
commerce, the Company
partners with merchants
to integrate their
products into the Lycos
Network service, making
them available for sale
to the Company's users.

COMMUNITY PODS

Tripod maintains over 65
theme-based community
"pods" that combine
user-created homepages
with professional
content from Tripod's
editorial staff. These
pods allow Tripod users
to easily find topical
content and locate other
members with similar
interests.
<PAGE>

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY UN-
DERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITA-
TION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDIC-
TION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDIC-
TION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 17
Price Range of Common Stock.............................................. 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 26
Management............................................................... 37
Principal and Selling Stockholders....................................... 40
Description of Capital Stock............................................. 42
Underwriting............................................................. 44
Notice to Canadian Residents............................................. 45
Legal Matters............................................................ 46
Experts.................................................................. 46
Available Information.................................................... 46
Incorporation of Certain Documents by Reference.......................... 47
Index to Consolidated Financial Statements............................... F-1
</TABLE>

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

LOGO

3,000,000 Shares
Common Stock
($.01 par value)

PROSPECTUS

CREDIT SUISSE FIRST BOSTON
HAMBRECHT & QUIST
MERRILL LYNCH & CO.

BEAR, STEARNS & CO. INC.
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
VOLPE BROWN WHELAN & COMPANY
WASSERSTEIN PERELLA SECURITIES, INC.

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

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The Company will pay all expenses incident to the offering and sale to the
public of the shares being registered. Such expenses are set forth in the
following table. All of the amounts shown are estimates except the Securities
and Exchange Commission ("SEC") registration fee.

<TABLE>
<S> <C>
SEC registration fee........................................... $ 61,098
NASD filing fee................................................ 21,211
NASDAQ National Market listing fee............................. 17,500
Legal fees and expenses........................................ 100,000
Accounting fees and expenses................................... 25,000
Blue Sky fees and expenses (including legal fees).............. 15,000
Printing and engraving expenses................................ 75,000
Transfer agent fees and expenses............................... 10,000
Miscellaneous expenses......................................... 25,191
--------
Total.......................................................... $350,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Amended and Restated Certificate of Incorporation, as amended,
includes a provision that eliminates the personal liability of its directors
for monetary damages for breach or alleged breach of their duty of care. In
addition, the Delaware General Corporation Law and the Company's Amended and
Restated By-laws provide for indemnification of the Company's directors and
officers for liabilities and expenses that they may incur in such capacities.
In general, directors and officers are indemnified with respect to actions
taken in good faith in a manner reasonably believed to be in, or not opposed
to, the best interests of the Company, and with respect to any criminal action
or proceeding, actions that the indemnitee has no reasonable choice to believe
were unlawful.

The Company has purchased insurance with respect to, among other things, the
liabilities that may arise under the provisions referred to above. The
directors and officers of the Company also are insured against certain
liabilities, including certain liabilities arising under the Securities Act of
1933, as amended, which might be incurred by them in such capacities and
against which they are not indemnified by the Company.

The Company has entered into separate indemnification agreements with its
directors and officers. The indemnification agreements create certain
indemnification obligations of the Company in favor of the directors and
officers and, as permitted by applicable law, will clarify and expand the
circumstances under which a director or officer will be indemnified.

ITEM 16. EXHIBITS

<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Specimen certificate for shares of Common Stock (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-1 (Reg.
No. 333-1354)).
5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation.
23.1 Consent of KPMG Peat Marwick LLP, Independent Accountants.
23.2 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
23.3 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-3).
</TABLE>

II-1
<PAGE>

ITEM 17. UNDERTAKINGS

A. UNDERTAKING REGARDING FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT
DOCUMENTS BY REFERENCE

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement 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.

B. UNDERTAKING IN RESPECT OF INDEMNIFICATION

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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.

C. UNDERTAKING PURSUANT TO RULE 430A

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of the 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 purposes 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-2
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, 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 Waltham, Commonwealth of Massachusetts, on this
15th day of May 1998.

LYCOS, INC.

/s/ Robert J. Davis
By: _________________________________
ROBERT J. DAVIS PRESIDENT AND
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT each person whose signature appears
below constitutes and appoints Robert J. Davis and Edward M. Philip and each
of them, with the power to act without the other, as attorneys-in-fact, each
with the power of substitution, for him or her in any and all capacities, to
sign any amendment or post-effective amendment to this Registration Statement
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorneys-in-fact, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

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

SIGNATURE TITLE DATE

/s/ Robert J. Davis President, Chief May 15, 1998
- ------------------------------------- Executive Officer
ROBERT J. DAVIS and Director
(Principal
Executive Officer)

/s/ Edward M. Philip Chief Operating May 15, 1998
- ------------------------------------- Officer and Chief
EDWARD M. PHILIP Financial Officer
(Principal
Financial and
Accounting Officer)

/s/ John M. Connors, Jr. Director May 15, 1998
- -------------------------------------
JOHN M. CONNORS, JR.

/s/ Daniel J. Nova Director May 15, 1998
- -------------------------------------
DANIEL J. NOVA

/s/ Richard H. Sabot Director May 15, 1998
- -------------------------------------
RICHARD H. SABOT

/s/ David S. Wetherell Director May 15, 1998
- -------------------------------------
DAVID S. WETHERELL

II-3
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Specimen certificate for shares of Common Stock (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-1
(Reg. No. 333-1354)).
5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation.
23.1 Consent of KPMG Peat Marwick LLP, Independent Accountants.
23.2 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
23.3 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-3).
</TABLE>

<PAGE>

EXHIBIT 1.1

TH&T Draft: 5/14/98
-------------------
3,000,000 SHARES

LYCOS, INC.

COMMON STOCK

UNDERWRITING AGREEMENT
----------------------

June __, 1998

Credit Suisse First Boston Corporation
Bear, Stearns & Co. Inc.
Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated
Hambrecht & Quist LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Volpe Brown Whelan & Company, LLC
Wasserstein Perella Securities, Inc.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629

Dear Sirs:

1. Introductory. Lycos, Inc., a Delaware corporation ("Company"), proposes
to issue and sell 2,000,000 shares of its common stock, par value $.01 per share
("Securities"), and CMG@Ventures I, LLC, a Delaware limited liability company
("Selling Stockholder"), proposes to sell 1,000,000 outstanding shares of the
Securities (such aggregate 3,000,000 shares of Securities being hereinafter
referred to as the "Firm Securities"). The Company also proposes to sell to the
Underwriters (defined below), at the option of the Underwriters, an aggregate of
not more than 450,000 additional shares of its Securities as set forth below
(such 450,000 aggregate additional shares being hereinafter referred to as the
"Optional Securities"). The Firm Securities and the Optional Securities are
herein collectively called the "Offered Securities". The Company and the Selling
Stockholder hereby agree with the several Underwriters named in Schedule A
hereto ("Underwriters") as follows:

2. Representations and Warranties of the Company and the Selling Stockholder.
(a) The Company represents and warrants to, and agrees with, the several
Underwriters that:

(i) A registration statement (No. 333-______) relating to the Offered
Securities, including a form of prospectus, has been filed with the
Securities and Exchange Commission ("Commission") and either (A) has been
declared effective under the Securities Act of 1933, as amended ("Act"),
and is not proposed to be amended or (B) is proposed to be amended by
amendment or post-effective amendment. If such registration statement (the
"initial registration statement") has been declared effective, either (A)
an additional registration statement (the "additional registration
statement") relating to the Offered Securities may have been filed with the
Commission pursuant to Rule 462(b) ("Rule 462(b)") under the Act and, if so
filed, has become effective upon filing pursuant to such Rule
<PAGE>

and the Offered Securities all have been duly registered under the Act
pursuant to the initial registration statement and, if applicable, the
additional registration statement or (B) such an additional registration
statement is proposed to be filed with the Commission pursuant to Rule
462(b) and will become effective upon filing pursuant to such Rule and upon
such filing the Offered Securities will all have been duly registered under
the Act pursuant to the initial registration statement and such additional
registration statement. If the Company does not propose to amend the
initial registration statement or if an additional registration statement
has been filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act
or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "Effective Time" with respect to the initial
registration statement or, if filed prior to the execution and delivery of
this Agreement, the additional registration statement means (A) if the
Company has advised the Representatives to the several Underwriters named
herein ("Representatives") that it does not propose to amend such
registration statement, the date and time as of which such registration
statement, or the most recent post-effective amendment thereto (if any)
filed prior to the execution and delivery of this Agreement, was declared
effective by the Commission or has become effective upon filing pursuant to
Rule 462(c), or (B) if the Company has advised the Representatives that it
proposes to file an amendment or post-effective amendment to such
registration statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment, as the
case may be, is declared effective by the Commission. If an additional
registration statement has not been filed prior to the execution and
delivery of this Agreement but the Company has advised the Representatives
that it proposes to file one, "Effective Time" with respect to such
additional registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "Effective Date" with respect to the initial registration statement
or the additional registration statement (if any) means the date of the
Effective Time thereof. The initial registration statement, as amended at
its Effective Time, including all material incorporated by reference
therein, including all information contained in the additional registration
statement (if any) and deemed to be a part of the initial registration
statement as of the Effective Time of the additional registration statement
pursuant to the General Instructions of the Form on which it is filed and
including all information (if any) deemed to be a part of the initial
registration statement as of its Effective Time pursuant to Rule 430A(b)
("Rule 430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement". The additional registration statement, as amended
at its Effective Time, including the contents of the initial registration
statement incorporated by reference therein and including all information
(if any) deemed to be a part of the additional registration statement as of
its Effective Time pursuant to Rule 430A(b), is hereinafter referred to as
the "Additional Registration Statement". The Initial Registration Statement
and the Additional Registration Statement are hereinafter referred to
collectively as the "Registration Statements" and individually as a
"Registration Statement". The form of prospectus relating to the Offered
Securities, as first filed with the Commission pursuant to and in
accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no such
filing is required) as included in a Registration Statement, including all
material incorporated by reference in such prospectus, is hereinafter
referred to as the "Prospectus". No document has been or will be prepared
or distributed in reliance on Rule 434 under the Act.

(ii) The Commission has not issued any order preventing or suspending
the use of the Prospectus or any preliminary prospectus contained in the
Initial Registration Statement or instituted any proceedings for that
purpose. If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (A) on the Effective
Date of the Initial Registration Statement, the Initial Registration
Statement conformed in all respects to the requirements of the Act

2
<PAGE>

and the rules and regulations of the Commission ("Rules and Regulations")
and did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, (B) on the Effective Date of the
Additional Registration Statement (if any), each Registration Statement
conformed or will conform, in all respects to the requirements of the Act
and the Rules and Regulations and did not include, or will not include, any
untrue statement of a material fact and did not omit, or will not omit, to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (C) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at the
time of filing of the Prospectus pursuant to Rule 424(b) or (if no such
filing is required) at the Effective Date of the Additional Registration
Statement in which the Prospectus is included, each Registration Statement
and the Prospectus will conform, in all respects to the requirements of the
Act and the Rules and Regulations, and neither of such documents includes,
or will include, any untrue statement of a material fact or omits, or will
omit, to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement: on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement and the Prospectus will conform in all
respects to the requirements of the Act and the Rules and Regulations,
neither of such documents will include any untrue statement of a material
fact or will omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do not
apply to statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein, it
being understood and agreed that the only such information is that
described as such in Section 7(c) hereof.

(iii) The Company has not distributed and, prior to the later of (a) any
Closing Date (as defined herein) and (b) the completion of the distribution
of the Offered Securities, will not distribute any offering material in
connection with the offering of the Offered Securities other than a
Registration Statement, any preliminary prospectus contained therein or the
Prospectus or any amendment or supplement thereto.

(iv) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus; and the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification.

(v) Each of Tripod, Inc. ("Tripod") and WiseWire Corporation
("WiseWire") has been duly incorporated and is an existing corporation in
good standing under the laws of the jurisdiction of its incorporation, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus; and each of Tripod and
WiseWire, except where the failure to be so qualified will not have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company, is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of
its business requires such qualification; all of the issued and outstanding
capital stock of each subsidiary of the Company has been duly authorized
and validly issued and is fully paid and nonassessable; and the capital
stock of each subsidiary owned by the Company, directly or through
subsidiaries, is owned free from any liens, encumbrances and defects.

3
<PAGE>

(vi) The Offered Securities and all other outstanding shares of capital
stock of the Company have been duly authorized and validly issued, fully
paid and nonassessable and conform to the description thereof contained in
the Prospectus; and no stockholder of the Company has any preemptive rights
with respect to the Securities. The information set forth under the
caption "Capitalization" in the Prospectus is true and correct. There are
no outstanding options, warrants or other rights granted to or by the
Company to purchase Securities or other securities of the Company other
than as described in the Prospectus.

(vii) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would
give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection with
this offering.

(viii) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to cause any securities of the Company owned or to be owned by such
person to be registered pursuant to the Registration Statement filed by the
Company under the Act covering the Offered Securities which have not been
fully satisfied or waived.

(ix) The Offered Securities have been approved for listing subject to
notice of issuance on the Nasdaq Stock Market's National Market.

(x) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required to be obtained or
made by the Company for the consummation of the transactions contemplated
by this Agreement in connection with the sale of the Offered Securities,
except such as have been obtained and made under the Act, required under
state securities laws or the by-laws and rules of the National Association
of Securities Dealers, Inc. ("NASD") in connection with the purchase and
distribution by the Underwriters of the Offered Securities.

(xi) This Agreement, the Irrevocable Power of Attorney of Selling
Stockholder by and between the Selling Stockholder and the Attorneys-In-
Fact named therein, dated May __, 1998 ("Power of Attorney"), and the
Custody Agreement by and between the Selling Stockholder and the Custodian
named therein, dated May __, 1998 ("Custody Agreement") have been duly
authorized, executed and delivered by the Company.

(xii) The execution, delivery and performance of this Agreement, the
Power of Attorney and the Custody Agreement, and the consummation of the
transactions herein and therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over
the Company or any subsidiary of the Company or any of their properties, or
any agreement or instrument to which the Company or any such subsidiary is
a party or by which the Company or any such subsidiary is bound or to which
any of the properties of the Company or any such subsidiary is subject, or
the charter or bylaws of the Company or any such subsidiary.

(xiii) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and
except as disclosed in the Prospectus, the Company and its subsidiaries
hold any leased real or personal property under valid and

4
<PAGE>

enforceable leases with no exceptions that would materially interfere with
the use made or to be made thereof by them.

(xiv) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole.

(xv) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a material adverse effect on the Company and its subsidiaries
taken as a whole.

(xvi) Except as disclosed in the Prospectus, the Company and each of its
subsidiaries have the right to use all trademarks, trade names, trade
secrets, servicemarks, inventions, patent rights, mask works, copyrights,
licenses, software code, audiovisual works, formats, algorithms and
underlying data required to operate its business as presently being
conducted and proposed to be conducted as described in the Prospectus, and
the Company and each of its subsidiaries have all required approvals and
governmental authorizations now used in, or which are necessary for
fulfillment of their respective obligations or the conduct of their
respective businesses as now conducted or proposed to be conducted as
described in the Prospectus; and neither the Company nor any of its
subsidiaries is infringing any trademark, trade name rights, patent rights,
mask works, copyrights, licenses, trade secret, servicemarks or other
similar rights of others, and there is no claim being made against the
Company or any of its subsidiaries regarding trademark, trade name, patent,
mask work, copyright, license, trade secret or other infringement or
assertion of intellectual property rights which could have a material
adverse effect on the earnings, properties, business affairs or business
prospects, stockholders' equity, net worth or results of operations of the
Company. The Company has agreements in place with each employee,
consultant or other person or party engaged by the Company or any
subsidiary sufficient to enable the Company and any subsidiary to fulfill
their contractual obligations and to conduct their respective businesses as
now conducted or proposed to be conducted as described in the Prospectus
and providing for the assignment to the Company or any of its subsidiaries,
as the case may be, of all intellectual property and exploitation rights in
the work performed and the protection of the trade secrets and confidential
information of the Company, each of its subsidiaries and of third parties
which have been developed by such person for or on behalf of the Company or
any of its subsidiaries. The Company's and its subsidiaries' computer
software (the "Software") is "Millennium Compliant". For the purposes of
this Agreement "Millennium Compliant" means: (a) the functions,
calculations, and other computing processes of the Software (collectively,
"Processes") perform in an accurate manner regardless of the date in time
on which the Processes are actually performed and regardless of the date
input to the Software, and whether or not the dates are affected by leap
years; (b) the Software can accept, store, sort, extract, sequence, and
otherwise manipulate date inputs and date values, and return and display
date values, in a materially accurate manner regardless of the dates used
or format of the date input; (c) the Software will function without
interruptions caused by the date in time on which the Processes are
actually performed or by the date input to the Software; (d) the Software
accepts and responds to four (4) digit year date input in a manner that
resolves any material ambiguities as to the century in an accurate manner;
and (e) the Software displays, prints and provides electronic output of
date information in ways that are unambiguous as to the determination of
the century.

5
<PAGE>

(xvii) Except as disclosed in the Prospectus, neither the Company nor
any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws,
is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a material adverse effect on
the Company and its subsidiaries taken as a whole; and the Company is not
aware of any pending investigation which might lead to such a claim.

(xviii) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against the Company, any of its subsidiaries
or any of their respective properties that, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the condition (financial or other),
business, prospects, properties or results of operations of the Company and
its subsidiaries taken as a whole, or would materially and adversely affect
the ability of the Company to perform its obligations under this Agreement
and no such actions, suits or proceedings are threatened or, to the
Company's knowledge, contemplated.

(xix) The financial statements included in each Registration Statement
and the Prospectus present fairly the financial position of the Company and
its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis;
and the schedules included in each Registration Statement present fairly
the information required to be stated therein; and the assumptions used in
preparing the pro forma financial statements included in each Registration
Statement and the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein, the related pro forma adjustments give appropriate
effect to those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding historical
financial statement amounts.

(xx) Except as disclosed in the Prospectus, since the date of the latest
audited financial statements included in the Prospectus, there has been no
material adverse change, in the condition (financial or other), business,
prospects, properties or results of operations of the Company and its
subsidiaries taken as a whole, and, except as disclosed in or contemplated
by the Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.

(xxi) The Company and each of its subsidiaries has filed all foreign,
federal, state and local tax returns that are required to be filed or has
requested extensions thereof (except in any case in which the failure so to
file would not have a materially adverse effect on the Company and its
subsidiaries, taken as a whole) and the Company and each of its
subsidiaries has paid all material taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent that any
of the foregoing is due and payable, except for any such assessment, fine
or penalty that is currently being contested in good faith or as described
in or contemplated by the Registration Statement or the Prospectus.

(xxii) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940.

6
<PAGE>

(xxiii) Neither the Company, nor any of its affiliates, has taken or may
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of the shares of the
Securities to facilitate the sale or resale of the Offered Securities.

(xxiv) KPMG Peat Marwick LLP, who have certified the financial
statements filed with the Commission as part of each Registration
Statement, are independent public accountants as required by the Act and
the Rules and Regulations. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with management's general or
specific authorization; (b) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
and (c) access to assets is permitted only in accordance with management's
general or specific authorization.

(xxv) The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.

(xxvi) The Company and each of its subsidiaries are in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company or any of its
subsidiaries would have any liability; the Company and each of its
subsidiaries have not incurred and do not expect to incur liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal from,
any "pension plan" or (ii) Section 412 or 4971 of the Internal Revenue Code
of 1986, as amended, including the regulations and published
interpretations thereunder ("Code"); and each "pension plan" for which the
Company and each of its subsidiaries would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified
in all material respect and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.

(xxvii) Except as set forth in each Registration Statement and the
Prospectus, there are no agreements, claims, payment, issuances,
arrangements or understandings, whether oral or written, for services in
the nature of finder's, consulting or origination fees with respect to the
sale of the Offered Securities or any other arrangements, agreements,
understandings, payments or issuance with respect to the Company or any of
its officers, directors, shareholders, partners, employees, subsidiaries or
affiliates that may affect the Underwriters' compensation as determined by
the NASD.

(xxviii) Except as set forth in each Registration Statement (including
without limitation the documents incorporated by reference therein) and the
Prospectus, no officer, director or shareholder of the Company or any
"affiliate" or "associate" (as these terms are defined in Rule 405 under
the Act) of any of the foregoing persons or entities has or has had, either
directly or indirectly (a) an interest in any person or entity that (x)
furnishes or sells services or products which are furnished or sold or that
are proposed to be furnished or sold by the Company, or (y) purchases from
or sells or furnishes to the Company any goods or services, or (b) a
beneficial interest in any contract or agreement to which the Company is a
party or by which it may be bound or affected. Except as set forth in each
Registration Statement and the Prospectus under the caption "Certain
Transactions" and "Management", there are no existing or proposed
agreements, arrangements, understandings or transactions, between or among
the Company and any officer, director, principal shareholder of the Company
or any partner, affiliate or associate of any of the foregoing persons or
entities.

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<PAGE>

(xxix) The minute books of the Company made available to the
Underwriters contain a complete summary of all meetings and actions of the
directors and shareholders of the Company since the time of its
incorporation and reflects accurately and fairly in all respects all
transactions referred to in such minutes.

(xxx) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes and the Company
agrees to comply with such Section if prior to the completion of the
distribution of the Offered Securities it commences doing such business.

(b) The Selling Stockholder represents and warrants to, and agrees with,
the several Underwriters that:

(i) The Selling Stockholder has and on each Closing Date hereinafter
mentioned will have valid and unencumbered title to the Offered Securities
to be delivered by the Selling Stockholder on such Closing Date and full
right, power and authority to enter into this Agreement, the Power of
Attorney and the Custody Agreement and to sell, assign, transfer and
deliver the Offered Securities to be delivered by the Selling Stockholder
on such Closing Date hereunder; and upon the delivery of and payment for
the Offered Securities on each Closing Date hereunder the several
Underwriters will acquire valid and unencumbered title to the Offered
Securities to be delivered by the Selling Stockholder on such Closing Date.

(ii) To the best knowledge of the Selling Stockholder, the Selling
Stockholder has reviewed the Prospectus and each Registration Statement,
and the information regarding the Selling Stockholder set forth therein
under the caption "Selling Stockholder" is complete and accurate.

(iii) The Registration Statement, on the Effective Date, and the
Prospectus on the Effective Date and on any Closing Date, do not, and will
not, include any untrue statement of a material fact or omit, or will omit,
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.

(iv) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Selling Stockholder and any person
that would give rise to a valid claim against the Selling Stockholder or
any Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.

(v) The execution, delivery and performance of this Agreement, the Power
of Attorney and the Custody Agreement, and the consummation of the
transactions herein and therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over
the Selling Stockholder or any subsidiary of the Selling Stockholder or any
of their properties, or any agreement or instrument to which the Selling
Stockholder or any such subsidiary is a party or by which the Selling
Stockholder or any such subsidiary is bound or to which any of the
properties of the Selling Stockholder or any such subsidiary is subject, or
the charter or by-laws of the Selling Stockholder or any such subsidiary.

(vi) All consents, approvals, authorizations and orders necessary for
the execution and delivery by the Selling Stockholder of this Agreement,
the Power of Attorney and the Custody Agreement (assuming the making of all
filings required under Rule 424(b) or Rule 430A), and have been obtained.

8
<PAGE>

(vii) The Selling Stockholder has not taken and will not take, directly
or indirectly, any action designed to, or which has constituted, or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Securities of the Company and, other than
as permitted by the Act, the Selling Stockholder has not distributed, and
will not distribute, any prospectus or other offering material in
connection with the Offered Securities.

(viii) Neither the Selling Stockholder nor any of its affiliates
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other
association with (within the meaning of Article I, Section (m) of the By-
Laws of the NASD), any member firm of the NASD.

3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and the Selling Stockholder
agree, severally and not jointly, to sell to each Underwriter, and each
Underwriter agrees, severally and not jointly, to purchase from the Company and
the Selling Stockholder, at a purchase price of $_________ per share, the number
of Firm Securities set forth below the caption "Company" or "Selling
Stockholder", as the case may be, and opposite the name of such Underwriter in
Schedule A hereto.

Certificates in negotiable form for the Offered Securities to be sold by
the Selling Stockholder hereunder have been placed in custody, for delivery
under this Agreement, under the Custody Agreement made with the Company, as
custodian ("Custodian"). The Selling Stockholder agrees that the shares
represented by the certificates held in custody for the Selling Stockholder
under the Custody Agreement are subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Stockholder for such
custody are to that extent irrevocable, and that the obligations of the Selling
Stockholder hereunder shall not be terminated by operation of law, dissolution
or termination of the Selling Stockholder or the occurrence of any other event.
If the Selling Stockholder should be dissolved or otherwise terminated, before
the delivery of the Offered Securities hereunder, certificates for such Offered
Securities shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such dissolution or termination had not
occurred, regardless of whether or not the Custodian shall have received notice
of such dissolution or termination.

The Company and the Custodian will deliver the Firm Securities to the
Representatives for the accounts of the Underwriters, at the office of Testa,
Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street, Boston,
Massachusetts 02110, against payment of the purchase price in Federal (same day)
funds by official bank check or checks or wire transfer to an account at a bank
acceptable to Credit Suisse First Boston Corporation ("CSFBC") at 10:00 A.M.,
New York time, on ___________, or at such other time not later than seven full
business days thereafter as CSFBC and the Company determine, such time being
herein referred to as the "First Closing Date". The certificates for the Firm
Securities so to be delivered will be in definitive form, in such denominations
and registered in such names as CSFBC requests and will be made available for
checking and packaging at least 24 hours prior to the First Closing Date.

In addition, upon written notice from CSFBC given to the Company from time
to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase, and the Company shall sell, all or less than all of
the Optional Securities at the purchase price per Security to be paid for the
Firm Securities. Such Optional Securities shall be purchased from the Company
for the account of each Underwriter in the same proportion as the number of Firm
Securities set forth opposite such Underwriter's name bears to the total number
of Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and
may be purchased by the Underwriters only for the purpose of covering over-
allotments made in connection with the sale of the Firm Securities. No Optional
Securities shall be sold or delivered unless the Firm Securities previously have
been, or simultaneously are, sold and delivered. The right to purchase the
Optional Securities or any portion thereof may be exercised from time to time
and to the extent not previously exercised may be surrendered and

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<PAGE>

terminated at any time upon notice by CSFBC to the Company.

Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company and the Custodian
will deliver the Optional Securities being purchased on each Optional Closing
Date to the Representatives for the accounts of the several Underwriters, at the
office of Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street,
Boston, Massachusetts 02110, against payment of the purchase price therefor in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to CSFBC. The certificates for the Optional
Securities being purchased on each Optional Closing Date will be in definitive
form, in such denominations and registered in such names as CSFBC requests upon
reasonable notice prior to such Optional Closing Date and will be made available
for checking and packaging at a reasonable time in advance of such Optional
Closing Date.

4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.

5. Certain Agreements of the Company and the Selling Stockholder. Each of
the Company and, with respect to clauses (i), (j), (k) and (m) below only, the
Selling Stockholder, agree with the several Underwriters that:

(a) If the Effective Time of the Initial Registration Statement is prior
to the execution and delivery of this Agreement, the Company will file the
Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
second business day following the execution and delivery of this Agreement
or (B) the fifteenth business day after the Effective Date of the Initial
Registration Statement.

The Company will advise CSFBC promptly of any such filing pursuant to Rule
424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred as
of such execution and delivery, the Company will file the additional
registration statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b)
on or prior to 10:00 P.M., New York time, on the date of this Agreement or,
if earlier, on or prior to the time the Prospectus is printed and
distributed to any Underwriter, or will make such filing at such later date
as shall have been consented to by CSFBC.

(b) The Company will advise CSFBC promptly of any proposal to amend or
supplement the initial or any additional registration statement as filed or
the related prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the Prospectus and will not
effect such amendment or supplementation without CSFBC's consent; and the
Company will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceedings in respect of a
Registration Statement and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.

(c) The Company will comply with the Act, the Exchange Act and the Rules
and Regulations so as to permit the completion of the distribution of the
Offered Securities as contemplated in this

10
<PAGE>

Agreement, each Registration Statement and the Prospectus. If, at any time
when a prospectus relating to the Offered Securities is required to be
delivered under the Act in connection with sales by any Underwriter or
dealer, any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will promptly notify CSFBC of such event
and will promptly prepare and file with the Commission, at its own expense,
an amendment or supplement which will correct such statement or omission or
an amendment which will effect such compliance. Neither CSFBC's consent to,
nor the Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6.

(d) As soon as practicable, but not later than the Availability Date (as
defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) which will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter.

(e) The Company will furnish to the Representatives copies of each
Registration Statement, each related preliminary prospectus, and, so long
as a prospectus relating to the Offered Securities is required to be
delivered under the Act in connection with sales by any Underwriter or
dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus and all other such documents shall be so furnished as soon as
available. The Company and the Selling Stockholder will pay the expenses of
printing and distributing to the Underwriters all such documents.

(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as
required for the distribution.

(g) During the period of three years hereafter, upon request, the
Company will furnish to the Representatives and, upon request, to each of
the other Underwriters, as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and the
Company will furnish to the Representatives (i) as soon as available, a
copy of each report and any definitive proxy statement of the Company filed
with the Commission under the Securities Exchange Act of 1934, as amended
("Exchange Act"), or mailed to stockholders, and (ii) from time to time,
such other information concerning the Company as CSFBC may reasonably
request.

(h) For a period of 90 days after the date on which shares of Securities
are first sold by the Underwriters to the public pursuant to a Registration
Statement, the Company will not, without the prior written consent of
CSFBC: (i) offer, sell, contract to sell, pledge, transfer, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise dispose of, directly or
indirectly, any shares of Securities or securities convertible into or
exchangeable or exercisable for any shares of Securities (including,
without limitation, any shares of Securities which the undersigned may be
deemed to beneficially own in accordance with the rules and regulations
promulgated under the Exchange Act); (ii) enter into any swap or any other
agreement or transaction that transfers, in whole or in part, directly or
indirectly, any of the economic consequences of ownership of shares of
Securities or any securities convertible

11
<PAGE>

into, or exercisable or exchangeable for, shares of Securities; (iii)
publicly disclose the intention to make any such offer, sale, pledge,
transfer or disposition of any security described in (i) or (ii) above; or
(iv) engage in any hedging transaction with respect to the Securities that
may have an impact on the market price of the Securities. Notwithstanding
the preceding sentence, the Company may issue up to 1,000,000 Securities in
the aggregate in connection with any acquisition or series of acquisitions
(including options and warrants assumed by the Company in connection with
any acquisition), make grants of employee stock options pursuant to the
terms of a plan in effect on the date hereof or issuances of Securities
pursuant to the exercise of such options or the exercise of any other
employee stock options outstanding on the date hereof.

(i) The Company and the Selling Stockholder agree with the several
Underwriters that the Company and the Selling Stockholder will pay all
expenses incident to the performance of the obligations of the Company and
the Selling Stockholder, as the case may be, under this Agreement
including, without limitation, (i) any filing fees and other expenses
(including fees and disbursements of counsel) in connection with
qualification of the Offered Securities for sale under the laws of such
jurisdictions as CSFBC designates and the printing of memoranda relating
thereto, (ii) the filing fee incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review
by the NASD of the Offered Securities, (iii) any travel expenses of the
Company's officers and employees and any other expenses of the Company in
connection with attending or hosting meetings with prospective purchasers
of the Offered Securities, (iv) any transfer taxes on the sale by the
Selling Stockholder of the Offered Securities to the Underwriters and (v)
expenses incurred in distributing preliminary prospectuses and the
Prospectus (including any amendments and supplements thereto) to the
Underwriters.

(j) The Selling Stockholder agrees to deliver to CSFBC, attention:
Transactions Advisory Group on or prior to the First Closing Date a
properly completed and executed United States Treasury Department Form W-9
(or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).

(k) The Selling Stockholder agrees, for a period of 90 days after the
date on which shares of Securities are first sold by the Underwriters to
the public pursuant to a Registration Statement, that it will not, without
the prior written consent of CSFBC and except for sales to the Company to
satisfy the obligation to sell shares of Securities to the Company upon
exercise of options granted under the Company's 1995 Stock Option Plan: (i)
offer, sell, contract to sell, pledge, transfer, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise dispose of, directly or
indirectly, any shares of Securities or securities convertible into or
exchangeable or exercisable for any shares of Securities (including,
without limitation, any shares of Securities which the undersigned may be
deemed to beneficially own in accordance with the rules and regulations
promulgated under the Exchange Act); (ii) enter into any swap or any other
agreement or transaction that transfers, in whole or in part, directly or
indirectly, any of the economic consequences of ownership of shares of
Securities or any securities convertible into, or exercisable or
exchangeable for, shares of Securities; (iii) publicly disclose the
intention to make any such offer, sale, pledge, transfer or disposition of
any security described in (i) or (ii) above; or (iv) engage in any hedging
transaction with respect to the Securities that may have an impact on the
market price of the Securities. Notwithstanding the foregoing, the Selling
Stockholder may transfer Securities in connection with bona fide gifts,
provided that any transferee agrees in writing as a condition precedent to
such transfer to be bound by the terms set forth herein.

(l) The Company shall apply the net proceeds of its sale of the Offered
Securities as set forth in the Prospectus.

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<PAGE>

(m) The Company and the Selling Stockholder will not take, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any securities of the
Company.

(n) If at any time during the 25-day period after a Registration
Statement becomes effective or during the period prior to any Closing Date,
any rumor, publication or event relating to or affecting the Company shall
occur as a result of which in the Representatives' reasonable judgment the
market price of the Securities has been or is likely to be materially
affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company
will, after notice from the Representatives advising the Company to the
effect set forth above, forthwith prepare, consult with the Representatives
concerning the substance of, and disseminate a press release or other
public statement reasonably satisfactory to the Representatives, responding
to or commenting on such rumor, publication or event.

6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholder herein, to the
accuracy of the statements of Company officers made pursuant to the provisions
hereof, to the performance by the Company and the Selling Stockholder of their
obligations hereunder and to the following additional conditions precedent:

(a) The Representatives shall have received from each of KPMG Peat
Marwick LLP and Coopers & Lybrand L.L.P. a letter or letters dated,
respectively, the date hereof and each Closing Date, in form and substance
satisfactory to the Representatives, together with signed or reproduced
copies of such letter for each of the Underwriters containing statements
and information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain information contained in each Registration Statement and the
Prospectus.

In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (i) such letters shall be accompanied
by a written explanation of the Company as to the significance thereof,
unless the Representatives deem such explanation unnecessary, and (ii) such
changes, decreases or increases to not, in the sole judgment of the
Representatives, make it impractical or inadvisable to proceed with the
purchase and delivery of the Offered Securities as contemplated by such
Registration Statement, as amended as of the date hereof.

(b) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have been consented to
by CSFBC. If the Effective Time of the Additional Registration Statement
(if any) is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or, if earlier, the time the Prospectus
is printed and distributed to any Underwriter, or shall have occurred at
such later date as shall have been consented to by CSFBC. If the Effective
Time of the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with the
Commission in accordance with the Rules and Regulations and Section 5(a) of
this Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of a Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Company, the Selling Stockholder or the Representatives,
shall be contemplated by the Commission.

13
<PAGE>

(c) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development in the
condition (financial or other), business, properties or results of
operations of the Company or its subsidiaries which, in the judgment of a
majority in interest of the Underwriters, including the Representatives, is
material and adverse and makes it impractical or inadvisable to proceed
with completion of the public offering or the sale of and payment for the
Offered Securities; (ii) any downgrading in the rating of any debt
securities of the Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act), or
any public announcement that any such organization has under surveillance
or review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities generally including,
without limitation, the Offered Securities, on the Nasdaq National Market,
or any setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any exchange or
in the over-the-counter market; (iv) any banking moratorium declared by
U.S. Federal or New York authorities; or (v) any outbreak or escalation of
major hostilities in which the United States is involved, any declaration
of war by Congress or any other substantial national or international
calamity or emergency if, in the judgment of a majority in interest of the
Underwriters including the Representatives, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.

(d) The Representatives shall have received an opinion, dated such
Closing Date, of Hutchins, Wheeler & Dittmar, A Professional Corporation,
counsel for the Company, to the effect that:

(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
and the Company is duly qualified to do business as a foreign
corporation in good standing in California, Massachusetts and
Pennsylvania;

(ii) The Offered Securities delivered on such Closing Date
and all other outstanding shares of the Securities of the Company
have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in
the Prospectus; the Company has authorized and outstanding capital
stock as set forth under the caption "Capitalization" in the
Prospectus as of the date specified therein; the certificates for
the Offered Securities, assuming they are in the form filed with
the Commission, are in due and proper form; and no stockholder of
the Company has any preemptive rights with respect to the
Securities pursuant to any statute, the Company's Certificate of
Incorporation, By-laws, or to such counsel's knowledge, any
agreement with the Company;

(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no
outstanding securities of the Company convertible or exchangeable
into or evidencing the right to purchase or subscribe for any
shares of capital stock of the Company and there are no outstanding
or authorized options, warrants or other securities obligating the
Company to issue any shares of its capital stock or any securities
convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of such capital stock;

(iv) There are no contracts, agreements or understandings
known to such counsel between the Company and any person granting
such person the right to cause any securities

14
<PAGE>

of the Company owned or to be owned by such person to be registered
pursuant to the Registration Statement filed by the Company under
the Act covering the Offered Securities which have not been fully
satisfied or waived;

(v) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required to be obtained or made by the Company for the consummation
of the transactions contemplated by this Agreement, in connection
with the sale of the Offered Securities, except such as have been
obtained and made under the Act and such as may be required under
state securities laws;

(vi) The execution, delivery and performance of this
Agreement, the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or
order of any governmental agency or body or any court having
jurisdiction over the Company or any subsidiary of the Company or
any of their properties, or any agreement or instrument to which
the Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or the
charter or bylaws of the Company or any such subsidiary;

(vii) The Initial Registration Statement was declared
effective under the Act as of the date and time specified in such
opinion, the Additional Registration Statement (if any) was filed
and became effective under the Act as of the date and time (if
determinable) specified in such opinion, the Prospectus either was
filed with the Commission pursuant to the subparagraph of Rule
424(b) specified in such opinion on the date specified therein or
was included in the Initial Registration Statement or the
Additional Registration Statement (as the case may be), and, to the
knowledge of such counsel, no stop order suspending the
effectiveness of a Registration Statement or any part thereof has
been issued and no proceedings for that purpose have been
instituted or are pending under the Act, and each Registration
Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates, complied
as to form in all material respects with the requirements of the
Act and the Rules and Regulations; such counsel has no reason to
believe that any part of a Registration Statement or any amendment
thereto, as of its effective date, contained any untrue statement
of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein
not misleading; or that the Prospectus or any amendment or
supplement thereto, as of its issue date or as of such Closing
Date, contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; the descriptions in the
Registration Statement and Prospectus of statutes, legal and
governmental proceedings and contracts and other documents are
accurate and fairly present in all material respects the
information required to be shown; it being understood that such
counsel need express no opinion as to the financial statements or
other financial or statistical data contained in the Registration
Statement or the Prospectus;

(viii) This Agreement, the Power of Attorney and the
Custody Agreement have been duly authorized, executed and delivered
by the Company;

(ix) All of the Offered Securities have been duly
authorized and accepted for quotation on the Nasdaq National
Market, subject to official notice of issuance;

15
<PAGE>

(x) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of
the proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of
1940, as amended; and

(xi) Such counsel does not know of any legal or
governmental proceedings or investigations pending or threatened to
which the Company or any of its subsidiaries is a party or to which
the property of the Company or any of its subsidiaries is subject
that are required to be described in any Registration Statement or
the Prospectus and are not described therein or any statutes,
regulations, contracts or other documents that are required to be
described in any Registration Statement or the Prospectus or to be
filed as exhibits to any Registration Statement that are not
described therein or filed as required.

(e) The Representatives shall have received the opinion
contemplated in the Power of Attorney executed and delivered by the Selling
Stockholder and an opinion, dated such Closing Date, of Palmer & Dodge LLP,
counsel for the Selling Stockholder, to the effect that:

(i) The Selling Stockholder had valid and unencumbered
title to the Offered Securities delivered by the Selling
Stockholder on such Closing Date and had full right, power and
authority to sell, assign, transfer and deliver the Offered
Securities delivered by the Selling Stockholder on such Closing
Date hereunder; and the several Underwriters have acquired valid
and unencumbered title to the Offered Securities purchased by them
from the Selling Stockholder on such Closing Date hereunder;

(ii) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required to be obtained or made by the Selling Stockholder for the
consummation of the transactions contemplated the Custody Agreement
or this Agreement in connection with the sale of the Offered
Securities sold by the Selling Stockholder, except such as have
been obtained and made under the Act and such as may be required
under state securities laws;

(iii) The execution, delivery and performance of this
Agreement, the Power of Attorney and the Custody Agreement and the
consummation of the transactions therein and herein contemplated
will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body or any
court having jurisdiction over the Selling Stockholder or any of
its properties or any agreement or instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder is bound
or to which any of the properties of the Selling Stockholder is
subject, or the charter or by-laws of the Selling Stockholder which
is a corporation;

(iv) The Power of Attorney and the Custody Agreement with
respect to the Selling Stockholder have been duly authorized,
executed and delivered by the Selling Stockholder and constitute
valid and legally binding obligations of the Selling Stockholder
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and

(v) This Agreement has been duly authorized, executed and
delivered by the Selling Stockholder.

16
<PAGE>

(f) The Representatives shall have received from Testa, Hurwitz &
Thibeault, LLP, counsel for the Underwriters, such opinion or opinions,
dated such Closing Date, with respect to the incorporation of the Company,
the validity of the Offered Securities delivered on such Closing Date, the
Registration Statement, the Prospectus and other related matters as the
Representatives may require, and the Selling Stockholder and the Company
shall have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters. In rendering such
opinion, Testa, Hurwitz & Thibeault, LLP may rely as to the incorporation
of the Company upon the opinion of Hutchins, Wheeler & Dittmar, A
Professional Corporation.

(g) The Representatives shall have received from the Selling
Stockholder and CMG Information Services, Inc., and each person who is a
director or executive officer of the Company, an agreement ("Lock-up
Agreement") dated on or before the date of this Agreement to the effect
that, for a period of 90 days after the date on which shares of Securities
are first sold by the Underwriters to the public pursuant to a Registration
Statement, such person will not, without the prior written consent of
CSFBC: (i) offer, sell, contract to sell, pledge, transfer, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise dispose of, directly or
indirectly, any shares of Securities or securities convertible into or
exchangeable or exercisable for any shares of Securities (including,
without limitation, any shares of Securities which the undersigned may be
deemed to beneficially own in accordance with the rules and regulations
promulgated under the Exchange Act); (ii) enter into any swap or any other
agreement or transaction that transfers, in whole or in part, directly or
indirectly, any of the economic consequences of ownership of shares of
Securities or any securities convertible into, or exercisable or
exchangeable for, shares of Securities; (iii) publicly disclose the
intention to make any such offer, sale, pledge, transfer or disposition of
any security described in (i) or (ii) above; or (iv) engage in any hedging
transaction with respect to the Securities that may have an impact on the
market price of the Securities. Notwithstanding the foregoing, such person
may transfer any or all of the securities subject to a Lock-up Agreement
("Lock-up Shares") to one or more members of such person's immediate family
or to trusts for the benefit of members of such person's immediate family
or in connection with bona fide gifts, provided that any transferee agrees
in writing as a condition precedent to such transfer to be bound by the
terms such Lock-up Agreement. The transferor shall notify CSFBC in writing
prior to the transfer, and there shall be no further transfer of Lock-up
Shares, except in accordance with such Lock-up Agreement.

(i) The Representatives shall have received a certificate, dated
such Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers shall
state that: the representations and warranties of the Company in this
Agreement are true and correct; the Company has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to such Closing Date; the Initial
Registration Statement has been declared effective by the Commission and no
stop order suspending the effectiveness of any Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
contemplated by the Commission; the Additional Registration Statement (if
any) satisfying the requirements of subparagraphs (1) and (3) of Rule
462(b) was filed pursuant to Rule 462(b), including payment of the
applicable filing fee in accordance with Rule 111(a) or (b) under the Act;
prior to the time the Prospectus was printed and distributed to any
Underwriter; and, subsequent to the respective dates of the most recent
financial statements in the Prospectus, there has been no material adverse
change, nor any development in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in or contemplated by the
Prospectus or as described in such certificate; such officer has carefully
examined each Registration Statement and the Prospectus and, in his
opinion, as of the Effective Date of the Initial Registration Statement
(and, if applicable, the Additional Registration Statement), the statements
contained in the Registration

17
<PAGE>

Statement and the Prospectus were true and correct, and such Registration
Statement and Prospectus did not omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
since the Effective Date of the Registration Statement, no event has
occurred which should have been set forth in a supplement to or an
amendment of the Prospectus which has not been so set forth in such
supplement or amendment; and

(j) The Representatives shall have received a letter, dated such
Closing Date, from each of KPMG Peat Marwick LLP and Coopers & Lybrand
L.L.P. which meets the requirements of subsection (a) of this Section,
except that the specified date referred to in such subsection will be a
date not more than three business days prior to such Closing Date for the
purposes of this subsection.

If any of the conditions hereinabove provided for in this Section 6 shall not
have been fulfilled when and as required by this Agreement to be fulfilled, the
obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company and the Selling Stockholder of such
termination in writing or by telegram at or prior to the First Closing Date and
each Optional Closing Date.

The Selling Stockholder and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.

7. Indemnification and Contribution. (a) Subject to the provisions of
paragraph (f) of this Section 7, the Company and the Selling Stockholder will
jointly and severally indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company and the Selling
Stockholder will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below.

(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company and the Selling Stockholder against any losses, claims,
damages or liabilities to which the Company or the Selling Stockholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company and the

18
<PAGE>

Selling Stockholder in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred, it being
understood and agreed that the only such information furnished by any
Underwriter consists of the following information in the Prospectus furnished on
behalf of each Underwriter: (i) the last paragraph at the bottom of the cover
page concerning the terms of the offering by the Underwriters, (ii) the legend
concerning over-allotments, stabilizing transactions, syndicate short-covering
transactions, penalty bids, and passive market making on the inside front cover
page, (iii) the concession and reallowance figures appearing in the table under
the caption "Underwriting" and (iv) the information contained in the [fourth]
and [seventh] paragraphs under the caption "Underwriting".

(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.

(d) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the Underwriters on the other from the
offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Selling Stockholder on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Selling Stockholder on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Stockholder bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholder or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation

19
<PAGE>

(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.

(e) The obligations of the Company and the Selling Stockholder under this
Section shall be in addition to any liability which the Company and the Selling
Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.

(f) The aggregate liability of the Selling Stockholder under the indemnity
agreements contained in the provisions of this Section 7 hereof shall be limited
to an amount equal to the lesser of (i) the initial public offering price of the
Offered Securities sold by the Selling Stockholder to the Underwriters and (ii)
that percentage of the total amount of the losses, claims, damages and obtained
by dividing the total number of shares of Offered Securities sold by the Selling
Stockholder hereunder by the total number of shares of Offered Securities sold
by the Selling Stockholder and the Company hereunder. The Underwriters agree
that the Selling Stockholder shall have no liability under Section 7(a) to
indemnify any Underwriter with respect to any amount unless the Underwriters
shall have first requested payment of such amount by the Company and the Company
shall have failed, within fourteen days, to pay the requested amount to the
Underwriters. The Company and the Selling Stockholder may agree, as between
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.

8. Default of Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Offered Securities hereunder on either the First
or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Stockholder for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Stockholder for the purchase of such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any non-
defaulting Underwriter, the Company or the Selling Stockholder, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.

9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Stockholder, of the Company or their respective officers and of the
several Underwriters set forth in or made pursuant to this Agreement will remain
in full force and effect, regardless of any investigation, or statement as to
the results thereof, made by or on behalf of any Underwriter, the Selling
Stockholder, the Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this

20
<PAGE>

Agreement is terminated pursuant to Section 8 or if for any reason the purchase
of the Offered Securities by the Underwriters is not consummated, the Company
and the Selling Stockholder shall remain responsible for the expenses to be paid
or reimbursed by them pursuant to Section 5 and the respective obligations of
the Company, the Selling Stockholder, and the Underwriters pursuant to Section 7
shall remain in effect, and if any Offered Securities have been purchased
hereunder the representations and warranties in Section 2 and all obligations
under Section 5 shall also remain in effect. If the purchase of the Offered
Securities by the Underwriters is not consummated for any reason other than
solely because of the termination of this Agreement pursuant to Section 8 or the
occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c),
the Company and the Selling Stockholder will, jointly and severally, reimburse
the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.

10. Notices. All communications hereunder will be in writing and will be
mailed, delivered or telegraphed and confirmed as follows:

To the Underwriters and/or Representatives:
------------------------------------------
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Attention: Investment Banking Department - Transactions Advisory Group

To the Company:
--------------
Lycos, Inc.
400-2 Totten Pond Road
Waltham, Massachusetts 02154
Attention: Jeffrey M. Snider, Esq.

With a copy to:
--------------
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: Michael J. Riccio, Jr., Esq.

provided, however, that any notice to an Underwriter pursuant to Section 7 will
be mailed, delivered or telegraphed and confirmed to such Underwriter.

11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 7, and no other person
will have any right or obligation hereunder.

12. Representation. The Representatives will act for the several Underwriters
in connection with the transactions contemplated by this Agreement, and any
action under this Agreement taken by the Representatives jointly or by CSFBC
will be binding upon all of the Underwriters.___________________will act for the
Selling Stockholders in connection with such transactions, and any action under
or in respect of this Agreement taken by__________________________________will
be binding upon the Selling Stockholder.

13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

14. Applicable Law and Jurisdiction. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to principles of conflicts of laws.

21
<PAGE>

If the foregoing is in accordance with the Representatives' understanding of
our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Selling
Stockholder, the Company and the several Underwriters in accordance with its
terms.

Very truly yours,

LYCOS, INC.

By.........................................
[Insert title]

CMG@VENTURES I, LLC

By.........................................
[Insert title]

The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.

CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO. INC.
DAIN RAUSCHER WESSELS, A DIVISION OF
DAIN RAUSCHER INCORPORATED
HAMBRECHT & QUIST LLC
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
VOLPE BROWN WHELAN & COMPANY, LLC
WASSERSTEIN PERELLA SECURITIES, INC.

Acting on behalf of themselves and as the Representatives of the several
Underwriters.

By CREDIT SUISSE FIRST BOSTON CORPORATION

By.....................................................
[Insert title]

22
<PAGE>

SCHEDULE A

NUMBER OF FIRM SECURITIES TOTAL
TO BE SOLD BY NUMBER OF
------------------------------------ FIRM SECURITIES
SELLING TO BE
UNDERWRITER COMPANY STOCKHOLDER PURCHASED
- ----------- ------- ----------- ---------

<S> <C> <C> <C>
Credit Suisse First Boston Corporation........................
Bear, Stearns & Co. Inc.
Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated
Hambrecht & Quist LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Volpe Brown Whelan & Company, LLC
Wasserstein Perella Securities, Inc.

Total............................................... 2,000,000 1,000,000 3,000,000
========= ========= =========
</TABLE>

<PAGE>

EXHIBIT 5.1

May 15, 1998

Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02154

Gentlemen:

We have acted as counsel to Lycos, Inc., a Delaware corporation (the
"Company"), in connection with proceedings being taken to register under the
Securities Act of 1933, as amended, up to 3,450,000 shares of the Company's
Common Stock, $.01 par value per share (the "Common Stock"), pursuant to a
Registration Statement on Form S-3 (the "Registration Statement") which
includes 450,000 shares which may be sold upon exercise of the underwriters
over-allotment option described in the Registration Statement. Of the Common
Stock being registered, 2,450,000 are being offered by the Company (including
the 450,000 shares subject to the over-allotment option) and 1,000,000 shares
are being offered by CMG@Ventures I, L.L.C. (the "Selling Stockholder").

As such counsel, we have examined (i) certain corporate records of the
Company, including its Restated Certification of Incorporation, its Bylaws,
stock records and Minutes of Meetings of its Board of Directors; (ii) a
certificate of the Secretary of the State of Delaware as to the legal
existence of the Company; and (iii) such other documents as we have deemed
necessary as a basis for the opinions hereinafter expressed.

Based upon the foregoing, and having regard for such legal considerations as
we deem relevant, we are of the opinion that:

1. The Company is a corporation duly organized and validly existing under
the laws of the State of Delaware.

2. The Company is authorized to issue 40,000,000 shares of Common Stock,
par value $.01 per share, and 5,000,000 shares of Preferred Stock, par
value $.01 per share.

3. When issued and sold under the circumstances contemplated in the
Registration Statement, the 2,450,000 shares of Common Stock offered by the
Company will be duly authorized, validly issued, fully paid and
nonassessable.

4. When sold under circumstances contemplated in the Registration
Statement, the 1,000,000 shares of Common Stock offered by the Selling
Stockholder will be duly authorized, validly issued, fully paid and
nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.

Very truly yours,

HUTCHINS, WHEELER & DITTMAR A
Professional Corporation

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors
Lycos, Inc.:

We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.

KPMG Peat Marwick LLP

Boston, Massachusetts
May 15, 1998

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-3 of our
report, which includes an explanatory paragraph concerning WiseWire
Corporation's ability to continue as a going concern, dated July 31, 1997,
except for the first paragraph of Note 5 as to which the date is October 13,
1997 and Note 12 as to which the date is September 24, 1997, on our audits of
the financial statements of WiseWire Corporation. We also consent to the
references to our firm under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.

Pittsburgh, Pennsylvania
May 15, 1998